BTL Boom continues

The_J

the_flying_pig wrote: »

assume percy buys a £100k house with a £20k deposit. he's got his eye on a £200k house 5 years down the line.

in scenario 1 house prices stay exactly the same for 5 years. so in 2017 his total equity is about £35k - his initial £20k plus his repayment mortgage has paid off about another £15k. he needs to borrow another £165k to buy that £200k house.

in scenario 2 house prices fall by 20%. his deposit is wiped out. but he's still paid off £15k of his mortgage, so he's not in NE. the more expensive house will now only cost him £160k. so he needs to borrow £145k to buy it.

so percy is quite possibly better off under scenario 2.

he's definitely better off if he's made some meatry overpayments, or racked up some meaty savings, in that time. he's only worse off in scenario 2 if his total savings and equity is pushed so low as to mean that he can't afford to trade up or remortgage. and if he's on a repayment mortgage & starts with a decent deposit this is very unlikely to happen.

the maths are different, of course, if he's a much older person with an eye on trading down, selling up, or whatever. but percy was born in 1983. he's got no interest in high house prices.

Scenario 2: don't buy, rent a nicer house for 5 years, save up the £15k that would have gone into a mortgage and buy at 160k with a mortgage of £125k.

Graham_Devon

The_J wrote: »

Scenario 2: don't buy, rent a nicer house for 5 years, save up the £15k that would have gone into a mortgage and buy at 160k with a mortgage of £125k.

Can you explain to me how you rent AND save the money saved from not buying?

the_flying_pig

The_J wrote: »

Scenario 2: don't buy, rent a nicer house for 5 years, save up the £15k that would have gone into a mortgage and buy at 160k with a mortgage of £125k.

right.

percy has bought now. given that he's bought, the best thing for him is slow falls in prices.

here's an analogy. i use good weather as an analogy for falling house prices.

if you take your holiday in the UK, you hope the weather will be nice.

but you still probably buy a windbreak & some new cold/wet weather clothes, because you think the weather might well be bad, as well as taking some warm weather clothes too.

when you get there, you hope for good weather all week, of course. obviously the money you spent on cold weather clothes etc will have been wasted if the weather turns out to be good all week but you still want it to be warm. that money has been spent now.

obviously best of all is that you can magically predict that the weather will be good & that you only buy, and pack, clothes accordingly, but life's not like that, for percy or for any of us.

crash123

RenovationMan wrote: »

Sorry, I refuse to believe that people save up for deposits over several years and then are happy for that deposit and more besides to be lost just so that other people don't have to work so hard to get their own house.

Sorry, you're talking bollox. You know it and I know and all the other 12 people who frequent this board, know it. :cool:

We bought in the last crash and prices continued to go down. Were we bothered NO. We could afford the repayments easy and we bought a home which is what Percy has bought.

chucky

Percy1983 wrote: »

Ok so I should buy a house for £100k then sell it for £70k then buy another for £100k and sell for £70k, as nice as it would be to be able to correct the market by myself I see a problem in that plan.

So you do want house prices to rise, otherwise you would have lost £30k.

RenovationMan

Graham_Devon wrote: »

I am impacted by falling prices, in many ways.

One, the house value. Two, harder to get a mortgage.

I truly truly believe AFTER the house prices falls have settled, we ALL would be in a much much better position. Not only would new entrants to the housing market have a little more cash to spend in other business areas, such as leisure, but more cash to back themselves up for any event.

The more money put into mortgage debt repayment, the less money for the rest of the economy....also the more people using benefits for living costs.

Call me stupid if you like.....but I can't see the genius in wanting the next house to cost you MORE. I want to move to a bigger / nicer home. By wanting HPI, I'd only being making that move financially harder.

Yeah, but really you want house prices to fall so that you can get a bigger house and as you only 'own' half a house (shared ownership), you half the risk when prices fall.

I don't think you're stupid (by the way, I never called anyone stupid - another spectacular strawman construct by the master, Devon) for wanting to buy a cheaper house, but let's not wrap it up in all this self-sacrificial egalitarian nonsence.

You want houses to fall in value so that you can buy a cheaper house for you and your family. Nowt wrong with that at all, no need to gild the lilly.

DervProf

chucky wrote: »

It's refreshing to see you would rather discuss the quality of a couple of URL links instead of the thread subject about BTL'ers taking advantage of falling prices.

I'm glad you feel refreshed, and it appears that RM might also have benefited from my post.

SteveV2

what happens when mortgages become more available?

Thrugelmir

SteveV2 wrote: »

what happens when mortgages become more available?

When are you expecting that to happen?

DervProf

SteveV2 wrote: »

what happens when mortgages become more available?

In theory, more FTBs will enter the market, and existing homeowners will start moving again.

In practice, I expect that there will also be a rise in BTL investors. This will lead to HPI. HPI will be "celebrated" in the media (and by certain forum members here), and more people will be drawn towards BTL investment, causing more upward pressure on prices. The only thing that will ensure that we don't end up where we are now (prospective homebuyers struggling to be able to borrow enough to buy a property) is that we have a massive building program or the banks will have to be ever more "generous" with their lending practices. Hang on, doesn't something bad eventually happen if that continues ?