I'm getting out now......

LiveOnLess

I'm just about to put my 4-bed Norfolk house on the market, if I succeed in selling it I'm going to rent for a while. I've been convinced for a long time that house prices just can't go up any further, but blow me, they have confounded my expectations and carried on doing so over the past couple of years. This time though I think we really have reached the top of this bubble. If I'm wrong, at some stage in future I'll have to buy back into the market at a "loss" and live in a smaller house, wishing for the rest of my days that I hadn't been "too clever". But.....

Here (for what it's worth) is my take on where we are now (at least, and perhaps, excluding London):

The house market - like any other - operates at the margins, only a relatively small % of all properties are for sale at any time, but these set the value for all similar properties. Those moving "sideways" - for work reasons for instance - are unaffected by high prices (ok the extra stamp duty etc hurts a bit), but only FTB's and those moving up the ladder are significantly worse off when prices double. Today FTB's have largely been priced out and replaced by BTL landlords, these people have prevented the market from stalling, as without FTB's in the past it has always done so. Anyone becoming a BTL landlord today is banking everything on the continued rise in house prices, since they will actually be losing money on any rent vs. return on capital comparison. Strangely though this does not seem to deter them, and there are plenty out there who think house prices will just keep on going up indefinitely.

In my view all that's needed for prices to crash from where we are now is a trigger, the-straw-that breaks-the-camel's-back, and we may well see this next month if IR's go up by 0.5%, and credit is tightened up. Once house prices stall and start to fall - as those that just have to sell are forced to drop their prices, we'll see many BTL landlords panic selling as well - further depressing prices. A downward spiral like the one we saw in 89-93 will then become established. Few will buy as long as they believe that prices will be lower next month, or next year, just as few can resist buying (BTL'ers) when they are convinced prices will be higher soon. It's a "No-brainer.

Some other factors that point to a crash: Say a young person starting out - as we all did, basically with nothing - one day aspires to own outright a house like mine - a small badly built 4-bed box on an estate; really nothing special - which is now worth a quarter of a million pounds. To achieve this over a 30 year period (Age 30-60) they will have to repay £8333 in cash every year, out of taxed income, on top of their mortgage interest - which will itself, even at todays low rates, be pretty crippling. They will never own their homes, so why bother trying to buy? If prices don't fall soon this truth will become apparent to more and more younger people. Who then will buy our 4-bed boxes from us when we want to trade down?

Rents in my area have hardly gone up since 1998 when I rented out my previous and similar house. I can still rent a house like mine for £700 pcm or so. Prices have tripled since then, rents have gone nowhere.

The UK (like the US) economy is largely (60-70%) driven by consumer spending. Since 2000, or just before, real disposable incomes i.e. after inflation ( the real inflation we all experience, not the massaged figures the government feed us) and tax increases have fallen. Consumer spending and the "boom" we have witnessed has been financed mainly by people borrowing against the perceived increase in value of their houses. The government, to their shame, and in a misguided attempt to stave off a recession, has encouraged this by turning up the money supply thus allowing the banks to lend in an unprecedented way, further boosting house prices, thus further boosting spending. Eventually the party must end, the longer this sort of thing goes on, the worse the pain on the downside will be. This is where we are now (imho). The consumer is spent out, many are going bust. Working people are being squeezed from all sides, the inflation caused by the printing of too much money - that not backed by any real tangible wealth, is starting to show. Interest rates are on the way up. The US consumer is not spending, and many (sub-prime) borrowers are being re-possessed. A slow down in the US will affect the rest of the world, and especially the UK. I rest my case....... By the way, to anyone who's thinking that high house valuations are in fact a sign of tangible wealth, well in my book they are not. Since 1998 a 300% increase in the number of houses would be, a 300% increase in their paper value isn't, as we shall soon see.

This country - since the days of the "big bang" when Thatcher proclaimed that the country didn't need industry, and we could all live off the wealth created by the city - has become a "spiv’s economy". The financial services "industry", city dealers, hedge funds, banks, and other hangers-on have gambled with the nations future, while neglecting to invest enough in real wealth creation; industry, trade, infrastructure, R&D, technology etc. i.e. the things that created the wealth we have in the first place, and that they are now frittering away. Incompetence is everywhere, and seems to be tolerated if not actually encouraged, especially in the public sector!!!

I'm going to shut up now, don my hard hat, and wait for the fireworks.......

nealnomoney

did you copy and paste that from somewhere????????????

spurs_nut

Yawwwnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn!

silvercar

Today FTB's have largely been priced out and replaced by BTL landlords, these people have prevented the market from stalling, as without FTB's in the past it has always done so.

So, according to your theory, there are all these FTBs just waiting to buy. Won't they prop up the property market?

We traded up last Summer. At the time everyone said it was the wrong time, prices were too high.....

Now my next door neighbour has just put his house on the market, 20% more than we did and got loads of interest.

CB1979_2

:eek: congrats though

LiveOnLess

No, I just wrote it myself.........I was bored!!! Can't deny that I've been influenced by loads of stuff I've read over the past year or two though.

nealnomoney

dont give them the satisfaction silvercar, they have just signed up to this site and then copied and pasted from a website, what a loser

LiveOnLess

No, because in a falling market many FTB's will hold off in the expectation of even lower prices - this is what happened last time. I remember, I was caught up in it all. The house market always overshoots where rationality says it should stop, both on the way up, and way down.

Romani_Ite_Domum

You have done your homework and made a decision based on current conditions in the economy. Good luck.

IMHO a house is a home. You are treating it as an investment as I assume you plan to buy another in a few years when prices fall? If you are happy with your house now and can afford it then why do anything?

CB1979_2

but what if there is a "crash" = more people repossessed = more people renting, therefore rental prices going up.
oh and lending crieria tightened, bigger deposits needed, etc. etc. etc.
and the threat of all these companies going bust = many more people repossessed = more people renting, blah blah blah

yay bring it on for the UK! :rolleyes:

your area mustn't have gone up in rental cost because supply outstrips demand.
oh and it's norfolk have prices taken a tumble since Mr Matthews put the UK at a potential epidemic through dodgy bootiful turkeys and laying off all the folk round there?

anyway ta ta you enjoy renting then coming back on here in 5 years time moaning how you can't get on the ladder cos since you STR'd your area has gone up another 40% :hello:

[Deleted User]

lol I couldn`t be a nomad full of `what ifs`

I like having my own home

There`s something de-stressing about being content and not chasing the rainbow