How much can house prices keep rising ?

westernpromise

It always amazes me that people who weren't smart enough to buy at a better price than now in the past nonetheless think they'll be smart enough to buy at a better price than now in the future.

As those of who remember 1989 to 1995 can vouch, the problem with buying in a crash is nobody knows when it's over. So lenders remain scared of further negative equity (= partly unsecured lending) and so to avoid it they insist on big deposits, low salary multiples and expensive fixes, making property harder rather than easier to buy. Buyers remain scared of negative equity and so to avoid it they pay landlords more to rent a property than the mortgage to own it would cost, leading to the rise of BTL.

What must increasingly become a factor in renters' economics is whether they've got enough working life left to pay off a mortgage. If you're 40 then one 25-year mortgage term takes you to normal retirement age. If you wait till your 50s for the price crash that needn't come, then you are quite simply going to be renting at unknown cost for the rest of your days because you haven't left time to pay off any borrowing.

Out,_Vile_Jelly

westernpromise wrote: »

What must increasingly become a factor in renters' economics is whether they've got enough working life left to pay off a mortgage.

This was a major reason why I decided to buy in my mid-30s (plus the need to remove letting agents from my life, and wanting a garden of my own). Renting suited me at a certain time of my life though.

lisyloo

Out,_Vile_Jelly wrote: »

This was a major reason why I decided to buy in my mid-30s (plus the need to remove letting agents from my life, and wanting a garden of my own). Renting suited me at a certain time of my life though.

You are quite right to point out that the vast majority of the population (who do not share common values with most MSE members) buy homes for life related reasons. Often there is a woman directing what happens e.g. nesting.


We are happy renting a pied a terre as it suits our circumstances, we have very few responsibilities and can walk away when it suits us. We are "lucky" to have a nice agent, although .........the harder I work at it the luckier I get IYKWIM.

AFF8879

Out,_Vile_Jelly wrote: »

I bought my (very ordinary two bed) house in South London just over three years ago. I bought it to live in and enjoy the garden, not as an amazingly shrewd financial move. I remortgaged two years ago, when its value had gone up over 40%. Currently it stands at an increase of 66%. I find this ridiculous, but am siezing the opportunity to repay as much as I can while the LTV gives rates in my favour. I overpay by £500 a month; my boyfriend is overpaying by £900 per month on his mortgage.

The internet makes the not-so-bright think that extremes are normal. Those on HPC obsessively scouring Rightmove for evidence of "crashing shires" are not normal; neither are those who start endless threads about how their purchase in Wood Green makes them a financial genius. The vast majority of people in this country live between these polar positions.

This is a good point. Most people are not thinking purely financially when they buy a property to live in, it's simply one of many factors that go into deciding which property to purchase.

I also think the question surrounding a crash is hardly ever relevant in the long term. If you plot property prices over the past 100 years there is only one trajectory, "crashes" occur but are only relevant to the short term past (I.e "15% fall year on year") as opposed to the long term. Until fundamental economics / demographics of this country change I don't see any reversal of this, and even the pessimistic (depending on what side you're on) researchers only point to falls in 2017/early 2018, almost universal consensus is they will rise again in 2019.

Owning a property is a shrewd financial move in the sense we can pay down our debt to be left with an asset we own outright, capital gains have some use in terms of better remortgage rates / ability to borrow against this equity- but unless you plan on moving to a totally different area where prices are stagnant, it's rarely ever going to be "profit" that you realise outright.

mwpt

I do wonder about trends in cities vs rural locations. I'm not that experienced but I do believe there was recently a time when it became more popular to move out to the burbs while prices in cities stagnated or dropped. This didn't seem to be a London phenomenon, pretty sure it was global, or at least in many western countries.

Something changed where concentrating back into cities became popular again. Seems as though it is probably jobs related as advanced countries became more services economies rather than manufacturing and needed less land for this but it was helpful for businesses to locate together (ie. cities).

I wonder if there will be a change in this again in due course? Let's take a huge speculative thought on transport. Imagine that some ultra efficient energy source and battery technology is invented, autonomous vehicles become the norm and some efficient flight mechanism. I could imagine people using this as an opportunity to spread out a bit more again. Cities may not always be so popular.

CLAPTON

mwpt wrote: »

I do wonder about trends in cities vs rural locations. I'm not that experienced but I do believe there was recently a time when it became more popular to move out to the burbs while prices in cities stagnated or dropped. This didn't seem to be a London phenomenon, pretty sure it was global, or at least in many western countries.

in the case of London, the flow has been that the native born have moved out and the immigrants have moved in.; probably because of the large number of relatively unskilled jobs.

Something changed where concentrating back into cities became popular again. Seems as though it is probably jobs related as advanced countries became more services economies rather than manufacturing and needed less land for this but it was helpful for businesses to locate together (ie. cities).



I wonder if there will be a change in this again in due course? Let's take a huge speculative thought on transport. Imagine that some ultra efficient energy source and battery technology is invented, autonomous vehicles become the norm and some efficient flight mechanism. I could imagine people using this as an opportunity to spread out a bit more again. Cities may not always be so popular.

AdrianC

CLAPTON wrote: »

in the case of London, the flow has been that the native born have moved out and the immigrants have moved in

London has been a target for migration ever since it was founded, both from elsewhere within the country and from outside. There have been waves of foreign migrants since at least the Huguenots in the 16th and 17th century.

As for the "native-born", the population of London has been declining since the second world war, albeit with a kick up since a hundred-year-low in the early '90s. It's still below the historic high currently.



FWIW, did you know that it's technically impossible for any cockneys to be born within the NHS any more, since maternity services moved from Guys, the only hospital within earshot of the church bells of St Mary-le-Bow, on Cheapside? St Thomas's, where they moved to, is too far away.

padington

AdrianC wrote: »

London has been a target for migration ever since it was founded, both from elsewhere within the country and from outside. There have been waves of foreign migrants since at least the Huguenots in the 16th and 17th century.

As for the "native-born", the population of London has been declining since the second world war, albeit with a kick up since a hundred-year-low in the early '90s. It's still below the historic high currently.



FWIW, did you know that it's technically impossible for any cockneys to be born within the NHS any more, since maternity services moved from Guys, the only hospital within earshot of the church bells of St Mary-le-Bow, on Cheapside? St Thomas's, where they moved to, is too far away.

Never heard of home births ?

AdrianC

padington wrote: »

Never heard of home births ?

Let me show you a map of London...

CLAPTON

AFF8879 wrote: »

If I was mayor I would abandon these silly HTB schemes that only serve to inflate prices further and provide subsidised rental accommodation (small flats / nice standard HMOs) to key service workers e.g. Teachers, doctors, nurses etc. :beer:

are utility workers essential or food delivery people or shop workers?

21year old essential workers soon become 25 years old or even 30 year olds who really don't want to live in HMOs but desire their own place of even a family sized home to start a family.

but I agree that HTB ar a nonsense but so is accommodation for 'essential workers' (which just means state employed people)