House Price Crash Discussion Thread

KITCHEN1_2

"Your posts are very wordy for a forum" ...LOL

Yours....
"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!"

mine....

"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."

Enough said about that.

"have I by chance more than one property to my name"

No, I have just the one I live in. Had you asked how many have you bought and sold as investments in the last 30 years the answer would have been significantly different. Property investment has been my lifelong business and obssession even when I have had other business interests. However , no more ,I'll leave it to younger (better qualified) people

Having just read your earlier post ,no offence ,but you're short of some experience that only time ,observation and a lot of risk taking will help with.
That's not being a smart asre , it's telling you what someone told me a long time ago ,but you have to get there before you really understand it. Like many things in life.

Beingjdc,
Property investment is an arbitrage opportunity , nothing more or less than the same that exists in any other form of investment. It works to correct and allow former economic transgressions to be corrected and as usual it swings from one extreme to another in doing that job. The reward is commensurate with time cost on money and the degree of risk assumed in taking the otherside of a transaction that is deemed unattractive at the time. Much like the uncertainty involved in investing in any new venture for example.

I'll leave it there as I have no over reaching compulsion to try and change the way people think.

dweeby

KITCHEN1 wrote: »

Your posts are very wordy for a forum

They are!!!

beingjdc

KITCHEN1 wrote: »

Beingjdc,
Property investment is an arbitrage opportunity , nothing more or less than the same that exists in any other form of investment.

The thing is, in most investments, it's not arbitrage to borrow at 6% and invest at 4%...

adr0ck

Barclays are expecting interest rates to hit 4% in 2009

anyone any thoughts on this?

Turnbull2000

Current events...

FT - Shares in Paragon crash

Shares in Paragon on Friday crashed 46 per cent after the buy-to-let lender confirmed plans for a hugely discounted rights issue that values each share at a tenth of their closing value.

Paragon, the UK’s third-largest buy-to-let lender, relies entirely on the wholesale markets to finance its mortgage lending but has been unable to do a securitisation in recent months as the capital markets are virtually closed.

lol

Generali

There's a far more intelligent poster than me on the fool website that has calculated the future rates of interest implied by the interest rate swap market:


Jan 5.5
Feb 5.25
Mar 5.25
Apr 5.25
May 5
Jun 5
Jul 5
Aug 5
Sep 4.75
Oct 4.75
Nov 4.75
Dec 4.5

Link

Goldmans reckon rates will fall to 4.25% by early 2009.

adr0ck

Generali.........................does anyone forecast ahead of this i.e. 2-3 yrs

thanks

wolvoman

chappers wrote: »

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.

You talk about the media and story-making analysts creating a self-prophesising downturn, but then your last paragraph suggests you might be part of the self-fulfilling prophecy. The 'storm' you wish to ride out by tightening your belt is more likely to happen if you (and millions of others) actually do tighten your belt.

Generali

adr0ck wrote: »

Generali.........................does anyone forecast ahead of this i.e. 2-3 yrs

thanks

Not that I've come across, not proper forecasters anyway. You might as well throw a couple of dice and add the pips together for all the accuracy you'll have.

In 3 years time we could be in the midst of a huge oil crisis, or not. Bird flu might have killed millions. Or not. We could have a Labour Govt, or Tory, or had a millitary coup. There are just too many imponderables and wildly innacurate forcasts just make you look like an idiot if you're selling products on the back of your research.

The hedge fund I work for uses research from investment banks and brokers as a basis for some of our trading. If we get good ideas from them we're more inclined to trade with them and listen to them when they're pitching another start-up to us or whatever. If they bring duff ideas, we're not so interested.

FWIW, I can see downward pressure on interest rates over the next 20 years as baby boomers retire and want to move more of their money into low risk products like annuities, cash on deposit and bonds. For the same reason I can see a huge constituency building, though not there yet, to keep inflation low (due to a larger proportion of the populace living on fixed incomes). Also, I think that will have long term downward pressure on UK asset prices as more retirees look to sell their house to improve their standard of living - what's the point in living alone or with the missus in a £500k house on an income of £10k when you can live in a nice 2 bedder and free up £300k or something.

tr3mor

adr0ck wrote: »

Generali.........................does anyone forecast ahead of this i.e. 2-3 yrs

thanks

They can forecast as far ahead as they like. It doesn't mean that they're going to get it right.

Who knows what wars or global shocks are going to occur in the next 3 years? Who knows if China is going to be able to keep prices of exports low? Etc...

EDIT: Dammit. Beaten. What he said...