House prices to crash

[Gritt23]

I always wonder how accurate these figures are, especially when the housing market is quiet, because that by definition means the "average house price" will consist of a smaller survey.

Take the extreme, if one house was sold in July, and it was a 3 bed semi, small rooms, little garden, and it went for £250k, whereas in August, the only house sold was a 5 bed detatched for £500k, would the figures tell us house prices have doubled?

I just don't see how it can be as accurate as RPI inflation which is measured on a standard "basket of goods" from one month to another.

 

[The Antikythera Mechanism]

Have a look at this website - Historical UK Inflation Price Conversion
I bought my first house, a brand new property, in Chesley Close, Durrington for £11k in 1980. I was an Assistant QS at the time earning £2.4k pa. I had £1k deposit and struggled the pay the mortgage of £90/month. I've just checked Rightmove and a similar 2 bed terrace house, in the area, now sells for about £170k. A comparable salary to buy now, maintaining the ratio that I bought at would be £37k, which is not beyond the realms of possibility for a first time buyer.

What is surprising is that, using the above website, it can be calculated that £11k in 1980 would be worth £35k today, so house prices in that period have moved 4 times the rate of inflation. However, it would also appear that wages may well have increased at a similar rate. So it would seem that the rise in wages has fuelled the rise in property prices at a disproportionate rate to inflation.

 

[Badger]

In my particular case, it's worked out well because I like the area and I won't need to move again when our third child comes along in November, and my house is now valued higher than one might expect because of the lack of similar sized accomodation in the area.
Conversely, my brother kept his flat in Brighton and seems to have plenty of aggravation on a regular basis - keeping it occupied, maintenance and all those utilities you mentioned I guess.
All in all, I think we got lucky.

but he did have a top notch tenant for the last 2 years


I fit into the "moved back with parents to try and get a deposit" category. Having rented in Brighton for 2 years I barely managed to save any money simply because I was having to pay out rent and bills each month. I am currently looking at getting on the shared ownership scheme so at least I've got a toe on the property ladder. My main stumbling block at the moment is that none of the mortgage lenders are willing to lend 90% on new build flats so I'm trying to find ones on the same scheme that have been lived in or have a deal with a mortgage lender.

 

[Uncle C]

A comparable salary to buy now, maintaining the ratio that I bought at would be £37k, which is not beyond the realms of possibility for a first time buyer.

What?

 

[Tim Over Whelmed]

The average age of a first time buyer is now 34 and it is getting older very quickly. The Country will soon be a Nation of Timothy's living at home with Mum and Dad into their 50's and then maybe being able to buy a small place of their own with Mum and Dad's inheritance money.

At which point mortgage products will change to reflect the market. I guess house prices aren't going to fall down to the levels to stimulate the first time buyer market as more and more private investors snap up buy-to-lets etc.

Maybe we're move towards lifetime type mortgages and adopt a system whereby inheritence will be tax efficiently used againts your longer term mortgage?

 

[islingtonseagull]

My main stumbling block at the moment is that none of the mortgage lenders are willing to lend 90% on new build flats so I'm trying to find ones on the same scheme that have been lived in or have a deal with a mortgage lender.

This isn't a stumbling block. It is saftety barrier preventing certain negative equity doom.

I wouldn't touch a new build with a barge pole, especially at 90%!

 

[The Antikythera Mechanism]

What?

What? Do you think a single professional first time buyer, or a couple couldn't earn £37k pa between them?

 

[beorhthelm]

also, i like the graph but does it really apply to housing? looking at the other thread from Mar 2009, it appears to. but thats implying a bubble has been growing 30 years - really? not a little bit of making the theory fit the graph?

one might call "new paradigm" or denial for what i say here, but there have been fundemental changes to housing market, how we obtain mortgages, how we perceive property, etc. there's a simple demand factor in house prices were you *need* a home, most other markets the demand has no underpinning. as pointed out above, while the houses prices have far outstriped the "norm", other factors have also increased. put another way, there isnt going to be a drop to 20-25% of the peak where the mean might be. more likly 25% off from the peak (ie still well above the historic mean)

 

[Uncle Spielberg]

At which point mortgage products will change to reflect the market. I guess house prices aren't going to fall down to the levels to stimulate the first time buyer market as more and more private investors snap up buy-to-lets etc.

Maybe we're move towards lifetime type mortgages and adopt a system whereby inheritence will be tax efficiently used againts your longer term mortgage?

Why

Lenders do not want to lend to ftb's so they will not change to reflect the market. Lenders have no obligation to lend to anyone and as such have pulled the rug under ftb's feet. 99% of mortgage lending is 75% and under, cast iron A1 guaranteed employed, secure position, perfect credit profile. This excludes 80% of the public. There needs to be choice and the FSA cannot eliminate all risk from lending which is what they want to do. There needs to be choice and an option for everyone and a market priced on risk.

There is a very real danger of the housing market being controlled by 4 banks which it is now and creating an elite of super rich owners and landlords building up huge portfoilios of rented properties as the demand for rent is going up and will continue to do so as so many people cannot get a mortgage now.

If the rent exceeds the mortgage payment the landlord pays which it easily does the housing market will not crash as demand will exceed supply and the number of transactions will plummet as with no first time buyers there are no first time sellers.

 

[Lord Bracknell]

Why this desire/obsession for house prices to rise faster than inflation? Most insane.

Really think about it.

Someone buys a house 40 years ago in London for £100,000. Now it's worth £1,000,000 (excluding the effects of inflation). This person is now a millionaire, for doing jack-shit. Who ends up in debt; the younger generation.

No-one with half a brain-cell can really think that asset inflation is good. If you do, then you really don't understand the basics of economics and you've been fooled into the trap of 'debt is good'.

Really do yourself a favour and learn more about the foolishness of the system as it currently works. A starting point would be http://notayesmanseconomics.wordpress.com/.

Also, read some of the posters comments on the BBC Website on the articles by Robert Peston/Stephanie Flanders. Some interesting insights into the failings of the current 'debt' culture.

£100,000?

40 years ago, you could get a three bedroomed semi in London for a lot less than £10,000

 

[larus]

£100,000?

40 years ago, you could get a three bedroomed semi in London for a lot less than £10,000

I think the figure was from the FT - not my figures.

 

[Gwylan]

What? Do you think a single professional first time buyer, or a couple couldn't earn £37k pa between them?

They could.

That's the point I was making earlier - there are properties available for first-time buyers and not just for ones earning crazy salaries. People will have to get used to saving, just as they used to do.

My parents bought their first house 13 years after getting married, it took them that long to save for a deposit, but that was pretty standard in those days. A young professional couple putting aside £200 between them every month would have about £27k to £28k after 10 years, about 15% of a £180,000 home - not really out people's reach.

 

[Notters]

They could.

That's the point I was making earlier - there are properties available for first-time buyers and not just for ones earning crazy salaries. People will have to get used to saving, just as they used to do.

There really aren't in Brighton.

 

[larus]

I live in Telscombe Cliffs in a 4 bed detached house - 1960's build so large bedrooms and reasonable sized garden. 'Value' approx £330k.

However, build cost would probable be abour £130k - £150k I guess. Therefore, the rest of the value is in the land and profit for .

Rediculous. We need to make more land available, so the :
1. We have more houses built
2. We stop this stupid process of cramming houses together.

I don't know the percentage of land which is built on, but I know it's lower than I thought (especially when you hear people going on about protecting the countryside).

 

[Cheeky Monkey]

What is this obsession / desire in this country for house prices to crash ?. Most odd.

Not odd at all. Me and tens of thousands like me are desperate for a house price crash.

 

[MikeySmall]

There really aren't in Brighton.

It depends what / where you want to live. I think alot of people expect to immediately move into a 3 bedroom house. There are 1 bed flats available for under 150k in Brighton.

 

[Simster]

There really aren't in Brighton.

Brighton is overpriced because it is a trendy place to live. If I was buying my first place, I don't think I'd consider it, to be honest.

 

[Notters]

Brighton is overpriced because it is a trendy place to live. If I was buying my first place, I don't think I'd consider it, to be honest.

I have to admit, Falmer is my priority (!) and IMHO, if you can't walk there it's going to be a pain in the arse!

 

[beorhthelm]

There is a very real danger of the housing market being controlled by 4 banks which it is now ...

you keep saying this. which of the 6 major lenders (Barclays, HSBC, Lloyds, Nationwide, RBS, Santander) do you see dispearing? you should have a little more faith in the market to exploit the untapped need, sooner or later a bank will go back into the FTB/low deposit segment and they will all follow for fear of losing market share. FTB are the growth end of the market, if done right thtey get them for life make more money from them. of course, that might mean less need for mortage brokers as people find they dont need to change every 2 years...

 

[The Antikythera Mechanism]

Brighton is overpriced because it is a trendy place to live. If I was buying my first place, I don't think I'd consider it, to be honest.

Brighton is unusual because of the historical low level of new build, houses, in particular, therefore the ratio of available property to an increasing population is continually reducing. Demand will always outstrip supply, keeping prices high. I didn't buy my first house in Worthing through choice, but because I could get more for my money.