To just be so upset about house prices

[spuddy56]

We started looking in December after scrimping and saving for years and its got more and more out of reach with every passing week since then. We've had two sales fall through due to downvaluations, so not only did we need the huge deposit we had saved up for years, we needed 10k on top of that which is impossible for us. We are paying rent and have no family help. We viewed a tiny house that we love and has been on the market since beginning of April with no offers but the seller won't budge on the price. Based on one year of sold prices in the area its about 40k too much, even taking into account the 10% rises over the last 12 months. Theres just no way a mortgage company would lend that much. Been to view another one and it's tiny, has had no offers and is worth a lot less but agents don't think they will go lower. We've had to adjust our expectations down and down despite being what we thought were healthy earners. How are first time buyers managing to buy right now without help?! I'm so so upset at not having somewhere to settle and call a permanent home.

Yes, but it was a terrible suggestion. Do the maths. Read posters’ stories. We’re at the top of the market and people are starting to do daft things. Where is this equity you talk about coming from? Further price growth? Fuelled by what? Lending is already stretched to its limit and the cost of living is rising quickly.

The most likely outcome is that the OP will end up with her capital tied up in a house she doesn’t want to live in, in a location that doesn’t suit her, and has an asset that is losing value, wiping out her deposit.

Nor is ‘rent it out’ the ideal solution. There’s no tax relief for mortgage interest on rentals any more. Why do you think that landlords are leaving the market? Plus, HMRC will want the OP to make payments of the tax due on account, and that will be considerable. She may not have the cash flow for that.

@Iamthewombat

How do you know it's the top of the market? Because if you look at house prices in any year in the last hundred years and you look ten years later, they have gone up! Sometimes they go down a little but only temporarily.

I was told that we were top of the market and nobody should buy when I had my first real job in 2001. So glad that I didn't listen.

Yeah, you’re right. Markets NEVER have peaks and troughs. Doesn’t happen. Ever. Except when it does.

Ask anyone who bought a house in Ireland during the mid-2000s feeding frenzy. Or anyone who bought just before the credit crunch. Or anyone who joined the ‘buy anything, at any price’ madness in the late 1980s and got stung.

How about if you had invested in travel shares in December 2019? Or shares in RBS in 2007? What would you have thought a year later? “So glad I didn’t listen”?

If you were the OP, would you be happy to have bought something for £400k when a year later you could get the same thing for £300k? Or even less, if you look at the abandoned developments in Ireland after 2008. I don’t think so. That is what ‘the top of the market’ means. It doesn’t mean that prices will never increase again in the future.

I can’t believe that so few people understand the absolute basics of economic cycles . Which is probably how houses have got so expensive. I’ve got no skin in this game. I own a house with no mortgage. I can see the writing on the wall, though. As can many others, better qualified than me.

Trying to time the market is an absolute mugs game to because at the end of the day even when there are drops, there are of course drops all that happens is the banks protect their interest by pulling up the drawbridges and making loans harder to access so the only people that ever benefit from house price drops are those who can walk in and put the cash on the table.

Yeah, you’re right. Markets NEVER have peaks and troughs. Doesn’t happen. Ever. Except when it does

l think it depends where you buy. All the houses I’ve bought over 35 years have continued to rise in price. Ridiculous rises really.

Lots of London prices have stagnated since Brexit particularly flats with the pandemic, particularly with SD. They aren't going to suddenly increase in the midst of a cost of living crisis & higher rates.

People who buy today or have in the last few yrs will generally not see anything like the historic equity gains.

But that shouldn’t matter because then the next rung up the latter is closer and people will be able to afford to buy something a little bit bigger as their circumstances improve, it’s not a bad thing.

@Iamthewombat

You're debating with a BTL landlord. That may put some comments into perspective.

Yes, I noticed. Although we need people like Nothappyatwork in the market, I suppose, to prove the ‘greater fool’ theory. She’d be in there making a market for anyone knowingly trying to offload an overvalued asset.

Well, duh, yes. Of course it depends on when you buy. That’s the point. The OP is being advised not to buy at the peak.

But that shouldn’t matter because then the next rung up the latter is closer and people will be able to afford to buy something a little bit bigger as their circumstances improve, it’s not a bad thing.

Yes it's much easier to move up the ladder when prices aren't rising, however it's not really easier for people new onto the ladder because of such high starting prices & ftbs tending to be older & already better paid. They will need to bridge the gap with higher wages & savings. When you look at the age of FTBs & the fact many will try for a family after getting on the ladder & then have childcare costs & reduced wages.
I knew lots of people who were stuck on the ladder & it was only the stamp duty pause that helped them move up.

Plus a FTB today is going to have a much less favourable mortgage rate unless they have a big deposit & most dont.

I’m not sure if prices will come down. They have gone up and up since I brought my house in 1999 so 23yrs ago and was £82k -mortgage of £70k which was omg to us when earning £200 per week so £40 a day and could we afford it

now it’s worth £350k

I feel for op. I can’t imagine having a mortgage of £300k

Well, duh, yes. Of course it depends on when you buy. That’s the point. The OP is being advised not to buy at the peak

I said where not when.

The usual way for governments/central banks to deal with inflation is to raise interest rates. Inflation is rising. Interest rates have been very low for over 10 years now. It's not unreasonable to think they might go back up closer to what they were in the 1990s-early 2000s. They might even go up to the earlier levels, closer to 10%, or even above.

If interest rates shoot up, a lot of people who are just about surviving financially with low-rate mortgages are going to have to sell or even default. Look at MN to see how close people are to the limit of their finances at historically tiny interest rates. If you borrow to the limit now, can you afford to keep paying if your monthly payments double or triple? What happens when the boiler needs replacing? Or the roof?

I'd urge you to wait. I had friends who got caught in the late 1980s/early 1990s madness and it was very, very painful. This may not be the top of the market, but it surely isn't the bottom.

en.m.wikipedia.org/wiki/Irish_property_bubble

Here’s what happened in Ireland in 2007. By 2010, Dublin prices had slid by more than 50%. Who is still claiming that the same thing couldn’t possibly happen here?

But what was it compared to ten years later? Short downfalls happen, they mostly tend to go up after that.

I'm talking about ten years later, not one year later. Surely the people that bought late eighties are pretty happy with their price increase now?

I thought lots of the UK outside the SE were in negative equity for years after 08

I bought late 80’s as said up thread.

39k then, worth 500k now…,

My inlaws paid 60k in the 80s, worth 2m now. But the point is it's not true for everyone.

My 500k flat added 200k in 2 yrs, the people who bought it didn't see anything like the gain in the next 5 yrs.

I was, for 5 years, then we sold for £2k more than we paid having spent £10k on home improvements. But it was better than renting and we used the equity as a 5% deposit on a 4 bed in 2013. We are still there, with only 10 (fixed rate) years left on the mortgage.

There really are places where prices haven't increased in a decade. My best friend lives in the North East and has just sold her 2010 new build flat for £15k less than she paid - well over 15%.

Yes, negative equity doesn't have to be a disaster. But the cheap house that now costs millions is not representative of the whole of the UK as you say.