House price increases. Is everyone absolutely loaded?

lookstraightahead

smcqis said:

I think it’s a case of people are prepared to pay a bit more as for example in our case, we received a lot more than expected so it has its knock in effect. A big saving for us has been working from home where we have saved big amounts on childcare. Combination of this and low interest rates, our budget rose from about 50k. Will our new house be worth the same price in 5-10 years time…I’m not buying it to sell to make money so it’s not a concern

So long as you will be able to afford things when you have to pay for childcare again, living 'normally' and when interest rates shoot up then that's fine.

I was in negative equity for a long time so I've been bitten. Put this on top of your normal living expenditure and interest rates, and it can be a nightmare.

I guess you put down a hefty deposit though which is good. I think it's those who push themselves to the limit in the good times (like now) who will struggle.

Octothorpe

I wonder how everyone affords it too!

In our case, we had a lot of equity in current house and we both work, but husband is on a very good salary with regular big pay rises. So jumping up 2 rungs on the ladder, purely because we want an office he can use. I wanted the extra space and no attached neighbours. 

We 'saved' a lot of money during lockdown but spent it as no plans to move originally 😂 I do wish we hadn't as could have maybe got an even better place if had extra as a deposit, but hey ho.

It is depressing looking at sold prices from a year ago - our budget would have bought something pretty special back then 🤨🙄

MobileSaver

lookstraightahead said:

panic buying always comes with consequences.

Is there any actual evidence that people are "panic buying"?

I find it hard to believe that many if any people are rushing into something that typically takes six months to complete from start to finish...

RelievedSheff

lookstraightahead said:

smcqis said:

I think it’s a case of people are prepared to pay a bit more as for example in our case, we received a lot more than expected so it has its knock in effect. A big saving for us has been working from home where we have saved big amounts on childcare. Combination of this and low interest rates, our budget rose from about 50k. Will our new house be worth the same price in 5-10 years time…I’m not buying it to sell to make money so it’s not a concern

So long as you will be able to afford things when you have to pay for childcare again, living 'normally' and when interest rates shoot up then that's fine.

I was in negative equity for a long time so I've been bitten. Put this on top of your normal living expenditure and interest rates, and it can be a nightmare.

I guess you put down a hefty deposit though which is good. I think it's those who push themselves to the limit in the good times (like now) who will struggle.

We were in negative equity with our last property for a long time. We bought at the top of the market in 2007 with a 105% mortgage (remember those?) and house prices in the area subsequently plummeted.

It wasn't a problem though. We just continued to pay our mortgage and eventually the repayments chipped away at the negative equity and house prices did eventually start to creep back up again.

We were eventually able to move from that house a couple of years ago when we part exchanged it against a new build house. We are lucky that we moved when we did because house prices have rocketed here, but although they have risen where we were before they have not risen by nearly as much which would have made the deal we got unachievable now. We simply couldn't afford this house if we were looking to buy now.

Negative equity needn't be a big problem provided you can afford to pay the mortgage and don't have to move house.

Grumpy_chap

lookstraightahead said:

So long as you will be able to afford things when you have to pay for childcare again, living 'normally' and when interest rates shoot up then that's fine.

We are veering into DT and debate territory, but I am amazed at some of the actions people are taking based upon what is currently an abnormal set of circumstances and  the new normal is not yet with us.  New normal may well not be a simple return to old normal, but it will surely be a big change from now.

So, people saying they saved money through COVID and will therefore buy a new car, move to a bigger house, move to the countryside because they don't need to be near a centre of employment when WFH.

How will those people survive when work returns back to the office?  Maybe not full time, but say 3 days / week plus 2 WFH?  A common answer seems to be "just get another job that is fully WFH."  That assumes if companies "A", "B" and "C" re-establish with some in the office time, companies "D", "E" and "F" won't also do the same but stay 100% WFH. 

Even if that happens, there is likely to be downward pressure on salaries as the 100% WFH companies will not want to pay "city" salaries reflecting high housing and commute costs where the need is not there.  Plus, taken to an extreme, if the companies "D", "E" and "F" do stay on a 100% WFH model going forwards, they don't even need to pay UK salaries as they can recruit from anywhere in the world and there are many locations where salaries are much, much lower.

Davesnave

In brief, trillions of £ have been pumped into economies over the past 18 months, and although the billionaires have hoovered up more than half, some has cascaded down.

For some, maybe even the majority, it will likely end in tears or a lower standard of living. Nothing's certain, but  it's very unlikely we'll be returning to anything like the old normal. Those who control the money supply will see to that.

Ally_E.

Flatulentoldgoat said:

Cornwall is obviously a nice place and no disrespect to it, but 550k is seriously London money. No way should that it comparable (in general terms) to London. That would buy you something respectable in nicer parts such as Wimbledon and Ealing. Less space obviously but you've got a world of career prospects, amenities, culture, activities etc. It's a world class city as the prices usually reflect that although I can't argue it suffers greatly from foreign investors jacking the baseline up artificially.

£550k will buy you a 2 bed flat in Wimbledon, not a house. Those prices have sailed a long time ago.

lookstraightahead

RelievedSheff said:

lookstraightahead said:

smcqis said:

I think it’s a case of people are prepared to pay a bit more as for example in our case, we received a lot more than expected so it has its knock in effect. A big saving for us has been working from home where we have saved big amounts on childcare. Combination of this and low interest rates, our budget rose from about 50k. Will our new house be worth the same price in 5-10 years time…I’m not buying it to sell to make money so it’s not a concern

So long as you will be able to afford things when you have to pay for childcare again, living 'normally' and when interest rates shoot up then that's fine.

I was in negative equity for a long time so I've been bitten. Put this on top of your normal living expenditure and interest rates, and it can be a nightmare.

I guess you put down a hefty deposit though which is good. I think it's those who push themselves to the limit in the good times (like now) who will struggle.

We were in negative equity with our last property for a long time. We bought at the top of the market in 2007 with a 105% mortgage (remember those?) and house prices in the area subsequently plummeted.

It wasn't a problem though. We just continued to pay our mortgage and eventually the repayments chipped away at the negative equity and house prices did eventually start to creep back up again.

We were eventually able to move from that house a couple of years ago when we part exchanged it against a new build house. We are lucky that we moved when we did because house prices have rocketed here, but although they have risen where we were before they have not risen by nearly as much which would have made the deal we got unachievable now. We simply couldn't afford this house if we were looking to buy now.

Negative equity needn't be a big problem provided you can afford to pay the mortgage and don't have to move house.

We had to sell at a huge loss because of divorce. 

lookstraightahead

Grumpy_chap said:

lookstraightahead said:

So long as you will be able to afford things when you have to pay for childcare again, living 'normally' and when interest rates shoot up then that's fine.

We are veering into DT and debate territory, but I am amazed at some of the actions people are taking based upon what is currently an abnormal set of circumstances and  the new normal is not yet with us.  New normal may well not be a simple return to old normal, but it will surely be a big change from now.

So, people saying they saved money through COVID and will therefore buy a new car, move to a bigger house, move to the countryside because they don't need to be near a centre of employment when WFH.

How will those people survive when work returns back to the office?  Maybe not full time, but say 3 days / week plus 2 WFH?  A common answer seems to be "just get another job that is fully WFH."  That assumes if companies "A", "B" and "C" re-establish with some in the office time, companies "D", "E" and "F" won't also do the same but stay 100% WFH. 

Even if that happens, there is likely to be downward pressure on salaries as the 100% WFH companies will not want to pay "city" salaries reflecting high housing and commute costs where the need is not there.  Plus, taken to an extreme, if the companies "D", "E" and "F" do stay on a 100% WFH model going forwards, they don't even need to pay UK salaries as they can recruit from anywhere in the world and there are many locations where salaries are much, much lower.

Absolutely agree. I don't know why people are doing it, except all of a sudden they can buy a shiny new house. I think it will be shocking.

nicknameless

We're looking around at the moment and are currently looking at properties priced approximately x3 the value of our current property which is a city based 2 bed flat.  We are a couple without children and approx. 5 years from a position where we could consider stepping down from full-time work.

Our reasoning is that we can easily afford a 5 year fixed mortgage (we have been saving for years into pensions and ISAs) with plenty of leeway and as long as there isn't a 50% market crash in the meantime downsize / down cost to a different and cheaper part of the country at the end of that period or shortly after when we are looking to change working patterns.  We are looking at approx. 80% LTV btw.

I have to admit the prospect is making me slightly nervous with the current housing market and this going against our long term strategy of cheap housing = money in the bank / pension, but we are assuming (hoping?) that if there is a significant market correction in the meantime that our next property will also be cheaper too and that whilst we might lose a little in equity that would not be a disastrous outcome.

I wait to have my logic corrected.