House Price Crash Discussion Thread

brian_723

J_i_m wrote: »

I'm probably in somewhat of a minority here, though I don't know this, (this thread is far too long to read through) yet I am willing house prices to drop significantly over the next few years.

I am not a home owner and have never been. I am currently renting a two bedroom flat at £650 a month (ouch!) and am aware that if I had a mortgage I would be be saving maybe £200+ a month on that.

My plan is to move back in with my parents come the end of my current tenancy contract which expires in August to enable me to start saving for a deposit to put down on a mortgage.

I'd be looking for a house with upto 2 bedrooms (even though I'd likely be a single occupant) and a garage connected to the property and preferably not across the road in a block. It seems that the going rate for what I looking for in the area I would prefer are anything from £130'000 to £180'000.

One of these part buy part rent schemes are a definite possibility, though at this stage I want to keep my options open and not discount 100% ownership though obviously this would increase my length of time back under my parents roof by virtue of needing to build up a greater deposit.

To get a mortgage of £180'000 I imagine I'd need a deposit of around £40'000 maybe more, and on my income that'd take a minimum of four years of saving everything and spending practically nothing, which I'd be unlikely to achieve.

Which is why a part buy, part rent scheme makes some deal of sense, though obviously if prices fall significantly and I'm able to build a deposit of around £20'000 to secure a mortgage for a property of around 130'000 that would open up my options nicely.

Unfortunately... I have no idea how likely prices are to fall, because there seems to be plenty of conflicting advice and opinion in the press, and even more unfortunately for me my super duper saving plan is rather dependant on my income not being hit too savagely in the rather inevitable event of Mr Cameron having his wicked way with the NHS.

Actually, if I had my way I'd get the NHS to employ Martin Lewis as a savings consultant, because if there is one thing thing the NHS is good at, it's wasting money, usually in stupid areas and inevitably the people who suffer are the general staff and of-course the patients.

Be patient house prices are neither going up nor down within a range ,so if it takes 5 years let it be .It may not be great living at parents but you could be setting yourself up for life .

J_i_m

Patience is all very well... but equally I have to consider how long of my life I'll be repaying the mortgage. I'm not a particularly high earner, and I don't envisage being one either. By the time I'll have this deposit saved (assuming I'll still be gainfully employed that is) I'll already be in my 30's. And quite frankly... seeing as how mortgages cover 25+ years, and how I doubt I'll be in a position to overpay, I can't afford to delay too long, since I really don't need to be repaying a mortgage well into my retirement.

CautiousWithMoney

Jim if you are not yet even 30 and not on mega wages, you will be working until you are at least 75, probably 77!

IveSeenTheLight

J_i_m wrote: »

I'd be looking for a house with upto 2 bedrooms (even though I'd likely be a single occupant) and a garage connected to the property and preferably not across the road in a block. It seems that the going rate for what I looking for in the area I would prefer are anything from £130'000 to £180'000.

To get a mortgage of £180'000 I imagine I'd need a deposit of around £40'000 maybe more, and on my income that'd take a minimum of four years of saving everything and spending practically nothing, which I'd be unlikely to achieve.

Which is why a part buy, part rent scheme makes some deal of sense, though obviously if prices fall significantly and I'm able to build a deposit of around £20'000 to secure a mortgage for a property of around 130'000 that would open up my options nicely

Couple of things Jim.

1. You've shown the range for your area and immediataly desired the top of the range desirability. Maybe you need to consider lowering your expectations
2. Check out available mortgages. Your estimated £40k+ deposit is 22% of a £180k property or 30% of a £130k property. You don;t need such a high deposit (although the greater a deposit the better a rate you'll be able to get). You could consider a 10% mortgage meaning you only need £13k for the £130k property. By your calculation, it''s just over a years savings
3. You don't need prices to fall significantly for a £130,000 property in your area to be available. They are in that range now. Are you willing for a 28% drop in property so you can get the top of the range for £130k?

J_i_m

I've looked into the range, and have found that similar properties in the same area have a wide difference in price, I have not stated that I'm aiming at the £180'000 price range. Why would I? Especially when I know it's possible to get a comparable place in the same area for much less.

I could consider any mortgage I like... however, I shall not be in control of the lending, I can't even be sure if a bank will want to loan me eve up to £100'000, I've heard horror stories recently of people on similar income to me, either being refused mortgages or offered well below the amount needed for the place they are looking to buy.

My expectations are actually quite reasonable, I don't see why I should lower them if it meant having to buy a place in a area full of...say drug abusers.

IveSeenTheLight

J_i_m wrote: »

I have not stated that I'm aiming at the £180'000 price range. Why would I? Especially when I know it's possible to get a comparable place in the same area for much less.

You stated the range was £130k to £180k and then said you'd need a £40k deposit for the £180k property.
Hence why it appeared you were looking at the top of the range.

J_i_m wrote: »

I could consider any mortgage I like... however, I shall not be in control of the lending, I can't even be sure if a bank will want to loan me eve up to £100'000, I've heard horror stories recently of people on similar income to me, either being refused mortgages or offered well below the amount needed for the place they are looking to buy.

Sounds like you need to find out how much credit you have access to then.
This will help you to understand what options you have.

J_i_m wrote: »

My expectations are actually quite reasonable, I don't see why I should lower them if it meant having to buy a place in a area full of...say drug abusers.

Your expectations don;t come across clear.
You say you need a £40k deposit for a £180k property (top of your range) then are willing properties to lower so you would need a smaller deposit for a £130k property (still within your range, albeit at the bottom end).
To compound this, you don't seem clear if you could get a £100k mortgage.

I think you need to get more data to see where your options lie.

Reactor_2

Jim,

My advice to you would be to start saving now and see where you are in 4 years time, which will give you enough time to check out your options on a mortgage and explore the type of property you want to buy. The market has crashed and it is unlikely to go any lower, given where interest rates are, so there is no point in hoping it will go any lower.

nembot

I think it's case of wishful thinking to suggest prices will remain flat for an extended period, even now with all the mechanisms in place to keep the market afloat - prices are still dropping year on year.

They're crashing in Wales and other areas, which blow a hole in the typical spin of "the worst is over" when the fact is it's not even started yet.

Reactor_2

Here is a link to the graph of the Nationwide House Price Index:

http://www.flickr.com/photos/62577438@N08/5688572727/

As most people use a mortgage to buy their house and a mortgage is a leveraged bet on house prices, with the house acting as collateral, if house prices go down below the price you paid, along with expenses, the loss you will incurr, if you are forced to sell, will be a significant proportion of your yearly income(s), if not a multiple.

This will limit the amount of people that are going to sell, aswell as the price they will sell at, which I think fall into two categories; sellers that will sell at any price (rare, though closest is going to be at auction) and sellers that are trying to sell at cost, so they can move house.

The upside is limited as potential buyers need to overcome the deposit requirements, so unless they have saved enough and still have a job, house prices are very unlikely to go significantly higher.

At the same time we are in stagflation and as a result in a tough situation: Does the BOE keep interest rates low to help improve growth and risk fuelling inflation or do they raise rates to curb inflation and risk killing growth? This can be simplified to a question of: Do you want to keep the new generation happy or the old? At the moment everything is geared towards the new generation, if they are able to take advantage of the opportunities.

I personally think the socialising of the losses of the economy, which the people created themselves and the further pain of socialising the losses from inflation, is the only discipline the government and the BOE can apply, to teach the population a lesson in humility. I think the population should count themselves lucky as if it was a free market, more people would be bankrupted, but the on the otherhand, the survivors would also be alot better off.

Thrugelmir

Reactor wrote: »

This will limit the amount of people that are going to sell, aswell as the price they will sell at, which I think fall into two categories; sellers that will sell at any price (rare, though closest is going to be at auction) and sellers that are trying to sell at cost, so they can move house.

The market isn't static. Every day the 3 D's , death, divorce and distress keep the market ticking over. Drip, drip, drop.........