Can housing ever actually drop?

jimjames

Just to reiterate that prices can fall and fall fast especially after a boom. The situation referred to above with the abolition of MIRAS was one. My wife bought a place for £60k in 1989, 5 years later the price had dropped to £30k or so. We finally sold in 1998 for £40k. This was in Southern England. House is now worth £200k

Old_Lifer

House prices  do fall from time to time,  though many of those involved in selling houses may still be saying 'now is a good time to buy' shortly before the fall begins to commence.     I have, I suppose experienced three falls over the last four decades, the worst fall being in the order of 20-25%. It takes a few years for prices to recover after a fall.

Many younger people have no experience of falling prices and rising interest rates and think rising prices and low interest rates will go on uninterrupted for ever.

dude7691

Voyager2002 said:

An immediate comment: your strategy is almost asking for failure.

You are a student and you say you receive grants (not loans?). Most students aim to earn more as graduates than would have been possible as school-leavers, and economics is a pretty marketable subect. However, graduate-level jobs require reasonable social skills as well as academic knowledge, and by living in isolation in part of the parental home and become a hermit you are probably stunting your social skills, certainlly not developing the personal qualities that make a graduate attractive to an employer.

Again, you are determined to remain in Swansea but do not seem to have the kind of personal ties that usually make someone determined to live in a particular place. What happens if you are offered an attractive job somewhere else?

In short, the money that you are saving now is absolute peanuts when compared with what you are likely to earn as a graduate if you play your cards right now.

You also mention an interest in living in another country: in order to do so you would need a visa (permission from the government there to become an immigrant) and usually this requires professional skills and work experience: simply having a degree does not get you far. So again, for this ambition to become a reality you would need a reasonable career, which requires both academic achievement and reasonable social skills.

Hi There  

I'm from a low income background, and am studying at Open Uni, so I get £5433 total income from that, £4500 of which is a grant, paid yearly. My total student debt will only be £10k thereabouts, as my tuition fees are also paid by loans (£1.5k a year). Regarding my social skills, they're okay and I can get on with and be very amicable with people. I worked in retail for several years so I've had a lot of pratice of dealing with people I don't really click with. I have a very small circle of people I stay in close contact with, and my social needs are fulfilled, but they're living far away so as far as in person interaction goes you may have a point. A sign of the times really, can't afford to socialise. 

That's a good question. I guess in that scenario, the salary I am offered would go up and I would bite the bullet and commute if it was within a reasonable distance (season ticket for trains for example, or coaches). If not, then I'd rent out the property to maintain the mortgage and rent somewhere else myself. I could get a 40 year mortgage for £60k borrowed at £180/mth, so it wouldn't be difficult to hold onto it (although BTL would probably be more than this). 

I appreciate that my savings now are small compared with graduate earnings, it's just compound interest helps which is why I've made such an effort thusfar. 

The move abroad thing is pretty much a last resort if I get priced out of the market entirely, so I appreciate it could cost a significant amount to move, but if houses have increased 50% here in 4 years then it may be worth considering. I know it's a logistical nightmare. 

dude7691

kuratowski said:

You can only play the hand you're dealt.  If you're an undergraduate student and not working full time (btw do not even think about misleading the bank that income from a temporary job will be ongoing) then it is probably not the right time to buy a house.

All you can do is save what you can now - which you're already doing - and then deal with the situation as it is later when you are ready to buy.

The right time to buy might not necessarily be immediately after you graduate, either - don't let your aversion to paying market rent trick you into buying an unsuitable property you can afford at the expense of saving a bit longer and buying the right place later on.

Hi

I appreciate that, coming from the background I have I've done alright compared to where the statistics suggested I'd have ended up thusfar. The only reason I had that idea is because a 40 year mortgage would be about £180/mth on £60k borrowed @2% (just a rough guess). I could comfortably pay that now and I'd barely notice it, and would be hedged against future price rises to some extent. I know it's not an ethical thing to do but I wouldn't be defaulting, that's for sure. Affordability assessments are based on average expenditures I'd imagine, and include people who are irresponsible or spend a lot more than I do. Same as car insurance, safe drivers pay more because idiots love to overtake on blind bends

I suppose so yeah, it's just a case of if houses are gonna go up 50% I'm better off chucking the money into investments for the next 7 years because there's no way I'd be able to buy if that happened. That requires knowing the future though which I appreciate I can't do with any level of consistency. 

That is true, I think I may be slightly falliable to that and I'm definitely experiencing a level of fomo here. You're right though, done wrong it could be a terrible false economy. Thank you for your insights  

Dh6

You need to remember to live your life!

The decade you’re now in will most probably be the best of your life, LIVE IT!

strawb_shortcake

A mortgage is only part of the cost of home ownership,  so you might not notice £180 per month, but you've got insurance on top, life insurance is advisable as well as other household bills. 

Have you considered the ongoing maintenance costs that come with running a home? It's likely that a £100k home will absorb more maintenance than a more expensive and newer home. I'd assume that if house prices do continue to increase you'd like your home to to rise with rest of the market?

Don't underestimate the broader and soft skills that compliment a degree, employers do favour these and graduate schemes were very competitive before covid so may be harder going forward.

dude7691

Dh6 said:

You need to remember to live your life!

The decade you’re now in will most probably be the best of your life, LIVE IT!

Haha I had a phase of teenage impulsivity when I was 17-18, I used to be quite a social butterfly Never properly fulfilled me though, and where I live right now is pretty isolationary by nature anyway, hence why I'm saving so aggressively to try and change my circumstances so I can have a more balanced life that's actually enjoyable  

Stubod

dude7691 said:

Sorry to hear that, I understand it varies massively by area. For my own personal goals, I would be buying this house as my main residence and purely a hedge against inflation and renting for the rest of my life. I have no aspirations to become a landlord, or profit from housing in any way barre not paying rent to a landlord. I would be happy if the price stayed stagnant for 50 years as I never plan on selling. It's just as you can imagine far more important to me the price I get in at, as the growth has very minimal benefit to me as it's a home I never plan on leaving. Thanks for your input  

..no need for a "sorry", as the house price drop was actually a benefit for us as we were moving to a more expensive property. ie it would have cost us more to move if both houses had gone up by (say) 20%.

Where we got stung was the first housing boom when house prices in the area we were looking to buy went up by about 50%+ in 6 months!

(Although by today's prices still a lot cheaper in real terms than they are now!)

dude7691

annabanana82 said:

A mortgage is only part of the cost of home ownership,  so you might not notice £180 per month, but you've got insurance on top, life insurance is advisable as well as other household bills. 

Have you considered the ongoing maintenance costs that come with running a home? It's likely that a £100k home will absorb more maintenance than a more expensive and newer home. I'd assume that if house prices do continue to increase you'd like your home to to rise with rest of the market?

Don't underestimate the broader and soft skills that compliment a degree, employers do favour these and graduate schemes were very competitive before covid so may be harder going forward.

Yes absolutely! I know other bills aren't cheap either, it'd probably be around £400/mth all in (including maintenance), still affordable at the moment. I've heard the rule of thumb is around 1% of the property value per year for maintenance, so around £1k a year or so. I know of course some years are more and others are almost nothing. I wouldn't consider buying unless I could put away £10k in an emergency fund for stuff like that, which I'm currently on course to be able to do. Wouldn't personally take life insurance, have read into it quite a bit and as I have no dependents I don't feel like I'd get value for money out of it. 

Regarding price rises, it's not so important really. Even if my house value was flat, I'm not paying rent so am saving money that way. Plus, I'd probably get a roommate and charge a below market rent to help with the excess costs of owning property. Of course I'm also paying money in the form of opportunity cost with equities, but I can live with that, I'd be paying into them through an employer matched pension and a private one anyway. 

That makes sense, I'm firmly set on getting my degree no matter what happens. It has a value far beyond monetary making you more employable at all levels of the job market in general, even lower paid jobs appreciate the skills graduates have. 

Thanks for your contribution  

dude7691

Stubod said:

dude7691 said:

Sorry to hear that, I understand it varies massively by area. For my own personal goals, I would be buying this house as my main residence and purely a hedge against inflation and renting for the rest of my life. I have no aspirations to become a landlord, or profit from housing in any way barre not paying rent to a landlord. I would be happy if the price stayed stagnant for 50 years as I never plan on selling. It's just as you can imagine far more important to me the price I get in at, as the growth has very minimal benefit to me as it's a home I never plan on leaving. Thanks for your input  

..no need for a "sorry", as the house price drop was actually a benefit for us as we were moving to a more expensive property. ie it would have cost us more to move if both houses had gone up by (say) 20%.

Where we got stung was the first housing boom when house prices in the area we were looking to buy went up by about 50%+ in 6 months!

(Although by today's prices still a lot cheaper in real terms than they are now!)

Ah yes of course, house prices rises aren't good for people moving up the ladder either so that makes sense! 50%+ in 6 months is crazy, honestly the volatility in housing is easy to forget on a localized scale. 

I don't really know anywhere except some old mining towns that haven't increased in real terms, although I could be wholly wrong on that. It varies from area to area as much as it does from house to house. Crime rates, travel links etc. can always change and sting you unexpectedly. I know the broader figures don't speak for everywhere