Are house prices going to go down in 2012?

[Deadsouls]

Hello,

As the title says, anyone know anything about these things. We live in West London, where prices on 3 bed houses have gone up by about £50,000 in 1 year, so prices seem high.

We think we are going to buy, a little out of our ideal area, because we can't afford our area. But it seems so crazy that prices are going up and up and up....so the dilemma we are in is that soon if prices do keep going up we won't be able to make the jump from flat to house (that is in the rough area we are in near DCs school).

OR are we buying at a peak and are prices going to go down...do we wait? Clueless about these matters, who can I ask, estate agent??

It is going to be disaster eventually.

Just bought a house in Bristol area, we bought it for £12,500 less than the previous owners bought it for in 2007. We know they spent almost £10,000 on the property during their time here as the kitchen and bathroom are both new (in warranty) as are the solid wooden floors throughout. House prices definitely don't seem to be getting higher here at the moment, many local sellers are putting their houses on lower than they might to ensure quick sales...

"RBS were arses". Evidently, seeing as they went bust.

Do you really think "disaster" Noddy? I'm thinking stagnation in London and satellite regions TBH.

The London economy is so different to that elsewhere, where I agree prices have tanked.

I know desirable areas of Manchester have fallen 25% since peak on actual sales, but the biggest actual falls I've personally seen in London (eg house selling for £640k where they regularly used to fetch £840k) are now back at peak and likely to remain so because of new infrastructure improving those areas.

I think disaster for individuals who borrowed to excess and unwisely Stagnation would also be good as it would eradicate the 'house as cashpoint' trend where people remortgaged at will to pay for extravagant lifestyles. Either way I hope my brother and his girlfriend can one day afford a home

I'm not sure it will be disaster as in massive price crash. The BoE will keep printing money and propping up the economy. They have no other option.

I spend a lot of time studying demographics and audience targets for my day job, and one of the things that concerns me are the number of large and expensive houses in the hands of war babies who are now approaching their 70s.

When this housing wealth goes on the market, it will do so all at once because of a demographic bulge, but if there's insufficient credit in the economy and we're all in hock to the banks for mortgages our salaries can no longer support, who's going to buy them?

The ban of england have indicated this week that becasue of inflation printing money and low IR are about to cease.

"low IR are about to cease"

They haven't said this at all. It will be into 2013 that they might start raising them.

2013 is fast approaching and many banks are starting to detach from the B of E base rates already.today

Banks are being told to get their balance books in order which is why several have already increased their base rates to attract savers as money won't be so available from the B of E. There are several v good ISAs at the moment and this has to be funded. I don't know why IR rising gets such a neg response. It is a GOOD thing. ATM around the world with our silly rates and talks of never ending bonds the UK is looking shaky

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I don't see interest rates shooting up. A gradual creep starting next year feels more likely. I don't think banks would still be offering cheap long-terms fixes if they felt there was any likelihood of the base rate jumping significantly.

For me personally a huge jump would be great and wuld delay me buying as we have a large amount in savings and currently rent. But I don't see it.

It doesn't really matter what IRs do wrt the BofE though banks are no longer using that as a bench mark. They base rates on LIBOR and that is rising. It won't be a huge leap overnight but could be steady to try and final dampen inflation.

Rcheshire
5 year fixed rate mortgages are running at 8 times base rate
that does not sound cheap to me .....

my old tracker is at under double base rate
(the banks like to quote base plus but that is misleading with base rate effectively zero)

For comparison London against outskirts - bought a place in SE London start of 2010 and sold start of 2012 - painted neutral top to bottom but did nothing else - price achieved up 14%.
Person on next (more desirable) road bought and sold roughly same time, did full scale renovation and made 45% on price achieved - probably spent up to 20% of initial purchase price on renovation.
Have another property in Kent, really just possible/just outside London commuting distance, bought a year ago - if selling, would probaby break even allowing for work done - but lots of others for sale and don't seem to be many buyers about there.

TalkinPeace2. Not in relation to current BOE base rates no. But when you buy a 5-10 yr fix you are looking beyond current BOE rates and considering long-term norms.

Bar those on IO the main 'pressure' expected to be placed on mortgage-holders is when base rates start to rise. There was a post earlier in this thread I think which asked some one if they could cope once mortgage rates have reached 7 or 8%.
Being able to fix for 7 years at 3.99 is very cheap...unless you expect base rates to remain where they are for that length of time.

but in the West I honestly cannot see base rates at over 2 % for the next ten years plus which makes double base a nice earner for the banks

then again they do not base their figures on UK base as all the lent money is recouped on the international money markets

which makes the 8 times differential even more offensive and usurous

The long term fixes either require a fairly hefty deposit or in a few cases they have been pulled.

Base rate long term average is around 5% I think

Which is where it should be heading again IMHO however the multiple would then fall

Agree a 7 year fix at that level looks excellent and only 30% deposit!!!

Agree with the demographics I have many friends who are crammed at the seams yet their parents live in 4 pr 5 bedroom houses which are of course empty, my saddest example was a friend who had her baby on a home ventilator in the living room overnight of a tiny attic flat whilst her single MIL lived in a 5 bed with huge garden just down the road

I havnt seen my friend for a while but she is often in my thoughts

Wasn't always like this my parents lived in a similar or bigger sized place than their parents once we got to about 10ish I'm sure

The long term average UK interest rate is 8%. I can't see us getting there anytime soon other than if QE does trigger off massive inflation ( and the 'wise' Mervyn King panics).

You can mock housepricecrash.com - but when everyone on here and in the mainstream media moans 'but noone saw this coming' well they predicted the credit crunch perfectly and the collapse of Northern Rock, Lehman Brothers and the Icelandic Banks - they're always ten steps ahead of the mainstream media and I find the site incredibly useful for financial planning and investments. They've saved me a packet by allowing me to pull money out of banks before they went tits up - so I'll always be grateful. Yes it's contrarian. Yes it's a rough place (no hugz) populated by some grumpy old buggers - but they are smart. I'd rather have smart and rude than cuddly and plain wrong.

Yes the 'houseblocking' going on at the moment (can't think of a nicer term for it, but you know what I mean - empty nesters living in huge houses, families crammed into tiny flats) makes me so sad. It's quite simply a product of the bubble of the last decade and the fact that benefits (the winter fuel payment) for older folk are not means tested, and actually help to keep people in houses they probably couldn't afford on their own - and prevent them downsizing to more suitable accomodation (i.e. without 4 spare bedrooms to heat!). Yes I know folk have got memories in those homes - but memories are portable.

And now we're back in recession. House prices have never been higher at the end of a recession than at the start. Does anyone honestly think that their house will rise in value in a recession?

So are we only seeing falls outside London?

It seems to be the case at the moment - which is exactly like the late 80s bust - which started off up north and which had everyone in London remarking that London was immune - cue a year or two later and London was underwater! Even London will run out of greater fools eventually... when the tide turns in the capital sentiment turns super quick.

As a potential house buyer (and flat seller) in London this year, I've read this thread with interest. I'm pretty anxious about the house market at the moment in north London, as prices seem very high compared to last year, but what I'm concerned about all these predictions is what does one actually do about it as a buyer?

The trouble is, there are just way too few family houses on the market, and I have a young child and we need a house. We want to buy near decent schools and there is a population bulge which means many people my age/my position will be trying to do the same.

I can also imagine that many people in their 70s will have to move at some stage from big houses - but not early enough for us, clearly.

To be honest, we COULD buy a big flat, but then we'd be looking at big costs of moving yet again relatively soon. Alternatively, rents on houses in the area I am looking in cost several thousand pounds a month - which doesn't take long to end up costing us in the way a loss might. I'd think very seriously about renting otherwise. Also, there aren't the places to put our money if we sold up first and rented.

The trouble is with this stuff about stagnation and falls, is it sort of isn't giving me a practical answer to what on earth to do! I am guessing that many people are in my exact situation....

Many people are in the same situation...

One thing to bear in mind when calculating the cost in rent, is the opportunity cost of missed interest on savings when you buy.

E.g. Let's you were going to buy a house for £800k vs renting the same house for £2500pcm. If buying you might put down a 400k deposit and take out a 400k mortgage. A £400k mortgage is costing you ~£2000pcm so buying looks £500 cheaper on a month by month basis.

However if renting, that £400k you would have used as a deposit is earning ~£1000 pcm in interest, so 2500pcm rent - £1000pcm savings interest means it's cheaper per month to rent than buy.

There are many other factors (both financial and emotional) that will determine the correct decision, but the above is one people often seem to miss.