another 'am i doing the right thing?' thread.

Microstar_2

There will surely be a point where sellers think 'ok, if I have to go THAT low to sell, I wont sell at all, i'll stay put".
Yes, a lot will think that. But some, for a variety of reasons, will HAVE to sell. It only takes a small number of distress sales to drive the market lower.

I just dont think the price drops can go as far as some think. Also, when prices drop to reasonable levels more people may make second purchases as BTL's or otherwise.
I think prices WILL drop very significantly. People will not step into the market if they think prices will be lower next month. They will hold off. I think the market will fall quite sharply and then bounce along the bottom for a while. Once prices have settled at a much lower level then some confidence returns and buyers come back, lifting the market again. And off we go on another cycle. This is what happened last time and I see no reason for it to be different this time.

dopester

ruggedtoast wrote: »

Youve misunderstood supply and demand. Prices are set by demand indexed with ability to pay.

There is a practically limitless demand for housing, always has been always will be, but the prices that people can afford are falling. £80k does sound a bit low though.

I agree totally with you on supply and demand linked to ability to pay.

Yet why does £80K sound a bit low for your average slave-box home when it's now £160K after one of the biggest credit booms in history?

What's the average wage in this country again? The credit markets which have fuelled all of the HPI boom for the past decade+ are now fully closed. Banks don't have the kind of capital (nor want to accept the risks) of lending for mega-mortgages from their own balance sheets.

We're going back to logical lending of 3.5 salary or 2.75 joint salary. The City is going to be a bloodbath of redundancies having a knock on effect to the entire economy... and the days of holidays and countless retail luxuries acquired from home equity release are numbered as house prices fall.

ruggedtoast

phil_b wrote: »

There will surely be a point where sellers think 'ok, if I have to go THAT low to sell, I wont sell at all, i'll stay put". I just dont think the price drops can go as far as some think. Also, when prices drop to reasonable levels more people may make second purchases as BTL's or otherwise. Good demand is still there for good properties, wages and employment are good and people are still buying, so even a small'ish drop should pep things up (I hope).

Aren't you're assuming that everyone asking £200k for a property that cost £80k 6 years ago bought recently? Most homeowners have been in their places for awhile and arent at much risk from negative equity even if prices fall back to 2001 levels. Theyre currently asking £200k because thats what the market has set and thats what they need to move or trade up. If the markets set lower and they can do the same for 80k thats what they'll ask for.

People who've taken on a bigger mortgage to trade up will be hurt. Recent buyers and people who've MEWed themselves to the hilt could get absolutely clobbered. Its exactly the people you mention who have no flexibility on price that are most at risk. And you want to become one of them!

And I dont want to sound like a broken record but demand is pretty irrelevant if people cant pay. Demand isnt some magical thing that will prop up the markets current crazy prices when Nationwide are telling people that the computer says no.

poppy10_2

phil_b wrote: »

My girlfriends parents are lending us 50k interest free, and we are putting in 10k each, so a 70k deposit. this means a rate of 5.6% fixed with £700 a month payments, £280 of which is repayment to the parents. We intend to make sizable overpayments each month too, touch-wood.

the options seem to be £725 burnt on rent each month Vs £420 burnt on mortage interest.

You're forgetting that by using the £70k as a deposit, you are losing the interest you would have earned on it if you had been renting - on a conservative estimate this amounts to £230 per month.

pinkshoes

poppy10 wrote: »

You're forgetting that by using the £70k as a deposit, you are losing the interest you would have earned on it if you had been renting - on a conservative estimate this amounts to £230 per month.

The interest is only on £20k, as the £50k is not theirs until they buy...

OP, if you love the house, buy it, if you have doubts, don't!

neverdespairgirl

phil_b wrote: »

There will surely be a point where sellers think 'ok, if I have to go THAT low to sell, I wont sell at all, i'll stay put". I just dont think the price drops can go as far as some think. Also, when prices drop to reasonable levels more people may make second purchases as BTL's or otherwise.

Of course, some sellers will think that.

But others find they can't pay the mortgage, have lost jobs, split up with partners, got a new job in another part of the country, had a new baby and want to buy a bigger place, inherited the place - you get the picture. There will always be sellers.

If prices drop, people will be wary of buying BTLs if confidence is low.

Zammo

Pull Out Of The Deal, You Are About To Make The Biggest Financial Mistake Of Your Life.

We Are Just Off The Peak Of The Largest Asset Bubble In History.

Do Not Buy.

macaque_2

phil_b wrote: »

Hi all,

I have been renting with the girlfriend for a year in a non central-heated 2-bed flat for £725 a month. the winter was horrifically cold! We would really like to buy a house now.

the situation is this:

We viewed many properties and put an offer of £150k in on one we really liked (£169k asking). We ended up agreeing at £160k.

Soliciters are currently pushing things through and all is fine.

the house is a 3-bed end terrace on a decent plot, with room down the side to extend. It is very well presented with a modern kitchen, oak floors throughout, converted attick with en-suite, sizeable conservatory and workshop outside. It is great for transport links and close to many high street shops - located on a quiet and (IMO) handsome street.
I anticipate there will always be decent demand for this price housing in this sort of area.

I am now very worried about the housing market (how many times have you heard that one recently?). I get the feeling we are buying at the WORST time???

My girlfriends parents are lending us 50k interest free, and we are putting in 10k each, so a 70k deposit. this means a rate of 5.6% fixed with £700 a month payments, £280 of which is repayment to the parents. We intend to make sizable overpayments each month too, touch-wood.

the options seem to be £725 burnt on rent each month Vs £420 burnt on mortage interest. Initially it is obvious which is best, but if we buy a house that loses £500-1000 in value each month we would be burning much more by buying... though that depreciation is far from certain.

Considering the above do you think it makes best sense to proceed with the purchase despite the current marker? Or would you continue to rent and wait?

While wanting to create a nice home, I also want to make a sound financial investment for the first time in my life, and the doom and gloom on the news is very annoying at this stage!

I feel we could have got the house for 155k, and this bothers me a lot. I'm not sure I could bring myself to start re-negotiating. would that be too cheeky and offensive at this stage???

Thanks

You are not really better off at all with a mortgage. You are speculating on an asset which is almost certain to go down in value.

Why not ask your girlfriends parents to keep the £50k but pay you the value of the interest on £50k. That will be worth £300 per month. Add to this the interest earned on your deposits and the net cost of renting comes down to £325 per month. This adds up to a net saving per month of £95 by renting and zero risk of capital losses.

oswestry123

Phil B, in respect to your question on what proportion of first time buyers need 100% mortgages its very low indeed. I remember hearing on working lunch some guy saying that only 3% of mortgages for FTB's are 100% mortgages so most people tend to have some deposit. This is probably a lot from their parents in mine and some of my friends cases.

dopester

It's a shame you removed or deleted your post mitchaa.

People like you should go back to watching Corrie or Eastenders - waste of time for most people to do any reading in to property booms and busts of the past cause those things can't happen in the modern age can they.

It's fully logical to you that houses can rise 300% in such a short time when wages have on average risen 35% over the same time-frame, but utterly illogical that they can't fall back 50%. So many people are going to be utterly schooled in this crash.