Reply to: Property prices (again)

[Sysman]

Well, they've made a pretty good fist of it to date. They have started to offset it in other ways, like offering longer and longer terms. And if you can't repay in your old age, the house goes to the bank. A cunning plan.

And that's if the gobmint don't nick it first via a combination of care costs and inheritance tax.

Anyone here remember Tony Benn's* idea back in the 1960s to nationalise housing?

Here it comes, but by the back door.

* He was probably known as Anthony Wedgewood Benn back then.

[scooterscot]

The house I last bought was a place where I could call home, desirable, in a convenient local, a roof over my head, nothing more. Cost me 315K and even then the roof is in need of repair! Investment, investment, investment, no….. it’s somewhere to live, live, live.

[Captain Dispensable]

It's pretty similar to the US sub-prime problem when lending 5 or 6 times salary. Doesn't take much to change for it to become unaffordable.

All mortgagees are renters, off their mortgage company. They're just gambling that the historical evidence of house prices always rising over time will pay off for them in the time they have the house, whether it be just a few years or 30.

If lifetime and beyond mortgages become the norm then people will be paying for the priviledge of being able to do what they like with their rented property without having to run it past the landlord every time.

[VectraMan]

Well, they've made a pretty good fist of it to date. They have started to offset it in other ways, like offering longer and longer terms. And if you can't repay in your old age, the house goes to the bank. A cunning plan.

Perhaps that's the next step: interest only lifetime mortgages. You keep repaying the interest until you die, and then the bank gets your house to sell.

Oh wait, that's just like renting.

The stupid would still go for it though "to get a foot on the housing ladder".

The reason for the US crash is all the "sub prime" lenders (that's banks that lend to people with poor history or not much income) have been hit badly by defaults. I know our situation is not necessarily the same, but at some point this all has to start going badly for the banks and they'll have to reign in all the silly deals and get back to responsible lending.

[hyperD]

There is a demand for council housing which is being fueled by private BTLs. Further proof of this can be seen in your council tax bills. I'll give you an example from ours:

 Description                        2005    2006     2007
 Refuge collection                 £2000   £2400    £2500 (5% council tax total) (4-9% yearly increase) 
 Housing & council tax benefit    £14000  £15500   £17600 (40% council tax total) (10-14% yearly increase) 

[sasguru]

Yes, but prices are rising faster than wages which means demand has to fall off. The lenders can't keep lending larger and larger multiples of salary, so the number of people who can't possibly get a mortgage will increase. And as the gap between buying and renting widens, the number of people who don't want to get a mortgage will also increase.

The rise has to stop somewhere, even if the economy continues to be good and interest rates don't change drastically.

Aye as Wendigo says, the lenders just become more creative ....

[Francko]

Ok the average income for a russian immigrant on the dole is 51 quid a week.

[wendigo100]

The lenders can't keep lending larger and larger multiples of salary

Well, they've made a pretty good fist of it to date. They have started to offset it in other ways, like offering longer and longer terms. And if you can't repay in your old age, the house goes to the bank. A cunning plan.

[VectraMan]

House prices will keep rising for now as

Supply < Demand

As supply will not change in the medium term, demand has to fall off.
This will only happen if
(1) Interest rates rise massively
(2) Unemployment increases massively

As both these are unlikely to happen in a 2-3 year time span, I predict continuing house price rises.

Yes, but prices are rising faster than wages which means demand has to fall off. The lenders can't keep lending larger and larger multiples of salary, so the number of people who can't possibly get a mortgage will increase. And as the gap between buying and renting widens, the number of people who don't want to get a mortgage will also increase.

The rise has to stop somewhere, even if the economy continues to be good and interest rates don't change drastically.

[Vito]

The average certainly seems more likely to be £40-£45k ish per couple than £60k...of which take home will be £30k ish...which is £2.5k ish per month take home...

Take from that:

£300 on food

£200 on petrol

£300 on car (running and depreciation)

£300 on bills (assuming 2 bed house ish)

£200 on clothes

That leaves about £1,300 per month to spend on mortgage, going out, make-up, presents, home maintenance, furniture, gyms/club memberships, pension, holidays, and probably loads of other things I've not even thought of...

Not a pretty picture huh...add in to that interest on loans/credit cards which most people have, nursery fees for couples with kids along with all other kiddie expenses etc etc

Its a wonder how people survive...

[Ivor1]

Defo the case in my area in terms of supply and demand, I paid £330k last year for a 3 bed semi last June (offer made Jan before_, the one next door to same house and crappier condition completed its sale last week for £399k, £69k increase in 12months. Estate agent put it soley down to demand. People dont want to move because of rising rates, so less on the market, but still seems to be alot of people wanting to buy.

[sasguru]

House prices will keep rising for now as

Supply < Demand

As supply will not change in the medium term, demand has to fall off.
This will only happen if
(1) Interest rates rise massively
(2) Unemployment increases massively

As both these are unlikely to happen in a 2-3 year time span, I predict continuing house price rises.

[AtW]

If you think about it, the average income for a family is around 50-60k.

[Captain Dispensable]

Not forgetting credit card debt with people juggling between 0 percent interest deals.

Then there's people remortaging their homes to release equity from house price increases purely to buy tat or pay off other debt.

Then there's those on interest only fixed rate mortgages that are due to end soon.

Plenty of people I know are in these situations. All of them have their heads in the sand to some extent. I'm so smug being debt free

[wendigo100]

£50-£60K is a bit optimistic surely. I'd have thought more like £40K, and only then if both work full time.

I do think these interest rate rises won't do much. If you're completely convinced about house price growth you're not going to be put off by finding an extra couple of hundred a year to pay for a 1/4% increase in rates. It'll only affect people who are borderline insolvent anyway.

I'd agree that £50K sounds optimistic, although average wages are pushing £25K now.

Regarding the borderline insolvent, I'm willing to bet there are a lot of those as people borrow to the limit to chase house prices.