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

Dan29

If you are looking for somewhere to stay for a long time, then find what you are looking for, and go and buy it. I remember when I was looking for a flat here in West London, I was told that there was going to be a crash - and that was five years ago - in which time the average value of a property in this area has risen by about 50-70%. I could have been still holding out, but didn't, and am glad for that choice.

Agreed - I bought in West London in August 2001, meaning that the conveyancing was happening either side of 11 September that year. Everyone said at the time that prices were about to drop, but my flat is now worth 20-25% more.

Of course that doesn't mean that prices won't drop in the next couple of years, but as long as you're not buying for investment, not stretching yourself too much with the mortgage amount, get a fixed rate, and don't plan to move again for a few years, I don't see what the problem is.

pinkchick_2

Thanks for those words of wisdom JohnDB. Gonna find somewhere that will be suitable for my needs for the next 5years and in your words go and buy it!

mkdoodle

House prices tend to peak 2-4 years after share prices. When there is a significant fall in the stock market (e.g. 1987, 2001), governments and central banks usually cut interest rates to prevent a recession. The resulting liquidity feeds into the property market, especially as people who have been burned in the stock market often look for an alternative “investment”. This inevitably results in a bubble, with people desperate to get into the rising property market, until the consensus of buyers and owners recognises that property is over-priced, resulting in a panic and a sell off.

One problem with low interest rates set by central banks (the Fed in the USA and the Bank of England here) is that they are used by consumers to finance extra consumption. This has resulted in increased balance of payments deficits. The countries with surpluses, notably Japan and China, have used the extra cash to buy dollar and sterling denominated debt, government and corporate bonds, etc. Japan does this in part to keep its currency competitive, so that it can continue to export.

To make all the extra stuff that Americans and Britons buy, the Chinese and Japanese have to buy more resources, especially oil. They are likely to sell off their dollar and sterling debt, or at least to buy less, in order to pay for this. With less demand for debt, long-term interest rates will rise. Because of this, it is possible that mortgage lenders will have to increase mortgage rates, even as central banks cut bank lending rates again. That would force property values down even further.

My bet is that the only way house prices will rise over the next few years is if the authorities wreck the economy to such an extent that we get hyperinflation.

On the other hand, it’s possible that the economy is being well managed, Gordon Brown is a genius and there is nothing to worry about.

smeghead_3-2

I beleive house prices will drop, and I think they will start to significantly drop after christmas. I beleive credit is still so easy to get hold of, and people are 'crediting themselves up to the eyeballs', but this bubble will burst when finally people reach their credit limits. I also beleive that it is virtually impossible for 1st time byers to get onto the ladder I suggested to my wife a couple of months ago that maybe we should sell, and rent for 6 months whilst the market slides. We baught our house for £30,000 and less than 3 years later I am looking to sell it for 90,000. I figure that if i put the £60,000 profit into a 5% interest savings account, this will generate £1500 interest in 6 months and rent at 350 per week = 2100 thus rent only costs 600 for 6 months. Then (with 60,000 as a deposit) when the house prices finally 'bottom out' I can be in like flin...:@)

PS if anyone is interested in a 2 bedroomed semi, in Bradford...Around 90,000 (ONO) then let me know...(Sorry Martin for this blatent advert, but in for a penny and all that...

Cheers all

FONGRANG

ANSWER TO THE PROBLEM: ALL THE THIRTY SOMETHINGS STAY WITH THEIR PARENTS, GIVE THEM A DECENT RENT AND SAVE FOR A COUPLE OF YEARS. THE BUY TO LET MARKET WILL DRY UP. HOUSE PRICES WILL FALL IN LINE WITH CHEAPER RENTED PROPERTY SALES AND THE BUYING STARTS AGAIN. ONCE THE SQUEEZE HAS BEEN PUT ON THE LETTING MARKET AND THE INEVITABLE MORTGAGE INTEREST RATES RISE, PRICES WILL FALL. EVERYTHING GOES IN CYCLES.....
DON'T BE IN A RUSH TO BUY AT ANY PRICE

Pakard

Most of the FTB are single. If they can’t buy their living space, they are going to share a house, leave with the parents or have a rich partner. A double room rental is between £260.00 to £385.00 or more a month inclusive of bills. A one bedroom apartments start “if you are lucky” at £129,000.00 . £10,000.00 deposit and you are left with £119,000.00 mortgage. Interest + repayment is going to be between £712 at 5.2% and £ 777.00 at 6.19%. Add Council tax + Electricity + Gas + Water + Telephone + TV License + Internet LOL + Life Insurance, House and property insurance and we are talking about additional £300.00 a month. What about cost of transport to work ( by public transport or by car + car insurance + petrol) +  House maintenance. Where is here fun and what about my holiday?
BTW Electricity, gas, water, council tax is going to increase by at least 10% next year. What about Petrol?

Reaper

I suggested to my wife a couple of months ago that maybe we should sell, and rent for 6 months whilst the market slides.  We baught our house for £30,000 and less than 3 years later I am looking to sell it for 90,000.  I figure that if i put the £60,000 profit into a 5% interest savings account, this will generate £1500 interest in 6 months and rent at 350 per week = 2100 thus rent only costs 600 for 6 months.

Terrible idea. First your maths it out. I think you have forgotten just how expensive it is to buy and sell houses. Let's say your estate agent charges you a 1.5% selling fee. That's £1350, and I haven't started on valuations, two sets of solicitors fees, arrangement fees etc. So the £1500 interest you though was going to supplement your rent for 6 months has long gone.

Second, there ain't going to be a dramatic crash. Yes some areas of the country got overheated and will drift down, and yes prices overall are overvalued, but that doesn't mean there will be a crash. You have to look at the flip side. Interest rates are historicaly low and are not expected to rise more than 0.25%, if that. Unemployment is low - in fact the country is thought to be close to what economists consider "full employment". Peoples finances are stretched but not breaking. They CAN are ARE paying their current mortgages. First time buyers are having difficulty getting on the ladder and that is putting the brakes on the market. But unless something dramatic happens to cause a crash (last time 15% interest rates did the job!) it is much more likely to settle down slightly and then stagnate.

I agree with the view that you should buy a house if you want to live in it but not buy (or sell) for speculation. Don't gamble. You have an asset - keep it. If you must gamble on house prices falling go and place a spread bet, but don't bet the house on it!

PS if anyone is interested in a 2 bedroomed semi, in Bradford...Around 90,000 (ONO) then let me know...

Optimistic trying to sell your house when you have been trying to persuade everybody it's value is about to plummet! I guess your job isn't in Sales then?!

chevalier

Hi
I have looked at the discussion and here is my two penny worth.
1st of all have you thought about doing one of these part buy/part rent deals. You buy part of the property - say 30% of it and then pay rent on the rest. This goes on for a certain length of time say 5 years and then you have the option to buy the other bit, or some more of it. Just a thought.

The other thing is about buy to let. Say I bought a house to let out, then I am using it to generate rental income. The price of the house is irrelevant as long as the house is let, and I can pay the mortgage on it. If I had the money to buy to let, I certainly wouldn't sell it because the market started to go down.

Dan29

The other thing is about buy to let. Say I bought a house to let out, then I am using it to generate rental income. The price of the house is irrelevant as long as the house is let, and I can pay the mortgage on it. If I had the money to buy to let, I certainly wouldn't sell it because the market started to go down.

Exactly! I bought my 2nd property to let three months ago, as a long-term investment, and am not worried at all. Don't understand why people are panic selling.

willywillwill

Some really good points being made on this board, reading through it, seems that there's no clear answer. I completely agree that to speculate using your home is a little unwise. Smeghead's idea of holding that money on deposit seemed to leave out the tax issue as well . I thought Pakard's post was slightly off point and towards the end when he started banging on about immigrants I thought that was completely irrelevant and unnecessary. Stick to the issue. I think there will be a drop in prices and whoever wins the US election will be compelled to raise interest rates, which will inevitably lead to interest rate increases here and a slow down in the housing market. this along with the credit bubble burst which will follow is going to cause everyone a few problems.