House price crash?

nonsensefactory

youngmoney wrote: »

Houses are not overvalued. If people are willing to buy at that price, then that is the price they are worth. A house price is never the bricks and mortar of the house, it's simply the demand. On a very simple level, if there was only one person interested in my house 5 years ago and now there are 15, then logic dictates I should get a higher price for my property. Similarly, if demand was high for my property years ago but now nobody is interested, then I'd have to lower the asking price to get a sale.

For example, I know that Foxtons register around 1,000 NEW applicants every single week and I very much doubt they bring 1000 new properties onto the market each week.

I guess it's a measure of risk like Homer J was saying. Rent is money you'll never see again, whereas if you bought a house 2-3 years ago and sold now, you'd (probably) be in a better financial position.

However, nothing is ever for sure and I think in todays market, pretty much any decision you make puts you at a potential disadvantage.

Out of curiosity nonsensefactory, let's say that the market does continue to rise, have you made provisions to buy, or would you continue renting out?

They are over-valued on more than one level:

i) Traditional lending multiples : 3.5 x single income : average wage at £25K should equate to an average house price at £87.5K, not £120 to £180K depending where you live, more in London (admittedly London pay is higher)

ii) I can rent cheaper than I can buy : my flat is 'worth' I guess £80K, I pay £425 in rent, a mortgage would be £520 pcm

I'm going to buy one day for sure - I have a deposit saved but if the market continues to rise then no, I'll carry on renting

The problem as I said earlier is that people can borrow more than they can afford and the banks are happy to let them. What people don't seem to realise is that a £120 to £180K mortgage is simply a massive amount of debt which has to be serviced no matter what happens and interest rates are going only one way, up.

Melissa177

But what is a "traditional lending multiple"? Surely that has to vary, depending on the interest rate?

I've seen plenty of stats which suggest that people are spending roughly the same proportion of their income on housing as they were 20 years ago - which is probably a better indicator.

homer_j_3

I think that young has a valid point, how can it not be?

People who bought property when everything crashed means that they bought low and with the increase in prices will most likely be very asset rich with good rental incomes and or money from the sale of them.

Your response comes from your experience of people that owned property before the crash who suffered badly and were burnt when it crashed. You seem to have a very bitter taste for this and it may be well justified.

homer_j_3

nonsensefactory wrote: »

They are over-valued on more than one level:

i) Traditional lending multiples : 3.5 x single income : average wage at £25K should equate to an average house price at £87.5K, not £120 to £180K depending where you live, more in London (admittedly London pay is higher)

Tell me when lending multiples have had any bearing on house prices in this way. When my parents had to get a mortgage they had only one option and that was with their own bank having proven that they can save money.

ii) I can rent cheaper than I can buy : my flat is 'worth' I guess £80K, I pay £425 in rent, a mortgage would be £520 pcm

Im glad you can rent cheaper but still where does this overvalue property prices?

I'm going to buy one day for sure - I have a deposit saved but if the market continues to rise then no, I'll carry on renting

I am glad that you have made this decision and if you can keep saving then brilliant - many people cannot do this.

The problem as I said earlier is that people can borrow more than they can afford and the banks are happy to let them. What people don't seem to realise is that a £120 to £180K mortgage is simply a massive amount of debt which has to be serviced no matter what happens and interest rates are going only one way, up.

Some banks will lend more generously than others and yes this does help house prices as I have said earlier because it allows people to pay.

Just to add that just because something costs more than it did before it doesn't mean its overvalued.

Petrol cost more this week than it did a few years ago, would that stop you buying it? Or would you simply go on public transport?

kingkano

Maybe renting is undervalued at the moment Probably because there is so much BTL and more people want to buy? lol. From posts I've read many people say rents havent increased in 10 years, so I can see how this skew might have come about.

Melissa177

It's funny, because there was an article in the Evening Standard (London) last week about how much rental prices are up, and how tennants are locking themselves into long term agreements (ie, 3 years) just to secure the best properties.

This sounded very odd to me!

stashmycash

davesgirl97 wrote: »

I know of a couple who bought a shared ownership, and they have sub let it out and bought another house, seems to me very very unfair, surley something like this should be kept an eye on in a legal way.

My friend actually reported the people of a couple of the houses to the housing !!!. and they said there was nothing they could do because the owners told them they were abroad or had other excuses and yet my freind has seen these people in town etc.

Another couple bought a shared ownership 3 bed house because they said one of them had a son and they needed a bed for him when staying. My friend has only ever seen this boy once in the 6 years they have been there.

sparkleworld

Regarding the shared ownership-

I have read ALL of the posts on this thread with some interest. Whilst I dont even begin to understand the BTL market I do know from bitter experience about the last housing crash!
My husband and I bought a 1 bed flat in 1989 for £36.5 k we managed to get it reduced from £40K (thank Goodness)

It then plummetted in value so much that our negative equity was £18k.
We couldn't afford to move! Had 2 children whilst living there and were advised countless times to take the easy option and to get reposessed!
We refused and sat on it (or should that be in it) for 11 years :eek:
Not funny with two children.
In 2001 we finally sold it for £32K And as it was an interest only mortgage with an endownment attatched we managed to claw back the negative equity to just £5k.

We had been advised that the endownment probably wouldn't meet the final amount of the mortgage and so toook the decision to sell the endownment. With this we managed to clear the debt on the flat and put down a deposit on a shared ownership house.

We had to fight tooth and nail for our house as there were only 2 three bedroomed houses available on this scheme. We love our house and are so proud that we stuck it out for all those years. We would dearly love to buy the other half but due to the house price increase this looks very doubtful, So in a strange way we feel we are in a no lose situation as if the house prices do crash hopefully we will be in a situation that we can afford to buy the other half of our house, and if they don't we still get to live in a fab , spacious house of which we have a 50% share in the profit!

nonsensefactory

homer_j wrote: »

Tell me when lending multiples have had any bearing on house prices in this way. When my parents had to get a mortgage they had only one option and that was with their own bank having proven that they can save money.


Im glad you can rent cheaper but still where does this overvalue property prices?


I am glad that you have made this decision and if you can keep saving then brilliant - many people cannot do this.



Some banks will lend more generously than others and yes this does help house prices as I have said earlier because it allows people to pay.

Just to add that just because something costs more than it did before it doesn't mean its overvalued.

Petrol cost more this week than it did a few years ago, would that stop you buying it? Or would you simply go on public transport?

The idea of having preset lending multiples is that is acts as a rationing device i.e. to stop you over-extending yourself - 10 years ago you couldn't go the bank to get a 5 or 6 times mortgage just because you want a 4 bed detached in a leafy suburb and not the 2 up 2 down your salary dictates, the bank would've laughed you out of court. Now people are going to the bank asking for a 5 or 6 times mortgage to buy and the banks are lending it to them - these people are screwed and it's why I'm staying out of the market, at least for now.

Ad

Unfortunately this corrupt lying government and ineffectual bank of nothing will do all they can to prevent a crash. How many ‘Buy to let’ properties and second and third homes does your councillor, MP have? The Bank of England is a spineless joke... Independent my a***.

Until people get off their backsides and stop reading the ever-repeated threads on Housepricecrash and start shouting and loudly there won’t be any changes. What this country needs is a revolution that could make some heads roll.