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**Don't Buy A House** House Prices Set To Crash!!!

Sorry for the attention grabbing subject, but hopefully this is true.

Think about it. Who really benefits from over-inflated property prices?
  • First time buyers?

Definately not. I've been waiting to buy a house for Four years, but the increase in prices has
outpaced what I can save for a deposit, and my investment returns put together.
How many more people are in this position I wonder?
  • Homeowners not looking to sell?

Slightly, because they can borrow against the increased equity in their home.
  • Homeowners looking to trade-up?

No, because they will have to pay a premium for their new home.
  • Homeowners looking to trade-down?

Again slightly, because they will make a bigger profit on the difference.
But I believe this is a relatively small group.
  • Estate Agents, Mortgage lenders and the Government?

You bet! A percentage of the value of a more expensive house is more money for all three of these
major types of institutions.

What can we do about this?

Everyone who is thinking of buying a house - **Don't buy one yet!!**

The whole thing is controlled by Market Forces.
Greedy Estate agents price a house by the rule of thumb - What they sold a similiar one for + 3 to 5%
I know some, and I know this to be true!

Margaret Thatcher's greatest plan was that everyone should be able to afford their own home.
(I don't often agree with Margaret Thatcher, but on this point I believe she was right.)

Gordon Brown would like to bring in 40 year mortgages - of course he would.
This would enable the property boom to continue. I for one don't want to be penalised just to
enhance Gordon Brown's career.

Martin, Any chance of a campaign on this one? It really is a classic example of punishing the little
guy at the moment. Please, please, help the little guy!!!
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Comments

  • yonk
    yonk Posts: 762
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    You could have cashed in your investments to enhance your deposit - were you just waiting for a crash (and investing elsewhere in the meantime)?
  • kinster_2
    kinster_2 Posts: 592 Forumite
    Everyone who is thinking of buying a house - **Don't buy one yet!!**

    Ermmm... don't you think everyone already knows that, because prices have stopped increasing and not many are taking out new mortgages?
    You'll Never Be Rich Working for Someone Else
  • dunstonh
    dunstonh Posts: 115,636
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    You buy a house to live in over the long term. So what if prices go down in the interim for 2-5 years.

    In May 1989 the average house cost £70,246. After the decline it bottomed out in 1995 with the avergage cost just under £62,000. It took until 1998 for the average price to climb back to the 1989 level. Now its over £150,000 so even if you had bought at the previous high, before the last crash, you are well up.

    Lets say a price drop of 30% happens over the next 5 years, the only people its going to affect adversely are property developers and those with an inheritance or selling up. However, those selling up or getting an inheritance would almost certainly have gained 100% gain at least prior to the adjustment so a 30% drop is nothing.

    If it does come, then its not going to be a sudden drop. It will be a slow decline. I say bring it on. It would benefit many who have the same or lower mortgage they arranged over 5 years ago but are looking to move up. Those that have constantly borrowed against equity would not benefit but if they can afford their monthly payments, it wont hurt them financially. Although they wont be in a position to move on for a 5-10 years. Perhaps that would teach them not to borrow so much next time.

    If you want to buy a house, buy it. Remember there will always be good times and bad times to buy when you look back with hindsight but over the longer term property has gone up. Ask your parents how much they paid for there house in the sixties/seventies.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • glennw
    glennw Posts: 34
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    You could have cashed in your investments to enhance your deposit - were you just waiting for a crash (and investing elsewhere in the meantime)?

    Unfortunately, most of my investment is Credit Card Super Tart money. What is mine doesn't add up to 5% of the current value of a cheaper terraced house. This is what I believe I would need to get a good discounted rate mortgage.

    Ermmm... don't you think everyone already knows that, because prices have stopped increasing and not many are taking out new mortgages?

    I hope you're right...
    You buy a house to live in over the long term. So what if prices go down in the interim for 2-5 years.

    You seem to have missed the point. Myself, and I believe many others cannot currently afford to buy a house to live in over the long term.
    If you want to buy a house, buy it. Remember there will always be good times and bad times to buy when you look back with hindsight but over the longer term property has gone up. Ask your parents how much they paid for there house in the sixties/seventies.

    For the sake of discussion I would also ask them how much interest they have paid over the life of their mortgage, and what that equates to in todays money. The difference between buying at the top and buying at the bottom is huge. But catching falling knives is difficult, even if they fall slowly!
    (If it is a slow decline, and the property market remains fairly illiquid then is it any easier to predict the bottom?)

    You are, of course, right about hindsight. With that I would have bought four years ago with a 100% Mortgage. And been well up now. But what of the future? Increasing interest rates and the possibility of a crash or a slow decline make these difficult times.

    Ask the people who suffered the negative equity trap of the early nineties whether they would say: "If you want to buy a house, buy it."

    I for one hope they crash rather faster than last time.
  • dunstonh
    dunstonh Posts: 115,636
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    You are, of course, right about hindsight. With that I would have bought four years ago with a 100% Mortgage. And been well up now. But what of the future? Increasing interest rates and the possibility of a crash or a slow decline make these difficult times

    Interest rates are anticipated to up no more than 0.5% from the current position.  That doenst make a lot of difference to the average mortgage.

    There is a lot of scaremongering going on to try and cool house prices but the economic situation itself gives no indicators that house prices will drop big time.    
    Ask the people who suffered the negative equity trap of the early nineties whether they would say: "If you want to buy a house, buy it."

    Ignoring those that borrowed too much and couldnt afford repayments and got repossessed, the average person wouldnt have noticed any difference.  It may have reduced the likelihood if them moving whilst in negative equity but there were negative equity mortgages available.  If you are in the house and can afford the payments, the "paper" value of the house is irrelevent until you come to sell it.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Spendless
    Spendless Posts: 23,997
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    I bought a small 2 bed MTH in 1994 as a single working girl. Within a year the house was in negative equity. It didn`t bother me as I didn`t want/need to move. Fast forward to 2001 now I`ve got a problem cos I`ve now got a husband and baby. The house is too small. An estate agent estimated £3,000 negative equity. A builder £10,000.
    Where I live 2 bed MTH are the first rung of the ladder.
    People were bypassing these in favour of new houses or 3 bed semis.
    We were lucky Mr spendless got a mortgage in his name and we moved to a bigger house in a better area.

    We got the house cheap cos it needed some modernising. The idea was to do the work ourselves raise the value of this house re-mortgage and with the money pay off the defecet on the other.
    It didn`t happen that way some people came forward to rent my house and the boom happened here in 2002.
    When the tenants moved out last year we sold my
    place.

    I wouldn`t tell people not to buy a property I would say
    in the event of a property crash would a lifestyle change cause you a problem.
    y di
  • Nicholas
    Nicholas Posts: 630
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    You are, of course, right about hindsight. With that I would have bought four years ago with a 100% Mortgage. And been well up now. But what of the future? Increasing interest rates and the possibility of a crash or a slow decline make these difficult times.

    Ask the people who suffered the negative equity trap of the early nineties whether they would say: "If you want to buy a house, buy it."

    I for one hope they crash rather faster than last time.

    Not being funny, you got it wrong last time around, you may be wrong now. Everyone has a different opinion on the way things are going to go, and of course some will end up being right. Just remember though, that if you end up waiting 5 years for the market to hit rock bottom you will end up having paid another 5 years worth of rent (or endured another 5 years living at home).

    Seems like you are thinking extreme long term. However, don't forget we all only have one life and the next few years that you are waiting you will never be able to reclaim again :(
  • soon, the big question is going to be 'how low will they go'.


    That is what happened last time.

    people don't want to wait forever, so they pitch in at what they think is the bottom. (in the stockmarket, they call it bottom pickers). I think the bottom is 2-3 years away from now.


    prices drop a lot. then they rise back a little as bottom-pickers come in.

    This process repeats itself 20 or 30 times (maybe 5-10 times, maybe 70-80 times, who knows).

    don't buy in too early (as a bottom-picker).
  • Galstonian
    Galstonian Posts: 1,292 Forumite
    "don't buy in too early (as a bottom-picker). "

    And how can one tell when "too early" is without waiting until it might be "too late"?

    I think I'll just leave picking bottoms to you...
  • spl0dge_2
    spl0dge_2 Posts: 31 Forumite
    nobody knows.
    that's the whole point.

    "I think I'll just leave picking bottoms to you... "

    cheap joke made by a loser.
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