Low offers is the way to go

MarkyMarkD

Yes, but equally well the more prices rise, the higher the percentage equity you have which makes your loan lower risk for the lender and, in some cases, entitles you to a lower rate.

Following your figures, move from £80k mtge on £100k house (80%) to £180k on £200k (90%). Or if prices were 10% lower, from £80k mtge on £90k house (89%) to £170k on £180k (94%).

Reaper

That's a good point, although in practice the past huge increases in house prices mean that equity is not a problem for most home owners unless the drop is huge.

Woby_Tide

That's a good point, although in practice the past huge increases in house prices mean that equity is not a problem for most home owners unless the drop is huge.

say 30-40%? from people offering much lower than asking price for example?

yvonnechristina

If prices fell 30% (which I believe is the bare minimum to make them at all reasonable once again),it would be better for people wanting to move up and for first time buyers who are currently priced out completely and have now pretty much deserted the market.

Say you currently have a 2 bed flat currently valued at I don't know 120k, and want to move to a 3 bed valued at say 190k, there is a difference in price of 70k which may not be so massive in terms of servicing the debt but in terms of actually paying off the debt 70k takes a lot of time to pay off....

Whereas if prices return to reality and there is a 30% drop and 2 bed which was 120k is then worth 84k, and the 3 bed drops 30% and is then worth 133k. Therefore to move up there would be a difference of 49k which would take significantly less time to pay off and is more realistic than an extra 70k...

Also high house prices are not good long term in that young professional people with key skills needed for the nhs (doctors, nurses etc) and teachers may decide that other countries such as New Zealand, Canada etc offer better living standards where they can actually afford to own a property and get something for their money.

Also, if house prices stayed high long term (in relation to average earnings - as they currently are) it encourages people to take the easy option and live off the dole (as who wants to work for a living when you get so little for your money).....and the only people who can afford to have children as family homes are so disproportionate to earnings are those on benefits....and the extremely wealthy (which is fine but there just aren't that many of them)...

So what you get is a decreasing birth rate for the kind of people you want in a society and an increase in those who are just going to take money out of the system and put nothing in....Not very good for a country at all I would think. Neither young nor old....

Slinky

"Prices may be high but they aren't really selling at these prices...or if they are selling they are taking a long time to sell "

We sold our house last week at 98% of the asking price after it had been on the market a week.

West Country, over £200K and to a cash buyer.

It's not all doom and gloom.

Pal

Say you currently have a 2 bed flat currently valued at I don't know 120k, and want to move to a 3 bed valued at say 190k, there is a difference in price of 70k which may not be so massive in terms of servicing the debt  but in terms of actually paying off the debt 70k takes a lot of time to pay off....

Whereas if prices return to reality and there is a 30% drop and 2 bed which was 120k is then worth 84k, and the 3 bed drops 30% and is then worth 133k.  Therefore to move up there would be a difference of 49k which would take significantly less time to pay off  and is more realistic than an extra 70k...

I believe that this argument is flawed because you are assuming that both prices fall by the same percentage, which they will not.

If the £120k house I am selling eventually sold for £84k, I would simply knock the difference (£36k) off the price I am willing to pay for the £190k house, making the price £154k.

Remember that the headline house price rises and falls are just averages for the whole market for houses being sold at that time. In practice it is impossible to value a house until it is actually sold to someone for a price. As a result each house's value will be rising and falling depending on the market for that house at that time.

The price that someone is then able to obtain for their house will then feed through into the amount they are willing (or able) to pay for their next house, impacting the entire chain that they are in, and also impacting the notional value of similar properties nearby. But the impact will be in absolute cash figures, rather than overall percentages. Unfortunately the market doesn't work like that.

Finally, can you all please remember that if you are buying a two bedroom flat in South London you should offer double the asking price and promise to complete within a month?

Woby_Tide

If prices fell 30% (which I believe is the bare minimum to make them at all reasonable once again),it would be better for people wanting to move up and for first time buyers who are currently priced out completely and have now pretty much deserted the market.

Say you currently have a 2 bed flat currently valued at I don't know 120k, and want to move to a 3 bed valued at say 190k, there is a difference in price of 70k which may not be so massive in terms of servicing the debt  but in terms of actually paying off the debt 70k takes a lot of time to pay off....

Whereas if prices return to reality and there is a 30% drop and 2 bed which was 120k is then worth 84k, and the 3 bed drops 30% and is then worth 133k.  Therefore to move up there would be a difference of 49k which would take significantly less time to pay off  and is more realistic than an extra 70k...

Also high house prices are not good long term in that young professional people with key skills needed for the nhs (doctors, nurses etc) and teachers may decide that other countries such as New Zealand, Canada etc offer better living standards where they can actually afford to own a property and get something for their money.

Also, if house prices stayed high long term (in relation to average earnings - as they currently are) it encourages people to take the easy option and live off the dole (as who wants to work for a living when you get so little for your money).....and the only people who can afford to have children as family homes are so disproportionate to earnings are those on benefits....and the extremely wealthy (which is fine but there just aren't that many of them)...

So what you get is a decreasing birth rate for the kind of people you want in a society and an increase in those who are just going to take money out of the system and put nothing in....Not very good for a country at all I would think.  Neither young nor old....

all very well and nice, lets consider that the majority of people actually have a mortgage, so by decreasing the market by 30% they now have (a fair chance of) negative equity , or they'll have to be looking at a near 100% mortgage on their next property, so they won't move, so there will be no properties available to these first time buyers. Decreasing the market by 30/40% pretty much only benefits those who are first time buyers in the majority of cases, it'll punish a hell of a lot more of current owners who then won't want to move for that reason.

(You read the Daily Mail don't you?)

Reaper

lol yvonnechristina - I've been nice so far as you are a new poster but I have to say your arguments have more holes than swiss cheese!

I won't get started on why there will not be the sudden crash you hope for as all the arguments have already been covered in the big "house prices about to crash" thread.

Instead let's pick up on a couple of other examples:

Also, if house prices stayed high long term (in relation to average earnings - as they currently are) it encourages people to take the easy option and live off the dole (as who wants to work for a living when you get so little for your money)

I fail to see any connection between employment and house prices. People who can't afford to buy rent or stay with parents. They don't react by suddenly quitting their jobs! Indeed the current economy bears this out as house prices are high and unemployment is low.

.....and the only people who can afford to have children as family homes are so disproportionate to earnings are those on benefits

It gets better. People on benefits earn more than people working? No (ok maybe in very rare cases with am unskilled worker). I think you are trying to say homeowners will feel the pinch due to high mortgage payments (that's different to employment). Even there it is not true as most homeowners have owned their houses for a number of years so their mortgages are nothing like their house price. That brings us down to recent first time buyers - a much smaller group. Even with this group I have heard that the correlation between wealth and number of kids is weak. Sorry - I don't have the stats to hand and really can't be bothered to go and look them up.

So what you get is a decreasing birth rate for the kind of people you want in a society and an increase in those who are just going to take money out of the system

Planet Earth is now a distant spec. But feel free to quote studies and statistics showing that high house prices lead to the wrong type of people being born. I'd go out and buy a hat to eat if you can prove it.

yvonnechristina

I don't think that a drop of 30% would negatively affect all that many people. Largely those who had bought in the last few years at astronomical prices.....I think that negative equity is inevitable for some people at some point in the next few years unfortunately.

It has been in the headlines for years that there is a problem with retaining essential nhs staff such as nurses and other professions such as teachers....which is all related to high house prices in my view and the standard of living of young people in this country (who are forced to rent and priced out of buying a house).

The option of living off the dole isn't open to all sections of society. But becoming a single parent mother is almost becoming a career choice nowadays.... Re young professional people leaving the country for opportunities abroad I may well be able to get some stats for you there as I'm sure I read it somewhere (or then may be it was in the Daily Mail (lol - I don't read it honest!)

dougk_2

yvonnechristina,

A drop of 30 to 40% is not likely.

If you offered me 30% less than the value of my house I would tell you where to go as would every estate agent!

If house prices dropped by that much a large number of people would simply not be able to afford to sell there home and make a loss - Landlords would not sell so rental prices would stay high.

If houses are not put on the market, there would be few properties available leading to high competition and fastly increasing prices again.

Whilst mortgage rates are low (under 6%) it is cheaper to buy than rent in many areas.

I wish people would think as property as somewhere to live rather than as an investment, because thats the way most people use their property for - to live in.

Am I worried about a drop of even 20% - no , because I know in 5 to 10 years time it will have increased again and pass what it is worth now. House prices have risen 5000% in 40 years so a drop of 30% really is nothing in the long term.

Many more people could afford houses if they didn't waste their money and prioritise their lives. Whilst it is very nice to go on a "night out " £50 can easily be spent on booze and stuff . Do this every Friday and thats £200 a month. £200 a month pays for £50k of mortgage!
Similarly people think little of spending £25k on a car or £3k on a holiday.


Lastly the recent drop in house prices IMHO is becuase of :
a) scaremongering
b) the autumn /winter dip. If you look at past trends the price and quantity of sales dips every year at this particular time

There is good employment prospects in the UK, low interest rates (6% to me is low) and good quality properties are available. You cannot compare the standard of houses in the uK to those in many countries abroad.