House Price Crash Discussion Thread

Generali

From the FT [link]

Worryingly, UK house prices rose by 1.3 per cent during December, according to the Halifax. There is a real danger the residential property market is on the turn. Improvements in October and November, when prices fell 0.7 per cent and 1.3 per cent, are being reversed. We can only pray that the downward trend will resume this month, fulfilling optimists’ forecasts of a 10-15 per cent slump in 2008. Hold your nerve, Merv. Keep those interest rates high.

I know the above paragraph sounds nonsensical. The assumption that rising house prices are good is deeply embedded in our culture. A belief in witches was too, years ago. Housing equity squats on the lives of Britons like an overfed toad. Most of us would benefit if it underwent a new year weight loss programme. We pay a heavy price for the delusional comfort that comes from owning expensive homes, both in loan charges and distorted personal priorities.

dolce_vita

Hey Gen, that second paragraph could be summed up by my stock answer #3 in my sig

CarUser_2

Anybody see the tonight program on itv. This year might me bad for investors but it will help the first time buyers find a home. I was planning to invest this year but i might just wait a while to see what really happens.

MiserlyMartin

I would wait a few years. Otherwise your 'investment' will turn out to be a very bad one.

chappers

Economists are predicting a general downturn in the economy including house prices .At this stage it is hard to say what the effect will be on house prices, I have heard everything from 5-45% over the next 5 years.Some are even predicting small rises or a flattening out.The media can often be guilty of scaremongering and finding analysts who are willing to make wild predictions just to create a story. Unfortunately a lot of how the economy performs is based on sentiment and confidence so sometimes these sensationalist reports can become self prophesizing.

However the sensible umongst us should be tightening our belts and trying to cut down on our credit commitments as this puts us in the best position to ride out any storm that may be on its way. The simple answer is that nobody has the difinitive answer.

cheeky_lil_monkey

We bought a good-sized 2bed new-build apartment about 20 months ago. We did not buy thinking 'oh great, we'll make a packet' and were well aware that the developers mark-up on the property would mean it would realistically acheive that price on the open market about 12months later.

At the time, some people thought we'd be better off waiting. However, we would be paying more in rent that we are paying in the interest part of our mortgage. Currently we'd have been £20-£30,000 equity (we put down a sizeable deposit alongside a slight property growth), £20,000(ish) in savings. We could sink some of this into the property, but would like to keep it aside as we'd like a refurb property for our next home and would like the cash to be readily available for a deposit and refurb costs.

IMO if we'd stayed renting, we'd have been funding the people who have greatly helped the house prices to be as stupidly high as they are today. We also know too many people who have been stung due to tenancy agreements, where the LL has asked them to leave after their 6mths are up and then has hiked the price up for the next tenants. It happens. And whilst we can never guarantee security in your own home - it has thus far been more secure than a rental property. We also don't have to wait 4 months for a LL to take notice of a ceiling caving in and mould spores appearing on walls.

Our property is not ideal for a family, but is 2bed so we would be able to sit out a period of negative equity if we really had to. Ideally we would like to move somewhere bigger where we'd be physically more comfortable staying put for x number of years, but it would mean us being a little less economically comfortable - guess we've to weigh one against the other. Any thoughts on whether to stick or move this coming summer?

IMO I don't see there being such a dramatic fall in houseprices as in the last crash, a 5-10% fall could be fairly healthy. For us, we'd still be in positive equity and the 5-10% would make a greater difference to a property on the next rung of the ladder, making it a little cheaper to move up than it wud be now, despite a fall in our own home price...if that makes sense. No idea when this could happen though - it's all just a guessing game. Prices could continue rising for another year or so, then stagnate, then fall, or they could fall tomorrow. No one knows and anyone who claims to know for certain is talking through their hat.

For all those people out there who are holding off from buying just to benefit from a market crash or such likes, a good proportion of you will be in properties owned by the BTL's we've all come to dislike so much. It's predicted they may be the first to be hit and I can understand this, but at the same time if more and more people are selling and moving into rented accommodation - the LL will be profiting and if rental accom gets harder to come by, prices will go up, LL will find they're making money again and they won't be selling up.

The property market is a big circle of swings and roundabouts. A good solution would be to increase tax on buy-to-lets, decrease mortgage amounts, stop LL playing one property off the other - unless they can afford to pay for both mortgages, they shouldn't be allowed a 2nd mortgage, afterall no rental income is guaranteed. Various other things could be implemented to slowly but surely decrease the amout of buy-to-let LL which would have a more controlled dip in the market as not all LL would pull out at the same point and properties would still trickle onto the market.

I know house prices are ridiculously high and compared to the past we're paying shocking amounts of money each month for something the bank tends to own most of for most of our lives, but if that's the way it's got to be, then that's the way it's got to be. We found it very hard to get on the ladder and sometimes dispair on how to move up it (there's a HUGE jump where we live from a place for a couple to a place for a family) and know many people who just can't afford it. We count ourselves incredibly lucky. I think what I'm trying to say is waiting for prices to fall to £40,000 for a family home - it's highly unlikely to happen and we know we would rather prices stayed the way they are (roughly, markets always change) and we had to work hard, save hard etc. than prices would fall through the roof and x amount of people be out of homes.

Who benefits then anyway? Quite often the LL, who find themselves with a lot more people needing roofs over their heads due to having their homes re-possessed - not something we want to see happen!

KITCHEN1_2

Tax on BTL's the best idea.No, not really. There is no difference between an investor who invests capital freely into property and one who invests into manufacturing widgets as long as the market is allowed to freely determine what returns are available.
As usual you're committing to to the common fallacy typically based upon either fear ,or envy that investment is harmful when said investor somehow appears to be making money from the process.
No, the best idea is for govts and central banks to stop trying to socially manage the economy.They have already proven they don't do it well by creating periodic overly volatile conditions which have a great potential to destroy the long term financial aspirations of the population they govern.
Without their interference/engineering price movement would tend to be a great deal smoother and less of a life disturbing event.
Just bear in mind if the govt and central banks did not mismanage and create the necessary conditions then issues like property prices and BTL's would hardly merit a discussion.
Take aim by all means ,but get the right target.

dweeby

BOE keeps interest rates at 5.5%.

cheeky_lil_monkey

Kitchen1 you're suggesting I don't know what I'm talking about?
Well.....I've got a degree in Property Management and Investment and am involved in finance and investments, I know about risks and yields etc. I do have some insight into the whole situation. I was not saying that it would be a 'fix all' solution. I could go into detail with other investments - but that's not what this thread is about.
Your posts are very wordy for a forum, I'm going to give the benefit of the doubt in this being 'just the way you speak' rather than trying to be a smart @rse and appear intellectual - I have no way to tell.

Have you by any chance got more than 1 property to your name?

I was trying to show some people on here who believe they're doing the 100% right thing by not buying a property now that they are helping keep some btl's who, due to many faults of our government and other reasons, do appear to have taken over many areas of the country making it next to near impossible to find property to buy that isn't at a premium or where an investor won't go in over your head and pay over the odds for the property!

Anyway, on with the day.

beingjdc

KITCHEN1 wrote: »

Tax on BTL's the best idea.No, not really. There is no difference between an investor who invests capital freely into property and one who invests into manufacturing widgets as long as the market is allowed to freely determine what returns are available.

The key difference is that an investor who invests in manufacturing widgets increases the total amount of widgets available, and can only make a profit if people want widgets. A BTLer who buys an existing property to rent it out doesn't increase the total supply of property - they may move one from being available for owner-occupation to being available for rent, but that's about it.