To think that house prices will ever fall to affordable levels?

[MumNWLondon]

I saw this in the Daily Mail:

link

For those that know me, I have been a property bear (ie I think that house prices will fall) for a while now; I think its very sad that its no longer possible to buy an average family house for three times family income, and ever sadder that many bought in at the peak and now face negative equity in small properties and hence will not be able to easily move to a family home.

So am I being unreasonable to hope that house prices will decline to sensible levels and do you think its likely?

My house has been on the market for 5 months and has reduced by approx 13% so prices are dropping (its under 90K for 3 bed terrace near v good schools if anyone fancies living up north )

Why should buying a house be a "right?"

That is not intended to be inflammatory, I am interested in why people (no, not necessarily on this thread), think thus.

One things which seems to be pushing things up in our area (pocket of SE London) is the shortage of school places in the borough, thanks to the baby boom. People I know are starting to measure distances to "good schools" and to get nervous. As long as that is a factor, prices in this particular area probably aren't going to head south (although increased interest rates might have some effect). DH and I were shocked at how much our (rented) house seems to have secured in a sale. We're pretty bloody shocked at asking rents, too.

Other factors in this area are: snob value of the housing stock (though terraced, the houses are "pretty" and not flats); good transport to the right side of London for the City and Canary Wharf

oops. I had better stop now, as I seem to be being a bit bullish myself! (Tho' unwittingly)

Hully, I'm not sure I think it should be a right but there are reasons why I want to own a house. Mostly I think its the best way to ensure security for my family. Property prices always rise in the end so I won't lose any of my investment even if I'm not fussed on making money from it. It annoys me that people intent on making money from what should be homes not investment vehicles have artificially driven up house prices over the last two decades and priced a hell of a lot of people out of the bottom of the market.

Buying my own house means that my family aren't in danger of having to move every 6 months. Owning at retirement also means fewer outgoings, having to pay rent will be a big chunk out of my pension and knowing that if I have to go into residential care then I have assets that can be sold to pay it.

Buying a house isn't a right and isn't for everyone but the option/opportunity should be there, I'd still like to know what the hell happened to suddenly increase prices at the rate that they did between 1999 and 2004 ?

Yes I think the UK will get a crash. Its already happening in Ireland after all, prices down around 40% so far, with many saying another 30% to go. I'm really glad I held off buying in 2006.

But if mainly people want to own homes so that they can enjoy the same financial advantages as those that do own homes (which are undeniable), and conditions are changed so that they can do so, eg more houses built, then prices won't continue to rise and the new home owners won't enjoy those said benefits. Catch 22.

People always go on about a housing shortage and whilst I'm sure this is true for some areas, I see no evidence of it here. Loads for sale, lots of new housing being built, but they're not building the houses they've got permission for until they sell them. Our council doesn't have any empty property exemption for council tax (6 month reduction only) which I'm sure helps a little. But the media like to go on about the shortage which helps inflate the market.

I don't see buying a house as a right on the proviso that there is a decent alternative, council housing for those who really need it and a change in tenancy laws to allow people to have security of tenure.

People always go on about a housing shortage and whilst I'm sure this is true for some areas, I see no evidence of it here. Loads for sale, lots of new housing being built, but they're not building the houses they've got permission for until they sell them. Our council doesn't have any empty property exemption for council tax (6 month reduction only) which I'm sure helps a little. But the media like to go on about the shortage which helps inflate the market.

I don't see buying a house as a right on the proviso that there is a decent alternative, council housing for those who really need it and a change in tenancy laws to allow people to have security of tenure.

"I'd still like to know what the hell happened to suddenly increase prices at the rate that they did between 1999 and 2004"

Cheap credit and bandwagon.

Just read the daily wail article. I hate the way that all these articles talk about recovery and jeopardizing recovery. The housing market does not need to recover!

MuminMWLondon - we have sold thanks (at 10k above asking).

Partly the problem is with letting arrangements. As an awful lot of houses for let are owned by small scale btl landlords, any changes to tenancy arrangement to require longer terms / fixed rates etc would result in an awful lot of people leaving teh btl market. There would be a reduction in prices overall but more people would have to buy as the only real alternative would be social/ LA housing.

There probably does need to be some revision of the letting rules to encourage people to enter into longer term tenancies instead if the standard 6 months but both should be used.

The main reason we bought was because renting was too insecure for us as a family.

My dd has lived in 7 homes, she is nine. The house we are in now has been her home for almost 5 yrs. So for in the first 4 yrs of her life we had to move six times.

Every move was because the landlord had either sold due to financial hardship or because the landlord had put the rent up massively at the end of the first 6 month period.

Also, rents in our area are much higher than a mortgage.
We pay around £430 per month for our mortgage. If we rented the same property we would be paying £900-1100 per month.

If there were guaranteed longer lets and more realistic rent levels in this area I think we would have happily stayed as renters.

I don't think it's likely and I think anybody in a position to buy are barking mad not to just get on with it.

The catastrophic crash that was predicted never really happened even in the midst of all the banking woes.

There is serious short supply where we are(and plenty of other places) and always will be and the market never even blinked 6 months ago when we bought and sold.We still had to be pushy about getting viewings 1st and we only got the house we got because the estate agents were selling our house. I know several renters that just couldn't get viewings because they didn't have anything to sell in return. There was a queue for everything.

My sil has paid £1000s in rent due to waiting for the supposed crash,they're constantly worried about having to move and schools are a worry. She'll need to calculate the rent she's paid and the rise in price over the past 2 years she's spent waiting in any supposed crash that ever happens.

We have bought in the 2 school catchment areas we need and can stick it out for as long as we need in this house. Rent(in short supply too) for a similar house would be more than our mortgage so we've just got on with it.

Interestingly my dp works in the surveys industry(nationally),they're inundated at the moment and have more work than they had during all the previous housing fuss and hysteria.

I just think you have to stop reading all the scaremongering shite that hardly ever happens and get on with living your own life. As long as you buy a house you could stick it out in for as long as needs be and have a mortgage you can afford whatever happens you're pretty much covered.

EdgarAllenPoll - your figure of 92% of the total land in the UK is in agricultural use is wrong. In fact just 67.8% of the UK's land is used for agriculture.

I do not think house prices will ever fall back to the affordable levels OP describes (for the sorts of neighbourhoods that people want to live in).

I want house prices to fall, very much; we bought our house for a stupid amount of money and I still can't believe it's supposed to be worth that much.

Mind, I know someone who was caught out badly by the falls we've had already in last 3 years; a retired couple in a large house (handy for their many children and grandchildren). They decided to downsize and equity release right just before prices started to plummet. When their house didn't sell They got a bridging loan to buy the smaller property, thinking it was just a little correction and that they had so much equity to spare, anyway... but it didn't work like that: took 18 months to sell their big house. They were suposed to end up with loads of dosh and smaller house, but now have just enough to be financially secure but little to leave their kids .

Anyone I know who has bought in Ireland since 2006 is in 100k plus negative equity. Thats a hell of a lot of rent. I've been renting for a long time and have saved myself an absolute fortune, also if the economy here gets even worse, we can leaqve easily. There is no personal bankrupty really in Ireland, so if you lose your job and default you're completely fucked. In a year or two we'll get a nice 15 or 20 year mortgage on one salary, can't wait!

I think its unrealistic to want to buy a family home as your first property (not sure of your exact circumstances, op, so not getting at you here).

But I keep seeing this. "We want to buy a 3 bed semi and we have a joint income of £70,000 or whatever and we just can't afford it."

Well, no, the way it works and always has is that you start with a one bed flat or a share in a one bed flat, then a two bed flat, then maybe a two bed flat with a garden, then into a small two bed house ... etc etc.

The people who can afford family houses now have equity from their previous properties.

At who's expense though glastocat ? All very well you rubbing your hands with glee what about the family who've lost £100k by being in the wrong place at the wrong time ?
The prices should never have been allowed to run out of control as they have but as that decision has been made by the powers that be they should also be making damn sure people don't lose their homes/life savings.
No doubt that's not how the fixed free market works though

My parents bought a 3 bed detached on 3 times my dad's below average income in the 70's. People were able to buy a family home straight away in some areas but that's not the case now. Now you wouldn't be able to afford a house like that on a dual average income.

There's always going to be pain, either the people who get into negative equity or the people priced out the market.

I personally think in the long term a correction in housing prices will cause less pain

mamatomany, unfortunately many of my friends and family are in just that position, and I feel sorry for them. One friend got a 100% mortgage on a two bedroomed flat in 2006. We were also looking at houses at the same time, but when I sat down and ran the numbers I realised how crazy it was - we would have had to beggar ourselves over a thirty year mortgage to buy a very ordinary house. We ignored the choruses of people telling us how stupid we were not to 'get on the ladder' Anyway, we tried to talk sense into my friend but she went ahead. Her flat is now worth around half what she paid, not that anyone is buying apartments any more. So, yes I am bloody delighted that I'm not completely fucked financially, it was difficult to resist the homeowners telling us how we were turning down free money by not buying in the boom years. But I am sorry for the many people who listened to the lying government, bank officials and developers, lives have been utterly destroyed. But I do not see why I should pay for their mistakes, and if you can't afford to pay your mortgage you shouldn't keep your home, that's just silly. After all, who would pay for that? Its not as if there's a shortage of places to rent around here.

It's not Glastocat's fault this mess, at least not everyone will be screwed if house prices do crash.

I know what you mean bibbittyBH. I often think the same thing about some (some) wanna-be buyers with ridiculous expectations.

I don't think they will fall to the affordable levels they were at when we first bought in 1998. At that point we were fortunate enough to buy a 3 bed semi on 3 x DH's reasonable but not huge salary.

However I think prices will start to drop again later in the year as various economic factors kick in. It is difficult to see a clear picture as things vary so much from area to area. Here for example there were steep falls but we're now back to where we were in 2007.

A friend is trying to sell and had an offer of 20k over the ceiling price for her road which was also just over a stamp hold threshold. It amazed me when she told but sadly for her the people have withdrawn and are going to rent. I have a feeling she's going to regret her pricing in a couple of months and may well end up chasing the Market down.