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?

I disagree that it was such an obvious huge risk to people. There were many who really believed that when you sat down with the banks to discuss what you could afford, you were getting good advice. That turned out not to be true, but even the banks got it wrong. So I don't think you can blame individuals and I have a lot of sympathy for people stuck in negative equity.

And expat I don't understand your lack of compassion about people who might have made the wrong choices. People make lots of non-perfect choices (get pregnant accidentally, choose careers that don't pay well etc) and this is no different. I don't get upset about paying taxes to support families that make less than mine, why is this bad choice different than others? If we're going to be a caring society, and I think you've said that you believe in that, then why do we only care about one sort of person?

Lack of compassion?

It's using taxpayer money to effectively give someone an asset.

TOTALLY different ballgame from public services like education.

It's giving one person an asset (because they can't really afford to stay in the house) but not another. Just because that person made a poor financial mistake.

Well, we can say the same about many businesses.

Shall we bail all failing businesses out, too?

After all, they just made some poor decisions and they may have families, too.

I don't care that I've been priced out because I don't see it as a right to own one's own home.

What I'm more concerned with are tenant's rights. For everyone.

It's not a right to own or stay in a home when you can't afford a mortgage.

If you take out a loan, and you don't pay it back, the bank comes back to take its property.

So if we're going to take that approach to people who can't pay their mortgage and didn't get insurance to cover it during their hard times, then let's just bail everyone out who can't pay back a loan.

It's not giving one person an asset it's giving them a temporary lifeline and ensuring they don't lose everything they've worked for during their working lives so far.
They have 2 years to get their act together if they can't then they fall on their swords and rightly so
I agree people should have mortgage protection insurance but if you strip people of their assets it's only the big bad banks that win and the tax payer has to pick the pieces up anyway so why not try and avoid the social consequences of unemployment, depression, homelessness etc.

And we've been propping up business failing or otherwise for years in the form of tax credits, grants etc.

And most of these people aren't in massive huge houses either - these could be people in ex-council houses who are struggling. If they can stay in their homes and get their feet back under them then they'll have more money to pay in to the system for the rest of their lives (or need less to take out as pensioners). Plus with mortgage costs cheaper than renting, it doesn't seem that bad to me.

Ah no if they are in ex council houses and have had a 40% discount and still gotten in a mess they can fcuk right off.

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.

That's fair enough if you can afford to buy a one bed flat in your twenties and move up but doesn't help if you spend your 20s paying off student debt and saving for a deposit. Also that model assumes your house increases lots in value which is not a given any more.

mama no, not people who bought from the council but those of us who bought from them! (because you'd have to really be bad with money to get in trouble if you bought it direct with the council). All the ones in the area we used to live in had mostly changed hands. (We bought one in 2005, it was worth 60% more in 2007 but we sold in 2008 for 30% more than we paid and feel very lucky we moved when we did as prices fell further). It's the lower end of the market that fell around here too - because of the lack of first time buyers - and it's these starter homes (cheaper than some flats) that were bought by people with no deposits...

expat in some ways concils helping people into homeownership are taking a good long-term move - if you rent, it is for life. If you have a mortgage - it is for 25-35 years.

if you retire owning a house, you will never need housing benefit to be paid for you.

I would rather the council paid a mortgage for a family, than for their landlord.

expatinscotland is right to raise the bullshit surrounding tenancy. So far, we have had fairly good experiences (in fact, I stayed in my last landlady's place for 9 years, and saved a packet of money compared to what I would have paid for a mortgate - even assuming I could have got a mortgage, living on my wits as I did).

However, our recent experience with lettings has been nowhere near as positive. On our last move, we were shown all the shit EAs had on their books, which they hadn;t been able to shift, before we got to see anything decent. Then, when we agreed on a place, the landlords finally refused to sign the contract with 5 days to go before we were due to move in (and not long before the Christmas shutdown), and with an extremely thin excuse. Naturally, we were extremely pissed off. However, we ended up with another place in the New Year, and that had been empty for a while, so we got it "cheap" (but still 50% more than what we had been paying). Now the landlady has accepted an offer on this place, so we are looking for somewhere else to move. One local estate agent appears to have a very sick strategy of letting all its properties before they go on its website, so there is absolutely no transparency about the price something went on at, how long it has been on the market, and what similar properties have actually gone for. They use the appearance of scarcity to discipline would-be letters, pressure them into getting put on their mailing list, and then presumably feed them details of properties which "will go fast" - at £1,500-1,600/month. That is just sharp dealing, and it needs to be regulated.

Any other examples of regulations required?

(BTW, it's worth reading the Renter Girl blog for ideas...

the fact that renting is such a rip off and so insecure is a major reason why people overstretched themselves on a mortgage.

that should be the first priority towards fixing things, IMO.

because more and more people are going to have to rent, particularly now with university fees and college fees meaning more and more people have a lot of debt.

and with the cuts the government is bringing in.

Hi, all. Re-reading this, is does sounds as thought I was either whining or in desperate straits. For the records, we could afford the inflated rates theya re charging, but don't bloody want to, especially since we think those prices are out of line and we can get something for less. It is extraordinary, though, how inefficient our "markets" are - and what measures exist for keeping them inefficient. A poster on MN the other day introduced me to Property Bee (a Mozilla Thunderbird add-on, which allows you to track price and time on market, on primelocation, rightmove, etc.). However, the strategy I outlined in my post above just short-circuits any Property Bee-style attempt to bring transparency to the market.

Oh, damn. Too much wine.

"for the record" (not records)
"they" (not theya)

Apologies, and again, well said, expatinscotland.

Where's BeenBeta, by the way? He seems to love attacking economic short circuits and bad behaviour!

My landlord had our house up for sale before we rented it. Even at current mortgege rates and assuming a reasonable sum for insurance and repair costs each month i am still saving money by renting. I have a fixed tem tenenacy so he cannot kick me out for 2 years.

My landlord would have to drop his asking price by 30% to make it worthwhle me buying this house. In fact, 30% is about what I think the market needs to drop to make houses fair value across the country. The value of houses has dropped 40% in Ireland. It is not beyond the bounds of possibiliy it will happen in the UK.

WingedVictory - that was a genuine x-post by the way.

Not an answer to your call.

I agree that there's something wrong with the rental market in the UK - but it is definitely cheaper to own up where I live. Houses we looked at buying were also up for rent at monthly costs that were equivalent to at least a 100% mortgage. (Plus after 25 years you own your own home and as time goes on your mortage shouldn't increase with inflation like rent will). I really don't understand why rental costs are so high, it's not true in other countries (did my PhD in Vancouver where renting is less than half the cost of a mortgage). If rent was more affordable, to represent the fact that you are not getting a permanent stake in the house, things would be much fairer.

abdnhiker - you need to take account of repair, maintaining and insuring the house though. Add those costs on top of the mortgege and renting really is still cheaper than a mortgage.

Also, you never do own a house on a 100% mortgage unless you also pay off capital as well as the interest.

Don't forget the Rent Acts and the period before some of you were born where rented property could not be had for love nor money because landlords could never evict a tenant and rents were very very low and could passed down the family. That regulation totally failed and since assured shortholds came in in the last 25 years property has been available to rent again - it has made a massive difference to people to have that affordability. If you bring in regulation then you would also need the state really to be the landlord and we tax payers to subsidise the low rents.

Interseting comparison in 1984 bought my first place. The radio of its cost today to the equivalent salary I had then to those salaries now is very similar except interset rates are not the 12% or whatever I was paying around those times and tax rates are much lower. IT is not always much much harder. In those days it was hard for anyoen to lend to you too and you had to have saved for years with a lender to show commitment and even then they would often not lend although by 84 it was getting easier. 1970s property crash was pretty spectacular too but from memory I think that was a lot of commercial property too.

I wish prices would start going up again! Our house was on the market 3 years ago for £210k (which was ridiculous considering it is only a 2 bed terrace) as that was the going rate at the time. The housing market collapsed just a month after we put it on, so after a couple of years we took it off again. Had to put it back on market 2 weeks ago as we are building a house near family and dd is starting school there in Sept so need to have moved by then. It is now on at £115k which is pretty reasonable considering it is in good location etc but haven't even had any viewers. Getting pretty stressed about it and articles like that in the DM only make it worse.

I think by this time next year they will be down 10 - 15% at least.

Yes, its much cheaper for us to rent than buy but our money is in the bank and we get taxed on the interest which reduces the amount that goes towards the rent.

I don't think everyone necessarily has a right to buy, but I do think that average family houses should be worth roughly 3-4x average local family salaries. I do think that people with reasonable salaries should not be priced out.

Starter flats that would have sold for £60k in 1996 since 2004 have sold for £250k.

Prices went up because of easy & cheap credit.

" WingedVictory - that was a genuine x-post by the way. Not an answer to your call. "

Right. Bet you keep hoping for The MN Thread Call...

Aren't we all?

In commenting on "up where we live", abdnhiker raises a good point about whether we can actually make any generalisations, given how varied the UK is. That's a nuisance for anyone trying to work out the best way to spend his or her money, though, as it's not just one market, and so it's extremely opaque, leaving most of us at a massive disadvantage...

MumNWLondon - I have to disagree that 'the way it works and always has' is that someone would start with a one-bed flat and only have 3 or 4 moves work their way up to a 3-bed semi.

Maybe that was the case in London, but for instance my parents married in the 60s in their early/mid twenties, he was a junior civil servant/clerk (no degree), she was not working, they were able to by a 3 bed semi immediately and this was the norm amongst their friends. My DH and me bought our 1st home (3 bed terrace) in the early nineties. We were late twenties and both working, but in low paid jobs. This was in the Midlands.

It SHOULD be the norm to be able to have a family home whilst you are still optimal age to have a family.

Look what happened in the 90s and it will happen again. Don't buy. Sit and wait because outside London those prices will come down-houses are not worth what they are priced at and if you are patient- why pay 50K more now for something that will be on the market for 50 K less in 2 years time?