# House prices



## Estoril-5 (Mar 8, 2007)

I read quite a few money websites and blogs, specifically about house prices, as im a first time buyer (ftb).

ive asked the question but not had any replies, i guess the people who could answer this are people in the know or people who have already been through a recession.

as im only 29 i cant remember the last one.

heres my question (ive cut and paste of moneyweek webiste where i posted it last week)

A question, if house prices do fall 40% or more, who in their right mind would sell if they didnt have to (unless they wanted to upgrade) - it comes down to the death, divorce or debt scenario.

So all the poeple who are waiting for a crash, isnt it going to be a sellers market as there will be minimal houses for sale and many buyers who have waited for the drops in pricing.

Also with the reduced number of properties for sale, doesnt that mean the desireable proerties are reduced leaving you with something you may not want to buy even though you have the money?

im a FTB with not enough deposit BUT if the crash comes will it be a bit of a anti-climax?


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## Gruffs (Dec 10, 2007)

Not really.

What will happen is that although the price will lower, Interest rates will go up.

So, you say that no-one will move if prices lower 40% but if that happens, to try to balance it, interest rates will go up and then there will be a lot of folk who are in trouble, even at 6%. So there should be repossessions abound.

Low prices, high interest means that the repayments should be similar for a FTB but, crucially the deposit amount goes down. 

But, high purchase price, high interest is a whole load of trouble for an awful lot of people. The govt and the market know this which is why the prices are being held artificially high even though no-one is willing to pay the asking prices.

It rankles me quite frankly that people have been bailed out of financial contracts that they entered knowing the risks.

How many houses have you seen for sale for over 6 months?

We rent because it's better for us. We are just building up our savings and living in a property that is bigger/better than one we could afford the repayments on.

We'll just keep putting the money by until the situation changes.


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## Rob_Quads (Jul 17, 2006)

As gruff says it would be interest rates going up that would cause more people to sell.

IMO We are not going to see any crash. Interest rates will be kept low for this exact reason. The government can't affort for it all to crash. They don't have much money now, it may cost them to keep the interest rates low but it will cost a hell of a lot more if they go up and cause a crash.

The biggest risk at the moment is the cuts that are going to be making people jobless and not afford the morgatge. As long as this is a small enough number of people then it won't be enough to cause much of a problem.

At the market the housing market is stalled. We are selling my girlfriends house and had to accept a slightly lower offer than we normally would have but cirucmstances disctated we needed to, this is in contast to 90% of the houses out there on the market. They are in the "We will move if someone pays what we think the house is worth mode" It costs nothing to put it on the market so while they see a nice house not costing too much they want what they think thier house is also worth. If they don't get it they just stay put.
Of course I think now is the best time ever to move up the chain if you can. While you get less, the house you will get will be cheaper. As soon as the prices go up the gap gets bigger again.


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## Estoril-5 (Mar 8, 2007)

ok agreed on both points above BUT if people get kicked out of their houses, they still need somewhere to live, right?

so if theyre not in their own house they will be in a rented house or infact their own house which the bank has given them a mortgage payment or bailed them out some way.

so is there any chance of me owning my own house? not as an investment but somewhere I can live and put my stamp on it?


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## Richf (Apr 26, 2008)

Estoril-5 said:


> ok agreed on both points above BUT if people get kicked out of their houses, they still need somewhere to live, right?
> 
> so if theyre not in their own house they will be in a rented house or infact their own house which the bank has given them a mortgage payment or bailed them out some way.
> 
> so is there any chance of me owning my own house? not as an investment but somewhere I can live and put my stamp on it?


House ownership is over rated only the UK seems obsessed by it few other countries feel the same and therefore have a more stable house market

It does amuse me how people who have interest only mortgages think they are so much better off than renting , they dont own the house the bank does and they pay a monthly fee to live there so are essentially renting off the bank

The other myth is how much you actually pay for a house , people think that if you buy a house for £100,000 that you then owe £100,000 but thats not exactly true if you have a repayment mortgage over 25 years that £100k mortgage will cost you £171k and thats if rates stay below 5% if they go over 10% (we were paying 14% at one point) then that 100k house will now cost you £272k !!!!


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## Gruffs (Dec 10, 2007)

Sure.

If you have 10% deposit and the means to pay your mortgage.

We took mortgage advice. I could be sitting in house 5 times our combined salary. If i had the 10%.

The only way atm is to save £20K+.

Which takes a long time.

The upside is that is £20K+ that you won't be paying interest on.

If people lose their houses, they will have to rent or be in social housing. But it won't happen. It won't be allowed to happen.

Aside from the 'Making my own stamp' point. The only upside to owning atm is that you are forced to save in Bricks and mortar. If you pay off your mortgage, you have somethign of value. But, as is pointed out above, that can cost you a lot. If you are disciplined enough to save, you can do the same. Or, if you don't own a house when you retire, the govt. can't take it back when they means test your benefits.


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## Richf (Apr 26, 2008)

Gruffs said:


> If people lose their houses, they will have to rent or be in social housing. But it won't happen. It won't be allowed to happen.


I'd love to know why you think that wont happen , plenty of people had their homes repossed in the 1980's.

The country is broke we are in massive debt there is no money to bail out individuals


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## Estoril-5 (Mar 8, 2007)

the renting Vs owning scenario.

I can rent a 3 bedroom house for £580 (which i currently do), i can buy the same house with a mortgage of £850 approx.

so after £25 years the rent will be £174,000 and the mortgage repayments will be £255,000 (plus add another £25,000 for maintenance etc) = £280,000

so youre basically paying an extra £106,000 to own your house. seems a lot of money.

but a few things to bear in mind, after year 25 you will not pay anymore mortgage, your house may appreciate, you have something to handover to your kids if youre that way inclined.

and from an investment point of view, aslong as the house is worth more than £106,000 youve made money and had somewhere to live.


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## Gruffs (Dec 10, 2007)

Basically, yes.


After 25 years, you stop paying the mortgage but you continue to pay rent.

Unless you can't afford it. Then the govt. will pay it for you.

Mostly, i think you are damned if you do and damned if you don't. there are pitfalls and drawbacks to both.

One thing i really do enjoy is not having to pay for (or do) maintenance. Though i would dearly love to run some AV/Ethernet cabling around the place and install a wood burning stove.


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## s2kpaul (Jul 27, 2006)

well im in process of buying now hopefully next month i;ll move in. !st time buying is hard unless you have a deposit but to rent would be £700 and mortgage £800 so were going for it


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## Richf (Apr 26, 2008)

Estoril-5 said:


> the renting Vs owning scenario.
> 
> I can rent a 3 bedroom house for £580 (which i currently do), i can buy the same house with a mortgage of £850 approx.
> 
> ...


Fundamental mistake though

The rent wont be £174,000 though if the rent keeps pace with current inflation then it will go up around 2-3 % per year

2% would see you monthly rent at £932.90 pm at yr 25 total rent £222930.88

3% would see your monthly rent at £1179pm at yr 25 total rent £253756.48

A repayment mortgage depends on interest rates


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## dale205mills (Oct 26, 2006)

I was lucky with my place, on the market for 160k and I walked away with it at 146k little over what I wanted to pay but I had the keys with in a week as I was one of the lucky few to be a cash buyer.


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