House prices > Rent = Price fall

[Turion]

Let's face it, many new homeowners, ambitious upgraders and BLTers found a false friend in the low interest rate / east credit enviroment. Aside from the credit crunch, that is inducing merely 'normal' conditions back into the market. There is another reason prices will fall.

Prices will fall simply because it is possible to rent a much nicer home for much less than actually buying it. I can rent a 200k house for £800/month = £9600/yr. The interest on the average 200k mortage needed to buy it @ say 7% a.p.r = £1166/mo = £14000/yr. That is without all the additional costs involved in home ownership and repaying the capital! In a normal market situation the rent should be higher. My calculations prove that house prices are at least 40% overvalued at current prices.

BTL landlords, the ones who will not be forced to sell, are getting less than 5% yield after costs. This paltry amount together with falling asset values will cause collapse of the BTL market during thenext 3 years, as they start selling. BTL type housing is likely to fall 50% or more.

[Turion]

Mortgage cost > Rent = Price fall

Correction to title. Makes more sense now

[PAH]

Yeah, when I was looking around for a place to stay a couple of years ago, it was much cheaper to rent than to buy the same house on an interest only mortgage, so a no-brainer for the short-term.

How long that short-term will turn out to be has yet to be discovered. I'd guess another few years at least.

[tim123]

Prices will fall simply because it is possible to rent a much nicer home for much less than actually buying it. I can rent a 200k house for £800/month = £9600/yr. The interest on the average 200k mortage needed to buy it @ say 7% a.p.r = £1166/mo = £14000/yr. That is without all the additional costs involved in home ownership and repaying the capital! In a normal market situation the rent should be higher. My calculations prove that house prices are at least 40% overvalued at current prices..

But house prices are going to continue to go up at 10% pa ad infinitum making up the shortfall in the rent.

(and yes, there are still people around who believe that)

tim

[AtW]

One good thing is that those scammy "seminars" on get rich quick (via BTL) sold for like £2-3k per place would probably stop - a lot of stupid people have already paid the money for those though.

[sasguru]

Yadda yadda from those who didn't take advantage of the biggest housing boom in history. Because prices were over-valued in 1999-2000
Tell you what atw, even if prices fell 50%, you wouldn't be able to buy.
So forget about commenting on house prices, it's only theoretical for you.
Now go and write out your rent cheque for this month, there's a good fellow.

[AtW]

Tell you what atw, even if prices fell 50%, you wouldn't be able to buy.

What my ability to buy a house has got to do with discussion on direction which house prices are taking?

[51st State]

Yadda yadda from those who didn't take advantage of the biggest housing boom in history. Because prices were over-valued in 1999-2000
Tell you what atw, even if prices fell 50%, you wouldn't be able to buy.
So forget about commenting on house prices, it's only theoretical for you.
Now go and write out your rent cheque for this month, there's a good fellow.

[sasguru]

What my ability to buy a house has got to do with discussion on direction which house prices are taking?

Indeed.

[snaw]

What my ability to buy a house has got to do with discussion on direction which house prices are taking?

Why are you so obsessed with it. You've no vested interest in the whole thing, but can't stop posting on it and seem to be positively creaming your pants at the prospect of a crash.