'Will house prices crash in 2008?' Poll Results & Discussion

mdj1

sarah1975uk wrote: »

i think its just a cycle of how things go, house prices will always go up and down over the years, just a case of being clever enough to know when to sell and when to buy, overall you will always make money on a house in the long term. Trick to ride out any down turn is to not re-mortgage to the max and dont borrow more than you can afford when first buying the house

Very true Sarah

But unfortunately, thats what people have done and it's why we are seeing the number of reposessions rise at an alarming rate!

There are lots of people out there (sheeple) that surfed the wave, listening to all the crap that the government were spinning them about no more boom and bust and the good times are here, remortgage your house, lie to buy, comit fraud, we don't care, we're making more money than ever! Unfortunately, every wave has to break, and this was a tsunami!

mdj1

zdenka wrote: »

We are in a situation where we had to move across the country so fed up with toing and froing we decided to rent instead.

We sold our house and short term renting seems to be changing to longer-term. The interest from the house sale money is more than paying for the rent so with this uncertainty in the market, we don't see a point of re-entering it.

Where we are the only properties that seem to be selling are terraced houses or properties that need doing up. We want neither.

Unless I see a real reason to buy in a short term I'm staying put.

HI Zdenka

Ahh, so your a STR (Sold to Rent) and good for you. I'm a firm believer in this, I know you probably did this for different reasons than most, but i've tried to get many friends in a good "low mortgage, big house" position to consider the same. Sell now, let the interest pay your rent, you have no ongoing repair bills etc, your paying out LESS every month than when the BANK still owned part of your house. And WHEN the house prices fall you can re-buy a cheaper house of the same size, leaving you with money in the bank you never had before. Or buy a bigger house for the same price you sold for. I see it as a Win Win situation!

It's not for everyone though.

mdj1

curriej99 wrote: »

Good point -but if you plan on sticking around for a few years then the money has to be on buying property. even if there is a crash, then sit tight and in a while things will come round. Don't be greedy, you greedy young pup! If you can afford it, BUY IT.

Yeah, buy a house, pay over the odds for it, but don't worry if it's value drops say 40% in the next three years, it will be worth what you paid for it today in say 7 to 10 years!

But remember, you will be paying for this for the next 25 years plus! And if the value of your property is LOWER than when you purchased it at the time you need to remortgage THEN your going to have problems. NO BANK will lend you (Example) £200k for a remortgage for a house that's only worth £160k

That's just one of the problems! you may be able to "afford" the house now. But who wants to be a slave to the bank for a third of your life. There is no point in being able to "afford" something if you can't "live" and i mean, LIVE

I have a couple of friends who are (were) looking to buy, They have no concept of the cost of living, both living at home. Fair enough, both of them have good jobs and a good deposit, but after giving them a FULL budget. He said to me. We'll we will have about £400 left at the end of every month. I told him he could kiss goodby to about £200 - £250 for UNSEEN expenses. break downs, repairs etc. Then i said, so say your wages don't change over the next x years, or mrs X gets pregnant, or you want to get married. your £200 a month going to pay for that? Oh and there will be no holidays. Yeah, i know but it won't be forever. I said, no just the next 25 years, or when you win the lottery, which ever comes sooner. He said, but Mr x has a new lexus and goes on holiday 2 times a year? I said to him, wages haven't increased dramatically over the last 10 years. but house prices have. People re-mortgaged their houses to buy the nice things in life. Holidays, nice cars, new conservatories etc. He's now decided to see sense a bit.

mdj1

giger wrote: »

I am also voting E, but I think it could also be D or F.
Another rate cut will help things and make things more affordable for FTBs.

hi Giger, i'm not slating you here, and you have said you fall into the category of 'not understanding it all'

Here you say you think a rate cut would be great. Yes for some people it would. But what you have to remember is just becuase the bank of england reduces its rate, it doesn't mean that the bank have to reduce theirs. The rate of actual borrowing is based on what the bank and money lenders are prepaired to lend to each other for. In the current global climate things are not good, and these people / businesses are very nervous. They have lost MILLIONS if not BILLIONS in bad debt ext and need to get this back, so even if the BofE reduced interest rates by 0.5% overnight, don't expect the banks for follow suit.

There is lots of articles out there about this and the fact that a lot of rates have gone up over the last few weeks even though the B of E reduced their rate.

sarah1975uk

I brought my first 3 bed house in 2002 and as my kids got bigger i wanted to upgrade to a 4 bed property, put the house on the market and started to look for 4 bed houses, was worried at the time that the increase in house price to upgrade was going to be too much long term, but looked and looked whilst trying sell and stumbled upon a 4 bed house that was a reposession and i took a further mortgage out in my sole name to purcahse it and now live in it, decided not to sell the other one in the end and now rent it out. The rent is less than the mortgage payment but im not so bothered at the moment as i know in time it will increase enough for me to either sell the one im in pay off a bit off the other house and put the 4th bedroom onto it by way of an extension. or could just sell both in a few years time and buy a house out right. who knows what will happen, but stumbling on this venture was all driven by circumstances but know that it will pay off and id kick myself in years to come if i hadnt taken the chance. And if anything else it will serve as a pension in years to come. Because now i have someone else paying the majority of my mortgage on the other house and of course a pension would be really expensive for me to ever get the income i wanted at retirement age. if worst came to worst id sell both and cut my losses. but way i see it i have 2 houses that will gain equity and im careful not to borrow against them.

sdooley

That's great Sarah and should work but best if you can as a small letter to keep 2-3 months mortgage payments in a seperate account to cover rental gaps if you need to find a new tenant.

TypeR

Some interesting view points.

The market is not (and I repeat) not supported by supply and demand, it's not even supported by crazy theories about "We live on an Island".

It is infact supported by the availability of money, which for last 10 years has been incredibly cheap and very very easy to get hold of - even for those people who really don't have the sorts of income to support a mortgage.

Most people know that bricks and mortar make money, and back before the boom (i.e the last time we went bust as a country when we splurged on houses) rates came down and we all started piling in taking on massive mortgages and buying like no tomorrow. For as long as there is capital growth potential, the banks were happy to lend, and lend in ever more ingenious ways.

Then affordability becomes stretched. Not even interest only mortgages (suicide) look affordable, the money sloshing around in the system then causes inflation, to combat inflation interest rates rise, and every few months, those people exiting cheap deals clammer to re-mortgage as cheap as they can.

Sadly, all the dodgy US subprime bonds are hitting banks all over the world, they try to stem their losses by tightening criteria and in most cases not passing on central bank cuts. You see, as already mentioned, the central banks aren't calling the shots anymore, the lenders are - and I think we'll find that they will be looking to stem the tide of losses and to do this means the days of easy cheap money are gone.

If there is no easy cheap money in the system, then the potential for capital growth evapourates and the realignment with reality begins. Sadly again, as markets rocket and potential gains are high, everyone piles in, quite the reverse is true when the economic outlook sours and the potential for your home to rise in value over the coming years is not as certain as it once was.

In years gone by, around dinner tables all over the country, voices were heard to be said "well my house is worth three times what we bought it for" will now be replaced by nervous whispers about how much your home is now worth as the value slides.

Anyone thinking that "Negative equity isn't a problem - just sit tight" needs to realise, if the market crashes, it will take the economy with it, loss of jobs and when people don't have jobs, they have to sell, and that just adds to the original woes that started the spiral downwards.

How do you avoid the bust? Don't create the boom

I will not allow house prices to get out of control and put at risk the sustainability of the future."

- Gordon Brown in 1997 Budget Speech (BBC coverage here), Apr '97

Congratulations Gordon, you failed.

jedk

sarah1975uk wrote: »

I brought my first 3 bed house in 2002 and as my kids got bigger i wanted to upgrade to a 4 bed property, put the house on the market and started to look for 4 bed houses, was worried at the time that the increase in house price to upgrade was going to be too much long term, but looked and looked whilst trying sell and stumbled upon a 4 bed house that was a reposession and i took a further mortgage out in my sole name to purcahse it and now live in it, decided not to sell the other one in the end and now rent it out. The rent is less than the mortgage payment but im not so bothered at the moment as i know in time it will increase enough for me to either sell the one im in pay off a bit off the other house and put the 4th bedroom onto it by way of an extension. or could just sell both in a few years time and buy a house out right. who knows what will happen, but stumbling on this venture was all driven by circumstances but know that it will pay off and id kick myself in years to come if i hadnt taken the chance. And if anything else it will serve as a pension in years to come. Because now i have someone else paying the majority of my mortgage on the other house and of course a pension would be really expensive for me to ever get the income i wanted at retirement age. if worst came to worst id sell both and cut my losses. but way i see it i have 2 houses that will gain equity and im careful not to borrow against them.

But what if rents fall steeply - and property prices fall steeply - you could end up having to sell both houses.

mdj1

Hi Sarah,

Alot of people have bought into the "buy to let pension scheme" mainly because pensions have been all but "wiped out".

I do hope this is the right choice for you and works. And i'm sure you run your rental business legitametly. thousands don't! I run several companies all above board and letting a property is a business. But that's another thread.

Please remeber though, that your pension as a house, is only worth what you can sell it for at retirement age. Everyone seems to think, you included, that when you retire you can sell one or both of the houses for a tidy pension. HOWEVER, you should not put all your eggs in one basket. I don't know how old you are or how far you are from retiring, but nothing in this world is guaranteed.

Although what is pretty much guaranteed is that in years to come the government will heavily tax second homes for incomes / pensions so it wont be as valuable as it seems.

Babydan

Yes, I agree with above. Media are responsible for the lack of buyers at the moment. However, when the market started to change beginning of 07. Certain agents in certain areas over-priced properties in order to get them
on the market, this has resulted in what looks like a major decrease in property value at the moment. I belive the reality is that a lot of properties were initially over priced by 10% in the first place. If you look at the last two years, there has not been a major change in the market, and for those that check out sold prices in their area, they will see what the achieved price has been in their own street. It will be quite a shock in some places!! I say, if you need to move, do it!! So long as you have no major debt and can afford it. Also check out the service from the agent you are using, and do your homework. If only we all knew, we would'nt need such a fantastic website. :A