First time buyer, when is best time to buy?

macaque_2

blinko wrote: »

he has a good point, the increase in population will increase demand purely on a basic supply and demand level.

Millions of people might want a new Ferrari but very few qualify as legitimate members of the demand pool. Sustainable demand for houses has all but collapsed and increasing the population by another 10 million won't make a jot of difference (unless these 10 million new citizens are millionaires). Demand equals the number of people with both the desire and means to buy. Economists call this a demand curve. At current prices, the pool of people with the income (or equity) to buy has shrunk to historically low levels. All we are seeing is speculative buying supported by cheap money.


House prices will fall heavily over the next generation and this is unavoidable. The Japanese learned this lesson as did the Americans and Germans.

blinko

macaque wrote: »

Millions of people might want a new Ferrari but very few qualify as legitimate members of the demand pool. Sustainable demand for houses has all but collapsed and increasing the population by another 10 million won't make a jot of difference (unless these 10 million new citizens are millionaires). Demand equals the number of people with both the desire and means to buy. Economists call this a demand curve. At current prices, the pool of people with the income (or equity) to buy has shrunk to historically low levels. All we are seeing is speculative buying supported by cheap money.


House prices will fall heavily over the next generation and this is unavoidable. The Japanese learned this lesson as did the Americans and Germans.

The only things that will make house prices fall is a massive inflow of properties. A major crash of some sort as per 5 years ago which restricts ability to borrow OR an increase in interest rates which increases the cost of borrowing OR of course a massive increase in wages (unlikely)

Of these interest rates have to rise BEFORE ANY CRASH/reduction in ability to borrow is possible. Ultimately house prices will increasely become unaffordable and poor people will be pushed further out of London.

In the short term house prices will rise rampantly, expect 5 - 10% gains minimum PA. Medium term, bank will raise rates OR withdrawl of H2B will slow market to 2.5 - 5% gains PA, medium - long term there will be a crash of some sort expect a correction of approximately 10 - 15%, although this will depend on the reason for the crash and whether further housing supply will come on board by then (it should've) and then a continued uptrend....

Loughton_Monkey

HAMISH_MCTAVISH wrote: »

......

It is difficult to overstate just how critical a shortage of housing the UK now has, and that strong a fundamental imbalance can usually only have one possible long term outcome on prices.

They'll soar.

This is the nub of the issue.

The same would apply to any commodity, except that with most others (e.g. food types) there are invariably 'substitutes' that can take away the worst of the supply/demand imbalance.

But with something as basic as housing, there's really no other substitute other than 'overcrowding'. We can argue that there is a huge overcapacity out there. I and Mrs LM live in a 4 bed house, as millions of other couples do - and 3 bed.....

A lot of the slack is already being taken up by 20/30-somethings living at home when they would prefer their own house. But I for one will not be renting out a room and nor will most homeowners sitting on spare bedrooms.

So it's prices increases until such time as either enough extra houses are built, or the population dramatically decreases. I simply cannot see either happening this side of 2020.

This perennial debate will get hundreds more posts expressing their dislike/disgust/unfairness of this concept. This is understandable. But I cannot believe there will be any that put forward any rational counter argument on the 'fact'.

macaque_2

blinko wrote: »

The only things that will make house prices fall is a massive inflow of properties. A major crash of some sort as per 5 years ago which restricts ability to borrow OR an increase in interest rates which increases the cost of borrowing OR of course a massive increase in wages (unlikely)

There is also the matter of legislation. Tax concessions on home ownership are generous and tax collection on property investment is lax. If the tax rules changed or implementation was tougher, the speculative element of property transactions would collapse and that would wipe out the UK property market.


Why would the government do this? The answer is for the same reasons that they pushed up house prices in the first place i.e. to win votes. Whilst house prices were rising, home owners voted in favour of property inflation. This vote winning formula however falls apart when people start buying multiple homes. A person who owns 10 houses has one vote. Ten people denied the opportunity to buy a home have 10 votes.

HAMISH_MCTAVISH

Loughton_Monkey wrote: »

This is the nub of the issue.

It is indeed.

Such a shame the usual suspects waste so much time distracting the debate and talking about symptoms, and not enough time looking at the cause.

There is only one cause of house prices being high in the UK, and it's a stonking great shortage of housing.

Everything else (higher lending, etc) is a symptom, not the cause.

with something as basic as housing, there's really no other substitute other than 'overcrowding'. We can argue that there is a huge overcapacity out there. I and Mrs LM live in a 4 bed house, as millions of other couples do - and 3 bed.....

Well, I don't think I've ever seen anyone argue there is a shortage of bedrooms....

There isn't, yet.

But of course you'd fully expect society to carry some spare capacity in 'bedrooms'. People do visit friends, parents, grandparents, etc, and I find a bedroom is usually far more comfortable than a tent.;)

Of course a large percentage of these 'spare' bedrooms are actually used for something else, like storage or home offices.

A lot of the slack is already being taken up by 20/30-somethings living at home when they would prefer their own house.

Indeed.

Several million of them at last count.

Although that is a symptom of the shortage as well.

The shortage of houses causes prices to rise, until sufficient people are excluded from buying or renting that supply and effective demand equalise.

Where the usual suspects got it badly wrong was in thinking high prices were the causal factor in this. And that if someone could wave a magic wand and "let prices fall" then all of a sudden there would be millions of spare houses for these people to buy.

Which is of course complete nonsense.

If there were millions of spare houses for these people to buy, prices wouldn't be high to ration the limited supply to start with.

But I for one will not be renting out a room and nor will most homeowners sitting on spare bedrooms.

Funny you should mention that though....

Record numbers of people now do, well over a million, with an average room rent of around £400 per month and mostly tax free thanks to the 'rent a room' allowance.

These sorts of things, lodgers, HMO's, B&B through councils, multi-family households, etc, have to a large extent masked the shortage so far and answer the usual suspects tedious questions like "so why aren't there thousands of homeless people sleeping rough?"....

Of course there are limits to how much we can tinker around the edges, and homelessness has shot up in recent years as well.

So it's prices increases until such time as either enough extra houses are built, or the population dramatically decreases. I simply cannot see either happening this side of 2020.

This perennial debate will get hundreds more posts expressing their dislike/disgust/unfairness of this concept. This is understandable. But I cannot believe there will be any that put forward any rational counter argument on the 'fact'.

Agreed.

There is a shortage, as even the most blinkered of bears now concede, and that shortage is worsening daily.

Shortages in most things are rationed through price.

I suppose we could try rationing through lotteries or waiting lists instead, but that seems even less practical than the current system.

Loughton_Monkey

Loughton_Monkey wrote: »

.....
This perennial debate will get hundreds more posts expressing their dislike/disgust/unfairness of this concept. This is understandable. But I cannot believe there will be any that put forward any rational counter argument on the 'fact'.

macaque wrote: »

...Tax concessions on home ownership are generous and tax collection on property investment is lax. If the tax rules changed or implementation was tougher, the speculative element of property transactions would collapse and that would wipe out the UK property market.....

I rest my case.

cells

HAMISH_MCTAVISH wrote: »

It is indeed.

Such a shame the usual suspects waste so much time distracting the debate and talking about symptoms, and not enough time looking at the cause.

There is only one cause of house prices being high in the UK, and it's a stonking great shortage of housing.

Everything else (higher lending, etc) is a symptom, not the cause.



Well, I don't think I've ever seen anyone argue there is a shortage of bedrooms....

There isn't, yet.

But of course you'd fully expect society to carry some spare capacity in 'bedrooms'. People do visit friends, parents, grandparents, etc, and I find a bedroom is usually far more comfortable than a tent.;)

Of course a large percentage of these 'spare' bedrooms are actually used for something else, like storage or home offices.



Indeed.

Several million of them at last count.

Although that is a symptom of the shortage as well.

The shortage of houses causes prices to rise, until sufficient people are excluded from buying or renting that supply and effective demand equalise.

Where the usual suspects got it badly wrong was in thinking high prices were the causal factor in this. And that if someone could wave a magic wand and "let prices fall" then all of a sudden there would be millions of spare houses for these people to buy.

Which is of course complete nonsense.

If there were millions of spare houses for these people to buy, prices wouldn't be high to ration the limited supply to start with.



Funny you should mention that though....

Record numbers of people now do, well over a million, with an average room rent of around £400 per month and mostly tax free thanks to the 'rent a room' allowance.

These sorts of things, lodgers, HMO's, B&B through councils, multi-family households, etc, have to a large extent masked the shortage so far and answer the usual suspects tedious questions like "so why aren't there thousands of homeless people sleeping rough?"....

Of course there are limits to how much we can tinker around the edges, and homelessness has shot up in recent years as well.




Agreed.

There is a shortage, as even the most blinkered of bears now concede, and that shortage is worsening daily.

Shortages in most things are rationed through price.

I suppose we could try rationing through lotteries or waiting lists instead, but that seems even less practical than the current system.

Note that another big way the market is 'solving' the problem of not enough homes built is by increasing the size of the private rental sector vs the total stock.

Private renters tend to live more to a house. They live more densely than OO or social.

In this shortage what has happened during the last 5 years (during which time the shortage got exponentially worse) is that a lot of OO stock has converted to prvate rental. When I last checked it was around 300-400k homes converting annually.

Contrary to popularity belief bwfore about 2004-2005 there was no big net increase in PR ie no increase in BTL. The private rental stock was about 2.5m units now it's nearly doubled to 5 million units.

So instead of 5 million people in OO houses you have say 6 million people in PR


So as long as the shortage persists there will be a huge huge shift from OO to PR just to home people. This is the real big problem. It takes wealth from the masses ans gands it over to the few.

By 2025 at current build rates the private rental sector will increase from almost 5 million to over 7.5 million. Sobin two decades 2005-2025 we could potentially have gone from 2.5m privately rented to 7.5m

LydiaJ

Swafe wrote: »

Im looking at this as more of an investment than a house to live in, that is the bonus, as I say - I live at home, so I dont pay rent and I dont need a place to live, my sticking point if buying a house at the right time so make my money go as far as it can,

How old are you? The important question you should be asking yourself is how long you want to go on living in your parents' house, and when you want a home of your own? If you're 22 and have a good relationship with parents who've adjusted to the fact that you're now an adult, it may make sense to wait a bit longer while you build up a bigger deposit. If you're nearer 30, or if your parents are treating you like a kid rather than an equal, then it's time to move on if you can afford it.

Don't listen to anybody who's certain what the market is going to do in the future, because nobody can know, and nobody does know. People can guess - my guess is that outside London prices aren't going to move very far or very fast in any direction for a while yet - but nobody actually knows. Get on with your life, have a home to live in, and don't try to speculate.