all right all those predicting a crash, how about today's headline "houses to cost 10x salary"?

[RanToTheHills]

Discuss.
What do you reckon then?

Having followed some of the house price threads on here, was interested to see today's headline. It fits in wiht my view that although house prices are inflated, a a dire shortage of housing will continue to drive up prices in hte medium/long-term.

Could do wiht the reassurance as about to take on a huge mortgage!

I live in Devon and moved back here even though wages are low, to get back to the countryside-that is the benefit that keeps us here. my husband works outside the county as we simply can't survive on a local wage he travels away and back for 1-3 weeks at time. We are now living in an extended family situation which I like and has benefited us as a family, we live with my mum who owns a house and have had other family members around for most of the time we have lived here, they have recently left, it can be a bit overcrowded at times though. Many parents around here are having to allow children to move back in after university or when they have children of their own as there is just no where to go. There is a major shortage of housing for rent in the private sector too. I know two people who moved recently and had a nightmare time finding anywhere just to rent, they both had to move from the old properties. You see planning permission granted all the time for holiday cottages/flats, its a shame some of these couldn't be residential as it would help.

Having big mortgage is no problem what ever the housing market does. If you buy at the peak and sell at the trough, provided you move to another house that one will be bought at the trough - so what's the problem?

All you need to worry about is whether you can still pay your mortgage if interest rates go up and/or your income goes down.

Unless we are talking about your first or final house purchase when of course it does make a difference

Perhaps the idea that everyone can own a house was only a temporary one, true for a brief period in history. I know many people whose parents (now aged around 75 - 80) who didn't buy until they were middle aged and already had families. People with relatively good jobs. This idea that you buy within a few years of leaving university may not be sustainable.

We sold our house last week and it is going for a ridiculous price.It has gone up 140k in 12 months and I don't think that is sustainable.We have been planning to rent but looked at a few in the last few days which seem so over priced and the agents where saying there has definitely been a cooling off A lot of economists are predicting further rate rises this year and banks are already tightening up their lending criteria so I think if you are comfortable with the payments and are looking for a home then buying is fine but the days of seeing it as a cashpot or pension could be over.

[noddyholder....are you in norfolk?]

I think I'm the best person to follow - always go contrary to my investment predictions and you can't go wrong..... we bought 2 buy to let flats in the early 90s I think it was and sold them at 33% less than we paid - that was during the period of negative equity etc. Not that it mattered as they were sold so we could buy the current house which then went up a lot anyway so having had property since 1983 it tends to even out. Interestingly my oldest child who had said at university she wouldn't want to buy until she married and was in her 30s has been looking at property supplements, talking about wanting to buy once she is in her first job etc.

I think the British just like the idea of owning their own place. People always do. Look at historically the issues we've had over peasants with plots of land they tilled, people turfed off the land in Scotland during the enclosures, the 1930s London Metroland building boom so people could buy their own homes. People want stability and certainty which is what you get with ownership. You might get it with some local authority tenancies and you used to have it with very low rent Rent Act tenancies but therefore there were few private landlords then prepared to rent so that didn't really work.

Today's FT says cost of average London home risen to nearly £350k. Rest of the country if £200k but that was always so. If you click on interactive map bit of www.ft.com/housepricemap it shows various prices.

Outside London they found slowing of inflation or stanation except NW and SW. Prices fell in the North, West Midland and Wales (this is based on Land Registry prices paid).

Agree about the contrary view Xenia. If you can see the bandwagon you've probably missed your chance as they say.

Noddy, I would be inclined to rent for 6 months or so and see what happens. Sounds like you've made a lot of money. Could be worthwhile putting the money in the bank as I doubt we've seen the last of interest rate rises.

There has been a lot of speculating driving these price increases. It's where the 'smart' money has been investing and others have followed, and people have been getting rich.

It was mentioned that cheap credit has played it's part - so true!! This is a boom in cheap credit with houses being the asset class.

Didn't the Beeny say it couldn't continue?

We are going to rent and put the money in savings until things cool down.The houses we viewed were rip offs if I'm honest and needed masses of work on top of high asking prices.We will rent until xmas and then think again.Agents also said for the first time in yrs monthly rentals are cheaper than mortgages!

Am I the ONLY one not prepared to stretch myself into oblivion for a house priced at about twice what it is actually worth? I see people talking about their huge mortgages and worrying about a possible crash and I think you are mad.

Yes, I would love to own a house. But why do people seem prepared to do anything to get one. Any time I talk to my in-laws I get the "renting is throwing money down the drain" line. Which I suppose in principle it is. But now when you would have to pay out about 70% of your monthly household income on a mortgage.

To me, this situation is not security. Which is surely why most people buy?

Houses are worth the price that people pay. They don't have a fixed value. So a house could be worth £250k today, £500k in 10 year's time or just £100k after a crash.

that is true nkf.Alls igns are pointing to a drop if not a crash.If interest rates hadn't been deliberately dropped too low in 2005 it would have been well underway by now.It is not the big mortgages alone which will cause the problem it is all the money people have taken out of their houses to do other things with etc that could push some into negative equity

In London the prices keep going up. I cant see a crash yet as supply doesnt meet demand. But do think interest rates will go up, but it seems to be very incremental.
Cant see how someone can afford x10 mortgage unless there are 2 incomes?
But mostly I dont see buying a house as a risk as if there is a crash you can just chose not to sell and ride it out as it were. The value of your house going up or down doesnt mean anything than unless you put it on the market If the mortgage is a risk, then you can offset that with a 5yr one (or am i just thinking shortterm and in for a shock - who knows?). Im no journalist so...
Except to boast about at dinner parties lol, but then that doesnt mean anything because you cant afford anything better unless you move location or country then its the job/sallary issue rears its head.
So all in all we're staying put and damn grateful we could just make it onto this crazy 'ladder' in the first place.
London house prices just sound like monopoly money at the moment - the estate agents add 20k to 50k on a valuation - and it goes.

With the last crash, many people couldn't ride it out because interest rates went so high it made their repayments impossible.

yes i admit NFK it is a 5 year plan only, with a 5 year fixed mortgage. God knows what happens after that. but we may be sick of `london by then

I recently saw figures for how much houses had sold for in my area. And they seemed less than the sort of asking prices one sees in the local papers. Totally unscientific of course but I'm wondering if people are selling as easily or for the sort of prices they would like to get.

ok this may be a silly question, probably is! as wasnt around for last crash. But if the house prices do plummet then wouldnt the interest rates be lowered to encourage the market to lift?
are the interest rates more likely to keep rising if supply over demand continues to push up the value?
I see how this can cause a crash, ie if the govt goes crazy with i rates. but if they dont then can a repeat of a crash be avoided?
god im rushing around and priobably talking bollox and did actualy an economics degree way back when so god knows whats happened to my brain!

there is a website called property snake which lists all the price reductions which is interesting.We saw a house around xmas which we liked it needed a bit of work and was 199k.I went to view it yesterday as it was back on at 259 and I assumed it had been renovated but no simply taken off and put back on again!

I love the fact that my 2 bed flat is worth well over 2x what I paid for it. But, I hate the fact that what it's worth won't go very far toward getting us into something larger in the same area.

FWIW, in my part of central London, many of the flats built/converted in the last 15 years are :

1. Owned by non-British citizens (my own building was marketed initially in Hong Kong aimed at people who wanted the security/investment of a property elsewhere due to the pending return of the city to the Chinese).
2. Purchased as rental properties for executives on relatively short London job assignments
3. Are London pied a terres for people who mainly live outide the city. It's the perfect 'lock and go' situation for flats that sit empty for periods of time.

I think only about 10 of the 52 flats in the block are occupied full time by the owners. It's certainly possible/likely that blocks like mine are typical and contribute to the price and shortage of affordable properties in London.

If interest rates keep rising buy to let just won't add up as mortgage payments will far exceed rental return.This is already happening actually as i can afford to rent places I could never buy.If this continues lots of buy to lets will be sold and the market will be flooded pushing prices down (hopefully)

Bettyboo - you need to ask someone with economics knowledge but I think braodly speaking (and contrary to popular belief) interest rates aren't jiggled purely to keep homeowners happy. They're a tool to control inflation. With the last crash, it was complicated because interest rates were pegged in line with (I think) the German ones. There was also a mad rush to buy because the government abolished joint MIRAS. It's a dim memory but it was very very unpleasant for many people.

I think there was also a crash but not a full scale recession in the 1970s. Some people argue that it's always boom and bust for house prices. Others claim that the highs and lows have been sorted by letting the Bank of England set interest rates.

I think the bank could see a crash/correction coming in 2005 and lowered rates then when really they should have risen as inflation was on the up.A lot of people took advantage of those low rates and got fixed deals at really good rates but these will be ending at the end of this year so people will then notice the rise.It is always a good time to buy though if you can afford to ride out these ups and downs and are looking for a home not an investment.

There was a story in the papers in the last few weeks about how under Prescott/Blair, there have been far fewer houses built than ever before. Planning permission has been mainly given to builders of flats - which has certainly meant that more residences were built. But, the problem is that, as flats, they were mainly smaller residences. The reduction of new build houses has made it even more expensive for families who want/need houses.

Thanks NFk i was just thinking that if a crash does occur that lowering interest rates could be too late if people have to move before it happens.
the bank of england seems to be safe on lifting the rates. Maybe this is a good way to go in general?..... be interested to see what peole think is a good way to deal with it.
Its interesting you say that i rates arent just for homeowners, which is a good point. It reminded me of the last election in Australia where a quite right wing govt got in with some dodgy policies but largely by offering attractive rates for mortgage owners. Lots of people voted for the right to keep their payments down. Or so my friends tell me (could be overly simplifing it i admit) but seems amazing politics has became so strongly aligned to homeownership rather than any ideological alliance. good to chat about this stuff has been a while, i miss it!