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frugal_dougal_3

meanmachine,

If there was a house right now that was within your budget, would you buy or would you hold on and wait for the possibility that it may or may not come down in price?

This isn't a trick question, it's just that I keep hearing that FTB's can't afford to buy anything, yet with a bit of research I have found properties priced at under £85k.

Maybe they are just being to rigid about where they want to live, but few of us stay in our first house forever, that's why it's called a ladder.

dougk_2

I don't think the price of a house in the SE will get to 3.25 x the "national" average salary. This would mean the average house would have to drop to somewher like £80k.... its not going to happen.

Why buy now.. because as prices increase as they will at some stage (even at say 2%) they will cost more.... so save money and buy now.. also if you are renting your money is paying someone elses mortgage (or just their pocket) and not helping you.

meanmachine_2

dougk wrote:

I don't think the price of a house in the SE will get to 3.25 x the "national" average salary. This would mean the average house would have to drop to somewher like £80k.... its not going to happen.

Why buy now.. because as prices increase as they will at some stage (even at say 2%) they will cost more.... so save money and buy now.. also if you are renting your money is paying someone elses mortgage (or just their pocket) and not helping you.

Common misconception. Now I'm beginning to see why you've bought at the peak of the market.

If I rent @ £800pcm I can put aside £500 per month in a 5% interest account.

If I buy the same property, currently I would have to pay around £1300.

Imagine that house prices drop by 5%. In 12 months time I have a larger deposit and can afford the same property with a lower outlay.

I also benefit if property prices stay @ 0% (losing 3% in real terms).

It's a risk, of course. But there's no way I'm buying in a falling market. That's just illogical.

meanmachine_2

dougk wrote:

I don't think the price of a house in the SE will get to 3.25 x the "national" average salary. This would mean the average house would have to drop to somewher like £80k.... its not going to happen.

But they were 80K only four years ago. What's changed in the last four years? Have wages increased by 300% in that time? No. All that's happened is that debt has become cheaper.

If interest rates go back to their historical average of 8%, who could afford a property 5.5 times the average salary? No one.

meanmachine_2

frugal_dougal wrote:

meanmachine,

If there was a house right now that was within your budget, would you buy or would you hold on and wait for the possibility that it may or may not come down in price?

This isn't a trick question, it's just that I keep hearing that FTB's can't afford to buy anything, yet with a bit of research I have found properties priced at under £85k.

Maybe they are just being to rigid about where they want to live, but few of us stay in our first house forever, that's why it's called a ladder.

Aah now you see - this is the BIG problem with an over inflated housing market. Because the ladder's got longer, every rung has become stretched. Now, if someone wants to move up the next rung they have to pay 50K more. Just five years ago the next rung on the ladder would have been around £10K more. So therefore in a flat, over inflated housing market no one can move anywhere - not unless wages start soaring by 30% to catch up. The result: stagnation.

dougk_2

So what you are saying is you can afford £1300 per month?

In which case that means you could afford a £200k repayment mortgage!

£800 a month would cover a £180k interest only mortgage , and there are plenty of properties about for that price outside of London and you could use the other £500 a month to pay some of the mortgage back. Which means over the year you would pay £6k back and in effect own an additional 3% of the house.

It would take a drop of 50% to get back to prices of 4 years ago and if this happens the country is knackered.

So.... to summerise its not you cannot afford to buy - its you choose not to buy because you think prices will drop and you don't want to pay current prices... thats fine we all want to buy things for cheaper prices!

meanmachine_2

dougk wrote:

So what you are saying is you can afford £1300 per month?

In which case that means you could afford a £200k repayment mortgage!

£800 a month would cover a £180k interest only mortgage , and there are plenty of properties about for that price outside of London and you could use the other £500 a month to pay some of the mortgage back. Which means over the year you would pay £6k back and in effect own an additional 3% of the house.

It would take a drop of 50% to get back to prices of 4 years ago and if this happens the country is knackered.

So.... to summerise its not you cannot afford to buy - its you choose not to buy because you think prices will drop and you don't want to pay current prices... thats fine we all want to buy things for cheaper prices!

No sadly my income at the moment is very erratic (I'm self employed), which is the other reason why I cannot be tied to an over-priced mortgage at the moment.

As I say, I'm hoping the market and my personal circumstances coincide to allow me to buy. But right now it's madness.

meanmachine_2

dougk wrote:

It would take a drop of 50% to get back to prices of 4 years ago and if this happens the country is knackered.

Only for those who have been stupid enough to MEW their "property profit" and waste it on flash cars and holidays. Why should anyone else be affected?

meanmachine_2

dougk wrote:

So what you are saying is you can afford £1300 per month?

In which case that means you could afford a £200k repayment mortgage!

£800 a month would cover a £180k interest only mortgage , and there are plenty of properties about for that price outside of London and you could use the other £500 a month to pay some of the mortgage back. Which means over the year you would pay £6k back and in effect own an additional 3% of the house.

It would take a drop of 50% to get back to prices of 4 years ago and if this happens the country is knackered.

So.... to summerise its not you cannot afford to buy - its you choose not to buy because you think prices will drop and you don't want to pay current prices... thats fine we all want to buy things for cheaper prices!

Oh and care to crunch those numbers again, but with a mortgage rate of 10% (assuming a fairly modest IR rate of 8%)? Seeing as how you've condemned me to an interest only 25 year mortgage, what might I be saving were I to continue renting rather than trying to maintain a mortgage under those circumstances?

nelly_2

Dougs one of these people who cant bear to lose 50p in a property price drop.

I hope it falls through the floor just to see them all cry