'We've reached a tipping point' Signs of house price weakness

wotsthat

Jason74 wrote: »

So I'd love you to explain to me, how was buying in 2002 a bad plan. And given that my flat could have been bought for about £140k in 2010, I'd be interested in your thoughts on how buying it in 2010 and setting off onthe path that imho has worked so well for mecould have been considered a bad plan either.

- you've admitted you're £34k 'down'
- there's a block of flats in Edinburgh where the roof has blown off for three consecutive winters
- you need to sell to get away from horrible neighbours
- renting a shared room in an HMO would have increased your chances of meeting new sexual partners whilst queuing for the toilet
- you think London prices have increased but they haven't.
- you own 100% of an illiquid depreciating (it is I tell you) asset
- where do you get an average rent of nearly £1,100/ month? You can sofa surf for much less than that.
- you had to have a mortgage you filthy beast

Seriously though - some interesting numbers there. I live in the Midlands where rental yield seems to be higher so the buying breakeven is achieved more rapidly.

Crashy_Time

In_For_A_Penny wrote: »

Even the headline is utterly contradictory.

Yes, the whole article is as well, but they are talking about a CRASH, and headlines like these affect sentiment. The Times is at it today as well. Things are coming off the boil and the PTB have limited means now to pump it back up (even if they wanted to, and I don`t believe they do now, it was always about protecting the banks) They never did manage to get sales volumes back up either did they?

wotsthat

Crashy_Time wrote: »

Your flat is in Edinburgh? There is a link on this thread about a flat in Gorgie trying to sell for similar to what it went for ten years ago. Of course yours was in one of the "special" post codes if IRC?

If we clubbed together and gave you a flat in Edinburgh you'd still be worse off than if you'd just bought it in 1997 yourself.

Rota

Crashy_Time wrote: »

Yes, the whole article is as well, but they are talking about a CRASH, and headlines like these affect sentiment. The Times is at it today as well. Things are coming off the boil and the PTB have limited means now to pump it back up (even if they wanted to, and I don`t believe they do now, it was always about protecting the banks) They never did manage to get sales volumes back up either did they?

So at what % drop off current levels/values would you buy?

Rota

wotsthat wrote: »

- you've admitted you're £34k 'down'
- there's a block of flats in Edinburgh where the roof has blown off for three consecutive winters
- you need to sell to get away from horrible neighbours
- renting a shared room in an HMO would have increased your chances of meeting new sexual partners whilst queuing for the toilet
- you think London prices have increased but they haven't.
- you own 100% of an illiquid depreciating (it is I tell you) asset
- where do you get an average rent of nearly £1,100/ month? You can sofa surf for much less than that.
- you had to have a mortgage you filthy beast

Seriously though - some interesting numbers there. I live in the Midlands where rental yield seems to be higher so the buying breakeven is achieved more rapidly.

Genius! :rotfl:

gbsilp

Rota wrote: »

Genius! :rotfl:

Well, the principal worked for thequant ("Roger the Lodger"), and he is clearly a genius..... :rotfl:

Crashy_Time

Jason74 wrote: »

Mine's gained about £110k since then. Of course, that gain means nothing to me, as the primary value of my (mortgage free) little pad is that it provides me with a comfortable place to live in an area I really like. Indeed, in a funny way, it leaves me worse off, as if I did want to buy a bigger home in the same area (and given I really like where I live, I wouldn't want to move far), the price of that will have gone up even more (probably £150k+).

But the big point, is that the value is irrelevant. I bought my flat for £92k in 2002. I've now paid off that 92k, incurring about £33k of Mortgage interest in the process. So my Maisonette has cost me £125k all in. If you want to include improvements I've made, the total rises to about £140k, and leasehold service charges bring the grand total to around £160k over 12 years.

When I bought the flat, it would have rented for about £650 per Month. It now rents for about £1,100. I can't say I know what the rental value was each year in between, but assuming roughly linear progression from the original £650 to the current £1,100, I'd have spent a total of around £126,000 renting the same property for the last 12 years.

So as of today, I'm £34,000 "down" in pure cash terms by buying rather than renting. But, compared to renting, I'm now gaining by £1,000 per Month, every Month, for life. Assuming I live for another 30 years (I'm 40 so that's a fairly modest aspiration), that will leave me £326,000 up over my lifetime before a penny of asset value is considered.. And if anything, that gain will increase rather than decrease over time.

I also have full security of tenure (with a 970 odd year lease, I don't have to worry about that in my lifetime!), and have the property kitted out just as I want it. As an aside, I also have an asset worth c£250k. But like I say, that's almost irrelevant when compared to the security and lack of future costs that owning my own home has given me. If it was still only worth the £92k I originally paid for it, I'd still be up on the deal.

So I'd love you to explain to me, how was buying in 2002 a bad plan. And given that my flat could have been bought for about £140k in 2010, I'd be interested in your thoughts on how buying it in 2010 and setting off onthe path that imho has worked so well for mecould have been considered a bad plan either.

If it was a plan that suited you, well done, glad you achieved your goal. I just think that there will be a correction and that property prices will drift down for years. If you want to believe that a flat bought for 92k in 2002 is going to continue to be worth 250k+ going forward, well good luck with that as well.


I have calculated my rental costs over the 17 year period again, and done it more accurately, as there were periods of paying room rates at 200 - 300 p.m in shared houses/flats, it comes out at around 71k. So about 4k a year, 350 p.m on average? I am happy with that batting average for housing costs, and am happy to have been able to live in 8 decent properties over the years.


I wouldn`t want to be highly leveraged in this market, and you have taken yourself out of that position, others won`t be so lucky. Worst case for you is that you paid a chunk of money into a property and you will lose a chunk of that money going forward, but you will still have a place to live.


You save some rent every month, but you will lose money that you have already paid into the property as prices correct. Others saving for a house are gaining every month that your house decreases in value. In a crashing market many average properties are going to lose a lot more in a year than my historical rental costs?

Crashy_Time

wotsthat wrote: »

If we clubbed together and gave you a flat in Edinburgh you'd still be worse off than if you'd just bought it in 1997 yourself.

Doesn`t help Robmatic though does it? People buying in the "special" postcodes of Edinburgh in 2010 probably thought their flat would be worth 50k more by now, not 5, that hardly covers solicitors costs?

Crashy_Time

Rota wrote: »

So at what % drop off current levels/values would you buy?

I would have to see a reversal in the way credit is given to the masses. That happened already because the system had a meltdown and the banks couldn`t lend, but it is happening again now as the banks choose not to repeat the mistakes of the past (See the latest RBS advert about NOT doing 0% transfers. They are telling people that excessive borrowing is no good anymore, that is a big shift)

ukcarper

Crashy_Time wrote: »

If it was a plan that suited you, well done, glad you achieved your goal. I just think that there will be a correction and that property prices will drift down for years. If you want to believe that a flat bought for 92k in 2002 is going to continue to be worth 250k+ going forward, well good luck with that as well.


I have calculated my rental costs over the 17 year period again, and done it more accurately, as there were periods of paying room rates at 200 - 300 p.m in shared houses/flats, it comes out at around 71k. So about 4k a year, 350 p.m on average? I am happy with that batting average for housing costs, and am happy to have been able to live in 8 decent properties over the years.


I wouldn`t want to be highly leveraged in this market, and you have taken yourself out of that position, others won`t be so lucky. Worst case for you is that you paid a chunk of money into a property and you will lose a chunk of that money going forward, but you will still have a place to live.


You save some rent every month, but you will lose money that you have already paid into the property as prices correct. Others saving for a house are gaining every month that your house decreases in value. In a crashing market many average properties are going to lose a lot more in a year than my historical rental costs?

So about £35k down If you had bought that £45k flat 17 years ago you would have paid for it 2 years ago