Can housing ever actually drop?

MaxiRobriguez

As someone who is still (i think) young, who got on the housing ladder at 22, I agree with the other posters that the primary focus should be on improving yourself. If that means renting for a bit, that's OK.

My first home was a bit like what your plan was - a terrace for about £100k, and I stayed in that for six years doing the same job. Having got bored of that job and starting to think about a career properly and maximising my earnings, in the five years since I've more house once and looking to do so again - but neither of those things would have happened/about to happen had I not worked on the career aspect first.

Don't let the tail wag the dog.

dude7691

MaxiRobriguez said:

As someone who is still (i think) young, who got on the housing ladder at 22, I agree with the other posters that the primary focus should be on improving yourself. If that means renting for a bit, that's OK.

My first home was a bit like what your plan was - a terrace for about £100k, and I stayed in that for six years doing the same job. Having got bored of that job and starting to think about a career properly and maximising my earnings, in the five years since I've more house once and looking to do so again - but neither of those things would have happened/about to happen had I not worked on the career aspect first.

Don't let the tail wag the dog.

22 is quite the achievement, congrats on that! I understand that, I'm not wholly against the idea. I have someone who I could rent with in Swansea, without a formal contract to live there for a few months just to check it's the right place for me (and equivalently scope out surrounding areas). Living in rural areas my whole life it would be quite a change for sure. 

That's totally understandable, I know I would likely get bored in a job I'd probably end up in without active focus on career progression, but I feel like there's nothing wrong with buying a house, focusing on building wealth as quickly as possible between 25-30 and then pushing my career a bit more once I've proved to myself I can hold down a job for a number of years. That way, compound interest also kicks in which is ideal as my long term goal is to retire (very frugally) in my late 40's - early 50's. I'd like the job to be relevant to what I studied, but there's no guarantees in this world of course. 

I take that point, I'll try to ensure I'm balancing them, thank you  

MaxiRobriguez

dude7691 said:

MaxiRobriguez said:

As someone who is still (i think) young, who got on the housing ladder at 22, I agree with the other posters that the primary focus should be on improving yourself. If that means renting for a bit, that's OK.

My first home was a bit like what your plan was - a terrace for about £100k, and I stayed in that for six years doing the same job. Having got bored of that job and starting to think about a career properly and maximising my earnings, in the five years since I've more house once and looking to do so again - but neither of those things would have happened/about to happen had I not worked on the career aspect first.

Don't let the tail wag the dog.

but I feel like there's nothing wrong with buying a house, focusing on building wealth as quickly as possible between 25-30 and then pushing my career a bit more once I've proved to myself I can hold down a job for a number of years. That way, compound interest also kicks in which is ideal as my long term goal is to retire (very frugally) in my late 40's - early 50's. I'd like the job to be relevant to what I studied, but there's no guarantees in this world of course. 

I take that point, I'll try to ensure I'm balancing them, thank you  

Building wealth doesn't have to be via a house though. Multiple avenues but ultimately your end goals (house, early retirement) will be dictated by average earnings and patience, not if you buy a starter home at 22, 25 or 30.

There's a nice video by Ben Felix on buying vs renting too here who shows it's not perhaps as clear cut as everyone thinks in terms of getting on the housing ladder = good, rent and throwing money away = bad.: https://www.youtube.com/watch?v=Uwl3-jBNEd4

MaxiRobriguez said:

As someone who is still (i think) young, who got on the housing ladder at 22, I agree with the other posters that the primary focus should be on improving yourself. If that means renting for a bit, that's OK.

My first home was a bit like what your plan was - a terrace for about £100k, and I stayed in that for six years doing the same job. Having got bored of that job and starting to think about a career properly and maximising my earnings, in the five years since I've more house once and looking to do so again - but neither of those things would have happened/about to happen had I not worked on the career aspect first.

Don't let the tail wag the dog.

22 is quite the achievement

Helps to have generous parents who provided a deposit. I didn't earn having a house at 22. That's the other thing to remember - don't get caught up on what others do as you don't know their circumstances. Just do what's right for you.

dude7691

MaxiRobriguez said:

Building wealth doesn't have to be via a house though. Multiple avenues but ultimately your end goals (house, early retirement) will be dictated by average earnings and patience, not if you buy a starter home at 22, 25 or 30.

There's a nice video by Ben Felix on buying vs renting too here who shows it's not perhaps as clear cut as everyone thinks in terms of getting on the housing ladder = good, rent and throwing money away = bad.

I absolutely agree housing isn't the main way to build wealth. I would never consider it such, I think property investment (BTL) has been dead for a while personally. I much prefer equities and the idea of the starter home is that I'd be able to contribute the savings I'd be making into index funds to generate a higher rate of return. Property only really becomes viable I think if you have a very high income, as you can leverage then and turn the small 3-4% average return of property into 4 times that (less interest & expenses of course), yearly plus the income from tenants creating a decent effective ROI for relative safety compared with stocks which tend to be more volatile. 

I understand housing is also a poor investment if you plan on only owning it for a short period of time, as there's lots of flat costs of buying and selling. In reality, I'd be using those 5 years I'm working to save and save to build enough equity that I could either sell it or rent it out (preferably the latter) and then move elsewhere and rent for better employment if that was a smart financial decision at the time (a decade from now is impossible to predict). 

MaxiRobriguez said:

Helps to have generous parents who provided a deposit. I didn't earn having a house at 22. That's the other thing to remember - don't get caught up on what others do as you don't know their circumstances. Just do what's right for you.

Haha I guess I don't have that, but it's not something I envy. I have good parents who do what they can even if it's not financial contributions I wouldn't be who I am and as frugal as I am without them as they instilled those values into me I guess. That's very true, comparing with the Jones's never ends well! I shall, thank you ) 

zagfles

I don't know people live under the illusion that house prices always rise, it's easy enough to research. In real terms, UK house prices are lower now than 15 years ago!

In the early 90's they dropped in nominal terms as well as real, and in the mid 70's they dropped in real terms but this was disguised by high inflation. Prices rose in the 80's and 1997-2007. It's a rollercoaster, see:

https://www.allagents.co.uk/house-prices-adjusted/

Scottex99

You seem like a smart kid, no offence intended, I'm almost 40. And props for getting qualified and having your head so screwed on at a young age.

Cool intro btw, kind of "odd" but cool if it's working for you.

One thing I would say is things change, in theory there's years and years and years for making money if you have the right blend of hard work, grabbing opportunities and luck.

I've done almost every option listed in this thread. I went to uni and bummed around, scraping a general, I've got my own place in UK (lucky to come from middle class family who helped with deposit). I've moved abroad and work abroad now. I've worked for peanuts and I've made more in a month than some people make in a year.

Anything can happen would be my point plus there's plenty more to life than money, but GL for sure!

dude7691

zagfles said:

I don't know people live under the illusion that house prices always rise, it's easy enough to research. In real terms, UK house prices are lower now than 15 years ago!

In the early 90's they dropped in nominal terms as well as real, and in the mid 70's they dropped in real terms but this was disguised by high inflation. Prices rose in the 80's and 1997-2007. It's a rollercoaster, see:

https://www.allagents.co.uk/house-prices-adjusted/

Hi

I know in the past that has always been the case, but we have a government at the moment who when a pandemic hit nearly the first thing they did was cut property taxes effectively to zero for the majority of the market! No doubt they will come down at some point, but over my time horizon for purchasing I'm guessing not. My best hope really is a few years of single digit growth only so I don't get completely priced out! 

That real terms comparison is remarkable actually, shows you how much a bubble 2008 really was in hindsight. When it comes to house price to incomes however, that's the kicker as we're sat at 08 valuations and likely to go higher. Of course it's not as bad here as in some countries (China for example 40:1), but 8.4:1 (roughly) is quite a significant increase from 20 years ago where it was half that! 

It appears very cyclical and if that was a stock I'd say it was a buy, because it's about to break all time high and push to a new cyclical high, that only further affirms my suspicion there's a lot more room for this market to run, to the detriment of FTB's unfortunate enough to not have been born 5-10 years earlier! 

Thank you  

dude7691

Scottex99 said:

You seem like a smart kid, no offence intended, I'm almost 40. And props for getting qualified and having your head so screwed on at a young age.

Cool intro btw, kind of "odd" but cool if it's working for you.

One thing I would say is things change, in theory there's years and years and years for making money if you have the right blend of hard work, grabbing opportunities and luck.

I've done almost every option listed in this thread. I went to uni and bummed around, scraping a general, I've got my own place in UK (lucky to come from middle class family who helped with deposit). I've moved abroad and work abroad now. I've worked for peanuts and I've made more in a month than some people make in a year.

Anything can happen would be my point plus there's plenty more to life than money, but GL for sure!

Hi There

I appreciate that, I like to think I'm semi-decent at articulating myself  

It is a weird way to live that's for sure, I do feel kind of forced into it what with the current state of the economy. I guess being fascinated by economics since the age of 14 as well, I know the power of compound interest all too well and I wanted to get try and just save as much as possible as quickly as possible so it works for me rather than against me (like it is for a lot of people I know ). I'm hoping once I've got a permanent roof over my head I'll be able to settle down a little more with a stable income and less worries about the economy. 

That's absolutely right yeah, I'm aware I've got time on my side and I don't want to squander away my youth on just making money because there's years to do that. It's just that dilemma in my head of the compound interest thing versus the fact you're only "young" once, but what is young nowadays ahaha, as long as you're in good health  

That's great as you have such a broad experience, and I resonate with that to some extent. I've worked for £4.30 an hour when I was 16-17 to scrape enough money to buy a 15 year old car and get insured, but months later traded risky assets and made about £30k in 6 weeks, but lost a good chunk of it after that, still got out net positive thankfully and learned some very valuable lessons! I also pursue other hobbies such as music production and cycling so I do spend money on things I enjoy, over 10 years a bicycle works out very cheap so I have no problem at all paying £400 upfront for one (I did back in 2018). Frugality I see as a way of always ensuring I have money for what I want, but only if I really, really want it.

Thanks for your good wishes and contributions, good luck to you also  

Voyager2002

dude7691 said:

I know in the past that has always been the case, but we have a government at the moment who when a pandemic hit nearly the first thing they did was cut property taxes effectively to zero for the majority of the market! No doubt they will come down at some point, but over my time horizon for purchasing I'm guessing not. My best hope really is a few years of single digit growth only so I don't get completely priced out! 

That real terms comparison is remarkable actually, shows you how much a bubble 2008 really was in hindsight. When it comes to house price to incomes however, that's the kicker as we're sat at 08 valuations and likely to go higher. Of course it's not as bad here as in some countries (China for example 40:1), but 8.4:1 (roughly) is quite a significant increase from 20 years ago where it was half that! 

It appears very cyclical and if that was a stock I'd say it was a buy, because it's about to break all time high and push to a new cyclical high, that only further affirms my suspicion there's a lot more room for this market to run, to the detriment of FTB's unfortunate enough to not have been born 5-10 years earlier!

At the beginning of the pandemic there was a wide expectation that the housing market would collapse. The government wished to prevent this (they rely on home-owners for votes) and so introduced the stamp duty 'holiday'. No one either hoped nor expected that it would lead to the current boom. Anyway, the general expectation is that there will be some kind of correction after the end of the 'holiday'.

kuratowski

Roll up, roll up, get 'em while they're expensive