House prices to crash

[Hunting 784561]

I don't think anyone has answered my original point about why property prices would crash when over the next few years there will be a fast growing population, most of whom will want to live in a corner of a small island where comparatively little construction is taking place?
.....

This.

The laws of supply and demand especially apply in the UK, and there are more people needing housing units, especially in the SE, then there are houses available or being built.

The Brighton market is especially resilient according to one estate agent I spoke to recently, as prices have fallen 20-25% across the UK over the last 2 years, but only by 10-15% in B&H.

Which is great for the baby boomers ( ie, me) but much more worrying for the next generation.

 

[Cheshire Cat]

I just take the attitude that I am effectively "renting" my house from the building society, who own it (or at least own the money that is paid for it which is effectively the same thing. Also given that if I default on the loan the building society will take possession of the house), until such time as I can pay off the mortgage when I will actually own it.

If I want to make money from my house, I would have to sell it but then find somewhere else to live. Buying another house - even a smaller and cheaper one would take up most or all of the profit I might make on the original buying price. Hence the value of my house is only an asset on my personal balance sheet and is written off against the current value of my mortgage loan, a cash reserve of the endowments which are supposed to pay off the loan eventually (some hope!!!), and a non-cash reserve of the value of the amount I have paid off. I cannot realise the full value of my house as cash unless I remortgage it (in which case I won't own it again) or I rent (in which case I have a cash sum but the value of this is reduced by inflation over time).

It is the difference between capital value and cash income.

 

[Gwylan]

I don't think anyone has answered my original point about why property prices would crash when over the next few years there will be a fast growing population, most of whom will want to live in a corner of a small island where comparatively little construction is taking place?

Well, I don't think that prices will "crash" but I think that sooner or later there will be a sharp increase in interest rates and some buyers will be left over-exposed and, sadly, have houses repossessed. If several thousand houses come on the market at once, that will bring down property prices.

If the government manages things well, it might not be too bumpy a landing but quite honestly, Gideon looks like he'd need a calculator to work out his small change, so I wouldn't bet on it.

 

[Cheshire Cat]

It also depends on the availablility of mortgages. If lenders insist on high interest rates compared to the current base rate, plus high fees, plus limited loan to value ratios and enormous deposits, and low earnings to loan ratios, mortgages become increasingly difficult to obtain and afford.

If buyers cannot afford to pay high property values, prices will have to come down if sellers want or need to sell - even at the risk of only breaking even or negative equity. The threat of negative equity and reposession is the major incentive for mortgage companies to make loans available and maintain prices as they will not want a lot of unsold and potentially unsellable properties cluttering up their balance sheets, with no cash coming in from repayments.

 

[Uncle Spielberg]

The Daily Express led today with " Big Mortgage rises on the way ". An expert has predicted interest rates will rise to 8% in the next 2 years to stave off inflation. I think they refer to the lenders variable rate averaging 4% at the moment rather than the Bank of England base rate of 0.5%, This would mean a Bank of England base rate of around 5%. Another " expert " predicted the Bank of England base rate would stay at 0.5% until 2014. Both predictions I believe to be bollocks. One is scaremongering and the other is lulling people into a false sense of security. The truth I believe is somewhere in the middle.

 

[Uncle C]

I don't think anyone has answered my original point about why property prices would crash when over the next few years there will be a fast growing population, most of whom will want to live in a corner of a small island where comparatively little construction is taking place?
QUOTE]

I think this all comes down to afford-ability. We would all like a nice car, a few bars of gold and a detached mansion, but we cant have them, cause we cant afford them.
Its the same with houses. Prices can only go up if more people can afford them. If they cant (like now) they will go down.

Most would like to own a Ferrari. If we could all afford them and Ferrari couldn't build them fast enough the price would go up. Ferrari build just enough to supply the marketplace, just like house builders.

 

[Uncle C]

The laws of supply and demand especially apply in the UK, and there are more people needing housing units, especially in the SE, then there are houses available or being built.
QUOTE]

Dont confuse 'needing' a house as demand. Demand is when you can afford to buy it.

 

[Uncle C]

The Brighton market is especially resilient according to one estate agent I spoke to recently.

Please, please never trust what an Estate Agent tells you. Their job is to sell houses and get commission. They wont do this by being honest about the state of the current market.

 

[ben andrews' girlfriend]

Housing prices crash? Bring it on! It's about time houses were affordable for people like me who work bloody hard and still can't afford to live on their own.

Sorry to all those trying to sell at the mo, etc etc.

 

[drew]

Housing prices crash? Bring it on! It's about time houses were affordable for people like me who work bloody hard and still can't afford to live on their own.

Sorry to all those trying to sell at the mo, etc etc.

At the fear of being shot down in flames, I would respectfully suggest that there have been very few periods in the past when people have tended to buy on their own. In my lifetime I can only recall people buying as couples.

 

[Uncle Spielberg]

That does not help. Are you telling BAG that she needs to get someone else before she has a right to get a mortgage/property ?.

 

[beorhthelm]

That does not help. Are you telling BAG that she needs to get someone else before she has a right to get a mortgage/property ?.

i think the comment merely observes that traditionally single people on one income have not been able to afford to buy a house themselves. the post recession years if the mid 90's were probably the only time in history it become widely affordable. my parents tell me they could only afford their first two bed house in Lewes because Mum worked at the bank and got a preferential deal.

 

[Uncle Spielberg]

40% of households are now single occupancy so I guess they are all f***ed.

 

[Gwylan]

At the fear of being shot down in flames, I would respectfully suggest that there have been very few periods in the past when people have tended to buy on their own. In my lifetime I can only recall people buying as couples.

Not really. It's not that long ago that women couldn't get credit, hell, it's not that long ago since a woman couldn't even get a chequebook without her husband's permission. I don't know how old your lifetime is but certainly before the 1950s, it was the husband who held sway. It was only when Thatcher came in that financial institutions were happy to lend to non-married couples.

 

[drew]

Not really. It's not that long ago that women couldn't get credit, hell, it's not that long ago since a woman couldn't even get a chequebook without her husband's permission. I don't know how old your lifetime is but certainly before the 1950s, it was the husband who held sway. It was only when Thatcher came in that financial institutions were happy to lend to non-married couples.

My working lifetime started in 1981 but I know that none of my extended family have brought property on their own apart from my brother who brought a small one bed flat in Buckingham road and low and behold his girlfriend moved in shortly after and spread the costs. I'm not saying it is never done just suggesting that it is in more cases than not that property is a joint purchase.

40% of households are now single occupancy so I guess they are all f***ed.

Not quite sure what bearing that 'stat' has on the debate. Households could be as small as a bedsit and it is irrespective of whether it is rented or owned.

i think the comment merely observes that traditionally single people on one income have not been able to afford to buy a house themselves. the post recession years if the mid 90's were probably the only time in history it become widely affordable. my parents tell me they could only afford their first two bed house in Lewes because Mum worked at the bank and got a preferential deal.

Thank you. Thought I was going to have to spell it out myself for some of the imbeciles on here!!

That does not help. Are you telling BAG that she needs to get someone else before she has a right to get a mortgage/property ?.

What the f*** do you mean by 'the right to get a mortgage'? It's about being able to afford it, not some god given right.

 

[Gwylan]

My working lifetime started in 1981 but I know that none of my extended family have brought property on their own apart from my brother who brought a small one bed flat in Buckingham road and low and behold his girlfriend moved in shortly after and spread the costs. I'm not saying it is never done just suggesting that it is in more cases than not that property is a joint purchase.

Yes, if you're looking back to the 80s, then you're right but that's a short point in history. And, prior to that, people still moved as couples or families (because the vast majority of people got married) but in most cases, the mortgage was in the man's name only as women had little in the way of property rights. BTW, I do remember single people getting mortgages in the 70s but that's because I worked in a building society and they offered preferential rates.

It's changed so quickly. There was a piece in the Observer this weekend about the baby boomer generation and it pointed out that prior to the 60s, even a wealthy working single woman wouldn't be allowed to get a mortgage on her own - something that I didn't know.

And while it's true that since the 80s people have tended to buy as couples, that (as I also pointed out) is a relatively new thing too. An unmarried couple in the 1960s looking to buy might well have struggled to get a mortgage.

I know everything comes down to Thatcher but she really did change the rules. Before her, the vast majority of people rented and getting a mortgage was a real struggle (10% deposit was the norm), post Thatcher, it became the done thing to rent and credit was easy. Whether that was a good or a bad thing will depend on your political point of view.

 

[Uncle C]

House sales in US fell 27% in July far outstripping the 12% fall predicted by Reuters analysts

America sneezes and we catch a cold.

http://www.guardian.co.uk/business/2010/aug/24/us-home-sales-slump

 

[dazzalewis1968]

House sales in US fell 27% in July far outstripping the 12% fall predicted by Reuters analysts

America sneezes and we catch a cold.

http://www.guardian.co.uk/business/2010/aug/24/us-home-sales-slump

Well my phone been ringing off the
Hook for the last 2 days so there
Still buying in Barnet

 

[Uncle C]

Well my phone been ringing off the
Hook for the last 2 days so there
Still buying in Barnet

Don't tell me, let me guess. You're an Estate Agent and you come bearing glad tidings of good news concerning the housing market.

 

[Uncle Spielberg]

House sales in US fell 27% in July far outstripping the 12% fall predicted by Reuters analysts

America sneezes and we catch a cold.

http://www.guardian.co.uk/business/2010/aug/24/us-home-sales-slump

You must be a right barrels of laughs at a party