how many REALLY think there'll be a crash rather than a stabilisation ?

bristol_pilot

If the housing market does not correct following a boom, then this will be virtually unique in history. In almost all markets a correction in real prices follows a boom - be it houses, shares, tulips or whatever. The question of course is WHEN, because the greatest rises in markets often occur just before the peak.

I too remember the last house price crash - I bought my first property in 1990 partly because I felt if I didn't get on the ladder then that I would never be able to afford it. Within 18 months that place was worth half what I paid for it and it was 2002 before it was again back to what I paid for it.

It is often said that its different this time for various reasons....the internet, immigration, buy-to-let.....but to me the vibe now is very similar to about 1989 - asking prices continuing to rise quickly but some property like 1-bed flats in the north starting to "stick", especially property with "issues" or poorly presented. The next stage is prices continuing to rise further but a big fall in sales volumes, as sellers refuse to reduce prices. You need a certain momentum of forced sellers to really tip the market, but this will come as consumers tighten their belts, the banks tighten up on cheap credit and unemployment and fear of unemployment starts to rise. The repossessions etc come much much later, we were well into the last crash before that was headline news.

poppy10_2

Erm... what actually is the average salary in the UK then?

Guy_Montag

Median is something like 25k; median full time is about £30k

Of course this ignores tax credits

beingjdc

Guy_Montag wrote: »

Median is something like 25k; median full time is about £30k

Of course this ignores tax credits

Erm, Median Full Time was £23250 in April 2006, so unless it's rocketed in 12 months, I think it's rather less! Average is a bit more because of top-end bonuses, footballers etc.

Guy_Montag

beingjdc wrote: »

Erm, Median Full Time was £23250 in April 2006, so unless it's rocketed in 12 months, I think it's rather less! Average is a bit more because of top-end bonuses, footballers etc.

I stand (next to pinkshoes) corrected.

Flutter

First post. Hi all.

Just wanted to say reading this thread has scared me lol.

Me and OH have been looking for a house for a long time, we are close to putting an offer on a house soon. (FTB) Don't know whether to bother or not now?

Turnbull2000

Flutter wrote: »

First post. Hi all.

Just wanted to say reading this thread has scared me lol.

Me and OH have been looking for a house for a long time, we are close to putting an offer on a house soon. (FTB) Don't know whether to bother or not now?

Honestly, that's not for us to decide. It's for you to choose.

(or alternatively, if you wish to think it through again - start a new thread outlining your earnings, location, prices and property type you're looking at, career progression and local rental costs!)

Guy_Montag

Flutter wrote: »

First post. Hi all.

Just wanted to say reading this thread has scared me lol.

Me and OH have been looking for a house for a long time, we are close to putting an offer on a house soon. (FTB) Don't know whether to bother or not now?

Can you afford it now?
At what point (with interest rates) can you not afford it? (Consider a five/ten year fix)
Are you planning on staying in the same property for a substantial length of time? (five+ years or two babies)
Are you planning on buying a new build? (Make sure you get a BIG discount)
Do you have stable or transferable jobs? (e.g. not a dog groomer and a car salesman)
Think carefully, study the market, think again.

Have another think about it.

Some people (myself included) have been expecting a crash since 2005 (& before) - just because it's not happened yet doesn't mean it won't; if it does it won't be overnight it will take years to hit the bottom; it might not happen for some years; it might not happen at all.

Generali

poppy10 wrote: »

Erm... what actually is the average salary in the UK then?

Link

The results of the 2006 ASHE show that median weekly pay for full-time employees in the UK grew by 3.7 per cent in April 2006 to reach £447. Median earnings of full-time male employees was £487 per week in April 2006; for women the median was £387.

The top 10 per cent of the earnings distribution earned more than £886 per week, while the bottom 10 per cent earned less than £244. Between April 2005 and 2006 the distribution of gross weekly pay widened, with a 3.7 per cent increase at the bottom decile, and a 4.2 per cent increase at the top decile.

Can people not get their heads around the fact that if house price inflation rises faster than wages, there comes a point at which houses become unnafordable!??

If we had HPI of 10% a year, the average cost of a house in the UK would be over a million pounds within 20 years. Does anyone really believe that will happen!!??

Ehm Yes!!! and where have you been living for the last 2 years?And just out of curiosity how are property prices on THE MOON!!!;)

Take a look at compound interest and then reconsider your post. If HPs rise at a rate faster than incomes, eventually it becomes impossible to afford the interest payments on the mortgage.

An example:

Wage=£30k pa. FTB studio flat = £90k. Flat costs 3 yrs gross income.

Wages rise at 5% pa. Studio flat rises at 10% pa. n=number of years.

After n years:

Wage = 30,000x(1.05^n). Flat=90,000x(1.1^n)

If n=5, wage = £38,288. Flat = £144,956. Flat costs 3.78 yrs gross income

If n=10, wage = £48,867. Flat=£233,437. Flat costs 4.77 yrs gross income

If n=30, wage = £129,658. Flat = £1,570,466. Flat costs 12.11 yrs gross income.

It seems to me that it is more likely that HPs rising faster than wages is ultimately unsustainable. When that day will come is open to argument.

PS This is maths not stats. As far as I know compound interest works in the same way on Earth or any heavenly body. Perhaps a NASA MSEer could advise.

bristol_pilot

Flutter wrote: »

First post. Hi all.

Just wanted to say reading this thread has scared me lol.

Me and OH have been looking for a house for a long time, we are close to putting an offer on a house soon. (FTB) Don't know whether to bother or not now?

The full house price cycle in the UK seems to be between 16 and 18 years, so if you are planning that the property will be your family home for 15, 20, 30 years then go ahead and buy.

Otherwise, you could compare the monthly cost of an Interest Only 25 year mortgage on the property (use IO assuming no deposit, even if you are intending getting another type of mortgage) with the monthly rental on a similar property in the same area. If it is vastlty cheaper to rent than an IO mortgage, as it now is in many areas, do not buy. If it much cheaper to buy on this basis than rent, then buy.

Opinion, not advice, of course.