does buying at the top or bottom of a market really matter?

LillyJ

PasturesNew wrote: »

I meant to convey that some houses rose by £250k over recent months, allbeit that those houses might have started off at a higher price. Not that any house rose 64x over that period.

Apologies for poor writing.

I meant: it took my dad 38 years to "make" £250k. Some people have "made" £250k in the year 2007.

OK I get you now.

I still think thought that percentages are more helpful in house prices, cos £250 on a £3 million house isn't as much as £250 on a £4k house!

PasturesNew

simcla wrote: »

!!!!!!, for your viewpoint to be 100% accurate, the following needs to occur,
1) You can accurately predict the peak of a market,
2) you need to be able to predict the trough of the market and
3) The property(s) you want to buy are available at the trough of the market.

As I see it:
1] Yes, but if you can get close then it's all good.
2] Yes, but again, close is good.
3] Depending on your requirements this will have a varying risk factor.

simcla wrote: »

If I could accurately predict the peaks and troughs of markets I would make enough money on the stock market not to be on MSE, but I do agree that if you have the ability (or luck) to do this then that would give you the best financial return on property invesstment.

Some people do this. Day Traders mainly.

I think (don't know but plan to check over the next few years) that the stock market, over time, outperforms housing for returns.

However, if you're buying stocks/shares it's your money you are playing with usually. Whereas a house is a leveraged asset.

When I buy my next house I will have a pot of money that will buy me a house and have enough left over to additionally buy a 1-bedroom house (or 2 cheap flats). So I could theoretically do that and provide myself with an income from that property, looking at the capital growth as a future cash pot. I have no desire to do this.

I am hoping stocks will outperform housing in the long-term (although this might include troughs as well as peaks, as I said, I need to get the hard facts and figures). In this case I will put my pot into shares... they are more liquid than property.

If I needed a new car, say, or an operation. Or to pay for something due to my infirmity in old age, it's easier to sell a handful of the shares than trying to sell a 4'x4' portion of the living room in a house I rent out!

simcla

I have not said it will even out over time. I agree if you are a buyer with no existing property to sell buying at the bottom is the best, and that selling a property at the peak of the market will give you the greatest gain.

If you have an existing property to sell and need to buy another property at the time (as in a normal house move), and the cost to change between the two properties is at a low point, then why does it matter what point in the cycle the market is?

John_Pierpoint

As !!!!!! explained, at the bottom, the steps on the house price ladder are closer together. You might be able to vault up to or three in one go.

BACKFRMTHEEDGE

http://news.bbc.co.uk/1/hi/business/7395041.stm



Falls in house prices "welcomed" by nearly everyone:T

PasturesNew

boinging wrote: »

The point I'm making is £225K was a hell of a lot of money 25 years ago!

I was earning about £6,000 in 1983.
Income tax was something like 25-30%
Mortgages would only lend 2.5x one income + 1 times a second.

Yeah ... it's a lot of money NOW to be honest!!

LillyJ

PasturesNew wrote: »

I was earning about £6,000 in 1983.
Income tax was something like 25-30%
Mortgages would only lend 2.5x one income + 1 times a second.

Yeah ... it's a lot of money NOW to be honest!!

It was a lot of money, but that isn't really the point. They bought at the top of the market, didn't suffer any problems, and are now living mortgage free in a home which they will be downsizing from in a few years time, which if it sells for 1 million and they downsize, they will get a nice bit of extra in the bank. The house price crash obviously helps downsizers , so it doesn't really matter if it doesn't sell for 1 million if the house they are downsizing to is cheaper as well.

boinging_2

LillyJ wrote: »

The house price crash obviously helps downsizers...

I'd say they are the one group of people it doesn't help.

20% off £1m is a lot more than 20% off £300,000.

LillyJ

boinging wrote: »

I'd say they are the one group of people it doesn't help.

20% off £1m is a lot more than 20% off £300,000.

Point taken.

It doesn't really matter anyway, they don't plan to downsize yet as my mum has been ill so she doesn't need the stress.
They have got no need to move whatsoever so could either stay where they are or move. The amount of money that they get from the house sale would be pretty irrelevant as they aren't ever going to be in negative equity, and as they don't need to move it is academic anyway.

I understand that their circumstances aren't that of everyone and that there has been some luck (and hard work) to play, but what I was originally trying to say is that some people seem to think that everyone who buys at the peak is going to drown in a hideous sea of debt ending up sleeping on a park bench with a lifetime of living off baked beans. Clearly not the case!

boinging_2

LillyJ wrote: »

Point taken.

It doesn't really matter anyway, they don't plan to downsize yet as my mum has been ill so she doesn't need the stress.
They have got no need to move whatsoever so could either stay where they are or move. The amount of money that they get from the house sale would be pretty irrelevant as they aren't ever going to be in negative equity, and as they don't need to move it is academic anyway.

I understand that their circumstances aren't that of everyone and that there has been some luck (and hard work) to play, but what I was originally trying to say is that some people seem to think that everyone who buys at the peak is going to drown in a hideous sea of debt ending up sleeping on a park bench with a lifetime of living off baked beans. Clearly not the case!

Quite this has to do with the OP is not clear to me, but thanks for letting me know about your familys future housing plans.

I can't believe that anyone would argue though, that buying at either side of the peak is not a much better idea than buying at the top.