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

dougk_2

And why they are so expensive (hence pushing up the cost of a house because you have to pay so much to get the work done)!

Prices in my opinion are high for lots of reason as I have probably already said on this thread.... if not...

Regulations - look how many things are regulated in this country now that were not before. (even down to what glass you fit!). Refurb a home and you need "professionals" to be able to comply - for Central heating, electrics, windows etc etc. days gone by people did a lot of work themselves.

Moving costs - Stamp duty, solicitors, estate agents, mortgage fees.. .all these have increased the house prices.

Its not simply a supply and demand thing.

vishpatel

dougk wrote:

Its not simply a supply and demand thing.

It's a bubble. Boom (which will be followed by Bust). A sentiment driven market.

frugal_dougal_3

Oh well, this thread is going to just run and run because it is a subject that people are completely polarised on.

Perhaps it is just simply that there are two types of people. The "tight !!!!!!" like myself and dougk who had to struggle and scrimp and save to get a house in the first place (which is what this site is all about). And the people who would rather live a more hedonistic life style which involves spending £50 on a paintballing session, own the latest techno gadget and everything else that is shiny.

Actually I'm not a tight !!!!!! at all. Due to this site I have managed to save about £65 a month and guess who benefits from it ?
Comic Relief, Tsunami, RNLI, NSPCC etc.

I don't think dougk is a tight !!!!!! either. Otherwise he wouldn't spend his time trying to help people.

Dan29

I think people are being slightly personal in their replies to dougk - even if you don't agree with him there's no need to be rude.

By the way vishpatel if you see a good mortgage broker I would have thought you could borrow much more than £110k on a salary of £33k.

vishpatel

Dan29 wrote:

By the way vishpatel if you see a good mortgage broker I would have thought you could borrow much more than £110k on a salary of £33k.

borrowing more than 110K would just be like tightening the noose around my neck!!

What you mean is if I see an IRRESPONSIBLE mortgage broker I could borrow more than 3.5 times my salary.

I manage to save £1200 a month & I am down to bare bones there... (I don't pay rent - live with family)

After a few calculations £110K is about the kind of mortgage I could afford to pay since repayments would be £700-£800 and other costs in running a house would be £300-400.

Please don't encourage me & other FTB's to get into outrageous levels of debt so early in their lives... thats just not on. Your messing with people's futures here.

nelly_2

Well said vishpatel. All these people have been congratulating them selves on how much their houses have gone up, but they cannot stand the fact they are going down.

They didnt borrow anything like the ammount people have to borrow today but their selfish attitudes wont let them see any further than their own situation.

dippy

If houses are overvalued, they are overvalued. Before there was mass hysteria that "if you don't buy now, you'll never be able to buy". And people at the bottom of the ladder have borrowed to the hilt just to be on the ladder, come what may (would anyone want a self-cert?). That was during the boom years.

Now that the predictions from the head economist are either crashses of 10-30% or stagnation, there is no such pressure to buy. People are re-evaluating and giving it some hard thoughts whether they can actually afford the mortgage repayments and how long they'll need to pay off the mortgage. People are finally seeing sense.

dougk_2

Excuse me but I do understand the costs of buying today as I am in the process of borrowing on a 90% (240k mortgage) basis with my partner for a house together... I am happy to pay todays prices because I see them as realistic compared to other goods (cars etc) and fairly realistic when comparing other nations like us. The bulk of the equity in my house has been used to pay off my partners debts from university etc.

A mortgage on 240k works out about £1300 per month.... when joint take home income is nearly 2.75 times this we don't see that as a problem as its on a fixed rate , so we know where we stand. If prices drop they drop, but in ten years time I will own 40% the house so if prices have dropped by that amount I still am not in any negative equity and in the house is still mine!

VishPatel - if you are earning 33k, I estimate your take home is circa £1800 month. Where do you spend the other £600 if you are lliving at home?. I managed on £150 a month when that was the case! But for what its worth I think you are doing the right thing - staying at home and saving.

This site is all about how to save money so some may think buying a house is costing you, I prefer to think it saves me money as the house is mine in the end.

When you start out in buying a house you don't have the choice of buying your ideal house in the ideal place (unless you are given or win the money!) so most of us start with a not so ideal property and work up over the years - its simply how it is done.

dougk_2

nelly wrote:

Well said vishpatel. All these people have been congratulating them selves on how much their houses have gone up, but they cannot stand the fact they are going down.

They didnt borrow anything like the ammount people have to borrow today but their selfish attitudes wont let them see any further than their own situation.

Nelly,

Yes in balance, I borrowed the same amount compared to my income. I borrowed £55k when I only earnt about £15k. I didn't have much spare after paying the bills but I still enjoyed myself (as you know from previous posts , I had holidays etc).

So if I earnt £30k now I would be quite happy to borrow £110k and more even as the rates are lower now than then. Borrowing £110k and paying the bills I estimate I would still have £700 a month spare for other things....more than a good many people on this board earn in the first place and the people who really should have something to moan about!

vishpatel

dougk wrote:

VishPatel - if you are earning 33k, I estimate your take home is circa £1800 month. Where do you spend the other £600 if you are lliving at home?. I managed on £150 a month when that was the case!

well my student loan takes a small chunk out, but below are the rest of my monthy costs. By the way, I'm not looking for any suggestions on how to save money on the below - I'm happy with my outgoings as they are right now...

1150 saving
155 student loan
0 mobile
35 adsl
5 haircut + products
15 toiletries etc…
120 social
150 food
35 gym
5 cd's
15 contact lenses
25 clothes
20 gifts
100 holidays
50 electronics

1880 TOTAL

dougk wrote:

When you start out in buying a house you don't have the choice of buying your ideal house in the ideal place (unless you are given or win the money!) so most of us start with a not so ideal property and work up over the years - its simply how it is done.

Yes, first time buyers shouldnt expect to get their ideal home, but the difference in quality in what a FTB can afford currently, and what they could afford in days gone by has changed markedly, and it wouldn't kill you to acknowledge this.

Like I've already said, the only places that are affordable to me now are miniscule 1 bed flats/studios, ex local authority flats, or some ridiculous commute, nowhere near any of my friends/family. You might think I'm being too picky but none of these are suitable. In a falling house market if I was to make a choice like this I would be trapped since I wouldn't have any equity to be able to move on.

What particularly annoys me about the advice you are giving is that it's wrong in most cases - the best advice for FTB's right now is to wait if they can. Fair enough, if you have family, kids etc... you might not want to rent for a few years. But for the overwhelming majority of FTB's, they would be stupid to enter the market now.

I do not look at housing as a market to make money in - I am simply trying to avoid LOSING MONEY, by taking on a riduculous amount of debt which could cause me big problems in the future, if, as I expect, house prices fall.

The only thing that will save FTB's if they decide to take the plunge now is rapid wage inflation (which would be negated by higher IRs anyway) or further house price increases - neither of which is likely!!

Someone on here mentioned you should not be attacked as you are only offering advice. Well I'm not sure if you consider my post as an attack, but I strongly hope you refrain from advising FTB's on housing as it has a HUGE impact on their lives. It is likely to be their most important financial transaction ever. Wrong advice on which toaster to buy is fair enough, no big loss, but it really peeves when someone doesn't appreciate the state of the current market, yet continues to give advice.

dougk wrote:

I borrowed £55k when I only earnt about £15k.

That's 3.7 times your salary which is around the maximum that is recommended. Can I ask, what kind of property did you get for that? We're you a FTB'er?
The difference now is that the average home costs 6x the average salary.

dougk wrote:

if I earnt £30k now I would be quite happy to borrow £110k and more even as the rates are lower now than then

I'd be quite happy to borrow £110K too, if it actually bought me anything suitable!!

Common mistake there however, you say you'd happily borrow more as IR's are low - low interest rates are not a good time to borrow if you are paying back over a long-term. The actual debt size would be larger. Over the long term (eg 25 years) interest rates are unlikely to remain low so you are setting yourself up - just like the rest of this country is now... consumer debt is currently at the highest level it has ever been!!