There will not be a crash

The_Dangerman

Lotus-eater wrote: »

Thats alright, I didn't tell you that for you to feel sorry for me, we're fine we've never overspent and have always had a buffer zone and we're no-where near strapped for cash.
The thing is, I don't think we are that uncommon, well the self employed bit maybe, but I get the feeling its getting tighter for many.

I'm sorry, I did not mean for it to sound patronising or anything, just a figure of speech sort of way.

I think most people ARE recieving reasonable rises though, and since housing costs account for the biggest propotion of expenditure, then this part of the budget will still rise. Rising energy prices will first hit luxury goods expenditure - including delaying replacing the car, for example, before they hit housing costs.

Addy1

teabelly wrote: »

http://www.communities.gov.uk/news/housing/717700

HPI is a mere 8% pa. Average house is now over 220k. London has seen HPI jump in January to 13.8% from 12.2% of December.

It will be interesting to see what the figures are around June/July. If there is still an annual increase then there isn't going to be a crash however many people wish it were so and HPI may continue indefinitely. If sold prices continue to climb even when lending is tricky then the property market is obviously pretty much immune to wider issues. Banks want to make money and they do so by lending. Much better to lend on an asset you can do something with rather than lending on depreciating consumer goods...

I might be being a bit dense, but surely if there is a crash, then as Dangermans says, demand for rented will shoot through the roof? Therefore BTLers will be falling over each other to buy to rent to all these people who have been affected by the crash, ie repossesed or sold to let?

Also I have a funny feeling if house prices start to fall, a lot of people my age would trample over their best mate to buy a house if it dropped in to their budget, surely keeping prices up?

I probably have a pretty simplistic view on things, as I haven't got a financial mind, and I understand the shortage of mortgage lending will affect it as well.

So surely unless the council start buying up houses, if there is a recession then people, even unemployed people, will need somewhere to live?

I was still in nappies the last time round so don't really understand crashes that well.

One more thing, surely if the media keep saying there will be a crash, then there will be one anyway? Because people would be scared to buy?

BobProperty

Addy1 wrote: »

I might be being a bit dense, but surely if there is a crash, then as Dangermans says, demand for rented will shoot through the roof?

Generali (I think and I agree with him) was making the point that people have to live somewhere but they don't borrow to rent. Rent has to be paid out of current income. If rents try to go up but wages don't people won't (can't) rent. That's the supply and demand part. Buying houses require affordability of borrowing. As I keep saying, house prices depend on affordability and sentiment.

Addy1 wrote: »

Also I have a funny feeling if house prices start to fall, a lot of people my age would trample over their best mate to buy a house if it dropped in to their budget, surely keeping prices up?

Will they, or will the mentality be "why buy this month when it will come down in price next month"?

The_Dangerman

BobProperty wrote: »

Generali (I think and I agree with him) was making the point that people have to live somewhere but they don't borrow to rent. Rent has to be paid out of current income. If rents try to go up but wages don't people won't (can't) rent. That's the supply and demand part. Buying houses require affordability of borrowing. As I keep saying, house prices depend on affordability and sentiment.


Will they, or will the mentality be "why buy this month when it will come down in price next month"?

But wages ARE risising. In 2007 accoriding to the Income Data Service average wage rises were 3.5%

Now, we can clearly see that that is below the rate of inflation which is undoubtably putting a squeeze on people. But it's not really as if people can choose NOT to rent. If you need somewhere to live you need somewhere to live. Therefore any short fall between your wage rise and the rate of inflation will first be found from luxury goods, not rents.

meanmachine_2

"I might be being thick, but if prices start dropping people will fall over themselves to buy houses".

I CANNOT believe this argument is still being made when banks are NO LONGER LENDING.

It really is like arguing with blind, deaf and dumb people.

Extremely amusing, and in itself explains everything, but incredible all the same.

Paul_N_4

The_Dangerman wrote: »

But wages ARE risising. In 2007 accoriding to the Income Data Service average wage rises were 3.5%

Now, we can clearly see that that is below the rate of inflation which is undoubtably putting a squeeze on people. But it's not really as if people can choose NOT to rent. If you need somewhere to live you need somewhere to live. Therefore any short fall between your wage rise and the rate of inflation will first be found from luxury goods, not rents.

Yes it was below inflation, and has been for previous years also. So you've proved yourself wrong where you said:

I think most people ARE recieving reasonable rises

MOST people haven't had a reasonable pay rise because their salary this year has risen below the rise in the cost to live in this country.

So by the very definition of MOST people getting below inflation pay rises, effectively, MOST people have had a pay cut. As Generali said, people are earning less.

You also assume MOST people have, or have had, the ability to buy luxury goods, and therefore people will reduce spending on these goods first. What if (and believe me MOST people do not buy new cars every year), MOST people do not have the ability to cut back on spending of luxury goods because they spend so little or no money at all on them?



(P.S. I'm not shouting at you, I'm trying to point out to you that when discussing these things you need to take into consideration the circumstances of the average man and women in this country. You seem to draw on your own experiences (such as your pay rise) and think this is typical for MOST people in this country. And you've pointed out yourself by quoting government statistics that this is not the case.)

meanmachine_2

I'm not laughing at you, more the fact that this self same argument - a classic one - has been posted on here about, oooh, a thousand billion times.

It's refuted by human psychology, past experience (I remember the mid 90s well when no one would touch property with a bargepole) and the fact that banks are already restricting lending in anticipation of further falls, which in itself creates further falls.

The_Dangerman

Paul_N wrote: »

Yes it was below inflation, and has been for previous years also. So you've proved yourself wrong where you said:



MOST people haven't had a reasonable pay rise because their salary this year has risen below the rise in the cost to live in this country.

So by the very definition of MOST people getting below inflation pay rises, effectively, MOST people have had a pay cut. As Generali said, people are earning less.

You also assume MOST people have, or have had, the ability to buy luxury goods, and therefore people will reduce spending on these goods first. What if (and believe me MOST people do not buy new cars every year), MOST people do not have the ability to cut back on spending of luxury goods because they spend so little or no money at all on them?



(P.S. I'm not shouting at you, I'm trying to point out to you that when discussing these things you need to take into consideration the circumstances of the average man and women in this country. You seem to draw on your own experiences (such as your pay rise) and think this is typical for MOST people in this country. And you've pointed out yourself by quoting government statistics that this is not the case.)

I feel you are getting a little bit bogged down in the minutia of what I said.

A 3.5% is a reasonble RISE because it is not stagnation. Ergo most people are getting reasonable RISES.

I think the vast majority of people can afford some luxuries in life, really, we are a wealthy nation. Everyone I come in contact with even on the minimum wage say they enjoy a couple of weeks in the sun. The vast majority therefore will have SOME fat to cut out of their budget.

Besides, my point is that that rent is the very last* thing one would decide not to pay. If you stuggle to pay the gas bill, put a jumper on. Having somewhere to live comes second to food and drink, surely.

*EDIT After food and drink - because I admit what I wrote was contradictory

Lotus-eater

Addy1 wrote: »

All I know is that people of my age have been brought up with the idea that getting on the property ladder ASAP no matter what is the thing to do, and it will be difficult to change that opinion, no matter how misguided.

Trust me, I was you at the last crash, it will alot easier than you expect.

The_Dangerman

meanmachine wrote: »

"I might be being thick, but if prices start dropping people will fall over themselves to buy houses".

I CANNOT believe this argument is still being made when banks are NO LONGER LENDING.

It really is like arguing with blind, deaf and dumb people.

Extremely amusing, and in itself explains everything, but incredible all the same.

You say "banks are no longer lending" like it is IMPOSSIBLE to get a loan or mortgage. What rubbish. Figures for February were only 6% down the previous February. BILLIONS of £s were lent out last month.

Of course that is not to suggest that getting a mortgage or other loans is as easy as it was. It isn't. But to suggest that it is impossible to get a loan is complete nonsense.