The May RightMove price index, available as of today, paints a very gloomy picture, with predicted transactions for 2005 possibly being lower than the 970,000 recorded in 1974.
Looking bad. I wonder if I would even clear my moving costs if I sold this year.
MM
It's good news for first time buyers.
Mary
Not really. Even if prices drop, rather than just levelling out as seems to be expected, they will still be high. However, that won't really matter as, with a reduced number of houses on the market, it will be difficult for them even to find one to buy.
Colin Bignell
Unusually for me I have felt sorry for some strangers recently. Twice I have done work for people who fit these criteria:
1: Young couple, recently married2: First house together, "we felt a need to get on the housing ladder"
3: Parents not wholly approving (of the house, not the relationship!)4: Working all the hours God sends, and then some
5: Budgeting extremely tight6: Houses "in need of some attention" and not really getting it
7: (and this is where I felt sorry for them) the house in question is in an area they obviously knew little about before moving in.Both couples had previously lived and still work outside the area, but had been forced to the area because house prices elsewhere were simply too high. Both had bought houses on council estates which are still largely council tennants. One estate isn't too bad, but the quality of the housing stock is pretty dire (1970s build) and there are a few questionable neighbours (petty vandalism). The other estate has the acknowledged reputation as the worst in the area and also has awful build quality.
I am *so* glad I am not in that position. The house I bought for £27k (ex council 2 bed semi on small development of maybe two dozen) in
1996(?) and sold for £30k in 2000 was valued last year at over £60k and could probably go on the market today at £75k or maybe more. In 1996 I was earning just over £10k so even a £25k mortgage was a bit of a stretch. Rightmove lists just 34 properties under £80k within a (very generous) 5 miles of this urban area. Some of those are "development opportunities" (building plot for example). The cheapest house, which sounds a bit of a dump and is in a bit of a dead-end area, is £45k.And this isn't one of the most expensive parts of the country by any means.
I can't see how a market slowdown is really going to help First Time Buyers; as Mary said the tendency is for supply to slow down to meet slowing demand. People will stay put wherever possible rather than move, and improve or extend if at all feasible. Occasionally someone will have to sell up for a specific reason (e.g. moving area for job) and their loss will be someone's gain, but unless there's going to be a drastic drop in prices, down to levels where you *don't* have to self-certify a mortgage on 6 times your annual salary (as a friend of mine has recently done), 1TBs aren't going to be any better off.
In some senses they'll be worse off, as the supply of 1TBs is probably relatively static (other than those who decide to rent instead) and if the supply of houses drops because of stagnation further *up* the line, that'll only tend to keep prices high at the bottom end of the market.
But I'm no economist, so what do I know?
Good thing we don't plan on moving any time soon :-)
Hwyl!
M.
Whilst you might be right, this has been forecast every year for the last 5 years at least, and all the forecasters have been completely wrong. The basic problem of not enough houses is unchanged. For the housing market to slump, we either need an enormous number of new houses, or a large enough recession (or interest rate hike) which results in significant reposessions. I don't see any sign of either.
Not really, as half the reason peple wont buy is the potential raising of mortgage payments.
Actually, its a fine time to sell your home and rent it back.
As the FT pointed out some time ago, when ROI on rental is a point less than the mortgage rate, unless house values are rising, purchasing a house is simply not justified on financial grounds.
I can, but you also need to be in the depths of a Wages and Prices Freeze.. We bought our first house in about 1970, for about £4650. This was exactly the same price as the new price had been, about 3 years earlier.
The opposite (and seriously bad) extreme is a house price boom, (was it in the late 80's?). We knew two people then who owned houses and literally got knocked out of the housing market, because they had sold their houses, but their next purchases fell through. and the rapidly rising prices got away from them. First time buyers had almost no chance in such a volatile market.
"nightjar .uk.com>"
Well, round here there are forests of 'For Sale' notices - as there always are. Even a small reduction in prices will make it a little easier for first time buyers to raise the deposit and mortgage.
Why should people see houses as something to make big profits on? They're for living in.
Mary
No, someone else said that. It think that a slow down WILL make it easier.
That's disgrraceful - and could probably be responsible for at least part of the 'boom' in house prices. When we got a mortgage the loan couldn't be more than 3.5 x annual salary. We scraped through with help from an uncle but the repayments were very hard for a long time.
But that's horrendously expensive too.
Same nere - but I do observe and am not willing to be led by the nose.
Same here. If we do it will be in a box.
Mary
Now the interest hike I like!
It might encourage people to save rather than spend.
It would certainly be a boon to those of us who rely on our savings rather than loans.
Mary
I reckon if empty second homes and additional homes bought for capital gain were sold off, it would go a long way to alleviating the lack of supply.
Furthermore, if there is a serious recession, the capitulation selling by the owners of these properties will make the housing market fall more than it would otherwise do.
cheers, Pete.
By what mechanism?
The way I see it, if it is just a *slowdown* rather than a proper drop it is the bottom end of the market which will suffer the most. People who already have houses have seen their assets increase in line with the market. People who don't haven't. A drop in prices *would* help the bottom end of the market, though it wouldn't be so good further up as people with large %age mortgages will be in danger of negative equity.
A concrete example (figures pure fantasy, but it illustrates the point).
Couple A buys a first house in 1995 for £60,000 on a combined salary of £25,000 (2.4x).
In 2005 they are earning £30,000 and decide to move. The house has risen in value to £100,000 but hasn't increased any in the last 12 months or so. Keeping their mortgage at the same relative level (2.4x) and assuming they've been paying interest-only (so they still owe the bank £60k) they can now afford a mortgage of £72,000 and so can look for houses in the region of £112,000 (£100k-£60k+£72k). Not much of a jump, but might find them a slightly bigger house in the same area or a similar house in a better area.
Couple B wants to buy a first house in 2005. Their combined salary is also £30,000. If they want to buy Couple A's house they will be looking at a multiplier of 3.33(etc.) which is considerably more "expensive" than Couple A's 2.4x.
Hwyl!
M.
Applying capital gains tax to main residences would probably end the boom for good. Why the state should make this particular form of unearned income tax free when young couples can't afford homes is a mystery. No young couples, no babies, an increasingly affluent but aged population shuffling around garden centres bored out of their brains. Thank God for the immigrants. Do you think one of them will push my wheelchair when I get old(er)?
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Even repaying a mortgage of 6x salary, the repayments are probably lower than renting.
'Affordable' housing in Scotland for first time buyers is supposed to be based on a couple with a joint income of £40k. As the average income in Scotland is only about £15k and more and more people are singles not couples, even 'affordable' housing is out of the question for many.
Owain
But people who sell their houses (or are repossessed) still need somewhere to live ... those houses may move from owner-occupied to private rented sector, but overall supply and demand for housing will not change.
Owain
My brain won't do numbers.
I just know from the experience of family and friends that even £1,000 can make a difference between being able to afford a house or not.
Mary
WHAT?
I'm not affluent but am aged and can't remember the last time I was in a garden centre. What's more I don't shuffle and I'm not unique..
You might not make it, then you'll be lucky, eh? Not having to be a burden to anyone ...
Mary
Because it is economically inefficient, as it prevents movement of the workforce. It effectively makes it economically unviable to ever sell a property, as it wipes out up to 40% of your equity every time you move.
Christian.
Not to mention political suicide for any party that trys to introduce it.
A higher rate of stamp duty in increasing bands similar to income tax would help. The trouble with the current stamp duty is it cuts in on the /whole/ amount of the transaction at the highest rate.
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