Is it a Good Time to Buy a House?
Discussion
CaptainSensib1e said:
Over the long-term wage inflation will lead to 'general' inflation as you put it, or price inflation as its more commonly known. If companies are having to pay workers more then they will have to put up the prices of their goods and services to compensate. What causes inflation is irrelevant to this discussion, its the fact there is inflation as its impact that's important.
But there is very little wage inflation at present, so it is very relevant.This really isn’t about crashes and good times to buy anymore.
House prices and mortgages are as realistic as they have been in a very long time.
The world is in recession and ultimately the financial state of things is now the norm. I don’t think its the bottom its just in the last 10+ years we have been sat on a balloon of wealth created by recycled debt. It’s been a false economy. All we are seeing now is the honest truth of the true value of houses. I do not see houses bouncing up in value. If they do it will be used by banks and governments as a good place to recover their debts. Thus I can see higher interest rates and taxes introduced if they do start to go up. The only thing that obscures the picture is the tax incentives of BTL. This seems to be the painful stake in the back of the housing market that adversely is keeping it up. The only reason the government isn’t taxing this sector is they are scared it would cause a bigger property crash.
My advice. You only live once. If you want a nicer quality of life and you believe a bigger house will give you it - then go for it. This really isn’t about making lots of money out of property anymore. Its about homes and living. Thank goodness!
House prices and mortgages are as realistic as they have been in a very long time.
The world is in recession and ultimately the financial state of things is now the norm. I don’t think its the bottom its just in the last 10+ years we have been sat on a balloon of wealth created by recycled debt. It’s been a false economy. All we are seeing now is the honest truth of the true value of houses. I do not see houses bouncing up in value. If they do it will be used by banks and governments as a good place to recover their debts. Thus I can see higher interest rates and taxes introduced if they do start to go up. The only thing that obscures the picture is the tax incentives of BTL. This seems to be the painful stake in the back of the housing market that adversely is keeping it up. The only reason the government isn’t taxing this sector is they are scared it would cause a bigger property crash.
My advice. You only live once. If you want a nicer quality of life and you believe a bigger house will give you it - then go for it. This really isn’t about making lots of money out of property anymore. Its about homes and living. Thank goodness!
PearlGarden said:
This really isn’t about making lots of money out of property anymore. Its about homes and living. Thank goodness!
Nooo, what will happen to all those Home Buying\Renovating programs on telly now then? Think of the children!For what it's worth I think I agree with you but I think it will take a long time for the penny to drop for all the rest of the amateur "property tycoons" to see the light. I don't think it's entirely their fault though, the entire media industry and government have been shoving the "houses make you rich" mantra down our throats for over a decade now.
Derek Chevalier said:
PearlGarden said:
All we are seeing now is the honest truth of the true value of houses.
Please tell me you are on a wind upThe thing is BTL is now a working class investment and governments have a way of keeping working class people working. They are always looking at ways to screw us over. I am sure BTL investments are in their sights. I cant see them doing anything whilst house prices look shaky or on a downward trend, but if they were to start going up?
Buying a house is never going to be easy or cheap. There are some people who think they will go even lower, but you have to ask how low can they really go. Like I Implied I think they are being artificially being held up by BTLs
The fact people with savings do not get as good a return when savings are in banks and or investments and the opinion of such investments is that there is more of a risk than in houses.
Personally though, taking in to account when I brought my house, the average wage and the value it’s worth now. Salary multiples of 3.5 and its about the same as it was back in 96, when I would say prices were at a particularly low point. This is without taking in to account interest rates. This is in the South West and guess it could be a regional thing.
PearlGarden said:
No not really. I would be the first to talk the market down a few years ago, but not personally concerned about it anymore. Who knows? I can look at my personal experience and say no they will not drop much. Or I can look at what is keeping them up and think well there is a somewhat unfair advantage to BTL investments over other savings, which the government may decide to start looking at the taxing arrangements for.
The thing is BTL is now a working class investment and governments have a way of keeping working class people working. They are always looking at ways to screw us over. I am sure BTL investments are in their sights. I cant see them doing anything whilst house prices look shaky or on a downward trend, but if they were to start going up?
Buying a house is never going to be easy or cheap. There are some people who think they will go even lower, but you have to ask how low can they really go. Like I Implied I think they are being artificially being held up by BTLs
The fact people with savings do not get as good a return when savings are in banks and or investments and the opinion of such investments is that there is more of a risk than in houses.
Personally though, taking in to account when I brought my house, the average wage and the value it’s worth now. Salary multiples of 3.5 and its about the same as it was back in 96, when I would say prices were at a particularly low point. This is without taking in to account interest rates. This is in the South West and guess it could be a regional thing.
I don't think salary multiples are anything like 3.5x today.The thing is BTL is now a working class investment and governments have a way of keeping working class people working. They are always looking at ways to screw us over. I am sure BTL investments are in their sights. I cant see them doing anything whilst house prices look shaky or on a downward trend, but if they were to start going up?
Buying a house is never going to be easy or cheap. There are some people who think they will go even lower, but you have to ask how low can they really go. Like I Implied I think they are being artificially being held up by BTLs
The fact people with savings do not get as good a return when savings are in banks and or investments and the opinion of such investments is that there is more of a risk than in houses.
Personally though, taking in to account when I brought my house, the average wage and the value it’s worth now. Salary multiples of 3.5 and its about the same as it was back in 96, when I would say prices were at a particularly low point. This is without taking in to account interest rates. This is in the South West and guess it could be a regional thing.
Average wage for year ending April 2012 was £26.5k (taken from the ONS, )Link.
Current average house price (taken July as thats the one I found quickly), The average UK mix-adjusted house price in July (also from ONS, Linky 2012 was £234,000.... so 8.8x average salary.
So by that quick and dirty bit of maths, houses are 2.5x over-priced, or salaries are 40% of what they should be.
Edited by Pork on Friday 23 November 13:00
I'd have to agree with that, compared to average salaries\multiples, house prices at least in the SE are well overpriced and I say that as a current home owner. As stated before I personally don't think my house is worth the asking price and I'd hate to be a first time buyer in this market. A 30% deposit on an average house price of £230k house is roughly £75k which is what someone will have to come up with before there'd even be considered for a mortgage these days which is a big chunk of money to come up with. They then have to borrow another £150k on top of that to just get on the property ladder.
I'm not really sure why they have gone up so high or what is keeping them at this rate, supply and demand in the boom period accounts for some of it as everyone wanted to buy but with prices so high and mortgages so hard to get these days, surely the demand would have cooled off which should have led to a drop in prices?
I'm not really sure why they have gone up so high or what is keeping them at this rate, supply and demand in the boom period accounts for some of it as everyone wanted to buy but with prices so high and mortgages so hard to get these days, surely the demand would have cooled off which should have led to a drop in prices?
Guvernator said:
£75k which is what someone will have to come up with before there'd even be considered for a mortgage these days which is a big chunk of money to come up with.
I reckon quite a few singles and definitely couples who could save that up in a few years. With help from mum and dad probably a lot more can do it. I suspect many don't have the foresight and/or are determined enough to do it. I saved up for my first home and had to give up toys for it, so those who don't do the same don't have that much sympathy from me. It's tough but that's life. Agreed though, if you have a low paid job and no inheritance then agree it's going to be nigh on impossible.Guvernator said:
I'm not really sure why they have gone up so high or what is keeping them at this rate
"I'm looking at the man in the mirror". As long as you and others consider buying more expensive property and paying those prices in the expensive areas you have the answer. Others will blame the authorities for QE, the BTL owners for pricing FTBs out, the rich foreigners for buying out central London property and so on...
fido said:
Guvernator said:
£75k which is what someone will have to come up with before there'd even be considered for a mortgage these days which is a big chunk of money to come up with.
I reckon quite a few singles and definitely couples who could save that up in a few years. With help from mum and dad probably a lot more can do it. I suspect many don't have the foresight and/or are determined enough to do it. I saved up for my first home and had to give up toys for it, so those who don't do the same don't have that much sympathy from me. It's tough but that's life.Guvernator said:
I'm not really sure why they have gone up so high or what is keeping them at this rate, supply and demand in the boom period accounts for some of it as everyone wanted to buy but with prices so high and mortgages so hard to get these days, surely the demand would have cooled off which should have led to a drop in prices?
An average three-bed house cost £2,000 in 1952. In 2012 it costs £162,000. That’s an inflation of 8,000%Between 1995 and 2007 the UK population increased by 5%, the housing stock increased by 10% and house prices increased by 350%, meanwhile mortgage lending by banks increased by 630%.
What does that tell you? In my opinion, the increased lending is the significant driver in this. Funny, the beneficiaries are big bisiness, the mugs paying more for, quite literally, the exact same things are the public.
source
chris7676 said:
BTL is a business activity and as such it means: income = revenue - costs. Nothing unusual there. They are not 'tax breaks'.
Speculation above the removal of tax relief on debt:http://www.standard.co.uk/business/markets/anthony...
I will have to take back what I said about the price of property in my area. In comparison to 96 and working back they are, indeed, still too much.
IMO The basic reason why house prices increased so much was due to interest rates not following true inflation. As I understand it the cost of houses have not been included in the cost of living as far as inflation is calculated thus interest rates were not high enough in the boom years, which had several effects. Low interest rates made it cheaper to be in debt and do not reward the saver. Savers see BTL as attractive. People buying houses could afford more because the monthly payments were lower.
You can’t blame anyone for doing BTL. It is an attractive investment, but its obscuring prices. The thing that’s keeping houses where they are are the cost to banks and the government and ultimately the taxpayer should they go pop. They all know it and that’s why Mortgages need much bigger deposits.
BTL is a business that gets far too many tax breaks for so-called business that exports nothing, which doesn’t benefit the country as a hole. Id much prefers to see manufacturing that exports getting some better tax breaks. That way we get some real wealth back in to the country. The pound goes up and we don’t have to drive round in mundane Korean cars.
I am a little too old to remember, but I believe the last housing crash was due to some taxing change to do with Nigela Lawson’s dad. Sure some of the older boys will now what I am on about.
IMO The basic reason why house prices increased so much was due to interest rates not following true inflation. As I understand it the cost of houses have not been included in the cost of living as far as inflation is calculated thus interest rates were not high enough in the boom years, which had several effects. Low interest rates made it cheaper to be in debt and do not reward the saver. Savers see BTL as attractive. People buying houses could afford more because the monthly payments were lower.
You can’t blame anyone for doing BTL. It is an attractive investment, but its obscuring prices. The thing that’s keeping houses where they are are the cost to banks and the government and ultimately the taxpayer should they go pop. They all know it and that’s why Mortgages need much bigger deposits.
BTL is a business that gets far too many tax breaks for so-called business that exports nothing, which doesn’t benefit the country as a hole. Id much prefers to see manufacturing that exports getting some better tax breaks. That way we get some real wealth back in to the country. The pound goes up and we don’t have to drive round in mundane Korean cars.
I am a little too old to remember, but I believe the last housing crash was due to some taxing change to do with Nigela Lawson’s dad. Sure some of the older boys will now what I am on about.
Edited by PearlGarden on Friday 23 November 14:37
Pork said:
An average three-bed house cost £2,000 in 1952. In 2012 it costs £162,000. That’s an inflation of 8,000%
Between 1995 and 2007 the UK population increased by 5%, the housing stock increased by 10% and house prices increased by 350%, meanwhile mortgage lending by banks increased by 630%.
What does that tell you? In my opinion, the increased lending is the significant driver in this. Funny, the beneficiaries are big bisiness, the mugs paying more for, quite literally, the exact same things are the public.
source
Yep, I don't like to get all tin-foil hat but sometimes when you are presented with cold hard facts like that, it's very difficult not to believe that house prices are being manipulated in some way and it's not for the benefit of the general house buying public.Between 1995 and 2007 the UK population increased by 5%, the housing stock increased by 10% and house prices increased by 350%, meanwhile mortgage lending by banks increased by 630%.
What does that tell you? In my opinion, the increased lending is the significant driver in this. Funny, the beneficiaries are big bisiness, the mugs paying more for, quite literally, the exact same things are the public.
source
PearlGarden said:
As I understand it the cost of houses have not been included in the cost of living as far as inflation is calculated thus interest rates were not high enough in the boom years, which had several effects. Low interest rates made it cheaper to be in debt and do not reward the saver. Savers see BTL as attractive. People buying houses could afford more because the monthly payments were lower.
Gordon Brown removed mortgage repayments from CPI (or was it RPI - one or the other) to, supposedly, bring the UK in-line with other countries. What it was really for, IMO, was to show inflation as being lower than it was, so IRs could stay low....no more boom and bust. Trouble is, it happened at a time the housing market was already hugely overheated.
I don't think he gets even a fraction of the 'credit' he deserves for where we are today.
I guess part of the problem is people rate you on your home and where you live. It’s an aspirational thing. You didn’t need to be in a great job to get a great big mortgage. I remember my wife seeing a financial adviser back in 2004 to see if we could get a more expensive home and was totally shocked by the amount of money available to us. It started to make sense as to why so many of my friends, family colleagues were looking down on us for not living in a bigger house and why they thought my wife and I were in crap jobs. That’s why I am now of the opinion if it truly makes someone happy to be living in a bigger house then go for it, but do it for yourself and not what others might think.
Financially I don’t know the best time to buy. Normally when everyone else is telling you not to, which is what it was like for me back in 96. As for the experts not knowing when, well, there are no experts only people trying to talk up and down the market for their own benefit.
Financially I don’t know the best time to buy. Normally when everyone else is telling you not to, which is what it was like for me back in 96. As for the experts not knowing when, well, there are no experts only people trying to talk up and down the market for their own benefit.
Pork said:
I don't think he gets even a fraction of the 'credit' he deserves for where we are today.
This ^^^^I really do believe that much of the blame for the state the UK economy is in today can be placed squarely at Gordon's feet. His "no more boom and bust" mantra meant the economy which is usually pretty good at self regulating itself went into overdrive as he basically removed the fail-safes. However he failed to consider the long term effects of this and the further it went up, well the further you have to fall back down again.
Add to that several other brilliant strategies like selling most of the UK's gold surplus at one of the lowest points for decades, only for them to start shooting back up again and overspending massively so that we now have a massive deficit to live with. I truly believe he should be put on trial for his incompetent handling of the UK economy. Phew glad I got that off my chest.
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