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??

That is a good point RCheshire. I think we'd lose out a bit on interest on savings due to being higher rate taxpayers, but there is stuff we could do.

The other point is that at least short term, we'd be happy to rent somewhere rougher/smaller to save our money for buying somewhere nicer. If we didn't have a kid, frankly we'd look at house shares. Our actual plan at the moment is to keep a good eye on the completion prices while the sale of our flat progresses.

I think that by being a good buyer who therefore gets a reasonable deal, I'd hope to offset some of the potential loss of a downturn, but those deals aren't easy to come by.

What I find tough is the way that the London market almost forces one to speculate and really doesn't even necessarily reward prudence.

Getting £1k per month on a £400k deposit means tying it up for a year to get that sort of rate, plus you pay tax on the interest so it's not quite that simple.

Many people are in crazyhead's situation, in that they simply want somewhere to buy. No-one really knows what the market is going to do and if you're looking for a longish term home it becomes less important anyway.

I'm with thomasbodley - stagnation for the rest of this year at least.

I suppose that at least in London, the short supply and robust economy does at least hopefully limit the damage a bit. Two poor friends of mine bought in pre-crash Dublin. Neither of them was doing anything more than buying a home and trying to be sensible

fresh, you can get 3.17 on an instant access account (Natwest) which is ~£840pcm interest after the auto-deduction of lower rate tax. You can get over £1000 if willing to lock in and/or the funds are in ISAs.

Every city, town, village and even road is it's own micro market to a degree, and I wouldn't pretend to have a decent view on London. In my area I expect small falls long term (bar some major surprise events); as a national picture I expect stagnation.

Agree that looking for a long-term 'home' may well outweigh the financials anyway - we're looking ourselves, but there are too many pie in the sky asking prices (e.g. 20% over the highest sale ever recorded in the road etc) which makes it tricky some of the time to feel like you stand a chance of not being taken for a mug.

PS. Not only London with comedy prices - this 3 bed bungalow is local to me.

www.rightmove.co.uk/property-for-sale/property-33643117.html

I'm hoping for falls tbh
We want to stay in the same area but can't afford to move to a bigger place - the jump is too big

RCheshire could you link to that account? Can't find it on the natwest website and would love to put some cash in there!

Crazyhead Get on with your life. To repeat the old City saying, "The market can stay irrational longer than you can stay solvent."

I wish people would accept that you can't win on every aspect and transaction in life. You have a child and a home you own. If you can afford a house or even a large flat in North London, you're almost certainly in the top 5% of taxpaying households.

You're already a winner in life's lottery by the standards of 99% of this planet's population. Does it really matter if your house is worth 10% or 15% less in the years to come if it's given you shelter and stability and contentment?

fresh, sorry it was nationwide:

www.nationwide.co.uk/savings/mysaveonlineplus/landing-page.asp?cmpid=Aggregators_81

Balances over 25k, I withdrawal per year without impacting interest (which is ok if it's 'deposit money')

Or dropping from 3.17 to 3.15, but min. £1 deposit and allowing 4 withdrawals per year:
www.coventrybuildingsociety.co.uk/savings-and-investments/easy-access/online-saver/Online-Saver.aspx?CBSREF=OLS201

Or if needing unlimited withdrawals then 3.10:
www.ingdirect.co.uk/savings/variable_rate/default.asp

This is 3.20 but 120 days notice for a withdrawal which isn't much better than a year for me...
www.aldermore.co.uk/campaigns/120-day-notice-account/?mvid=79674716_256019713

...in which case you may as well get 3.60 and lock for a year
www.moneysupermarket.com/savings/pre-apply/cahoot/1-year-fixed-rate-bond-(issue-3)/11555/?ProductCode=SAVINGS002937201OnMaturity&ClickThroughUrl=http%3A%2F%2Fad-emea.doubleclick.net%2Fclk%3B244675789%3B68832764%3Bj&RowPosition=1&TableName=1%20Year%20Fixed%20rate%20Bonds%20Table&OriginatingUrl=http%3A%2F%2Fwww.moneysupermarket.com%2Fsavings%2Ffixed-rate-bonds%2F&fromReview=False&fromPreApply=True&enquiryId=0

thomas - that was a very level-headed post.

Thanks RCheshire, off to look at all those..

and I agree re thomasbodleys post. Maybe now that the mad years are over people will start thinking about property as a home rather than an investment, and move when their circumstances dictate. Ironically this might keep the market ticking over better than when everyone's waiting for the 'best' time to buy and sell.

Crazyhead It may be of interest that the Land Registry today announced the prices have fallen 0.6% since last month (15th month of year-on-year falls) and prices in London fell 1.8% - since last month . I'm very pessemistic on house prices but even I was shocked at that - especially since the LR data is lagged ie relates to March (before either the FTB stamp duty holiday ended or the £2m+ stamp duty increase). The last time London dropped so much in a single month was in 2008 when prices were in freefall. Ominous...

The housing market in the UK is very driven by sentiment. And unemployment cuts to tax credits and other benefits and increasing interest rates will all add to it. New things coming on here in the south east are definitely cheaper and older more expensive stock just sits there. The low bank of england rate will become less and less relevant over the next year.Mortgages are becoming harder to get again. I think they will fall gradually this year and then stall for years.

Another point to consider when weighing up buying v renting is the long term benefits. When buying the house will ultimately be paid for, meaning that hopefully post-retirement you will no longer be paying a mortgage. Whereas a renter will still be paying rent. My parents, parents in law and sister in law are all in this position - lucky them.

This is true in one sense, but there is always an opportunity cost, i.e. if your parents have paid off their house which is worth £800k, then if they sold their house that money would be earning ~£2000 per month (avg 3% interest; gross of tax).

Now you might say "well they have to live somewhere", but it may be that that they could live in a place costing £1000pcm in rent, or a place worth £400k giving them £1000 worth of additional interest income per month on the otehr 400k

Don't get my wrong, I'd like to have paid off my own place before I'm too old, but even once paid off there is always a 'cost' for living there.

I see what you are saying, but there are other non-financial considerations too. A renter will always be subject to the whims of the rental market. For example A tenant may have no option but move if the landlord needs/wants to sell.

Another point that occurs to me is that, in my parents' case, their small property (2bed bungalow) is valued at around £150K and, in the current climate, it is doubtful that that lump sum would return enough interest to pay the rent on a similar property in the area.

As an aside, my PILs bought their London property 35 years ago for £35K. It was valued a couple of months ago at £950K. Now that was a hell of an investment

Though also to be fair having a property you own can be a liability. In these straitened times I am sure that property will be the next big area the government sees fit to tax - let's face it - it's an illiquid asset that takes a long time to get shot of - and is where most of the UK's 'wealth' is locked up. The talk of a 'mansion tax' in the last budget is to me a pretty good indication that a skint government has property in its sights as a cash cow - lets face it tax income from virtually every other avenue is falling. Nice to see prices in London falling too - I don't live there, but the young folks struggling to survive there could do with some price falls to help them get some security of tenure. Renting with kids and the risk of a shit landlord is not fun.

SuperScribbler, I'm by no means saying people shouldn't buy (we're looking ourselves), but that there are financial considerations people often don't think to take into account.

Lots (most?) of the time the subjective desire to own, be able to decorate, worth putting effort into a garden, security of tenure etc, may well outweigh the financial equation anyway.

I think interest only should be scrapped

Interest only is being scrapped - lot of people are being forced (quite rightly, imo) to go onto repayment and it is no longer possible to get io unless you have a large deposit and can prove you have repayment vehicle.

Agree that a house is a home and not an investment, but you do have to look at what the market is doing and try to protect yourself - you may plan to stay in a house, but things can change and if you need to sell and find yourself in NE then you are really stuck.

Plus, who wants to overpay, even if it is for a home? You are working hard for that money!

You can still get IO with a large deposit and no repayment vehicle. Hair brained debt schemes keep prices high

Can you? Oh dear, I thought they were being phased out. I hate it when I read in the news that the problem for ftb is strict lending criteria - I am a priced out ftb and I want mortgage lending to be stricter because it's the only thing that will bring prices down to a sensible level.

FruitSaladIsNotPudding I agree - a don't see a new sofa, bathroom suite, car etc. as an investment but I would try my damnedest to get them as cheap as I can - who wouldn't?

And you often hear the justification: "but it's a forever home", however as you rightly say things change - relocation, divorce, death, illness, interest rates, ofsteds, neighbours etc. etc. The truth is no-one knows when they may have to sell and if they've rushed in and paid over the odds, then often these are the ones who will be stuck somewhere they don't want to live/can't afford or else have to take a large financial hit when selling.

Nationwide HPI down a spot more....

Will be interesting I came to the conclusion a while ago that the gov desperately wants static prices and to inflate away all our debt, yet there is no reason why prices should stay static........

I believe that it is better to pay off 100,000 at 10% than 200,000 at 5%