First Time Buyer - How to Value a Property?

MobileSaver

Crashy_Time wrote: »

Getting harder to do now though with any credibility as the MSM and most of the country have woken up to the fact that the property bubble needs to pop?

You and your friends over at HPC have been saying that for almost 14 years now... 14 years!

Meanwhile, back in the real world, most people have just got on with their lives, bought themselves a home to live in and I suspect the vast majority are very happy with the decision they made.

It's the classic glass half full or half empty scenario and you only need to read the increasingly desperate posts on HPC to realise which category they fall into...

HPC wrote:

March 2015 "Are The Shires Crashing?"

Apparently not as prices are up around 14% since HPC proclaimed two years ago "It is bound to happen."

Tiners

ReadingTim wrote: »

Mate, it's your money and you don't have to argue with or justify it to anyone as to how you do, or don't spend it. And if you want to add your opinion to the well-rehearsed debate then expect to get counter-opinions expressed equally as strongly. But present your opinion as fact and dismiss others as anecdote then you're going to get some mud slung your way.

The fact of the matter is that no-one can predict the future, so it's all crystal-ball gazing, but short of psychic ability, the only thing we have to go on is past performance, which, over the last 20 years, doesn't really back up your opinion much.

It's quite interesting that you should use the last 20 years as your time scale for looking at the performance of the housing market...

From what I can see there have been 2 distinct phases of rampant house price inflation (HPI) in that time period, both caused by very specific reasons, non of which should have occurred in what is supposed to be 'free' market but with regulated lending.

Late 90's - 2007 We had rampant HPI due to irresponsible and often fraudulent lending by the banks >100% mortgages, io mortgages, liar loans etc etc

Post 2008 - Present day We've had rampant HPI due to massive amounts of govt and Central Bank intervention in the housing market with FLS,QE, ZIRP, HTB etc etc

How do you think the housing market would have performed in your stated time period without the issues I've outlined above? And how do you think it will perform in future assuming these things aren't repeated?

Crashy_Time

MobileSaver wrote: »

You and your friends over at HPC have been saying that for almost 14 years now... 14 years!

Meanwhile, back in the real world, most people have just got on with their lives, bought themselves a home to live in and I suspect the vast majority are very happy with the decision they made.

It's the classic glass half full or half empty scenario and you only need to read the increasingly desperate posts on HPC to realise which category they fall into...

Apparently not as prices are up around 14% since HPC proclaimed two years ago "It is bound to happen."

2003? The bubble was just getting started then, and cheap credit was everywhere with a government/public on the side of pumping up the housing market, so I can`t see that your point has much relevance to the present political/economic reality?

economic

Crashy_Time wrote: »

2003? The bubble was just getting started then, and cheap credit was everywhere with a government/public on the side of pumping up the housing market, so I can`t see that your point has much relevance to the present political/economic reality?

2017 - 2003 = 14 years. about 15% of the average lifespan. a huge chunk of lifespan worrying about housing being a bubble and therefore not buying. if you had the means to buy in 2003 but didnt because you thought it was a bubble, you were really very stupid.

Crashy_Time

economic wrote: »

2017 - 2003 = 14 years. about 15% of the average lifespan. a huge chunk of lifespan worrying about housing being a bubble and therefore not buying. if you had the means to buy in 2003 but didnt because you thought it was a bubble, you were really very stupid.

What about if you bought last week, or next week, is that very stupid or very smart?

economic

Crashy_Time wrote: »

What about if you bought last week, or next week, is that very stupid or very smart?

as a home to live in it is smart. you are taking advantage of low rates and not wasting money on renting. its silly to try time a market. market in london has already slowed and prices starting to drop. its probably a good time now as any to look for a bargain.

Crashy_Time

economic wrote: »

as a home to live in it is smart. you are taking advantage of low rates and not wasting money on renting. its silly to try time a market. market in london has already slowed and prices starting to drop. its probably a good time now as any to look for a bargain.

I think we will have to agree to differ on the concept of a "Bargain"...:rotfl:

getmore4less

You need to understand better where the variations are in your methods, there are so many things that can influence the pricing that statistical approaches have significant short comings.

The broad overview average to average gives an idea of the trend which can be helpful.

if you go more narrow to say a street or a single block, the volumes may be insufficient to get a trend but might pick up a deviation from the broader view.

Ie. is a particular block or street rising faster or slower, any factors that might be doing that, could be some planning application is going to make the area a bit better or a bit worse, could something simple like the street parking policy changed or permits went up and this block has private parking.

.........

looking at your particular methods.

LdnFtB wrote: »

...........

The first method I'm using is quite crude - I find the last flat that sold in the same block and increase that amount by the local house price inflation as measured by the Land Registry. This has left me with 10% differences between value and asking price.

I use the land Registry rather than the Nationwide or Halifax indexes as it allows you to sort by local authority and includes all sales, not just mortgages.

That is using a specific place to a broad average that will work if that particular flat was an average one and sold on trend, might be worth doing it for more than one and to factor in any unique features those have against the rest of the block.
Chances are that is similar to what the EA and vendors are doing this is what palces a re selling at so add a bit.


The second way I look at value is to look at similar sales in the area and figure out the price / m2 paid for those properties and apply that to properties that I'm looking at. I think this is more accurate than simply going with the broad description. This also results in about 10% difference between apparent value and asking price.

That's a broad value for money is space, where that can be handy is looking for the outliers, why is these smaller place selling for more money than others, will hint that a particular block may be more desirable than the others, sample size will improve the results.

The final method I'm using is to track the actual flat I'm looking at against the Land Registry index for the area. Say for example the flat I'm looking at was bought in Sep 2008 for £230,000. The Land Registry House Price Index for Islington Flats and Maisonettes was at 63.8 at that point. It's now at 100.2 - which implies that the value now ought to be ~£360,000. This valuation is 20% off the asking price!

the problem here is it is similar to the first method just using much older data, the last sold price of a specific property

What might be a good addition to this last method is to also look at similar places that sold around the same time to see where the specific sits, did it sell cheap or expensive at the time.

then of those have any sold since were they above or below the index.

All sorts of things can impact prices on a temporary basis, lack of very local supply(nothing in the block for sale for ages) or a sudden glut(3-4 places at the same time) could put a significant swing in the trend for a short periods.

Another thing to look at is market time, a place may have completes in Sept but that could have been a slow sale so the offer went in at March prices.


you can analyse and overthink till the cows come home, but if your methods keep telling you people are buying places at prices that are too high then you could be some time before you get somewhere.

Remember that buying takes time so in a rising market the asking prices will reflect optimism that by the time they find a buyer the market will have moved up anyway

MobileSaver

hutman wrote: »

its backed up my market fundamentals which will reveal themselves to you via a simple google search.

The only fundamentals that really count are that more and more people want their own home (demand) and we're not creating anywhere near enough homes (supply) to satisfy that demand. Until the fundamental law of supply and demand is addressed prices will continue to rise over the mid to long term.

There will be peaks and troughs along the way affected by localised and short-term issues (e.g. uncertainty over the aftermath of Brexit) but over the mid to long term it's a complete no-brainer which way prices will go.

Until and unless there's a seismic political shift in housing policy the 50%+ house price crash that the HPC crowd long for is never going to happen. To make matters worse for the HPCers the sad truth is that even in the practically unthinkable situation that house prices crash by almost 40%, all that would do is bring them back to the same levels as when the HPC site started! So they've waited 14 years and gained absolutely nothing (except lived in places they don't want to live, felt angry at the world in general, ruined countless relationships along the way and missed out on being half way through a mortgage and thus half way towards owning their own property outright...)

Crashy_Time

http://www.housepricecrash.co.uk/forum/index.php?/topic/230096-land-registry-april-2017-transaction-data/