House Price Crash Discussion Thread

colourfilm

Austin_Allegro wrote: »

Why is a glorified school sports day going to have any impact on house prices?

Not for the olympics event itself, but for the new DLR stations, the Eurostar link and the new shopping centre, amongst other things. I can't imagine anybody actually cares about the olympics.

harryhound

Surely it is the one part of Britain that already has a big-deficit-financed-make-work project under way.

I expect there might already be a fee or two involved in advising the new American president on how to promote the concept.

Forget Route66 is not the best road from the M25 to central London the A13 ?

colourfilm

Sorry harryhound I can't tell what you mean?

harryhound

harryhound wrote: »

Surely it is the one part of Britain that already has a big-deficit-financed-make-work project under way.

Last time Britain was in this ghastly mess was during the 1930's. Eventually on both sides of the Atlantic we came up with subsidised developments to try to give work to those, then largely poorly skilled who had lost their jobs. For example the Southern Railway company got government grants. With these it bought near bankrupt farms south of London, built electric railway lines to them and organised house building schemes. I think you will find the branch line through Tolworth to Chessington (of World of Adventure fame) was built thus. There are many other examples. The redevelopment of East London under the banner of "Olympics" is another such venture proud of its "make work" results.

harryhound wrote: »

I expect there might already be a fee or two involved in advising the new American president on how to promote the concept.

This was meant slightly tongue in cheek, but it would not surprise me if there is not already an exchange of knowledge about the creation of jobs by the Olymics based on our ongoing experience in East London

http://www.barackobama.com/issues/economy/#invest-for-jobs

harryhound wrote: »

Forget Route66 is not the best road from the M25 to central London the A13 ?

This is just a factual statement about London's trunk roads & motorways. From A1 to A13 built with subsidies..

It inspired Billy Bragg to pen an English version of the USA classic Route 66 "Chicago to LA" song. The route that many took in the 1930's "Grapes of Wrath" style.
http://www.vam.ac.uk/activ_events/adult_resources/memory_maps/contemp_writing/song/bragg/index.html
Since BB wrote his song, it has been upgraded to multi lane dual carriageway, all the way from the Canvey turnoff to Docklands, with just one set of lights at the "Ship & Shovel" junction.

bobbybee2

I see a lot of people claiming "renting is just throwing your money away" on here, so I wanted to clear some things up.

I have a hypothetical scenario based loosely on the current market situation.

Assume you buy a house for £200000, it loses 15% in year 1 and 15% in year 2. At the end of year 2 your house is worth £144500. So you have lost £55500.

You've been paying off your mortgage assuming a 5% interest rate on a 25 year mortgage (this is assuming you've somehow managed to get a 100% mortgage for simplicity), which equates to approximately £1182/month (of which £833 is paying off the interest). After two years you have generated approximately £8400 in equity and paid £20000 in interest, meaning you have lost £11600.

After two years you have made a total loss of approximately £67000.

Meanwhile if I rent a similar property (based on a 5% yield on a £200000 house), then the rent is £833/month. Assuming the rent goes up 5% per year, the total amount of rent paid by myself after two years is £20500.

Now if I were to buy your property off you at the end of the two years. I would have lived in a similar standard house for 2 years, had lower monthly outgoings and saved approximately £46500 in the process.

These figures don't take into account arrangement fees, solicitors fees etc. So once all this is taken into account buying becomes even worse in a downward market.

I saw recently that a company had done a more thorough analysis than my 'back of a fag packet' calculation and determined that in purely financial terms it's not worth buying over renting until house prices are going up by at least 2% per year (based on current yields etc).

So in conclusion, renting is throwing money away, but buying in a downward market is throwing a lot more money away!

tripleblack

bobbybee2 wrote: »

I see a lot of people claiming "renting is just throwing your money away" on here, so I wanted to clear some things up.

I have a hypothetical scenario based loosely on the current market situation.

Assume you buy a house for £200000, it loses 15% in year 1 and 15% in year 2. At the end of year 2 your house is worth £144500. So you have lost £55500.

You've been paying off your mortgage assuming a 5% interest rate on a 25 year mortgage (this is assuming you've somehow managed to get a 100% mortgage for simplicity), which equates to approximately £1182/month (of which £833 is paying off the interest). After two years you have generated approximately £8400 in equity and paid £20000 in interest, meaning you have lost £11600.

After two years you have made a total loss of approximately £67000.

Meanwhile if I rent a similar property (based on a 5% yield on a £200000 house), then the rent is £833/month. Assuming the rent goes up 5% per year, the total amount of rent paid by myself after two years is £20500.

Now if I were to buy your property off you at the end of the two years. I would have lived in a similar standard house for 2 years, had lower monthly outgoings and saved approximately £46500 in the process.

These figures don't take into account arrangement fees, solicitors fees etc. So once all this is taken into account buying becomes even worse in a downward market.

I saw recently that a company had done a more thorough analysis than my 'back of a fag packet' calculation and determined that in purely financial terms it's not worth buying over renting until house prices are going up by at least 2% per year (based on current yields etc).

So in conclusion, renting is throwing money away, but buying in a downward market is throwing a lot more money away!

I agree but with this in mind do you think selling up now to rent would be wise? I have split up with my partner and she wants me to buy her out which i can afford to do but as you can imagine agreeing on a price in this volatile market is tricky. If i thought i was going to stay here for good it would not worry me so much but that is not really the case now we have split. So my question is, would it be wise for me to see if i can sell the property asap then rent somewhere for a couple of years and then pick up a bargain when prices have bottomed out? I have a fair amount of equity in the house so will have a nice deposit if that time came. What do others think?

mean_momma

tripleblack wrote: »

I have split up with my partner and she wants me to buy her out which i can afford to do ......... So my question is, would it be wise for me to see if i can sell the property asap then rent somewhere for a couple of years and then pick up a bargain when prices have bottomed out? ..... What do others think?

Good idea for the time being, but don't relax for a minute - keep an eye on the market. I know a couple who got divorced during the last recession. She immediately bought a property, he decided to rent, got complacent, and missed out completely when the market took off again.

ManAtHome

mean_momma wrote: »

he decided to rent, got complacent, and missed out completely when the market took off again.

Complacent is a huge understatement - prices were wibbling along the bottom for at least 5 years before they took off again...

mean_momma

ManAtHome wrote: »

Complacent is a huge understatement - prices were wibbling along the bottom for at least 5 years before they took off again...

Following the final settlement in the mid '90s, he decided for some reason to keep renting and invest in a disasterous buy-to-let. The 'professional' tennant complained about everything, didn't pay the rent, spun it out till the final eviction. After that, prices started rising, so he probably decided to wait until they came down a bit, and wait ....and wait.....

MiserlyMartin

mark-jenkins wrote: »

People use to say that you are throwing away money if you rent...

Yes, this is what people said to justify the crazy prices and large mortgages that they were saddling around their necks. 'Better buy now or you will miss the boat - never get on the ladder'. Well all these things were statements designed to prop up the pyramid selling scam that was the UK property market. Now its falling like a house of cards and its one boat I feel great for not sailing. I knew it was only a matter of time before it crashed but not many people would stake their money on it.

All those dinner parties/social gatherings I had to endure with people bragging about how much their house was 'worth' and the looks of disapproval because I said I was renting until the market corrects. Well now whos laughing eh?!¬