I'm currently buying, but getting cold feet...!

ncooper1974

brit1234 wrote: »

Your right it is going to fall 20% this year alone and down 40-50% in the next couple of years.

I currently live in Loughton. I would like to spend up to £500k on a new family home.
£500k currently buys me something like this:
http://www.rightmove.co.uk/viewdetails-21052244.rsp?pa_n=1&tr_t=buy

£1,000,000 currently buys me something like this:
http://www.rightmove.co.uk/viewdetails-19836221.rsp?pa_n=1&tr_t=buy

Going by your figures of a 20% drop this year, and then a 40-50% (lets take the average and say 45%) drop in next couple of years, are you telling me that if i wait 2.5 years (Dec 2010) then I can get the £1 million pound property for £440,000? I dont think so...

Kez100

Yes, but the problem will be - you probably won't be able to get it.

Prices will fall because people just cannot raise the money to buy either as a loan, or as a deposit. You are thinking 440k at, say, 7% - but rates may be far higher then and thus price 440k out of your ability to buy. If people can buy then the prices won't fall so much.

That is why average wages are of interest. If the average person can't buy anything then prices need to drop to meet that ability. Once that happens and sentiment returns to positive, the market can move and chains can complete - all at the right adjusted price of course!

hethmar

brit1234 wrote: »

Your right it is going to fall 20% this year alone and down 40-50% in the next couple of years.


Makes sense to rent and see how the market will go to save you making the biggest financial mistake of your life.:exclamati

Brit, people were saying this back 6 or 7 years ago werent they? People were getting out of their owned homes and renting waiting for the big drop but instead property started soaring in price. I cant see how anyone can predict anything in this way - I cant see how houses can drop so drastically when we have a million more people (at least) coming in who need housing.

Alan_M_2

hethmar wrote: »

Brit, people were saying this back 6 or 7 years ago werent they? People were getting out of their owned homes and renting waiting for the big drop but instead property started soaring in price. I cant see how anyone can predict anything in this way - I cant see how houses can drop so drastically when we have a million more people (at least) coming in who need housing.

Percentages aside you've missed the whole root of the problem which is money availability.

It doesn't matter if a house is 1 Million, £100,000 or £10,000. If the mechanism isn't in place to fund the property it will not sell and will need to be reduced to a price at which the current mechanism can afford to fund it.

A house's value is not a a figured fixed on it's replacement cost or even it's original build cost. It's a price that is governed by the availability of money to those that wish to buy it. No availbility, no sale, therefore it's value needs adjustment.

Your assumption is that the million or more notional people wishing to buy property actually have the ability to borrow these sums or the availability of the money to start with.

Lotus-eater

ncooper1974 wrote: »

I currently live in Loughton. I would like to spend up to £500k on a new family home.
£500k currently buys me something like this:
http://www.rightmove.co.uk/viewdetails-21052244.rsp?pa_n=1&tr_t=buy

£1,000,000 currently buys me something like this:
http://www.rightmove.co.uk/viewdetails-19836221.rsp?pa_n=1&tr_t=buy

The first property (as I'm not in the SE) shows me just how overpriced the market is. Half a million for that! You're having a laugh.

The second one is probably many peoples dream house. But I think its pretty horrible tbh.

hethmar

Alan, I still cant see why property would drop 60 or 70%- it would surely be affordable long before that?

I dont think the million people coming in will be buying the houses but someone will be! Even if its the local authority - they arent going to be dossing on the streets.

Alan_M_2

hethmar wrote: »

Alan, I still cant see why property would drop 60 or 70%- it would surely be affordable long before that?

I dont think the million people coming in will be buying the houses but someone will be! Even if its the local authority - they arent going to be dossing on the streets.

That is governed purely by the availability of money not notional figures of value or immigration. I agree 60to 70% is unrealistic, market forces simply wouldn't allow it to drop that far. However I wouldn't be surprised to see 40% when it's all over although that's likely to be close to 30% or so in reality. We'll only truly know in 5-6 years time when we can actually quantify the damage to the entire economy.

Most of the Million people entering the country will be renting (they simply wouldn't qualify for mortgages), however I believe we're reasonably balanced at the moment with a number of people leaving the country, the net figure will be far below the Million maybe tens of thousands at a push.

Kez100

hethmar wrote: »

Alan, I still cant see why property would drop 60 or 70%- it would surely be affordable long before that?

I dont think the million people coming in will be buying the houses but someone will be! Even if its the local authority - they arent going to be dossing on the streets.

You need to get your head out of 2007.

Try this scenario:

From now on it is impossible to borrow anything to buy a house. Hopefully you can now understand in that scenario house prices are worth very little indeed - about as much as people have in savings....not a lot!

Now think of this scenario. You can borrow whatever you want but the interest rate is 40%. Again, what do you think this does to house prices?


I know the above won't happen (sincerely hope not!) but things which have exactly the same effect just not quite so drastic are.....unemployment, bigger deposits required, higher interest rates and lower income multiples allowed for borrowing.

Until we know the full extent of what will happen we cannot say how much property will fall by. We will only know once it is all over and we can look back on it but it could be higher than you think.

want2beMF

franklee wrote: »

Interesting figures, that's miles sway from what renting vs buying costs round this way. I'd be interested to know purchase price of the property, size of mortgage and approx. value of the property you would rent for 1200 per month. Round here rents are approx. the same as an interest only mortgage with a small deposit for a similar property. So rent vs buy is pretty much break even if house prices remain static. Therefore the financial part of the decision comes down to what one thinks house prices will do and how much one wants to buy If I was to downsize from a two bed to a one bed then of course I'm no longer comparing like with like

Just to answer your question, purchase price is £305k and we took a 90% offset mortgage. The rental property we were looking at was abt the same value at abt £330k (based on asking prices) so I think they would be going for abt the same price as the asking price on my property was £345k.

Technically, we did "downsize" from a 2 bedroom to 1 bedroom BUT in terms of size (per sq foot), my flat and the rental property was abt the same. Trust me, we compared size for size as well and the only difference was 1 extra smallish room that we would use as a storage room.

franklee

Alan_M wrote: »

Also factor maintenance into the above figures, which is a somewhat unknown quantity with owning.

With renting however, it's always zero.

Agreed, but I figure the OP can add maintenance for himself knowing the condition of the house he wished to buy.

Alan_M wrote: »

In the figures I'm not sure you're comparing like with like. Not many properties valued at £103,000 rent for £600 - £650 a month.

Yes, I did say at the end the rent seemed high, but again they were the OPs figures and it is he who knows what comparisons he wants to make.

Alan_M wrote: »

The property I currently rent at £800 per month is currently worth in the region of £230,000 - £250,000 depending on which estate agent you believe, and this has come down from close to £300,000.

Nice one, that beats me I'm paying 850pcm for a property "worth" 275K. Would like to move to 695pcm a property "worth" 200Kish.

Alan_M wrote: »

Run the figures through on the the basis of the figures above and the difference is so clear cut you'd come to the decision of why would I buy at all? But like I said, each case needs to be taken on it's own merits.

For myself I'm not buying until any drops are clear/over. Long term I do think buying is best as I hate the insecurity of renting long term, short term it's fine.