Whither house prices?

hurstpierpoint

I've got a couple of decisions to make which boil down to where house prices will be in 8/10 years.

Bearing in mind no-one has a crystal ball, present initiatives to stoke up sales and the elephant in the room that is the certainty of interest rates rising at some point it's beyond my ability to come up with a confident prediction I can work with.

We're talking semi rural West Midlands with good demand, at present.

Any thoughts? Thank you.

Generali

Given that, as you say, none of us can predict the future all you really have to go on is the trend.

So then you have a choice of which trend to use? Short-medium term (1-3 years) the trend has been very small nominal rises which means falls in real terms (after inflation that is).

Long term, UK house prices tend to rise with wages so about inflation +2% although it tends to be in fits and starts with a big rise in prices followed by stagnation or falling prices.

Personally, if I were buying a house as an investment I'd be looking for yield and treating capital growth as a bonus, something to cover depreciation of decor, carpets, kitchen etc.

pqrdef

First question has to be, where would prices be now, if it weren't for all the artificial distortions of the market?

Then you need to guess where the economy is going, and what artificial distortions there'll be in 10 years time.

Thrugelmir

hurstpierpoint wrote: »

I've got a couple of decisions to make which boil down to where house prices will be in 8/10 years.

Bearing in mind no-one has a crystal ball, present initiatives to stoke up sales and the elephant in the room that is the certainty of interest rates rising at some point it's beyond my ability to come up with a confident prediction I can work with.

We're talking semi rural West Midlands with good demand, at present.

Any thoughts? Thank you.

Buy a cheaper house. Pay less interest.

Speculating on capital values is like betting on the horses.

More than one way to make a "profit".

OffGridLiving

Thrugelmir wrote: »

Buy a cheaper house. Pay less interest.

Speculating on capital values is like betting on the horses.

More than one way to make a "profit".

Also, reduce risk by saving up a larger deposit and perhaps getting a long-term fix. I'm sure I saw a 10 year deal for 3.99% the other day. In the old days, you'd grab that rate like a drowning man grabs a lifebelt.

People need to stop worrying about trying to get this year's best deal and start looking at their financial security. A long-term mortgage deal is a solid foundation to build personal finances on.

grizzly1911

Is it to live in as a family home or a BTL.

I would go for them being a tad higher than they are now. But I wouldn't be looking to rely on capital appreciation.

If it is for a home then must be better to be paying down a mortgage than doing it for a landlord.

OffGridLiving

grizzly1911 wrote: »

If it is for a home then must be better to be paying down a mortgage than doing it for a landlord.

I think that would also hold true for a BTL. The consensus seems to be a long period of house price stagnation while the economy repairs itself, and if that is the case then there is no benefit to hanging on. The benefit to buying now is to get tenants in and immediately start paying down the mortgage.

Given a choice of waiting 5 years or buying now, the house purchase price would be about the same, but with buying now the remaining mortgage term would be 20 years instead of 25 and the LTV will be better, helping to acquire better mortgage products. The only caveat to this would be whether the buyer would qualify for the Help to Buy scheme, that I believe starts next year? Government assistance with a house purchase and a new build property would seem to be the ideal BTL opportunity.

grizzly1911

OffGridLiving wrote: »

I think that would also hold true for a BTL. The consensus seems to be a long period of house price stagnation while the economy repairs itself, and if that is the case then there is no benefit to hanging on. The benefit to buying now is to get tenants in and immediately start paying down the mortgage.

Given a choice of waiting 5 years or buying now, the house purchase price would be about the same, but with buying now the remaining mortgage term would be 20 years instead of 25 and the LTV will be better, helping to acquire better mortgage products. The only caveat to this would be whether the buyer would qualify for the Help to Buy scheme, that I believe starts next year? Government assistance with a house purchase and a new build property would seem to be the ideal BTL opportunity.

It is one thing to buy to meet a real need it is another for speculation.

OffGridLiving

grizzly1911 wrote: »

It is one thing to buy to meet a real need it is another for speculation.

It depends on perspective, long or short-term. I can't imagine too many people thinking they can buy a property, throw a bit of magnolia paint around and then sell it for a huge profit. Those days are long gone, thank goodness.

Someone buying a BTL on a long-term basis, to fund retirement as an example, will be more interested in rent returns than capital increases. The lower the mortgage, the greater the rental profit, the greater the retirement income.

Thrugelmir

OffGridLiving wrote: »

Someone buying a BTL on a long-term basis, to fund retirement as an example, will be more interested in rent returns than capital increases. The lower the mortgage, the greater the rental profit, the greater the retirement income.

Few BTL mortgages are on repayment basis. For the simple reason that the after tax income (i.e. net cash) isn't sufficent to meet the capital required to discharge the mortgage.

BTL was a fad born out of a rapidly rising property market where capital appreciation was the key. Without significant capital appreciation, property investment looks very different. Certainly when you look at the costs of owning a property for 30 plus years the returns diminish somewhat.

hurstpierpoint

Thrugelmir wrote: »

Few BTL mortgages are on repayment basis. For the simple reason that the after tax income (i.e. net cash) isn't sufficent to meet the capital required to discharge the mortgage.

BTL was a fad born out of a rapidly rising property market where capital appreciation was the key. Without significant capital appreciation, property investment looks very different. Certainly when you look at the costs of owning a property for 30 plus years the returns diminish somewhat.

I was pondering buying a larger family home, getting it paid for, and downsizing later. As we are happy where we are your point about capital appreciation is key. Without that it makes no sense (much like BTL in my opinion)

So, little return on savings and probably the same on property over the period I am looking at. Thanks for the pointers, back to the drawing board!