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?

The 70s was 40 years ago.

I agree house prices are a nightmare at the moment, and all of us who are smugly sitting on our huge piles of unearned equity are just as worried as the non-owners because we have children who will presumably want somewhere to live one day.

But we aren't going back to the 70s any time soon so it is pointless thinking about it.

I live in a very shabby three bedroom terraced house in London which dh and I bought at ages 40 and 42. We had been on the property ladder for the previous 16 years, 10 of them in negative equity.

Not around here Properties that would have been out 'next step' when we bought our current home now have far too many zeros at the end of the figure!

So many of the homes are rented out to ex-pats and bought by people abroad (so they are in effect holiday flats, and empty for a lot of the time).

I am coming over all 'Scot-Watch' here!

I'm not suggesting it is glastocats fault but there's no need to sound quite so delighted at the prospect of some poor bugger losing everything they've worked for either.
I honestly do not think the property market is going to be allowed to crash, far too many vested interests in keeping it alive and well and growing.

i don't think we're going to see a material drop in house prices in the near future - whatever decline was coming has already happened.

some v odd comments on here - someone said they didn't care if their house halved in value as long as all other house prices did the same... unless you are mortgage free, that is a ridiculous statement to make as it would mean you would be stuck living in your house for the rest of the term? as would everyone else - cue lots of issues nationwide.

someone else quote japan as an example of being v built up but with house prices havng been falling for 20 years? the japanese housing market is so completely different from anything we understand here that this is a completley invalid example. generally they have been in recession and the value of land has been falling, but there is almost no market in second hand homes there - they don't understand the concept...

and what's this example of a flat being worth less than half what it was in 2006? where is that exactly? cannot believe that is a valid uk example. and this being smug for not buying in 2006? well =- just think of the money you've been wasting in rent - the vast majority of people who bought in 2006 are not in negative equity now.

I know the 70's was nearly 40 years ago but just wanted to dispute the assertion that it's always been like this.

Some of my school friends who didn't go to university bought a 2 bed semi in 2000 for less than 30k. It's worth nearly 3 times that now.

8 years ago the house we rent cost less than 50k, identical houses on the road now sell for 130k

If we'd been in a position to buy earlier we'd be hugely better off and it's nothing to do with working up the ladder, just time and luck

I've been looking at rental options but there doesn't seem to be much choice in terms of unfurnished lettings where we want to move to. Plus many of them say "no pets", though I will ask them anyway - we have one lazy cat who sleeps all day!
But it is immaterial until we sell our house.
I'm willing to suck it up and sell the place for enough to just cover the mortgage, but DH is thinking in terms of being able to pay off all the fees associated with the selling plus a deposit for a new house. We are looking for a 4 bed place as we looking at expanding our family and I am fed up of working in a corner in the dining room - I want my own office (I work from home).

But Bibbity, what if you can't afford to buy until you've already had children, are you supposed to move your children into a house share? Or just accept that you will never be able to afford to buy? (Which I pretty much have anyway) Or is the idea not to have children until you've moved up the ladder enough - what if you haven't managed to get onto the ladder at all until your thirties? (Not having a dig, a genuine question, because I don't understand how it is "supposed to" work)

Just had a very quick look on Rightmove, and the cheapest place to buy in our area is a bedsit in a shitty area for around £80,000.

When I was with XP, he was due to inherit a fairly large chunk of money, so we would have had a deposit, but with his wage and mine if I'd gone back to work, we still wouldn't have been able to get a mortgage even for a bedsit like this. His mum was obsessed though with him putting his inheritance into property etc.

gladders I'm in Ireland, so pretty much everyone who took out a mortgage in 2006 is deep in negative equity as prices have fallen by over 40% (unless they paid cash) I never said it was in the UK.

And I'm not gloating at all about the poor sods who are in huge negative equity, as I said many of my friends and family are in that situation. But I am bloody delighted that I'm not in that situation, because I wasn't daft enough to believe borrowing 400k to buy a very ordinary three bedroomed house was a good idea. Anyone that had enough sense to do a bit of financial research could see Ireland was at the top of a huge property bubble in 2006, if I did, I don't see how other's can deny it. But people just saw house prices soaring and wanted to grab some of the free money. Several of my friends have told me they thought me and my husband were completely insane not to buy in 2006, now they wish they had listened to us. So, I'm not gloating, just bloody relieved we missed the bullet, and sad that I am surrounded y many people whose lives are in ruinss now the bubble has well and truly burst.

House prices will fall when interest rates start to rise. To buy a flat/house in London, the income multiple is higher compared with 1987 say. But the interest rates are hugely lower (14.5% compared with 0.5%) which makes London actually more affordable now, than it has been in the past, if you have a mortgage.

Renting is no longer a cheaper option, so it makes sense to buy as young as you can and don't fret about paying an interest only morgage in the short term, and start chipping away at the capital amount once if becomes more comfortable to do so.

OK, I'll admit I don't understand how this works at all (hence asking). Say you take out a mortgage on a property for £250k. You have paid off £100k and have £150k remaining. There is a huge market crash and the house is now worth only £125k, less than you have remaining on the mortgage - this is negative equity, yes?

But assuming all other property has also halved in value, why can't you still sell your house for £125k, that money goes on the rest of the mortgage, leaving you £25k in debt but otherwise free to take on another mortgage for say £150k. (The £25k debt would presumably just be added on to this one - unless it doesn't work like that either)

You would still have had to pay off that £150k from the first mortgage so what difference does it make paying it on a different house?

And conversely, if you had a £250k mortgage with £150k remaining and all houses doubled in value, you still wouldn't be better off if you sold, because the value you would get back from the house would all be swallowed up in the value of a new house anyway.

I have no idea if this makes sense, sorry.

You need some equity to buy the new house. The bank aren't going to remortgage for 110% the value of the new house

Bertiebott, banks are unwilling to let you sell a house in negative equity as that would mean the deficit was unsecured debt. If you added it on to a subsequent mortgage you would owe more than 100% of the second house value, which is generally thought to be a very bad idea. Such ideas are being kicked around in Ireland at the moment though, such is the desperate state we are in, also inter-generational mortgages.

This thread has depressed me even more.
D
DH, DD and I are starting out wanting to buy our first property - and its absolute hell. We're being drained for every last bit of finances, energy and happiness we have - and tthats only when we look around at whats available, and realise we have poor, poor choices, if any.

In the end, I wonder if its worth it.

But whats the alternative? Live on rent and hand to mouth or live in a shoebox and still hand to mouth, but the shoebox belongs to you?

I don't think you can get 100% mortgages any more.
I think you would struggle to get anything more than 90% and looking on moneysupiermarket, typically banks seems to be only willing to lend 70% but who these days has more than 20K of savings to put on a deposit?

Seems to me is the home owners and FTBs who are paying the price of the mistakes of the rich bankers
They paid hard and loose the market, putting the prices up to ridiculous levels then cause the whole system to collapse - and then curtailed the ability of the people on the ground to borrow to purchase the inflated prices!

I totally agree that no-one has the right to buy a house, but with long council waiting lists and limited choice of rentals, some people have no other option.

This Daily Mail article is purely there to put pressure on the Government to not put up CTG, in a 'we're all doomed' type move.

However, it is all very well saying that they won't allow the market to crash but they may not have a choice. There is no money left to bail the banks out again (as they are all saying they desperately need), people are losing there jobs and there is only so long inflation will be allowed to run rampant before interest rates creep up.

House transactions are half what they were a few years ago and so average prices are massively erratic (due to such a small sample). The proportion of first time buyers is at it's lowest level ever and there is absolutely no way someone can save for a deposit when interest on your savings can't beat inflation.

I'm not saying prices are going to plummet but there is only so much government can do. If people haven't got the money then they haven't got the money.

You knows it.

If I didn't own a house right now, I would keep a very close eye on the market as I think that the new taxes on buy-to-let will have a very big impact on properties for one and two bedroom flats/houses.

Owners of buy-to-let will be taxed to the eyeballs and will have to sell, and my gut feeling is that within 6 months ish the market will be flodded with smaller size properties. I'd buy a small ish flat, live there for let's say, two years - wait until the market stabilises a bit - and then sell and try to go up the property ladder that way.

see www.citywire.co.uk/personal/-/blogs/money-blog/content.aspx?ID=402795

I am glad someone pointed out that inflation could lead to a relative fall in housing prices without prices actually decreasing. This would be a slow gradual adjustment that would be tough on those still looking to buy now, but would overall be the easiest and fairest adjustment.. fingers crossed (personally I have a 75% LTV mortgage on my forever house in NE Scotland where prices aren't as unreasonable as other places - I really feel for people in the London area. Here you can get a decent starter house (not flat!) in a good school district for £120-150K).

The banks have insurance, can't remember what it's called (indemnity rings a bell) which basically means if you sell the house for less than the mortgage the bank doesn't lose out, so they couldn't care less if you sell in negative equity or not, unless you are in arrears and then it becomes a case of sell before repossession but with the mortgage protection products which everyone should have in place along side the governments paying up to £200k in interest to those who've lost their jobs, nobody should be in that situation in the UK which is why the big crash is highly unlikely.

I bought my house a year ago.

I've been saying house prices will fall for years- didn't expect western economies to collapse however- but i still think that the average house for sale should be affordable on the average salary, or at least on the mean salary, otherwise there will eventually be no buyers. Buying and selling houses to each other doesn't make an economy, and houses have been bought with fairy money for ages- inheritance (based on inflated property prices), equity (based on inflated property prices), etc. It's a bubble, and one which has had a floor put under the crash by the government, and that can't carry on for ever. The financial problems aren't over- payback hasn't even really begun yet, we're still in intensive care- and i think house prices will go down.

I bought last year becasue I read that previous crashes have taken several years to bottom out, and I calculated that 5 years of rent would cost me £30,000- unlikely to leave me better off if I did wait for the market to pick up.

I think glastocat raises some valid points.

We're lifelong renters. We'll never be able to afford anything. Not a one-bed flat. Not a two-bed flat. Nada. Especially not now.

Why should we pay for others who made poor financial decisions?

People will say, 'Oh, then they will be homeless and put a strain on the council.'

No, they won't.

Because the councils already don't have enough housing and regularly shunt people off to private lets.

If they work, they private let unless very indigent.

Then, maybe, there will be some change in how private lets and tenancies are run in this country.

If more people have no option but to rent, then there will be increased pressure to end all the BS in tenancy here that cause so many to make unwise financial decisions to buy.

We all make decisions with the information available to us at the time expat, they weren't bad financial decisions motivated by greed in 90% of cases they were families wanting a roof over their heads and some stability in their lives.
The truth is if interest rates stay as they are there's no reason why the banks we have all bailed out shouldn't be passing on those savings to every homeowner and that needs addressing as a priority too, they can't shaft the savers and the borrowers and expect tax payers hand outs as well.

My parents just sold their house that they paid £60k for in 1999 for £190k 3 months ago. It sold in 6 days and in my area I know quite a few that have sold fast. I suppose it depends on where you live but I dont think they will go down.

Yes, and I understand that, mama. We are a family who wanted that stability, too. But like glasto, even the most basic run of the numbers could show up that it was taking a huge financial risk.

I don't see why the government/taxpayer should have to pay for that. I really don't.

I'm a renter, but there are others who are not and shouldn't have to pay, either.

So should the childless not pay for for children that can't be afforded by their parents too ?
I pay for state education for plenty of other peoples children and don't use it myself, there are lots of examples we could band around aren't there ?
But anyone getting their mortgage paid for them would be entitled to their rent paid too so it's as long as it's short and if it means the buy to let brigade that have priced the likes of you out of the market don't get their pockets lined I'd have thought you'd be all for that ?