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

Percy1983

IveSeenTheLight wrote: »

I take it you meant you can't see how long term renting can put you in a better position than buying.

Whoops, you are correct, thanks!

Thrugelmir

Originally Posted by HAMISH_MCTAVISH
So imagine what will happen once lending gets back to something resembling normality, at levels some 30% to 40% higher than today?

It won't.

The hard facts are that mortgage lending basically doubled between 2003 and 2008 from £600 billion to £1,200 billion.

As we know now the lending models were unsustainable, i.e. Bradford & Bingley, Ulster Bank (RBS), Northern Rock and HBOS.

The huge intervention in the form of SLS, SGS, QE, Funding For Lending, Help to Buy Scheme etc. Is all part of the engineering operation that's been required merely to stablish the banks.

There's no conceivable way that lending can grow 30% - 40% against a backdrop of shrinking bank balance sheets. The credit boom is well and truely over.

Crashy_Time

Rota wrote: »

Do you have some stats on how many have MEWed and how much?
Renting has been the best choice so far you say. Where will you live when you retire?

Insurance is next to nothing (about £15 a month) so you hardly count that as a "cost". Interest on a loan is how a loan works. When a mortgage is paid off the house is worth more than everything you have put in so I don't see the issue.

I've got a new question for the bears. At which point do you realise you are wrong? Is it 10, 15, 20 years or longer? That's a long time between drinks.

Have you never heard of negative equity?

IveSeenTheLight

Crashy_Time wrote: »

Have you never heard of negative equity?

LOL.

Can you please show an example of a property which is mortgage free, but is worth less than the cost it took to pay off the property?

I'm sure you'll consider that there would have also been a cost for living in a property during the same time frame, but this will not be needed to negate your assumption.

wotsthat

Crashy_Time wrote: »

Have you never heard of negative equity?

I've never heard of anyone paying off their mortgage and still being in negative equity

Crashy_Time

HAMISH_MCTAVISH wrote: »

If I had to rent my house I'd pay £400 a month more than my repayment mortgage.

Renting was more expensive from day one.



I think you are very wrong about that.

17 years ago the average house price in Scotland was around £52,000, and the average flat price in Scotland was around £30,000.

Even allowing for the fact that you're in Edinburgh, you could have bought a decent enough flat in the late 90's for under 40K.

Had you done so, the repayment mortgage payments to date would have totalled significantly less than your rent (don't forget the last 7 years have been at very low interest, and the first 10 years would have averaged 5% interest), so you could have paid the equivalent rent amount and cleared off the mortgage in full.

You would now own the flat outright and be paying no rent.

Insurance and repairs might be a few grand.... But they're not a huge amount of money, and I expect you'll have had a number of moving costs in there as a renter as well.

You really would need to be financially illiterate to think it was a better move to rent for the last 17 years than buy.

In Edinburgh, around 1998, 40 - 50k would have got you a very basic flat in the Easter Rd/Gorgie/Dalry areas if you wanted to be central. The downside is that you have no control over neighbours, and the maintenance costs can be high, I know of a block where the roof blew off every winter for a few years, and the whole stair was in for a few thousands every time. (the council no longer oversee this shared repair scheme as I understand it, so good luck getting the money from those below now)


Basic flats in Edinburgh are back below 70k, so they have gone nowhere in price, and rents have gone nowhere either, and of course if you bought the 50k flat with a mortgage you paid much more over the term of the mortgage, not to mention those who MEW`ed when things started to get silly. Many will be in a worse financial situation than when they started.


Moving costs are the price of a rental van for a few hours.


A cash buyer in 1998 could have done OK, but they would have had to sell at the peak and would still need to live somewhere in an over valued market.


Cash buyers who wanted to stay put in 1998 did OK, those who just feared missing the boat won`t do so well. Those who also MEW`ed will do very badly.

Jason74

Crashy_Time wrote: »

Have you never heard of negative equity?

OK, I think I've just rumbled your game. You must be a full on raging housing bull who's set up a parody account to make anyone with bearish sentiments look stupid by putting bearish arguments in a really dumb way. There's just no way that some of the stuff you come out with can be genuinly held ideas. Indeed, I almost wonder whether "you" are in fact something that Hamish has created for humour value.

IveSeenTheLight

wotsthat wrote: »

I've never heard of anyone paying off their mortgage and still being in negative equity

It's even worse than that.
Maybe they need to understand what negative equity is.

Negative equity occurs when the value of an asset used to secure a loan is less than the outstanding balance on the loan.

Therefore by definition, a mortgage free property has no loan secured against it, therefore cannot be in negative equity.

We do understand that what he is alluding to is a price reduction to reduce below the property and repayment costs, however I am in agreement with you that I am not aware of a property which has reduced below the repayment costs after the mortgage-able period as generally they have garnered sufficient HPI during that period.

Crashy_Time

wotsthat wrote: »

I've never heard of anyone paying off their mortgage and still being in negative equity

The house is worth less than they paid for it is the simplest way to put it.

Percy1983

I will say the interest on my mortgage is similar to what it would be to rent, but every month my interest payment gets a little smaller while rents will only go up.

Will my house be worth worth the total of all payments made (including interest). Potentially not, will I have a house with no rent to pay... definitely.