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DimPrawn
5th May 2006, 09:57
http://newsimg.bbc.co.uk/media/images/41633000/gif/_41633742_house_prices_may06_203.gif

If that trend continues then properties will end the year around 13% more expensive than they started.

Where's the crash?

eternalnomad
5th May 2006, 10:22
http://newsimg.bbc.co.uk/media/images/41633000/gif/_41633742_house_prices_may06_203.gif

If that trend continues then properties will end the year around 13% more expensive than they started.

Where's the crash?

there is a high probability that sterling interest rates will have to rise in the medium term.

Higher rates could a 'tipping point' and precipitate a major downturn in the property market.

janey
5th May 2006, 10:24
there is a high probability that sterling interest rates will have to rise in the medium term.

Higher rates could a 'tipping point' and precipitate a major downturn in the property market.

so I shouldn't be looking to buy any time soon then?!

hasn't a proces crash been predicted for years now and prices just keep going up? The only thing that has happened is a slight leveling out in some areas

eternalnomad
5th May 2006, 10:32
so I shouldn't be looking to buy any time soon then?!

hasn't a proces crash been predicted for years now and prices just keep going up? The only thing that has happened is a slight leveling out in some areas


Janey,

you have to do what you feel is right in your own personal circumstances.

For some people, buying even at these stupid prices could make some sense.

Just make sure you gather as many facts about the market and the economy as you can before signing that contract to buy.

Our own house is up for sale, if it ever sells (not a single "sniff" in 4 months) then we will move into rented property rather than buy on the grounds I know I can rent a property cheaper than the cost of the equivalent interest only mortgage.....and an interest only mortgage is just like paying rent to a bank.

janey
5th May 2006, 10:47
Janey,

you have to do what you feel is right in your own personal circumstances.

For some people, buying even at these stupid prices could make some sense.

Just make sure you gather as many facts about the market and the economy as you can before signing that contract to buy.

Our own house is up for sale, if it ever sells (not a single "sniff" in 4 months) then we will move into rented property rather than buy on the grounds I know I can rent a property cheaper than the cost of the equivalent interest only mortgage.....and an interest only mortgage is just like paying rent to a bank.

thanks for the advice, it's only a background thought at the moment. I'm thinking that in 6 montsh time MAYBE I'll consider it but my concern with cardiff is that there is SO much building work going on that I'm worried that the market is (or may become) somewhat saturated

Francko
5th May 2006, 11:15
.....and an interest only mortgage is just like paying rent to a bank.

With the difference that after 25 years you net the gain from the house minus the expenses, while with renting you are off on the street with nothing in your pockets. Unless the price in 25 years will be lower than now, but I kind of doubt that. Nevertheless, I think waiting 1-2 years could be a good option now perhaps, as in the short term and if interest rates rise then there might be a reduction in the prices.

ASB
5th May 2006, 11:15
thanks for the advice, it's only a background thought at the moment. I'm thinking that in 6 montsh time MAYBE I'll consider it but my concern with cardiff is that there is SO much building work going on that I'm worried that the market is (or may become) somewhat saturated

That is always a difficult one. In general there is little or no resale market until the development is completed. Buying off plan at initial development can reap great rewards, certainly in a rising market. It can also penalise you heavily in a stagnant or otherwsie flat market.

However if you keep deferring whos knows where you will be. One reason to buy - even if you beleive prices are over inflated and due for a fall - is because rent is dead money. In order to gain out of falling prices they would have to fall at a faster rate than the rent you are paying.

Market timing is notoriously difficult. For most people who need to buy a first property just do it when you can afford it is probably the best strategy. A second simultaneous property is a different matter. That is an investment. Your prime resident isn't.

Fleetwood
5th May 2006, 11:18
residence

BlasterBates
5th May 2006, 11:20
In my opinion only buy if it really is something you want to live in.

If you want to make money buy an investment rag read it and stick your money in shares or bonds, then rent. GAZPROM, for example will probably give you stacks more than some overpriced home. GAZPROM has the same resources as BP but its current market value is an eighth. Now that's what I call an opportunity.

...and as someone said above rent is dead money, but so are interest payments, only that tiny little bit that pays off the mortgage is invested. The other several hundred pounds go straight to the bank.

eg

Mortgage £600
approx £500 on interest and £100 in the house

or rent £500 and £100 in Gazprom

Now I know what I would choose.

ASB
5th May 2006, 11:31
residence

cudnt by rsed too udit eet. :talk:

DimPrawn
5th May 2006, 11:56
In my opinion only buy if it really is something you want to live in.

If you want to make money buy an investment rag read it and stick your money in shares or bonds, then rent. GAZPROM, for example will probably give you stacks more than some overpriced home. GAZPROM has the same resources as BP but its current market value is an eighth. Now that's what I call an opportunity.

...and as someone said above rent is dead money, but so are interest payments, only that tiny little bit that pays off the mortgage is invested. The other several hundred pounds go straight to the bank.

eg

Mortgage £600
approx £500 on interest and £100 in the house

or rent £500 and £100 in Gazprom

Now I know what I would choose.

But house prices are going up 13% per year, every year forever?

At this rate, I could be a millionaire in 5 years time.

eternalnomad
5th May 2006, 13:04
With the difference that after 25 years you net the gain from the house minus the expenses, while with renting you are off on the street with nothing in your pockets. Unless the price in 25 years will be lower than now, but I kind of doubt that. Nevertheless, I think waiting 1-2 years could be a good option now perhaps, as in the short term and if interest rates rise then there might be a reduction in the prices.

And in 25 years you better hope you have enough capital to pay the bank what you owe them (i.e. 100% of the capital you borrowed in the first place) ....otherwise you are off on the streets with nothing in your pockets

Pondlife
5th May 2006, 13:14
The difference between renting + shares vs property is the value the % increase is based on. E.g. you pay £500 in rent and £100 into stocks/bonds etc. If the investment goes up by 10% that year you've made about £100 profit. On the other hand, the £100,000 house that you bought and are paying off at £600 a month has also gone up by 10% giving you a rise of £1000. Obviously your primary residence isn't the same type of investment as a secondary one. Everyone has to live somewhere.

Francko
5th May 2006, 13:26
And in 25 years you better hope you have enough capital to pay the bank what you owe them (i.e. 100% of the capital you borrowed in the first place) ....otherwise you are off on the streets with nothing in your pockets

Do you actually need the whole sum in your pocket? Can't you just sell the house and pay the mortgage with the sale?

The Lone Gunman
5th May 2006, 13:47
Well if you are just going to repay the interest you are running a risk. If you also pay off the capital then you are left with the no debt and the bricks and mortar.
You may have an asset that is worth less than you paid but you are not holding a debt with no equity.
The smart money pays extra when they can to reduce the term and therefore the cost.

BlasterBates
5th May 2006, 13:47
...and if the house price drops by 10% you look as sick as you would happy were it rise by 10%. In other words for your £1000 investment you would have lost £10000.

You can do exactly the same on the stock market using options. There basically you pay a small sum and get huge bucks if it goes up. In fact with options you only lose your initial investment, so actually it is less risky.

Francko
5th May 2006, 15:14
...and if the house price drops by 10% you look as sick as you would happy were it rise by 10%. In other words for your £1000 investment you would have lost £10000.


Well, we are talking about 25 years time. How many chances that houses in 2032 will be 10% less than now?

eternalnomad
5th May 2006, 15:24
Well, we are talking about 25 years time. How many chances that houses in 2032 will be 10% less than now?

In real terms (as in purchasing power of the currency) .....I would say its a 50/50 bet

Or are you a person that believes house prices only ever go up ?

nobody here but us chicke
5th May 2006, 17:06
local rag reports prices in harrogate have fallen by 9% in the last year.
'Average price drops of £20000'

In the village there was a small development built last year (10 houses) - None of them have sold.

Local estate agents say - nothing to worry about, temporary blip, can we interest you in a spanish/french/bulgarian villa instead?

Francko
5th May 2006, 22:58
In real terms (as in purchasing power of the currency) .....I would say its a 50/50 bet

Or are you a person that believes house prices only ever go up ?

Surely in relative terms (purchasing power) but I am not talking about the good investor but the normal people who enjoy life and spend money when they have it available (unfortunately rather common in UK otherwise there wouldn't be such a high level of debt). To me it's a choice between nothing after 25 years or something, which certainly would be more if you are a saviour investor (but let's face it, are we really all such good ants?) but for the ones who prefer to sleep at night rather than having nightmares about stock market crashes (which are certainly more common than house ones) is good enough.

shaunbhoy
8th May 2006, 09:58
Or are you a person that believes house prices only ever go up ?

In any 25 year period they only ever do go up. Of course you being a nomad, and presumably living in a hedge, don't have to consider the fact that wherever you live is going to consume money, and can therefore hypothesize till the cows come home about "buying power" and all the other buzzwords the grown-ups in your vicinity bandy about!
:rolleyes:

BlasterBates
8th May 2006, 10:12
Well, we are talking about 25 years time. How many chances that houses in 2032 will be 10% less than now?

No they won't that is true, but if you were wise enough to put your money in say GAZPROM wait for prices to drop 20-30% in 2-3 years time and then buy, you might be sitting under a palm tree in the caribbean drinking pinacolada rather than in your raincoat drinking lager in Bognor Regis, for example.

AtW
8th May 2006, 10:15
if you were wise enough to put your money in say GAZPROM wait for prices to drop 20-30% in 2-3 years time and then buy

I got GAZPROM shares in ... 1992... free too as part of privatisation drive where all Russian citizens were given vouchers that they could invest into shares of companies. A lot of them sold vouchers for bottle of vodka and some for little more, laughing off claims of the person responsible for privatisation that voucher will be worth a "Volga" car (better than Lada, kind of Rover 75 normally use by communist party and KGB at the time), it actually turned out to be true.

The Lone Gunman
8th May 2006, 10:23
Just as a matter of interest. Gunman Towers was valued last week at 230K. I purchased it about 2 years ago for 110K. Before you start with the "a valuation is not a sale price" bull, I would like to point out that a near neighbour valued at less sold for more and only took 3 weeks from advertised to sold.

Lucifer Box
8th May 2006, 10:24
Just as a matter of interest. Gunman Towers was valued last week at 230K. I purchased it about 2 years ago for 110K. Before you start with the "a valuation is not a sale price" bull, I would like to point out that a near neighbour valued at less sold for more and only took 3 weeks from advertised to sold.
But essentially it doesn't matter whether it's worth £1 or £1m because you live in it. If you're thinking of selling up and downsizing, then it might matter.

The Lone Gunman
8th May 2006, 10:32
But essentially it doesn't matter whether it's worth £1 or £1m because you live in it. If you're thinking of selling up and downsizing, then it might matter.That is a possibility. I didnt buy it as an investment, it was purchased as a place to live.

What does matter is the fear of a house price crash. Values would have to fall 50% to hit the purchase price and go a lot further to achieve negative equity. If the majority are in the same position then the crash is less likely as people wont be too woried about mounting debt. As long as interest rates dont get silly and they can still service their mortgage there will be no panic selling.

Mrs Gunman keeps banging on about selling up and moving abroad. I am tempted to cash in and go and start an outsourcing business in Mumbai, might try Goa as I have business contacts there. I realy like India.

AtW
8th May 2006, 10:35
But essentially it doesn't matter whether it's worth £1 or £1m because you live in it.

It does matter if you get taxes the heck out of and your only means to increasing wealth is load up with debt, that's where high house price is totally necessary as otherwise you would not get cheap loan. And cheap to service loan means the debt bubble will last longer...

Shimano105
8th May 2006, 10:43
Mortgages? FFS we're contractors aren't we? What do you want to saddle yourself with a mortgage for? They are for permies, surely....

Lucifer Box
8th May 2006, 10:44
Mortgages? FFS we're contractors aren't we? What do you want to saddle yourself with a mortgage for? They are for permies, surely....
Quite.

AtW
8th May 2006, 10:50
They are for permies, surely....

How big is your morgage? http://www.ezboard.com/images/emoticons/wink.gif

Lucifer Box
8th May 2006, 10:56
How big is your morgage? http://www.ezboard.com/images/emoticons/wink.gif
£0. :D

No suffering from mortgage envy here.

AtW
8th May 2006, 10:57
£0.

I asked Shimano105 because he turned permie recently....

DimPrawn
8th May 2006, 11:15
Anyone without a mortgage shows a lack of ambition when it comes to owning a large house.

It is accepted wisdom in the UK to buy a house well outside your own affordability levels and then live in poverty for the 1st 15 years until inflation has eroded the debt.

HTH

eternalnomad
8th May 2006, 12:43
In any 25 year period they only ever do go up. Of course you being a nomad, and presumably living in a hedge, don't have to consider the fact that wherever you live is going to consume money, and can therefore hypothesize till the cows come home about "buying power" and all the other buzzwords the grown-ups in your vicinity bandy about!
:rolleyes:

It sounds to me like I have touched a bit of a "raw nerve" - has one just committed to a rather large mortgage by any chance ?

How factually sure are you that house prices (as in "real terms" prices) only ever go up ?

shaunbhoy
8th May 2006, 12:49
has one just committed to a rather large mortgage by any chance ?

No.


How factually sure are you that house prices (as in "real terms" prices) only ever go up ?

I am factually positive that in "real terms", one has to have somewhere to live. If you can explain in "real terms", just how one evades shelling out cash in "real terms" to do that, I may consider dredging up an answer to your ridiculous request.

eternalnomad
8th May 2006, 13:05
one has to have somewhere to live. If you can explain in "real terms", just how one evades shelling out cash in "real terms" to do that, I may consider dredging up an answer to your ridiculous request.

I take it that you are not factually certain they always go up then !

I totally agree that everyone needs to live somewhere and accomodation doesnt come free.

However, my original assertions were

1) Renting can be cheaper than a repayment mortgage (and in some areas MUCH cheaper)

2) House prices do not always go up (which is a dangerous assumption made by a worryingly high proportion of house buyers in the UK which is helping to create a very dangerous property market for the unwary)

I seemed to have offended you in some way.....so as you insist on slinging personal insults around I can only conclude it must be the "wrong time of the month" for you :rollin:

Shimano105
8th May 2006, 13:09
Permie? ME? Don't make me...

Ok, I tried it out and quit after 2 weeks - now I'm 'back on the tools' contracting, thankfully.

Oh, and no m*rtgage either thank you!

ASB
8th May 2006, 13:11
It sounds to me like I have touched a bit of a "raw nerve" - has one just committed to a rather large mortgage by any chance ?

How factually sure are you that house prices (as in "real terms" prices) only ever go up ?

There have been periods of sustained falls, both in real and absolute terms. Mid victorian with liberalisation of the market was one.

In real terms recently 74-77, 80-82, 89-96.

The trough in '96 was pretty much at the level of the peak of '74. And conicidentally '80.

shaunbhoy
8th May 2006, 13:34
I take it that you are not factually certain they always go up then !

Well show me a 25-year period when they have fallen then smarta*se! Or else stop waffling like Margaret Beckett!!



I seemed to have offended you in some way.....so as you insist on slinging personal insults around I can only conclude it must be the "wrong time of the month" for you :rollin:

Another stick you have hold of the wrong end of. And it would take more than a lightweight like you to offend me sonny!

Next!!

:spank:

eternalnomad
8th May 2006, 13:41
Another stick you have hold of the wrong end of. And it would take more than a lightweight like you to offend me sonny!

Next!!

:spank:

I am glad I havent caused any offence because that would put me in your league. :moon:

ASB
8th May 2006, 14:46
Well show me a 25-year period when they have fallen then smarta*se! Or else stop waffling like Margaret Beckett!!

I think you're pretty safe.

'74-'96 is only 22 years. In this period the index rose from 20.4 to 110.1 but this was largely due to inflation (an average of about 7.5%). By comparison the price index (http://www.parliament.uk/commons/lib/research/rp99/rp99-020.pdf) changed from 100 to 555.2 (which is 20.4 to 113.26). This was a fall in real terms.

Between '74-'99 the nationwide index for northen property changes from 17.4 to 111.9. (7.7% per year). By comparsion the price index (to 98) changes from 17.4 to 103.06.

Over the last 30 years prices have "only" doubled in real terms (although most of that is in the last 10 years).

There is no easily available average data predating '73. Since inflation is a modern phenomeno (total inflation between 1750 and 1938 was only around 300% - 0.6% PA) this is probably the place to look. There were very substantial price falls in the latter half of the 19th century, given the low level of inflation there is a reasonable chance of 25 years with a fall in real terms. Unfortunately it is difficult to find any reference data.

eternalnomad
8th May 2006, 20:11
I think you're pretty safe..

An interesting post ASB (thanks for that), however Shaunbhoys claim is not safe.

Lets take a look at Japan from 1980 to 2005. After 25 years commencing in 1980 house prices in Japan finish exactly where they started.

http://www.economist.com/images/20041211/CFN190.gif

*Yes, I know the graph only goes to 2004 so if you want the data for 2005 take a look at the addtional data below (which shows things didnt get "any better" for Japanese property in 2005)

http://www.economist.com/images/20051210/cfn014.gif

DimPrawn
8th May 2006, 20:20
An interesting post ASB (thanks for that), however Shaunbhoys claim is not safe.

Lets take a look at Japan from 1980 to 2005. After 25 years commencing in 1980 house prices in Japan finish exactly where they started.

Last time I looked out of the window, I was living in Swindon, not Tokyo.

eternalnomad
8th May 2006, 20:42
Last time I looked out of the window, I was living in Swindon, not Tokyo.

Swindon...you have my sympathies Mr Prawn

DimPrawn
8th May 2006, 21:28
Not so much living, more existing.

NoddY
8th May 2006, 21:33
I didn't realise houses in Swindon had windows.

DimPrawn
9th May 2006, 08:17
http://newsimg.bbc.co.uk/media/images/41383000/gif/_41383669_average_price_gra416.gif

The number of home sales in England and Wales has jumped by 37% over the past year, the Land Registry has said, as the housing market pick-up continues.
Prices in England and Wales rose 5.05% in the year to 31 March, the registry said, to an average of £192,745.

Wealthy City financiers and foreign buyers pushed London prices 6% higher to more than £300,000 on average.


Houses falling in value. Never!

wendigo100
10th May 2006, 11:01
Houses falling in value. Never!Certainly not while our population is increasing.

If Japan had opened the immigration floodgates to all and sundry, their property would become a scarcer resource as well.

Of course, that pre-supposes that as many people would want to move there as seem to want to come here.

AlfredJPruffock
10th May 2006, 11:08
Property Prices for Dummies

One reads endless debates on this site about property prices.

So I propose to end the debate for once and for all.

Property Prices will either

Rise

Fall

Or remain the same.

Irrespective of the above, grey slates will remain grey slates.

threaded
10th May 2006, 11:11
Irrespective of the above, grey slates will remain grey slates.
Unless it rains, and then they go black.

Or a seagull poohs on them, then they go white.

ASB
11th May 2006, 09:48
Lets take a look at Japan from 1980 to 2005. After 25 years commencing in 1980 house prices in Japan finish exactly where they started.

Wrong. Possibly.

I can't be bothered to find the data to be sure but in YEN terms housing in japan was worth about the same in 2005 as it was in 1980. But during this period Japan [probably] suffered overall deflation. Thus there was probably still a positive uplift in that the purchasing power of said money had increased due to deflation.

tamper
14th May 2006, 16:44
Mortgages? FFS we're contractors aren't we? What do you want to saddle yourself with a mortgage for? They are for permies, surely....

Is this because we're contractors, ergo 'loadsamoney' boors with such a large pile of cash that we never stoop to borrowing? Or is there a mortgage alternative borrowing solution I'm not thinking about?

Fungus
14th May 2006, 20:22
I didn't realise houses in Swindon had windows.

I didn't realise Swindon had houses. Now why would someone wish to live there?