Re value ??

snickpan

MobileSaver said:

FrugalCat said:

MobileSaver said:

FrugalCat said:

mortgage backed house buyers of the past years may not be so happy.

On the contrary, I suspect the vast majority of people who bought a house as a home in past years will be much happier than those still choosing to rent, regardless of what happens to house prices.

  People who have large mortgages would feel hard done by in deflation (which would be the vast majority, talking about house buyers).

Why would someone who has been living in their own home for say the last three years (paying their own mortgage rather than their landlord's) feel hard done by, whichever way house prices move in the future?

they would wish their mortgage was £30k less,as if they had bought 'post lockdown', for example.  Everyone wishes their mortgage was less.

MobileSaver

snickpan said:

MobileSaver said:

Why would someone who has been living in their own home for say the last three years (paying their own mortgage rather than their landlord's) feel hard done by, whichever way house prices move in the future?

  Everyone wishes their mortgage was less.

Er, yes, what a self-evident thing to say. However few intelligent, rational people would feel hard done by because something was more expensive when they bought it three years ago.

FrugalCat

MobileSaver said:
Why would someone who has been living in their own home for say the last three years (paying their own mortgage rather than their landlord's) feel hard done by, whichever way house prices move in the future?

MobileSaver said:

Er, yes, what a self-evident thing to say. However few intelligent, rational people would feel hard done by because something was more expensive when they bought it three years ago.

If the mortgage becomes a bad thing to have, an intelligent, rational person might prefer it to be their landlords problem.

The critical bit of difference is in the mortgage. You might be able to rationalise a bad investment if you own the asset. But the "vast majority" don't own the houses they live in, they have a large debt against it.

MobileSaver

FrugalCat said:

MobileSaver said:

However few intelligent, rational people would feel hard done by because something was more expensive when they bought it three years ago.

If the mortgage becomes a bad thing to have, an intelligent, rational person might prefer it to be their landlords problem.

Again, yes, a few might but not the vast majority. Why keep paying your landlord's mortgage instead of your own for years on end? Why risk your landlord increasing the rental amount year after year when you can fix a mortgage for 5 years, 10 years or even longer at some of the lowest interest rates in history? Why risk having to completely upend your home life if your landlord decides to terminate your tenancy?

FrugalCat said:

But the "vast majority" don't own the houses they live in, they have a large debt against it.

That's simply not true, the amount of people with a mortgage (let alone a large one) is nowhere near 90%. For a start around a third of all homes are bought with cash and of course many homeowners who did initially require a mortgage have now paid it of

jimbog

FrugalCat said:

MobileSaver said:
Why would someone who has been living in their own home for say the last three years (paying their own mortgage rather than their landlord's) feel hard done by, whichever way house prices move in the future?

MobileSaver said:

Er, yes, what a self-evident thing to say. However few intelligent, rational people would feel hard done by because something was more expensive when they bought it three years ago.

 the "vast majority" don't own the houses they live in, they have a large debt against it.

A debt which is decreasing with time while their stake in the asset is increasing

FrugalCat

MobileSaver said:
Again, yes, a few might but not the vast majority. Why keep paying your landlord's mortgage instead of your own for years on end? Why risk your landlord increasing the rental amount year after year when you can fix a mortgage for 5 years, 10 years or even longer at some of the lowest interest rates in history? Why risk having to completely upend your home life if your landlord decides to terminate your tenancy?

You misunderstand - owning a house is better than renting, of course.
But when choosing between a 60-95% loan on a house and renting, it needs further thought. In any case, don't ignore the upsides of renting: All the risk lives with the owner of the property.

To answer your questions - assume we're going to see a decade of Japan-like deflation, for example. 

MobileSaver said:

That's simply not true, the amount of people with a mortgage (let alone a large one) is nowhere near 90%. For a start around a third of all homes are bought with cash and of course many homeowners who did initially require a mortgage have now paid it of

63% of UK homeowners "own" the home they live in. About a third of those are mortgage free. The remaining 66% have a total value of 1.4tn in debt against them. Of which 62bn are FTBs.
The average FTB mortgage is around £170k against average house prices of around £235k, suggesting a LTV of over 70% on average. (And using the average house price is generous here, as FTBs go for the bottom end of the market.)
Since the argument was "recent purchasers would suffer from deflation", this should cover that side of the argument.

But lets look at how at risk the rest of mortgage holders might be:
365k FTBs against around 11m mortgages in total means the non-FTBs would account for around £131k mortgage or an average of 55% LTV.
This would suggest that even longer term mortgagees could suffer somewhat, if their debts stopped inflating away.

MobileSaver

FrugalCat said:

MobileSaver said:

That's simply not true, the amount of people with a mortgage (let alone a large one) is nowhere near 90%. For a start around a third of all homes are bought with cash and of course many homeowners who did initially require a mortgage have now paid it of

Since the argument was "recent purchasers would suffer from deflation", this should cover that side of the argument.

That's the first mention I've seen that this was talking about recent past years, did I miss that somewhere or are the goalposts being moved?

Anyway, this is now straying into Debating House Prices and this is not the right forum for that.

FrugalCat

Well luckily for my argument it doesn't seem to matter too much how recent - so it's understandable you'd want to exit the discussion at this point.

Crashy_Time

Densol said:

Crashy_Time said:i

OldMusicGuy said:

Crashy_Time said:

You gave a "real world" example though and a postcode/area allows people to investigate those numbers for themselves? 

I think you are misunderstanding. The real world examples are to show what I experienced to help answer the OPs question. You can't check the numbers yourself unless I give you the full house details. Unless you think I am lying, I can't see why you are asking.

In one situation, we made an offer in early March 6% below asking on a property that we really liked. It had been on the market for over a year and was a new build (built by a local consortium rather than a big developer). As cash buyers, we thought that was a pretty good offer. It was rejected despite me playing the "well if you think this property will be easy to sell with coronavirus looming" card. The EA said there was a potential buyer willing to pay close to asking. We didn't up our offer, and within a couple of days the property changed to SSTC and is still showing as SSTC. They may not have paid full asking but clearly offered more than us. Obviously that could fall through but it looks like it's going ahead.

So that was an example of playing hardball and using the "well we're heading for tough times" card that didn't work. We lost that house so had to rush around to find another, and in the next few days we looked at a lot of properties online and quite a few in the flesh. We found a new build development that suited our needs and made an offer on March 12th (prior to lockdown). We were able to negotiate a deal that we were happy with, but the developer wasn't ready to panic sell. We looked at another new build development in the same town and I know on that development we could probably have got a better deal, because the houses and development wasn't quite as "premium" as the one we chose and they had more completed houses to sell. The sales agent was definitely more keen to negotiate on this development than the one we chose.

Both properties are in small towns in Somerset. But the point of my real world examples was to show the OP that there can be room for negotiation but not everyone is ready to drop their trousers. In the real world, we don't know how prices are going to go, and how desperate developers/sellers may be to drop prices. So the OP needs to weigh up the risk of losing the house they have secured now against the possibility that prices may fall. A lot will depend on the desirability and location of the property itself. 

If, and it looks increasingly likely that we can`t avoid it, we are actually in tough times, and not maybe/potentially heading for them I doubt that the developer/agent will be so resilient to holding out for their price level.

Rarely Crashy I agree with you on this point ! Maybe wishful thinking as I am in the market for a BTL bargain 

BOE seem to be in agreement as well, they seem to think the solution is more debt though, which of course I don`t agree with.

MobileSaver

FrugalCat said:

so it's understandable you'd want to exit the discussion at this point.

Perhaps you believe the Forum Rules don't apply for some reason but for reference: Debate House Prices

we’ve reluctantly decided to temporarily close the Debate House Prices & the Economy Board ... Please do not post content intended for this board elsewhere in the forum