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

bjmaca

Always worth coming the end of one of these long threads and putting in my opinion. Someone mentioned that the only people who are saying that the market will crash etc are people without property. This is so true. I am a professional property investor and I have done it with very little of my own money. I use all the tricks in the book to purchase property and at all times make sure that the rents cover the mortgage! otherwise why invest. It is not a good idea to invest in something that loses money or you have to keep paying for. Positive cashflow is the only way to go. So even if the mortgage rates go up a little you need to make sure you have enough meat on the bones of the investment to cover rises and falls.
I truely believe there will not be a crash as the government and other intitutions will not let that happen. Along with this the supply and demand issue is still there there are currently not enough houses for the amount of people so it cannot crash. You will see it slow down BUT as all of the papers mentioned last month that the market only rose by 0.7% last month one of the slowest months in years then how is a crash looming. The previous month one of the lenders said it had dropped by up to 1% in places but another said it had risen by .5%

The biggest advice I can give on property investing is as long as you treat you home as a home and not an investment you will always keep the roof over your head.

Now for the first home buyer I do feel for and I can see why you are all so upset about the rising prices but if you sit around and say "it will crash it will crash" then you will only be very disappointed in a market that has risen although a lot slower then before it is still rising. There are a number of ways to get on the property ladder and there will be a few more products launched soon to assist (PM me to get details if you are interested).

So after my little rant I say - There will be no crash and for those who are sitting around waiting for the market to fall to get on the ladder will only be more dissapointed.

davelewis1

I'm buying a tent.

KK

My hubby and I bought a small garden flat in Clapham in 1992 which we paid £63K for (I know, seems a bargain now!) - the girl we bought it from had paid £75K for it 4 years before.

4 and a half years later we were delighted to sell it for £70K as up to then it had been worth what we paid for it, and for some of the time less than we paid.

In 1996 we bought a smallish 3 bedroom detached house in a lovely town in Surrey, paying £84K for it. The chap we bought it from had paid £115K for it 4 years earlier. It needed everything doing to it and we have renovated it from top to bottom, putting in new ceilings, kitchen and bathroom, and most recently new central heating system.

It is now worth approx £300K, which is great, but we still can't afford to buy the next size house up (4 bed, or 3 bed, 3 reception) because we would have to find at least another £100-£150K. So far, we haven't lost on the property market, and have benefited twice from others losing substantial amounts on the properties.

We are lucky in that we only have one child and don't 'need' to move. We really struggled when we bought our first flat, but I wish we'd kept it and rented it out as it is now worth approx £250K!! In retrospect, if we'd done that we would now have no mortgage and a bit to spare too.

All around me friends are buying houses costing £450K - £550K to house their expanding families, but I'm nervous about the property prices. Most ordinary families cannot afford mortages of that value unless they have made substantial profits on previous properties or have been given generous help from families.

I feel very badly for first time buyers now, how on earth can the market sustain these prices, when the people that underpin the market cannot afford the cheapest housing? Although I feel fortunate in that our mortgage is now only £60K and will be paid off in 17 years approx (hopefully sooner as it is a 'smart' mortgage that we overpay on, where our limited savings, and any money in our current accounts is offset against the interest) I am certainly not complacent and am very reluctant to risk my position where my mortgage is very affordable for the sake of a slightly bigger house.

I don't have any predictions for the property market, but common sense tells me that it cannot go on the way it is. Let's hope that some time soon a solution for first time buyers is reached. I think the levels of stamp duty should be raised - £60K must mean that nearly every buyer is paying it. It will be interesting to see what happens with buy to let properties and if there is a flood of them onto the market. My hubby and I have looked at it and decided against it as the return isn't good enough and there is no guarantee that the prices will stay at their current level.

deemy2004

It's facts on the ground which suggest that house prices will fall, facts such as most houses have more than doubled in recent years, some trebled.

Facts such as you need 5,6 or 7 X salaries to buy.

Facts such as the market is now declining nationally.

Facts such as the 5 rate rises.

Facts such as maybe more rate rises if inflation rises, as expected during 2005.

Facts such as a growing elderly population wanting to downsize.

Facts such as a record £ triliion of debt.

Facts such as buy to letters having an historically high stake in housing stock.

Facts such as instead of first time buyers taking on 50% of house buying its now more like 10%, which impacts on market liquidity, and without liquidity you don't have a market hence the mark down of prices to generate liquidity

Now, I admit those facts are skewed in one direction, what about facts in the other direction ?

deemy2004

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mkdoodle

Now, I admit those facts are skewed in one direction, what about facts in the other direction ?

"Markets can remain irrational longer than you can remain solvent." – allegedly said by JM Keynes. The property market might rise further yet, regardless of the facts.

What won’t happen is the gentle levelling-off hoped for by the political classes. The market will either rise steeply or fall steeply. See the Nationwide’s graph of property prices. The property market has become increasingly volatile over the decades. There hasn’t been a level property market since the days of the gold standard and credit restrictions.

It’s especially dangerous for first time buyers. If the market turns, they’ll be in negative equity before they know what’s hit them. Well-captalised buy-to-let’rs should be able to get out if the market turns bad, first time buyers will be locked in all the way down.

Bamf100

You have totally got the wrong end of the stick and ended up ashamedly making a hurtful comment. So you wish misfortune on me jsut because I'd like to buy the cheapest house possible.

I do not have the power to control the market but I realise it's an open market and appreciate that there are always going to be different types of buyers and sellers with different often opposing ideals on why to buy or sell a house.

For first time buyers or sellers at an early stage in owning a house, their house is often viewed as an investment and they are entitled to


House prices are always going to go up and down! I think anyone investing a load of money into a house when house prices are at a huge high is bloody stupid with their money anyway and besides it's a risk they signed up to. If you have that much money you can afford to do so, if you have to get a stupidly big mortgage to be able to get a house, then I think you shouldn't be getting a house in the firstplace as imo it's very irresponsible to borrow obscene amounts of money anyway.

but of course, this all changes if you see your house as a home rather than an investment then effectively it doesn't really matter if they rise or fall. :-)


You wouldn't exactly make a very good investment banker.

Zzzzzzzzzzzzz, oh sorry, you finished.  If I offended anyone then I apologize, but the reason that post came about was because everyone I seemed to speak to said the same thing, which was:

"It's OK I will just wait until the market crashes and buy a cheap house at auction from someone who can't afford the mortgage repayments"  Disgusting!

I actually too believe that to buy over the last year would have been madness, all I was fed up with were the vultures.  I know not everyone falls into this category but these people do exist - trust me!

Oh and by the way I am a successful investor, as while you have been fretting in the UK waiting for prices to drop I had the noggin to use my cash to buy and sell abroad where the markets are very healthy, which will now allow me to subsidise my crap UK pension, have a nice home in UK and hopefully in time own a nice home in Spain to boot!

Incidentally anyone who would like informed impartial information about investing abroad, drop me a PM.

Nuff said.

Bamf100

Always worth coming the end of one of these long threads and putting in my opinion. Someone mentioned that the only people who are saying that the market will crash etc are people without property. This is so true. I am a professional property investor and I have done it with very little of my own money. I use all the tricks in the book to purchase property and at all times make sure that the rents cover the mortgage! otherwise why invest. It is not a good idea to invest in something that loses money or you have to keep paying for. Positive cashflow is the only way to go. So even if the mortgage rates go up a little you need to make sure you have enough meat on the bones of the investment to cover rises and falls.
I truely believe there will not be a crash as the government and other intitutions will not let that happen. Along with this the supply and demand issue is still there there are currently not enough houses for the amount of people so it cannot crash. You will see it slow down BUT as all of the papers mentioned last month that the market only rose by 0.7% last month one of the slowest months in years then how is a crash looming. The previous month one of the lenders said it had dropped by up to 1% in places but another said it had risen by .5%

The biggest advice I can give on property investing is as long as you treat you home as a home and not an investment you will always keep the roof over your head.

Now for the first home buyer I do feel for and I can see why you are all so upset about the rising prices but if you sit around and say "it will crash it will crash" then you will only be very disappointed in a market that has risen although a lot slower then before it is still rising. There are a number of ways to get on the property ladder and there will be a few more products launched soon to assist (PM me to get details if you are interested).

So after my little rant I say - There will be no crash and for those who are sitting around waiting for the market to fall to get on the ladder will only be more dissapointed.

Well said that man!!

Pakard

One of the slowest months in a year are January and February… not September. 0.6% 1% 2% ?

Here is the real data from 2002 to Sep 2004.

Loans for house purchase 000's
____Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2002 87 85 108 109 142 115 142 137 116 120 120 115
2003 90 81 92 91 94 101 119 116 114 126 113 115
2004 97 88 111 118 110 124 130 110 99

FTBs house purchase 000's

____Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2002 35.8 33.3 41.8 37.7 53.2 42.5 54.1 50.7 44.4 47.1 46.8 44.0
2003 28.4 26.6 31.1 31.4 28.5 28.9 35.3 30.1 31.8 35.6 30.2 31.4
2004 26.1 26.2 34.8 32.6 30.6 33.5 36.3 31.1 28.5

More BTL are selling than buying in last 12 months.

Reaper

Now, I admit those facts are skewed in one direction, what about facts in the other direction ?

I was kinda hoping somebody else would take up the challenge, but as nobody else has here goes...

Starting with your facts:

Facts such as you need 5,6 or 7 X salaries to buy.
Yup it's a problem. But new products are coming on to the market which allow ways round it such as partial ownership. Personally I think it is a bad idea as something has got to stop the market going up any further and making it easier to borrow money isn't good. Also look at the lending figures posted by Pakard. Although volumes are down first time buyer still make up almost a third of the lending, so somehow they are still making it onto the property ladder.

Facts such as the market is now declining nationally.
Settling I would say. One problem is the lack of reliable data. Figures from building societies and estate agents are notoriously inaccurate and contradictory so you can always find a report to justify both sides of the arguement. The land registry figures are considered the best but they only report about what happend several months ago. I'll go with the IMF as they are independant. They share my view that prices are overvalued but "the risk of decline in the near term is not very real at the moment". Full article here.

Facts such as the 5 rate rises.
Yes but as I have said before they are still at a historically low level. Take a look at this chart. It is missing the last few rate rises but you get the idea.

Facts such as maybe more rate rises if inflation rises, as expected during 2005.
I struggled to find many predictions on inflation. However the current CPI figure (the one the government use) is 1.1%, well below the target figure of 2%. The CBI predicts is will not exceed 1.7% next year meaning no action is required on interest rates. Furthermore the CBI point to weak economic figures which would put the bank off further interest rate rises for fear of damaging the economy.

Facts such as a growing elderly population wanting to downsize.
I could also point to compensating factors such as the shortage of housing stock in the UK (so much so that the government is looking at building on previously protected land), and more people living alone longer using up more housing.

Facts such as a record £ triliion of debt.
Yes it is high, but that equates to £17,000 for each person in the UK. Then remember most of that is mortgage debt and it doesn't sound so bad. Heck I've got more debt than that just on stoozing credit cards! It is also only half the household debt that the Dutch have and they haven't had meltdown yet.

Facts such as buy to letters having an historically high stake in housing stock.
I think buy-to-let is a non-issue although people keep raising it. After all whether you buy the house directly or rent it off somebody else who has bought it the number of houses in the supply chain is constant. Prices are determined by supply and demand.

As for my arguments against a crash, well I have mostly covered them above and before and have waffled on long enough already. Primarily they are low interest rates which have almost peaked (if they haven't already), a good job market, and the lack of a trigger which would mean that people with houses suddenly can't afford them any more - it would take that to cause a big crash.

Thanks for your points though Deemy. Even though I don't agree I would much rather argue facts than opinions.