Half a million in Negative Equity

wymondham

http://www.bbc.co.uk/news/business-26389009


Looks like we need more schemes to push up house prices!

Thrugelmir

Or maintain low interest rates to allow people the scope to repay debt.

HAMISH_MCTAVISH

wymondham wrote: »

Looks like we need more schemes to push up house prices!

When there are no longer any areas of the country in which Negative Equity is a problem, the recovery will be complete.

Then we can get on with the next boom.

chucknorris

wymondham wrote: »

http://www.bbc.co.uk/news/business-26389009


Looks like we need more schemes to push up house prices!

It is possible to be in negative equity and still be better off than if you had been renting for a number of years.


When house prices fell it didn't particularly matter to me because I had no intention of selling, it is only relevant if you sell. Even then someone might be trading up and getting value by buying when prices are low.


EDIT: I'm not saying negative equity isn't bad, I'm just saying sometimes it sometimes isn't as bad as it first sounds.

wymondham

Agree - Negative equity is not necessarily bad. Just gives you less choices if things take a turn for the worst in your life. Its a little confusing how most headlines show how much house prices have gone up, then this one comes along ... make me wonder how widespread the rises have been?

HAMISH_MCTAVISH

wymondham wrote: »

... make me wonder how widespread the rises have been?

Why not just look at the widely available regional house price data?

Halifax, Nationwide and Land Registry all publish it.

antrobus

wymondham wrote: »

http://www.bbc.co.uk/news/business-26389009


Looks like we need more schemes to push up house prices!

According to some figures produced by HML, who are some kind of 3rd party mortgage administration company. I have no idea what they base their data on, but back in Sept 2011 they were similarly claiming that there were 800,000 households in negative equity. So perhaps the BBC headline should read '300,000 households no longer in negative equity'.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8748761/1.7m-home-owners-face-negative-equity.html

gingeralan

chucknorris wrote: »

It is possible to be in negative equity and still be better off than if you had been renting for a number of years.


When house prices fell it didn't particularly matter to me because I had no intention of selling, it is only relevant if you sell. Even then someone might be trading up and getting value by buying when prices are low.


EDIT: I'm not saying negative equity isn't bad, I'm just saying sometimes it sometimes isn't as bad as it first sounds.

If you can service the debt it is a very fine line, you are technically bankrupt if your assets do not exceed your liabilities therefore I would suggest it is just down to forbearance from lenders who could not afford to acknowledge this are also technically bankrupt.

I suppose what I am saying is it is not a good idea to purchase if you feel that there is a significant chance of property value dropping to below your outstanding debt then you are taking a serious risk which the media and government seem to want to play down. I am not on about long term trends before we even start, I am on about short sharp shocks which do actually affect people who buy at the wrong time in the cycle.

It is not possible to predict with any degree of certainty but I feel that if you are looking to buy now and cannot realistically put down 20%+ deposit you should not consider buying. This risk posed by increasing interest rates and reducing property values puts you in a financially risky position along with reducing ones ability to move should the need arise.

CLAPTON

gingeralan wrote: »

you are technically bankrupt if your assets do not exceed your liabilities .

When did this become the law?

chucknorris

gingeralan wrote: »

I suppose what I am saying is it is not a good idea to purchase if you feel that there is a significant chance of property value dropping to below your outstanding debt then you are taking a serious risk which the media and government seem to want to play down. I am not on about long term trends before we even start, I am on about short sharp shocks which do actually affect people who buy at the wrong time in the cycle.


It is not possible to predict with any degree of certainty but I feel that if you are looking to buy now and cannot realistically put down 20%+ deposit you should not consider buying. This risk posed by increasing interest rates and reducing property values puts you in a financially risky position along with reducing ones ability to move should the need arise.

Risk has to be considered with the potential reward, if you are talking about investment property then that is straight forward. As well as the financial risk of buying then prices falling, there is also the risk of not buying and prices rising. You also have to decide where to put your money, in cash and lose for sure due to inflation or in the stock market where you could also end up in negative equity (and also be paying rent if you don't own).


Additionally if you are talking about buying your own home then there is more to consider over and above mere financial considerations.


I obviously wish that I bought in the last few years, but then again although property has been good for me in the past, as I approach retirement (4-10 years) I was (am) also trying to be sensible and head for a more diversified portfolio and also take on less risk and less property to manage. I am therefore making an effort to invest in the stock market and also my pension (both DB additional pension purchase and my SIPP which is currently also in shares). My portfolio (excluding my home) is currently:


53% property
21% shares
15% pension
11% cash


EDIT: What further murks the waters is that my wife's money is almost entirely in property (not incl. in above figures)

gingeralan

CLAPTON wrote: »

When did this become the law?

While I see your point that you are not bankrupt unless you go through court, I perhaps should have said insolvent.