First Time Buyers - Enough is Enough!

slater14

As one poster said - "There are going to be figures on both sides"

But there isnt.

We have Doug, "feeling" that there isnt a problem.

You have many posters using multipliers, historical averages, interest rate scenarios (+ -), market reports showing a "slipping" "stalling" stagnant" market.

..and lets not forget the very simple FACT that houses have tripled in 5 years, not to bring them back to an average price but to throw them further beyond earnings than has been seen EVER... before, after or during in any other boom or crash.

Doug,

Have you had your head in the clouds? I said "FACT interest rates are rising". What has been happening on your planet these last 6 months? On mine they have been "RISING".

I would like very much any "pro" to come up with as much information as can be provided by the "cons" I would read it and give it my consideration. I will not listen to "feelings" and "maybes" as justification for a rise or flat market.

deemy2004

The only saving grace on the interest rate front would be if the economy slowed significantly due to various factors such as the trillion £ debt mountain, budget and trade deficits etc.

But that very fact will make house prices fall, so the shift in emphasis will move from watching interest rates to watching the unemployment and economic activity statistics.

slater14

Nice point Deemy,

So house prices slump if rates go up ....and house prices slump if they go down (due to economic downturn).

Apart from Doug waving his magic dust over the housing bubble can any of you guys think of any scenario where prices may increase? I have wracked my brains and just cannot come up with a devils advocate argument.

deemy2004

If crude oil goes to $100, and inflation takes off to 10% per year than maybe house prices will rise 1 or 2% a year, though !!! in realterms they would be falling pretty fast.

Offcourse ! If that were to happen, then interest rates would be at 12% ! so ahem........... it would probably fall rather than rise even if inflation was 10%...

Now lets try it from another angle......

Say if the UK economy continued to growth by over 3% per year, and employment continued to rise, with tax reciepts rising due to more workers than unemployed, and the chinease continued to sell us cheap goods and we continued to rake up record debt.
Then maybe houser pices would slowly drift higher, but all it would do is delay the enevitable crunch ! Unless it continued on for something like a decade or so allow earnings to catch up...

But do you think Britain can continue with above average growth for another 10 years ?

Possible if Britain is as lucky as its been over the last say 7 years.

As the deck is shuffled and the cards are dealt out.. does the chanceller call, raise or fold ?

Pal

One scenario where house prices might continue to increase is if we join the euro. Interest rates will probably fall slightly boosting economic activity resulting in inflation, however the Bank of England would not be able to raise interest rates to control it.

As Deemy said previously, house prices would rise as wages increase, although you can expect house prices to rise slower than inflation, resulting in real house price falls.

dougk_2

slater14 wrote:

As one poster said -

Doug,

Have you had your head in the clouds? I said "FACT interest rates are rising". What has been happening on your planet these last 6 months? On mine they have been "RISING".

Erm... last interest rate rise here in the UK was in September, 8 months ago - That is a FACT. Interest rates are still low as has been said - lower than the 8% historical average. Perhaps it is you living on another planet?

Pal

Given that you are both relying on time scales to back up your interest rate rising/falling argument, it is largely pointless. After all, interest rates have not, so far, gone up or down today, so does that mean that it is a fact that they are rising or falling? No. It means that they have stayed the same.

The FACT is that, over the last 12 years or so, interest rates have fallen significantly and are now below historical averages (for what that is worth).

The FACT is that the last few interest rate rises have all been upwards but interest rates are still below their historical average (which, again, might mean nothing).

Neither of these FACTS is important - What is important is what interest rates are GOING TO DO IN THE FUTURE, and any opinions on that are pure speculation.

Personally I think that the next change will be a rise, but like everyone else on this board I am just guessing based on historical averages and various charts and leading economic indicators.

Time will tell.

frugal_dougal_3

slater14 wrote:

Apart from Doug waving his magic dust over the housing bubble can any of you guys think of any scenario where prices may increase?

Yes, believe it or not there are still areas in the UK which are currently deprived but are potential hotspots for future price increases due to rejuvenation projects and development. It needs quite a lot of research to determine where these will be, and it needs more effort than to simply keep coming up with statistics from various sources, but the opportunities are there.

BTW I hate statistics. They are like a big cozy blanket that you can hide under once you have found the particular set that coincide with your viewpoint. Then you needn't come out again but just keep regurgitating them over and over ad infinitum.

And no, I haven't got my head in the clouds, in a bucket, or up my a**e. I just can't understand where all the entrepreneurial spirit has gone. Did the likes of Richard Branson or Alan Sugar ever spend their time on a forum whinging about the price of things, or did they turn it to their advantage?

kkk_3

Why do we all think we have a right to own a house? And why do we all want to? When you consider all the expenses related to buying - stamp duty, legal costs etc and then the cost of buildings insurance and maintenance it's patent nonsense to say it's just as expensive to rent. In many other countries, such as Germany, it's the norm to rent rather than own property. Perhaps we need to rid ourselves of the culture of home-ownership.

WHA

kkk wrote:

Why do we all think we have a right to own a house? And why do we all want to? When you consider all the expenses related to buying - stamp duty, legal costs etc and then the cost of buildings insurance and maintenance it's patent nonsense to say it's just as expensive to rent. In many other countries, such as Germany, it's the norm to rent rather than own property. Perhaps we need to rid ourselves of the culture of home-ownership.

We have a "culture of home ownership" because too many people think of a home as an investment and not simply a place to live. People are buying houses of size, location and price far beyond their means and needs, just because they hope to make a profit.

It's very like the endowment situation. In the 80's and 90's "everyone" wanted an endowment mortgage because they were seeing other people's endowments producing huge profits at the end. I know many people who completely ignored "common sense" and insisted on an endowment mortgage purely out of greed, in the misplaced hope that it would work out well for them as it did for their parents/neighbours/friends. When I took out my mortgage in the early 90s, everyone thought I was crazy for taking out a repayment mortgage instead of an endowment!

Then we had the dot.com bubble and the stock market crash. Again, people were ploughing money into stocks and shares, just to make a quick buck, despite it being blindingly obvious that there was little backing up high share values.

Now, people see others making shed loads of profit on their houses and greed takes over - they want to do the same. It's the herd instinct I'm afraid. It is common sense that "everyone" can't buy and sell a few houses and end up a full time property developer or have a £1/2 million pound house in the country. Yes, a lot of people have made "real" profits in the current boom. But even more people are only sat on "paper profits" and a massive mortgage, and they will only ever "see" their profits if they down-trade or sell completely.

Sometimes I feel in a minority. I "could" sell my house and move to a bigger one, but I don't "need" to. Instead of buying a tiny house and trading up, I saved for a few years and bought a small family house that is serving our "average" sized family very well. I could afford a bigger mortgage, but simply aren't motivated to "trade up". I don't want to take the "risk" of trading up, due to the expectation of severe price falls, possible negative equity etc. It wouldn't surprise me if we stayed in the house for another 10/20/30 years - probably until retirement anway.

I really and truly fear an almighty collapse. I honestly hope it doesn't happen, but after seeing the last property boom and bust, and the human misery caused by negative equity, I suspect that very bad times are ahead of us.