Your opinions on how the government can help first time buyers

deemy2004

michaels wrote:

Why is there this fallacy that just cos prices have historically been 'x times income' that they should always be. I don't hear people going round saying 'gold/tvs/cars always used to cost x times income and now they are y times so a correction must be due...'

What are the choices for housing? - rent or buy. What does renting cost - in my area about 700 a month for a one bed flat. What mortgage will you get for 700 a month at 5%? - £168,000 (only looking at the interest, as capital payments are in effect savings, they are not spent).

Taking this argument further, with renting there is no chance of capital gain (or loss), wheras in owning a property there is the chance for this. Even if the odds are equal on the up and downside, the financial markets will give a positive value to this risk (volatility), check the finacial pages if you don't believe this.

Sorry but incorrect the financial markets or more accurately futures markets can be trading at either a premium or discount given the expected trend.

At the moment the futures markets are discounting an 8% drop in the housing market over 12 months !

So by renting your saving a loss of 8% on the capital which is more than the rent you have paid and far more if you take into account mortgage interest payments, So yes under current circumstances it is far cheaper to rent than buy.

I don't understand the tv, car, gold comment, as all three commodities are now far, far cheaper as a % of average earnings than they were say 10 years ago !

The X3.5 ratio is a yard stick to guage whether a market is overbought or oversold, at the present time it is way, way overbought ! And like an elastic band it will be snapped to and below the X3.5 ratio to reach a state of oversold.... As has happened so, so many times in the past...

meanmachine_2

The property I have my eye on is around £190K. For a one bed flat I think this is ridiculously overpriced.

If I rent at 600 per month and save the remaining £300, in 12 months' time, I'm predicting the same property will now be "worth" £175K.

Meantime I've saved £3000+ and "gained" £15K, giving me a grand total of £18K.

So can someone explain to me why this is money down the drain?

In a stagant or falling market the only people wasting money are those who bought at market peak. And these same people will be the earliest and biggest losers in the new bearish property market.

Still think I should buy?

Of course, it's a gamble. But the experts are on my side (for once).

deemy2004

The market will probably fragment more .... where say 3 bed semis are likely to fall less than 1 bed flats for obvious demand reasons as one is more likely to be in greater relative demand than the other.

On the way up people tend to buy anything on the way down people are much more picky...

The location will also have a similar effect, i.e. a 3bed semin in a bad location will fall much, much further in relative terms than a 3bed semi in a good area.

So some people could experience a property crash whilst the overall market may only decline 10% or so.

meanmachine_2

That's right Deemy.

Even during the last "correction" certain areas maintained their value, or only suffered falls of around 5-10%

It really is a false economy to buy in bad areas.

Now there are tonnes of properties on the market I'm steering well clear of places I'd never visit during the day, let alone during the night.

The supply is there, but the prices are still ridiculous. Happy to wait.

If I'm making the biggest, costliest purchase of my life I'm making damn sure that it's

a) in a good area
b) not a crummy new build
c) in a quiet location

Anything else just won't cut it.

waterbaby

Pennywise wrote:

But surely the people whose houses have increased in value are benefitting at the expense of the people lower down the housing ladder? In the big picture, everything must balance, when someone "loses" someone else "wins"

But the only winners are those who can sell and not buy, surely? ie, someone moving in with someone else, or an investor.

Otherwise there's not that much benefit from the rise in price;the price of the next house up is similarly inflated. So many (most?) homeowners haven't gained materially.

Personally I feel resentful towards the buy to letters - but people make their own decisions based on the options available to them. In the same way that people are looking for security in owning their own home, BTLs are trying to secure their own future.

It would be nice to think that people make their house-buying decisions with a conscience towards the rest of society, but I would do what was best for me and my family, and wouldn't expect any different from anyone else.

I feel that FTBs sometimes attack homeowners for charging the current high prices, but I think this is a little unfair. Homeowners are faced with the same market, and cannot just drop prices; then they would also be faced with a choice of a shed and a bus shelter.

meanmachine_2

The buy-to-let market, as pointed out in the papers this week is pretty much dead, no matter what Fiona Fullerton and her Z-list celeb friends would have you believe.

In fact, that is the great unknown in the market right now. What happens to BTL investments when prices start to fall? Do people hold on, even though their "investment" is under performing even the worst high street current account, or cut their losses and look elsewhere?

ALL intelligent landlords use the 12 - 20 rule. If a property can be acquired for 12 times annual rent, or less, then do so and if it rises to 20 times yearly rental or more then sell sell sell.

And to think these amateur landlords might still be buying....

deemy2004

Another factor is the stock market.
If it continues on its bull run then more and more BTL's will be eyeing with envy the returns they could be making in stocks as against in their drifting and more time consuming property portfolios.

Offcourse many will pile into the stock market just before it peaks... But that is perhaps many years away....