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

Crashy_Time

Ok, he said Mortgage paid off, my mistake, but lets just take his original statement out into the light to examine.


"When a mortgage is paid off the house is worth more than everything you have put in so I don't see the issue. "


Quite a bold assumption if I may say so.

Crashy_Time

Percy1983 wrote: »

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.

We`re getting there, just a little more realistic thinking and this would be a worthwhile thread.

ukcarper

Crashy_Time wrote: »

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

They would have 100% equity and would be in the very nice position of living rent free.

I have save over £50000 in rent over the last four and a bit years definitely should have rented instead of buying.

Crashy_Time

ukcarper wrote: »

They would have 100% equity and would be in the very nice position of living rent free.

I have save over £50000 in rent over the last four and a bit years definitely should have rented instead of buying.

Behaviour in the market suggests than many people have made assumptions and commitments based on how much they hoped their house would be worth in the future though?

Crashy_Time

Jason74 wrote: »

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.

Big words. Do you care to walk me through some of my false assumptions?

wotsthat

Crashy_Time wrote: »

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.

Just taking those numbers at face value..

Since 1997/8 I've averaged 4.55% on my mortgage (a mixture of svrs plus fixes so nothing special). If you'd bought the £40k flat and, say, used a 100% mortgage to keep the sums simple then a monthly payment of £280 would have meant you'd be mortgage free today.

For a total outlay of £57,120 you'd own a flat now worth, according to you, £70k.

What have you paid in rent during that time again?

ukcarper

Crashy_Time wrote: »

Behaviour in the market suggests than many people have made assumptions and commitments based on how much they hoped their house would be worth in the future though?

It doesn't matter what my house is worth if rents remain the same I will carry on saving £14.5k a year.

IveSeenTheLight

Crashy_Time wrote: »

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.

You may find this interesting
http://www.ros.gov.uk/pdfs/ros_statistical_report_apr-jun2014.pdf

Table 11 in particular for your flat reference.

You've cited a 16 year period (not a normal mortgage period).
You may dfind this interesting which showed the period between 2004 and 2014 Edinburgh had a 28.8% HPI.

http://www.ros.gov.uk/press_release/RoS10yearreport.pdf

I'm sure with a bit more digging we could find the HPI between 1998 and 2004.

Remember also how mortgage holders have benefitted from low interest rates.

wotsthat

Crashy_Time wrote: »

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

I'd wager that never has anyone got to the end of a 25 year mortgage term and found their house is worth less than they paid for it.

wotsthat

IveSeenTheLight wrote: »

Remember also how mortgage holders have benefitted from low interest rates.

I suppose for balance we should also remember that neighbours can be terrible if you buy and Edinburgh flats have a propensity to lose the roof every winter.