How far will house prices fall [volume 4]

[hyphen]

TheLordJohn said:

A blind faith in an ever rising market, is what gets a lot of people buying, I'd imagine.

Not just that, you still have to live somewhere. As London has a lot of new people, living at home with mum and dad isn't an option for many.

As a couple with own flat/house, you will probably pay £1.5k or so a month in rent, that is £18k a year!

So waiting for the market to rise or fall for 3 years and umming and ahhing, you could have lived in your own home and lessened any potential short term loss with that £54k+ now lining the landlords pocket.

[kingston12]

hyphen said:

TheLordJohn said:

A blind faith in an ever rising market, is what gets a lot of people buying, I'd imagine.

Not just that, you still have to live somewhere. As London has a lot of new people, living at home with mum and dad isn't an option for many.

As a couple with own flat/house, you will probably pay £1.5k or so a month in rent, that is £18k a year!

So waiting for the market to rise or fall for 3 years and umming and ahhing, you could have lived in your own home and lessened any potential short term loss with that £54k+ now lining the landlords pocket.

I think it is a combination of both - buying a home to live in is the main driver, but the fact that it has proved a fantastic investment in all but a couple of the last twenty years must certainly settle the nerves of anyone worried about committing.

The saving on rent is huge based on current interest rates. A £500k flat might cost £1,500 a month to rent, but the interest on a 2% mortgage is only about half that if you have a deposit.

[Guvernator]

That's one of the big issues in the UK. In a lot of overseas countries, renting is often significantly cheaper than buying. Here in the UK, renting or buying a property costs roughly the same a month, especially in London so as long as you can scrape together a 10% deposit and the stamp duty it's all good. If you then add in the bonus that buying a house means that in 25 years time you should end up with an asset that is worth a considerable amount and it's a bit of a no brainer.

I'm pretty sure I read somewhere that the UK has a very high percentage of home owners vs renters compared to a lot of other countries.

[ElectricSoup]

Talk of interest only mortgages is all well and good, but I've been looking in to those myself recently and there's a catch: you have to evidence how you're going to pay off the capital, and banks can not accept "I'll sell the house/flat at term" as evidence. You have to have other repayment vehicles in place, and those need to be watertight. Otherwise you won't get the mortgage.

If anyone in the mortgage business can disagree with me on this I'd be most grateful, as I'd like an interest only re-mortgage for my place but it seems impossible without some other capital/vehicle to cover the repayment sum.

[Guvernator]

Never really got the point of interest only mortgages myself. So you pay off the interest but still owe a stload which you then have to work out how to pay off. I can sort of see a use for it if you are a landlord and only interested in maximising your rental return but for everyone else, I really don't get it.

[p1stonhead]

ElectricSoup said:

Talk of interest only mortgages is all well and good, but I've been looking in to those myself recently and there's a catch: you have to evidence how you're going to pay off the capital, and banks can not accept "I'll sell the house/flat at term" as evidence. You have to have other repayment vehicles in place, and those need to be watertight. Otherwise you won't get the mortgage.

If anyone in the mortgage business can disagree with me on this I'd be most grateful, as I'd like an interest only re-mortgage for my place but it seems impossible without some other capital/vehicle to cover the repayment sum.

Hasn’t this always been the case? Lots of people took out endowments to cover such things.

Happy to be proven wrong but I can’t imagine ‘I’ll just sell the place’ would ever have worked. In theory you’re supposed to invest the difference between a capital and interest only mortgage so you have the money at the end to pay it off.

[TheLordJohn]

p1stonhead said:

Hasn’t this always been the case? Lots of people took out endowments to cover such things.

Happy to be proven wrong but I can’t imagine ‘I’ll just sell the place’ would ever have worked. In theory you’re supposed to invest the difference between a capital and interest only mortgage so you have the money at the end to pay it off.

Think they weren't too difficult to get up to the mid 2000's.
It is a lot more difficult to get interest only (none BTL) mortgage now.

[scenario8]

After the last global financial crisis on a macro level I can forgive retail banks demanding or expecting concurrent investments to repay the capital sum. It's a view shared by many.

On a micro level, however, I'm glad I've never been asked to show evidence of such with my IO loans. I expect if I tried to apply for a new mortgage today I'd be expected to.

Inner London prices, on the whole, are fantastical but many of these properties will have been owned for long periods and so purchased at prices with lower local earnings to prices ratios. More recent transactions will have been made by purchasers with higher relative earnings, by multiple parties, by those with large equity/deposits/gifts/windfalls/inheritances/other savings and at larger multiples. On the whole.

A couple of decades into resi sales and I am constantly surprised at just how many people have access to so much wealth and cash. I gave up trying to understand it years ago.

[kingston12]

Guvernator said:

That's one of the big issues in the UK. In a lot of overseas countries, renting is often significantly cheaper than buying. Here in the UK, renting or buying a property costs roughly the same a month, especially in London so as long as you can scrape together a 10% deposit and the stamp duty it's all good. If you then add in the bonus that buying a house means that in 25 years time you should end up with an asset that is worth a considerable amount and it's a bit of a no brainer.

I'm pretty sure I read somewhere that the UK has a very high percentage of home owners vs renters compared to a lot of other countries.

It always used to be the case that the UK had a much higher proportion of homeowners, but this has eroded over the last twenty years. It is still higher, just not like it was before and the trajectory is still downwards.

Everyone seems to want to get on the housing ladder, but it is impossible for an increasing number of people. It is fine for people earning a good wage in London (even with the high prices), but there are many more people on less who are locked out.

Low interest rates are the only reason it is cheaper to buy than rent. In my area, house prices have gone up five times between 1997 and 2017, rent costs have barely doubled in the same period.

To rent a flat would have cost £750 a month then, £1,500 now. To buy the same flat would have been £100k then (£500 a month interest at 6%), £500k now (£833 a month interest at 2%), so in that way it has become more favourable to own rather than rent.

Of course, paying back £500k over 25 years is harder than paying back just £100k, but that is what 30-35 year and inter-generational mortgages are for...

[kingston12]

p1stonhead said:

Hasn’t this always been the case? Lots of people took out endowments to cover such things.

Happy to be proven wrong but I can’t imagine ‘I’ll just sell the place’ would ever have worked. In theory you’re supposed to invest the difference between a capital and interest only mortgage so you have the money at the end to pay it off.

I can't remember if I was asked the question at all when I last took out a mortgage, but it was an IO mortgage which I just built up savings in a separate account to pay off. The bank had no access to that account.

That was a while ago now though, so it has probably all changed.

[turbobloke]

kingston12 said:

p1stonhead said:

Hasn’t this always been the case? Lots of people took out endowments to cover such things.

Happy to be proven wrong but I can’t imagine ‘I’ll just sell the place’ would ever have worked. In theory you’re supposed to invest the difference between a capital and interest only mortgage so you have the money at the end to pay it off.

I can't remember if I was asked the question at all when I last took out a mortgage, but it was an IO mortgage which I just built up savings in a separate account to pay off. The bank had no access to that account.

That was a while ago now though, so it has probably all changed.

These days, it appears that banks think they can discern what customers can afford whatever the type of product, if that's not the case then appearances certainly are deceptive.

[Rovinghawk]

kingston12 said:

£70-80k salary isn't uncommon - borrow 5 times that and a large-ish deposit from parents/savings puts you well within reach of the ex-council flats that you are talking about. Interest payment on £400k at 2% is under £700 a month. That is so easily affordable

The good stuff is only really affordable by couples or those on much higher salaries.

So around £500k won't get you anything good. I know why I don't choose to live down there.

[hyphen]

Guvernator said:

I'm pretty sure I read somewhere that the UK has a very high percentage of home owners vs renters compared to a lot of other countries.

Apples and Oranges.

Other countries cultures are different. Legal protection and general rights of renters in 'mainly rent' European countries for example are stronger, also in some of these countries property price increase annually are very low, and they have state insurance if you lose your job to cover you for couple of years so less necessary to own.

Edited by hyphen on Thursday 21st September 17:16

[Thankyou4calling]

Rovinghawk said:

So around £500k won't get you anything good. I know why I don't choose to live down there.

500k is pretty much entry level in Kingston. Yes there are places for less but not many decent ones.

[scenario8]

Rovinghawk said:

kingston12 said:

£70-80k salary isn't uncommon - borrow 5 times that and a large-ish deposit from parents/savings puts you well within reach of the ex-council flats that you are talking about. Interest payment on £400k at 2% is under £700 a month. That is so easily affordable

The good stuff is only really affordable by couples or those on much higher salaries.

So around £500k won't get you anything good. I know why I don't choose to live down there.

I hope this thread doesn't derail yet again into another dire discussion about how loathesome London is. Lord knows that's happened several times before and also in many other threads in NP&E. For what it's worth half a million will still offer a huge number of options within the M25 many/most people would consider "good". Admittedly few of those will be in zones 1 or 2 or provide paddocks and/or sea views that some non Londoners might consider essential.

[Rovinghawk]

scenario8 said:

I hope this thread doesn't derail yet again into another dire discussion about how loathesome London is.

We could derail the topic into a discussion on UK house prices rather than being localised to London & its immediate surroundings.

[scenario8]

I'm happy to read anything new on UK house price movements. I might even contribute if something interesting comes up or if the discussion moves on to something about which I have some knowledge.

Anyone? Any news today?

[hyphen]

News? ok.


Isle of Wight council borrowing £100m to build commercial property.

"The bulk of the £100 million will be invested in low risk industrial, office and retail properties offering a steady return, while up to 30 per cent will be spent on higher risk properties such as pubs, hotels, student accommodation and healthcare facilities. "

http://www.iwcp.co.uk/news/news/100m-property-plan...

Buy in Bury before you get prices out
http://www.manchestereveningnews.co.uk/news/proper...

[okgo]

Chicken Chaser said:

The london and up-and-coming inner city prices are ridiculously obscene, and I'm amazed that anyone would actually consider buying. Market value clearly thinks otherwise. There's either so many people willing to break themselves over owning a (very small) home in a desirable area or I really have underestimated what people in London earn on average. I'm quite a bit above the national average and I wouldn't dream of spending the kind of money on these old council flats that theyre fetching. I'll stick to living up North where the air is cleaner and the prices are far far lower!

You're probably under-estimating the salaries, hugely.

[p1stonhead]

okgo said:

Chicken Chaser said:

The london and up-and-coming inner city prices are ridiculously obscene, and I'm amazed that anyone would actually consider buying. Market value clearly thinks otherwise. There's either so many people willing to break themselves over owning a (very small) home in a desirable area or I really have underestimated what people in London earn on average. I'm quite a bit above the national average and I wouldn't dream of spending the kind of money on these old council flats that theyre fetching. I'll stick to living up North where the air is cleaner and the prices are far far lower!

You're probably under-estimating the salaries, hugely.

I know loads of couples (I say loads, probably 4 or 5) on closer to £100k than £50k each. Gives a lot of buying power when combined x 5.