Reply to: Mortgages to 'dry up' as Treasury reveals house prices will drop by a 25% in 2009

[expat]

WTS.

It's easy to get the housing market going again. The problem is that the prices are still boom prices; they're falling too slow. If the government just mandated that everybody who wanted to sell had to do so at 1999 prices, the market would start moving again in no time. And most wouldn't lose out, they just have to realise that the money they thought they'd made from their property never really existed.

Okay so a load of people would be in negative equity and/or bankrupcy, but they're the ones that took a big financial gamble, and they're the ones that fuelled the boom to the point where there could only be one outcome. So why shouldn't they be in the tulip?

I think that's too harsh a judgement on people who bought a house since 1999 because they wanted a place to stay, not because they wanted to speculate with money they didn't have; and who may well not have thought they'd made load of money from it.

[Stan.goodvibes]

Everybody who owns a house thinks they are better off with a house that is worth twice what they paid for it. In reality everyone is worse off, as the difference in buying the next house will also be larger, sucking up large amounts of any savings/disposable income.

This is entirely correct. original scenario - House worth 150k, want to move to a house worth 200k - difference = 50k. House prices double, you now own a 300k house, but 200k house is now worth 400k - difference = 100k.

I'm still on the side of property ownership, but ownership/equity is a long term proposition.

I bought my first property back in London in early '96. After the property debacle of the early 90's prices were low compared to wages and the banks were bending over backwards to loan money - 5% deposit, 2k cashback, and 2% off the market interest rate for 2 years.

Banks are always kneejerk reactors. They were the same back in '87 before the sharemarket crash, they will be the same again. Once they have redressed their balance sheet problems, they will be back to loaning again. Its how they make money. When things start looking up, they'll swing back to being over-optimistic and start offering great loan deals again.

Hold on to your money for the next 2-4 years, save a deposit, and wait for inflation and decreasing prices to make property good value. Then, secure the best long-term fixed interest deal you can get before interest rates climb and buy sensibly. Timing is everything.

Property will always swing high and low - historically it always has, and unlikely as it seems now, it will swing up again in another bubble. Bet on it, and be prepared...

[TykeMerc]

WHS
I did exactly the same, I decided house prices in London were way overvalued back in 2002 and didn't buy then, never mind 2007.

Everybody who owns a house thinks they are better off with a house that is worth twice what they paid for it. In reality everyone is worse off, as the difference in buying the next house will also be larger, sucking up large amounts of any savings/disposable income.

People down-sizing will be better off in a climbing market though. Hence my parents rolling around in money for the first time in their lives since retiring and selling their large guest house for a huge profit.

I bought my admittedly small house after I got divorced because it was cheaper than renting somewhere to live, I got it very cheaply. In the following few years it's supposedly more than doubled in value and if it drops to half of its peak then I'm about where I started and have had the benefit of the house as somewhere to live in the meantime, from my perspective I'm better off having bought it.

[VectraMan]

WTS.

It's easy to get the housing market going again. The problem is that the prices are still boom prices; they're falling too slow. If the government just mandated that everybody who wanted to sell had to do so at 1999 prices, the market would start moving again in no time. And most wouldn't lose out, they just have to realise that the money they thought they'd made from their property never really existed.

Okay so a load of people would be in negative equity and/or bankrupcy, but they're the ones that took a big financial gamble, and they're the ones that fuelled the boom to the point where there could only be one outcome. So why shouldn't they be in the tulip?

[JoJoGabor]

WHS
I did exactly the same, I decided house prices in London were way overvalued back in 2002 and didn't buy then, never mind 2007.

Everybody who owns a house thinks they are better off with a house that is worth twice what they paid for it. In reality everyone is worse off, as the difference in buying the next house will also be larger, sucking up large amounts of any savings/disposable income.

People down-sizing will be better off in a climbing market though. Hence my parents rolling around in money for the first time in their lives since retiring and selling their large guest house for a huge profit.

[Beefy198]

In fact, I'm not going to hide it any longer... this whole situation pisses me off.

I made a conscious decision not to attempt to get on the housing market because I felt it was horrendously over-valued.

I made a conscious decision not to attempt to get myself into financial difficulties by buying a house at a multiplier that was absurd.

I made a conscious decision not to bog myself down in debt and possibly not be able to keep up repayments.

But it now looks like people like me will be shafted by a market that is kept artificially high by the government whilst I cannot drum up the 35%+ that I would realistically need for a mortgage.

So basically those that show financial stupidity will be rewarded and maybe even protected? (If I hear one more person say that the government should ban repossessions to protect people from losing their homes I may punch someone)

And now, the government that has consistently told us to be financially prudent and to save for a rainy day is now wanting us to spend, spend, spend our way out of a recession?

Am I in an alternative universe?

[Platypus]

They don't want the facts that excessive "value" and unrestrained lending created a totally artificial debt fueled wealth spiral to get in the way before the electorate go to the polls. After they've been voted in they don't give a toss until the next time.

Spot on

[TykeMerc]

Unfortunately for those of us without houses, I fear this government will attempt to keep house prices high.... despite them being obviously over valued and people needing to borrow eight times their salary.

It's obviously the new way (or a vote winner)

Considering how many people (voters) are sat on mortgages of gigantic proportions on houses that have values going down faster than a depleted uranium balloon all the politicians are desperate to get the market going again.
They don't want the facts that excessive "value" and unrestrained lending created a totally artificial debt fueled wealth spiral to get in the way before the electorate go to the polls. After they've been voted in they don't give a toss until the next time.

[Beefy198]

Unfortunately for those of us without houses, I fear this government will attempt to keep house prices high.... despite them being obviously over valued and people needing to borrow eight times their salary.

It's obviously the new way (or a vote winner)

[Mailman]

When repayments exceed new lending.

Anyway, who would want to buy a house if prices are falling that quickly? I’d wait another year or so for prices to drop even further.

Hmmmm…deflation.

Whats the point of a £350,000 house costing £250,000 when you cant get a mortgage in the first place?

This time next year you might be lucky to find someone willing to give you a 75% mortgage so maybe in a years time you might have to have a 50% deposit?

And lets be honest here, most contractors will be out of work within the next 3 months anyways

Mailman

[Sysman]

Was told story other day of Lehmans trader who bought house worth £4m. £2m down, rest covered by Lehmans shares worth £4m ("in case they halve").

I knew a chap in the 1980s who borrowed a load of money to pay the taxman, using his own company's shares as collateral. The shares plummeted, the bank suddenly wanted a boat load of cash, and his house as security too.

He had found himself in a trap. If he paid himself enough to cover what the bank wanted, he incurred more tax on that. This was in the days of 60% tax at the top rate. In other words for every 1,000 he paid himself, 600 went in tax and there was only 400 left to pay the bank loan. Not pretty at all.

[Moscow Mule]

Faster faster ...come on...I need you ridiculous house prices to hit rock bottom soon - and I don't just mean inner-city yuppie flats, I mean proper places with big garages on the coast.

Fed up of being a hobo, sooner I buy the sooner I can start adding value with my "dramatic" DIY skills all in time for the next boom

That reminds me - must put the Bulgarian apartment on the market pronto.
Anyway want to buy a 2 bed flat in Varna?

Give you £20?

[BrilloPad]

An article yesterday (lost the link) said some bankers and traders have lost huge amounts on 10% deposits for property purchases that fell through before completion. One couple lost a £500,000 deposit on a 5M house

And they are going to be sued for the difference!

You have to laugh........

[OwlHoot]

An article yesterday (lost the link) said some bankers and traders have lost huge amounts on 10% deposits for property purchases that fell through before completion. One couple lost a £500,000 deposit on a 5M house

[BrilloPad]

Was told story other day of Lehmans trader who bought house worth £4m. £2m down, rest covered by Lehmans shares worth £4m ("in case they halve").

House repossed - wif/kids gone - living in bedroom with his parents.

Apart from not seeing the kids I say