Housing Market... THe Future?

[DaBeeeenster]

heh 20% by when, with what causing it, more interest rates hikes, and if so when it the price expected to fall ?

DETAILS please

TiG

I agree that house prices in the SE are due for a correction, but I dont think it will be as much as 20%. The reasons are the obvious ones I would have thought:

An already overpriced market
Enormous level of consumer debt
Rising interest rates
"Wacky" mortgages like self certs that enable borrowers to take risks that they will not be able to meet if there is a downturn in the economy

I own a flat in Islington (currently renting it out) and I think I will sell before this time next year. The one good thing about the housing market is that it takes a while for prices to rise or fall (due to the length of time it takes to complete a sale). The big risk for me is stepping off the property ladder when I am already on it; I could sell and see the market continue to rise, but I guess that's life. I've got better things to worry about tbh. It's only money after all.

[spikegifted]

I've read somewhere that UK residential housing is on average 20% over-priced... Now, that's an average and of course it differs from place to place. Now, I live and work in London, fast approaching my mid-30s and about get married. The Ruler_of_spike and I have looked at buying something for a long time and whenever and wherever we looked, we found ourselves coming to the conclusion that prices are just too expensive. Well, I found prices too high back in 1996!

Ok, there're some intrinsic reasons why property prices are higher in London and the South East (higher level of economic activity, higher population pressure, etc), but even if the 20% figure is applied to this area and immediately reduced, prices will suddenly become a lot more affordable. The question is what makes piece of property 'worth' the asking price. While economics and market-believers will tell you that it is 'worth' the price because someone is willing to pay for it and 'the market is always right'. To me, that's a load of bull. As with any market, the market can get the price wrong - that's call overheating or over-correction, depending on which direction the market is moving.

Ok, I'm not a surveyor nor do I work in the building/property industry, so my opinion is completely arbitrary. However, I've looked at property prices for a long time. What was considered too expensive back in 1996 is of course over priced in today's prices. Even allowing house prices to go up by twice the rate of inflation, it is impossible to arrive at today's prices.

So, when is a good time to buy? The obvious answer is 'when the market bottoms out'... which is another load of bull! If I knew the answer, I won't be telling you, either. The point I'm trying to make is that no-one knows. It's up the individual. The important thing is not make judgment by how much you can afford under current economic circumstances - we will experience high interest rate some time in the future, we just can't tell when just yet. Additionally, with high prices and prolonged low borrowing rate, your pain is more drawn out - you ended up still putting a relatively large amount of disposable income repaying the mortgage because inflation is not high enough to inflate your earnings.

My approach is: wait for the correction. Then go and see what's in the market. When we find something that we like and it has a price that we think is 'fair', we'd buy something. Before, we'd just keep renting.

[mr_anderson187]

ive been doin an a-level in economics, basically thsi is what its about, im not the smartest but the general idea that he tells us is that the economy is ducked 6 ways from sunday, and is like a car held together by duct tape (just about gonna go, but soon to fall apart) what he (tha teacher) tells us is that hous price inflation is crazy big, and really any time in the future it could fall in around us, and people who have just bought houses will be fubarred and end up with negative equity in their house.

anywyas thats what were being taught, im not sure hoiw it all stacks up in the real world though...

[DaBeeeenster]

I've read somewhere that UK residential housing is on average 20% over-priced... Now, that's an average and of course it differs from place to place. Now, I live and work in London, fast approaching my mid-30s and about get married. The Ruler_of_spike and I have looked at buying something for a long time and whenever and wherever we looked, we found ourselves coming to the conclusion that prices are just too expensive. Well, I found prices too high back in 1996!

Ok, there're some intrinsic reasons why property prices are higher in London and the South East (higher level of economic activity, higher population pressure, etc), but even if the 20% figure is applied to this area and immediately reduced, prices will suddenly become a lot more affordable. The question is what makes piece of property 'worth' the asking price. While economics and market-believers will tell you that it is 'worth' the price because someone is willing to pay for it and 'the market is always right'. To me, that's a load of bull. As with any market, the market can get the price wrong - that's call overheating or over-correction, depending on which direction the market is moving.

Ok, I'm not a surveyor nor do I work in the building/property industry, so my opinion is completely arbitrary. However, I've looked at property prices for a long time. What was considered too expensive back in 1996 is of course over priced in today's prices. Even allowing house prices to go up by twice the rate of inflation, it is impossible to arrive at today's prices.

So, when is a good time to buy? The obvious answer is 'when the market bottoms out'... which is another load of bull! If I knew the answer, I won't be telling you, either. The point I'm trying to make is that no-one knows. It's up the individual. The important thing is not make judgment by how much you can afford under current economic circumstances - we will experience high interest rate some time in the future, we just can't tell when just yet. Additionally, with high prices and prolonged low borrowing rate, your pain is more drawn out - you ended up still putting a relatively large amount of disposable income repaying the mortgage because inflation is not high enough to inflate your earnings.

My approach is: wait for the correction. Then go and see what's in the market. When we find something that we like and it has a price that we think is 'fair', we'd buy something. Before, we'd just keep renting.

What area are you living in at the moment Spike? Pint says it's south London? Lunch says it's within 2 miles of Claphan Common tube station?

[Stoo]

The only thing holding it together is the massive level of consumer borrowing, if anything happens to upset that then the whole house of cards will topple.
That's the reason why the BoE are being so careful with interest rate rises, they simply don't know which level of interest rate rise would rope in consumer borrowing compared to that which would trigger a crash..

[mark22]

I don't mean to annoy but the BoE is messing things up right now. As far as I'm concerned house prices aren't over priced, maybe it's where I live in east anglia but a crash or lowering in prices isn't going to help the economy in the long run. I mean what next, 90% tax again, labour huh = joke, probably shouldn't get political but learn some history and realise Thatcher =

[Stoo]

Thatcher is the whole reason the economy is buggered up, through her we've lost the manufacturing industry which was the whole backbone of the country!
Then she privatised most of the services so instead of priding themselves on good service and serving the needs of the consumer all they now care about are short-term profits for their shareholders.
Thatcher sold the country down the river all in the name of a quick profit.

Houses in east anglia aren't overpriced?? Our home has more than doubled in value in roughly 7 years! sorry, but a fairly small bungalow being "worth" over £180k ??

Most of what has screwed the housing prices up here has been a knock-on effect from London/Essex, people sell their vastly overpriced homes in london/essex for a small/large fortune settle up here and price everyone out of the market.. Very Useful.

[DaBeeeenster]

probably shouldn't get political but learn some history and realise Thatcher =

That sort of comment will get you banned.

(j/k)

[mark22]

Ok. Sorry, I knew going political wasn't a good idea with all the clever people on these forums it could flare up. I now can't say what i wanted to but let me say that I'm about to sell a bungalow for £310000. And that's without advertising, people walking past want it so I can see a consumers market there.

I know the whole situation can be bad for some people and I am not trying to say it's ok everywhere but certain areas of the market aren't overpriced.

[spikegifted]

What area are you living in at the moment Spike? Pint says it's south London? Lunch says it's within 2 miles of Claphan Common tube station?

You're not far off there dude... Putney - right UNDER the Heathrow landing path!!

[Rave]

Ok. Sorry, I knew going political wasn't a good idea with all the clever people on these forums it could flare up. I now can't say what i wanted to but let me say that I'm about to sell a bungalow for £310000.

Yeah, well therefore Thatcher = for you, for me. What she has done is **** over anyone who didn't get their foot on the housing ladder in time. £310,000 for a bungalow is overpriced from every perspective apart from someone who's selling.

IIRC you make your money from developing houses, so the current boom means that you'll be cashing in. That's fine, but when the crash comes as it inevitably (as far as I can see) will, then you're going to lose money and your business could potentially be in serious trouble. If Thatcher had encourage the housing market to grow in a sustainable fashion and had encouraged a program of building that roughly mirrored demand, then you'd have a sustainable long term business. As it is the business you're in is (IMO) currently an extremely high risk one. At the end of the day, a boom and bust economy only suits those who can see into the future, where as sustainable growth means everyone can benefit.

At the moment a bust will badly hurt you as a property developer and seriously help me as a non-homeowner. I would prefer an environment where you can make a fair profit selling me a house I can afford.

Rich :¬)

[Nick]

I was reading an annual survey fomr some property company in the paper yesterday. They reckon that house prices in general will fall by a few percent next year but them go up over the next five. Most areas will avergae a 13% increase over the five years.

Like Zak, I was lucky and bought at the bottom of the last house price crash, back when I was 21. We've moved once since then and are quite happy where we are now. Ok, so the house might be worth 70K more than when we bought it 5 years ago, but that means bugger all if we want to move, cos everywhere else is 70K more too. It might be equity in the house, but unless we move to a caravan, we can't get our hands on it!

The market surely sucks for first time buyers and the whole house price thing is a double edged sword. Owners not wishing to move are happy if prices are high as they think they're sitting on a gold mine. Many don't realise that unless they move down a house size, they're never going to a see a penny of their equity. Of course, high prices leave those without property in the cold. If prices were low, owners would be sweating it on paying for a mortgage bigger than the house's market value. That's fine if you can sit it out and wait for the prices to go back up, but no good if you have to move for some reason. For first time buyers this is a great though, lots of affordable housing and cos the market has bottomed out, plenty of scope to either stay put or move up with equity earnt in the first house helping to reduce the mortgage on the next one.

If it was me, I WOULD NOT buy in the current market. 6 or 7 years ago, if I was renting, I would have considered buying, as rents were roughly equalt to mortgage payments. Now though, the mortgage you'd have to take would damn near financially cripple you for life, unless you earnt some SERIOUSLY big money and you'd be forever struggling.

Best I can suggest is to find a good rent deal and stick with that. When you get some seriously large amounts of money, from and inheritance or something, THEN think about sticking it in a house.... better to have money and enjoy life than be saddled with a bank busting mortgage payment each month and not have enough left to do anything.

[RVF500]

Seeing as Brown has screwed up pensions (how can it be legal to steal £5 Bn from private funds?) the only future I now have regarding having income in retirement is the property I own. Though I'm sure that the current regime will find a way to tax that into worthlessness by the time I come to sell my home and downgrade.

Housing is like any other investment on the face of it. You can either afford to buy that investment or you can't. There is a risk involved once you do make the investment. The impact of a failed investment in this case is much more personal though as you stand to lose the very roof over your head. Government knows this and also knows that people will bend over backwards to meet bills on their homes. Like the motorist, the homeowner is a cash cow for the government. Stamp duty, removal of mortgage interest relief etc. Curbs on lenders would also have taken the heat out of the market by not allowing people to borrow so far beyond their means. No buyers, no mad prices. Something useful government could have done instead of looking at ways to implement yet another tax on us.

The first issue isn't so much can everyone buy a home but can everyone be housed at a reasonable rate? The failure in many areas is the lack of decent council accomodation. Due in part to local authorities selling off existing housing. Another failure in government. A balance needs to be struck, right now we don't have balance and the only way that appears to be seen as viable is to put the squeeze on current home owners in the time tested manner of increasing interest rates and hitting people in the pocket.

[jarvo]

house prices in most areas are to high, undebateable.
however noone wants to see a price fall, does anyone want to pay a £100,000 mortgage on a house worth £80,000... nope.

the government is loving the higher house prices and the higher oil prices as they are getting money from all angles from the motorist and homeowner.

mr brown & mr blair are liers and thiefs.

why do you blame thatcher when houses prices were at a record low when she left power?

there has been as shortage of new affordable houses since the 1940's... supply has never met demand and never will.

theyve introduced countless new stealth taxes and raised most other taxes.
the house prices wouldnt be so much a problem if people were taking home the same % of their wages as they were 10 years ago.

[Nick]

why do you blame thatcher when houses prices were at a record low when she left power?

Umm, cos in her drive to line the pockets of those who were already rich, at the expense of those who weren't, she hoiked interest rates through the roof. The rises were powered by a misguided belief in keeping inflation down by using intrest rates to curb spending, but also to benefit people with savings... who just happened to be the wealthy as most people had blown savings trying to make outrageously high mortgage payments.

Prices were at a record low becuase the nation's economy was in a major recession which had companies folding or laying off staff everyday and even the NEWS on TV thought it was worth putting an item on when a company was hiring, it happened so rarely!

True, we weren't in recession when Labour came to power, but the market was still cautious. Good ol' Maggie was hoofed out precisely BECAUSE she had driven us into a hole where the poor and not so well off were paying a proportionately far higher price for borrowing than those that were already rich.

Ok, politics bit over.

[RVF500]

Seems that the current mob haven't learned. They still use interest rates in the same way only they get the bank of England to do it so that they can say it wasn't anything to do with them.