There will not be a crash

strongboes

The_Dangerman wrote: »

Yes, February, because obviously the figures for March aren't available yet! We'll see what happens in the future but loans are still available, let's not forget that.

No again you misunderstand the op. Completed mortgages for February, these were offered months ago. These figures are permanently out of date which is only really a problem at a time like now when we are seeing a major change.

brit1234

The_Dangerman wrote: »

Yes, February, because obviously the figures for March aren't available yet! We'll see what happens in the future but loans are still available, let's not forget that.

Yeap but no 125%, 100%, very limited 90%. That is a massive change in one month. Where are all these people going to magic 10-25% deposits £100k+ all of a sudden to buy a property. Sorry but the change to 75% LTV will force prices down.

The fact is most people who have been buying over recent years haven't had deposits, or very small deposits and then there is all those buy to let investors who have been participating in mortgage fraud with building companies.

The breaks have been put on very hard and I don't believe there will be many parents wanting to fund their children's deposit as prices fall and the economic view looks gloomy.

southernscouser

TBeckett100 wrote: »

if you are a first time buyer,prepare to stay in that first home for 5 or so years.

Easier said than done even if you are earning above the average wage yet still can't buy a 1 bed flat.

I don't claim to be an expert so I'll gladly hold my hands up if I'm wrong, but first time buyers are the legs of the ladder which upon everyone relies to get on the next step. Yet they are being 'forced' out of the market so what happens?

I'm not saying it's all going to come tumbling down, but.....................! :undecided

Generali

The_Dangerman wrote: »

What you have forgotton is that Alfonsee and Britnee still need a place to live. If they can't save up enough deposit or borrow enough money they will rent. If both of them want to rent because they can't afford to buy there is a demand for rental properties which some BLTer will come along to fill. My letting agent will allow a bigger earnings to expenditure than a mortgage.

If Alfonse and Britnee can't afford the rent maybe they will co-habit. This could possibly result in mini Alfonses and Britnees and everyone is happy.

I haven't forgotten that they need to live somewhere, my point is that to be a part of demand for any given property they need to have the money to pay for it. If they have not enough money they get no house as they can't get into the bidding.

If money is being withdrawn from that which can be used to buy houses because the banks won't lend it then house prices can't rise because the money isn't there to bid them up.

It may be that Alfonse, Britnee and Chlamydia all get together to rent a place but they're not driving up the price of houses; they'll push up rents potentially. If the economy goes chests up then they'll be trying to pay the rent on housing benefit which will take money out of that available for rent and so drive rents back down again. If HB won't pay enough for them to rent somewhere then they're on the streets

About 8 pages ago, I made the point that in the short term rents are likely to be pushed up as potential buyers are taken out of the game by reduced funds made available for mortgages. It's what's known as the substitution effect.

Dolcevita - I see what you mean about Cap'n Blackadder, especially as today was my annual visit to a nice London restaurant paid for by Generalissimo #1's Godfather. We went to the Dorchester. Pretty good but food not nearly as good as The Savoy last year (they've got a meat trolly which isn't my favourite thing). Brilliant service though and The Boy (aka Generalissimo #1) and I went off to one of the function rooms that was out of use for a game of invisible football to run off some of his food and some of the very excellent red we had with our main course.

Doing this after some great wine with lunch and some excellent Calvados afterwards is like trying to swim through treacle! With or without the pencils up my nose.

globalds

southernscouser wrote: »

Easier said than done even if you are earning above the average wage yet still can't buy a 1 bed flat.

I don't claim to be an expert so I'll gladly hold my hands up if I'm wrong, but first time buyers are the legs of the ladder which upon everyone relies to get on the next step. Yet they are being 'forced' out of the market so what happens?

I'm not saying it's all going to come tumbling down, but.....................! :undecided

It is that small scale buy to let'ers that are in direct competition with the lowest levels of the house market .
This may be about to come to an end ..This in itself doesn't mean that there will be property meltdown ..
It could mean that all these desperate first time buyers start feeding in as the market lowers ..They may well be buying a type of property they would rather not ...City center apartment instead of two bed terrace ..If as I think house price drops will affect a certain type of property ...
There is, also, as I am starting to read (about Property in the USA)..The buy up of cheap oversupply by foriegn investors ..
So many of us may have Russian or Arabian Landlords ..And still can't afford to get on the property ladder ..

ukbondraider

Generali wrote: »

Prices are set by supply and demand in a free (or freeish) market - for every seller you need a buyer and vice versa. You have people that want to sell but without a buyer they won't be able to, similarly you have people that want to buy but without a seller they can't.

So now consider what constitutes demand, that is the buyers' side of the matter. You are the buyer and you want to buy a 2 bed terraced house in Barnsley that is up for sale at offers in excess of £100k which is about the market price and the seller is prepared to hold out for the market price. You also have 2 competitors that want to buy the same house. You each have a deposit of £10,000 and need a mortgage for the rest, being able to borrow 4x income.

Alfonse earns £15k pa so can borrow £60k and so can offer £70k in total, max. Britnee earns £20k so can borrow £80k and so can offer £90k max. Dangerman earns £40k pa so can borrow £160k and so can offer £170k max.

As the seller is after a minimum of £100k, the others aren't in the game, only you are able to buy and so only you form part of demand for that house as you are the only one willing and able to afford it. It doesn't matter how desperate Britnee is to buy, she can't afford it. Same goes for Alfonse. So in this instance, supply=1, demand=1. The sale is made and prices needn't rise or fall for the sale to occur unless one side of the bargain is particularly bad at haggling.

The point with demand is that it doesn't matter how much you want something, if you can't afford it you are whistling in the wind.

So consider now what happens to demand in the above example if banks want a bigger %age deposit or will only lend 2x income. You may feel that isn't what's happening now but I believe that it is.

So what happens to supply now, our seller in this example? She may hold out for £100k. The only problem is, none of her potential buyers can afford to buy. She may hold out for the money thinking that her potential buyers are just trying it on or that there may be another buyer in the wings. Some People call this a 'Mexican Standoff'; I have no idea why Mexicans are standing off in Barnsley but Some People are very strange.

My belief is that is where the market is now. Sellers don't wish to cut prices, buyers can't or won't pay what sellers want. Where we go from here is the interesting bit.

PS It's worth remembering that people talk a load of !!!! about markets as well as about supply and demand. A market is just the adding together of the buying and selling decisions that you, I and a whole load of other people make.

What you also forget in your calculation is that prices nowadays are not based on the affordability of one person. House prices have risen because nowadays you have to buy a house as a couple so if Alfonsee and Britney are dating then they can afford the house i.e there are now more buyers who are able to afford the sellers asking price.

Like Dangerman also pointed out, if people cannot afford to buy then they still have to rent which itself is also expensive. Thus with increased demand for rent the likes of Abromovich et el who already have many of houses in the whole of the country become more interested in investments purchases thus still increasing the demand further.

Generali

ukbondraider wrote: »

What you also forget in your calculation is that prices nowadays are not based on the affordability of one person. House prices have risen because nowadays you have to buy a house as a couple so if Alfonsee and Britney are dating then they can afford the house i.e there are now more buyers who are able to afford the sellers asking price.

Like Dangerman also pointed out, if people cannot afford to buy then they still have to rent which itself is also expensive. Thus with increased demand for rent the likes of Abromovich et el who already have many of houses in the whole of the country become more interested in investments purchases thus still increasing the demand further.

It's true what you say but my point was about 'What is supply and demand' rather than 'What will happen to house prices'.

If you work out what drives supply and demand for housing you can come to an informed conclusion about what you think will be the change in future house prices rather than just sticking a finger in the air and coming up with an answer.

Speaking of Abramovich, I saw the absolute spit of Abram Grant in the hotel this afternoon.

poppy10_2

Addy1 wrote: »

I am not sure if we are representative but we have had no trouble at all .

You're the doctor, aren't you? I don't think you are representative, professionals like doctors and solicitors are about the only group left that banks are still happy to chuck money at.

The_Dangerman

strongboes wrote: »

No again you misunderstand the op. Completed mortgages for February, these were offered months ago. These figures are permanently out of date which is only really a problem at a time like now when we are seeing a major change.

I completed in about 7 weeks I think? Hardly months! But I accept some people will have had an offer for longer than that - albeit still within the time that financial markets have tighten up.

I fully accept that it's more difficult to get a mortgage, but it is by no means impossible. There are even BTL mortgages still available at 85% LTV!! (Albeit quite scarce)

The_Dangerman

Generali wrote: »

It's true what you say but my point was about 'What is supply and demand' rather than 'What will happen to house prices'.

If you work out what drives supply and demand for housing you can come to an informed conclusion about what you think will be the change in future house prices rather than just sticking a finger in the air and coming up with an answer.

Speaking of Abramovich, I saw the absolute spit of Abram Grant in the hotel this afternoon.

I think UKBondraider has confirmed my point that supply and demand is a little more complicated, and "demand" is still created by renters.

More renters = bouyant rents = good reliable yield = more BLTers = sustained demand.