Are prices going up or down? FTB Help please!

BargainHunterCat

OH & I are looking at buying our first place together. Neither of us have ever owned our own place and we'd be happy to take on a place with work needing doing (if we could find one before developers snap it up).
He's of an age where he's very keen to get his own place & he's fed up of renting and "paying into nothing" as he says.
I don't necessarily agree with the whole "paying into nothing" cliche what with prices as they are, and I'm more cautious. I've been watching the market trying to ascertain if we're in for a drop in prices. As we all know prices are massively inflated at the moment and if there were to be any sort of drop, we'd be buying at exactly the wrong time & could potentially end up in negative equity.:eek:

I see the logic in working your way up the ladder but if we scramble onto the first rung and prices suddenly drop, we could find ourselves stuck somewhere we don't want to be long term with negative equity hanging round our necks.

Someone mentioned on a previous thread that we may follow the US trend for prices to go down & I wondered what the word on the street was.
We both live and wish to stay in Dorset, we currently live and work in Bournemouth and despite both being born in this area we are struggling to find anything affordable and half-decent. Between us our joint income is approx £40,000 which isn't vey much - I'm also self employed so not sure where I stand with mortgages. We don't have kids or pets yet, but we don't want to wait too long for them just because we've overstretched on the mortgage!

Does anybody have any advice please? My gut feeling is to wait and save as much money as we can while I also pay off my £15,000 debt (accumulated whilst trying to survive on my own & partly due to ex-hubby who spent all my money and then some).

I studied economics in college (so I'm clearly an expert...!:rotfl: ) & I feel that as we've had a very long "peak" we must be due for a dip and some sort of "trough" soon as far as house prices go.

Advice please!!!

ashcarrot

Pay off your debts first, your going to wanna a decent deposit really, and Dorset is supposed to have the highest house price to wages in england apparantly, and debts yet we're the happiest apparantly :S

I'm expecting a big drop but that may take 5 years to materialise so its a qn of do ya wait or do you get on with your life ... Im in a similar position .

BargainHunterCat

Thanks for that, I've set myself the challenge of paying off my debts in one year which I should more or less manage if I work hard.
I've been in financial difficulty hence not I'm keen to embark into mortgage land too soon!
OH's situation is much more stable & so he really wants to however.

I don't see what's wrong with renting for a couple of years while we save up for a really good deposit - you can certainly rent a nice place for considerably less than you'd pay if you had a mortgage on it with life insurance & buildings insurance to pay...

exil

"we may follow the US trend for prices to go down"

Yes - and we may not. If any of us actually knew this we'd be property millionaires, not spending our lunchtimes on these forums. The US housing market is totally unlike ours (in the main, there is plenty of space to build new and that depresses prices overall, house prices are only really high in the city centres where land is expensive)

Anyway with my own amateur economist hat on.

Looking at long term trends - which you MUST do if you're buying to live in rather than as a speculative investment - house prices keep more or less in line with disposable incomes. They do vary up and down around this trend - but in this country have VERY RARELY dropped in actual cash terms by more than a few percent (though in local markets this may happen). Why? As soon as prices drop, people in negative equity sit tight rather than selling, cutting off the supply of houses very sharply. So what you tend to see is a big drop in sales rather than an actual crash. Housing markets don't act exactly the same as others, (1)as people have to have somewhere to live and (2) due to mortgages, will not sell at a loss unless under compulsion ie they have to move due to their job - in which case prices will have dropped where they want to buy, too - and (3) the supply of houses is limited by green belt and similar regulations. Simply speaking, people want to buy houses in the leafy and economically strong SE and they can't build there. So prices go up over time, and that rise causes a ripple effect across the country.

But what do I know! Frankly I would go with your own instincts - and bear in mind that if you don't buy, rents ARE likely to go up long-term.

MickMack

exil wrote: »

"we may follow the US trend for prices to go down"

Yes - and we may not. If any of us actually knew this we'd be property millionaires, not spending our lunchtimes on these forums. The US housing market is totally unlike ours (in the main, there is plenty of space to build new and that depresses prices overall, house prices are only really high in the city centres where land is expensive)

Anyway with my own amateur economist hat on.

Looking at long term trends - which you MUST do if you're buying to live in rather than as a speculative investment - house prices keep more or less in line with disposable incomes. They do vary up and down around this trend - but in this country have VERY RARELY dropped in actual cash terms by more than a few percent (though in local markets this may happen). Why? As soon as prices drop, people in negative equity sit tight rather than selling, cutting off the supply of houses very sharply. So what you tend to see is a big drop in sales rather than an actual crash. Housing markets don't act exactly the same as others, (1)as people have to have somewhere to live and (2) due to mortgages, will not sell at a loss unless under compulsion ie they have to move due to their job - in which case prices will have dropped where they want to buy, too - and (3) the supply of houses is limited by green belt and similar regulations. Simply speaking, people want to buy houses in the leafy and economically strong SE and they can't build there. So prices go up over time, and that rise causes a ripple effect across the country.

But what do I know! Frankly I would go with your own instincts - and bear in mind that if you don't buy, rents ARE likely to go up long-term.

I don't agree entirely with your argument that people who find themselves in negative equity will just sit tight rather than sell. What you haven't considered is what will cause this crash to happen, if indeed it ever does happen, and that is an increase in interest rates, whether they creep up or have to be hiked up to stabilize the overall economy.

What happens in these cases where someone who has already overstretched themselves is then confronted with increased mortgage repayment that they can no longer afford, how are they going to sit tight in their negative equity house?

Am I totally off the ball here or are increased interest rates not the most likely trigger for a house price decline.

I am not claiming to be anywhere near to being an expert, but it makes sense to me that you focus on repaying your current debt and then see where things stand, I think if you plan to be debt free within a year that would be a significant achievement and would stand you in good stead when it comes to then looking for the best mortgage options. Think about how much you would be saving over the life of your mortgage if your able to go into it with a bit of a deposit!!!!

Woby_Tide

bearing in mind you've always got to look at the local factors, there still seems to be a shortage of smaller properties in Bournemouth, the sheer rate at which the older larger houses are being bought and converted to smaller units i.e. Boscombe/Charminster especially suggests that the market is still holding up here

BargainHunterCat

Woby_Tide wrote: »

bearing in mind you've always got to look at the local factors, there still seems to be a shortage of smaller properties in Bournemouth, the sheer rate at which the older larger houses are being bought and converted to smaller units i.e. Boscombe/Charminster especially suggests that the market is still holding up here

I agree - this is partly why OH is so keen to buy. He doesn't think prices will drop much in this area if at all because its so popular.
He also agrees that he needs to concentrate on saving for a deposit while I pay off my debts.
We currently rent in Merrick Park and pay £520pcm on a 1 bed flat unfurnished with no garden. However, when I look at the equivalent we'd be paying on a mortgage/life insurance/buildings insurance if we bought a similar flat to this one it's almost double so I don't really see the point in buying right now.
Just over a year ago I was renting a 3 bed house with garden for less than that in Derby so the geographical differences in price really make me wince. Problem is he doesn't want to move from this area whereas I wouldn't mind.

I guess we'll have to sit this one out and review in a years time.
Watch this space to see if I clear my debt in 1 year! :T

lynzpower

I know Bournemouth reasonably well, and I think you have the right idea. I am staggered by the house price to wage ratio there.

One thing Id suggest, is find something cheaper to rent. I know you might have to sacrifice the area, but its short term, and see it as a spring board.

I don't see what's wrong with renting for a couple of years while we save up for a really good deposit - you can certainly rent a nice place for considerably less than you'd pay if you had a mortgage on it with life insurance & buildings insurance to pay...

If I were in your shoes, Id rent something cheap and work out what the mortgage, life assurance, buildings cover and maintainrence per month on your own place would be and at least put this aside into savings. If you literally cant manage this anyway, then you wouldnt be able to buy in any case.

Im guessing your mortgage would allow you to borrow somewhere in the region of 120k? am i right or have you been offered more? the other thing to note is while having debt the products youll be offered are a higher rate. Additionally, one lender took my debt multiplied by 3 and subtracted from the amount they were willing to lend me. I dont know if this is happeneing now, but something to be aware of

billion25

I can confirm that house prices are going up or down.

courtjester

BargainHunterCat wrote: »

We both live and wish to stay in Dorset, we currently live and work in Bournemouth and despite both being born in this area we are struggling to find anything affordable and half-decent.

Have you considered moving out of Bournemouth? Go west (Bere Regis /Dorchester) or north beyond Wimborne towards Shaftesbury for cheaper house prices. Sure if you have to commute into Bournemouth, that would be a pain, but it's pretty nice out here in the shires....

BargainHunterCat

courtjester wrote: »

Have you considered moving out of Bournemouth? Go west (Bere Regis /Dorchester) or north beyond Wimborne towards Shaftesbury for cheaper house prices. Sure if you have to commute into Bournemouth, that would be a pain, but it's pretty nice out here in the shires....

I'd be all for that but OH has other ideas sadly...

I'll keep working on him...!