Tuesday, Sep 21, 2010
Put your fingers in your ears, go "lalalalala" and buy a house.
MSN Money: Five reasons you should buy property now
Never mind all the gloom: it’s a good time to buy a home. Here’s why.
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Predictable timing from the VI crowd.
Posted by estrader @ 01:25 PM (1970 views) Add Comment
28 Comments
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1. jack c said...
"Contributor" Nic Cicutti - having read his columns weekly for years, it's a toss up between him and Jeff Prestridge as to who can boil my P the most.
For someone to buy someone else has to sell and IMO it's the sellers (developers/sell to rent etc..) who will be on the right side of the deal at this juncture.
This is what Nic has to say in an exchange in the comments section "First, like you I have been a property owner since 1983 and, again like you, have done extremely well out of the extended house price boom of the past three decades. My first property cost £14k and my current one was recently valued at more than 70 times that amount" - I wonder if he has his Million pound property on the market by any chance?
2. sibley's b'stard child said...
Excellent; in other words, don't worry your pretty heads about the prospect of prices falling further get out there and buy.
"But if affordability remains within sensible limits, parents support their children's home-buying aspirations and the supply of mortgages eases, demand will remain high".
Yes, as i'm sure that the same factors were prevalent when you bought your first gaff for 14k.
3. timmy t said...
Whilst these might all be valid reasons to buy a house, he fails to justify having the word "now" in the title. The bottom line is that if you wait, you'll get all these benefits, plus you won't have to pay as much and be saddled with negative equity.
4. Crunchy said...
Still no mention of gold providing a solid 20% return over the last 5 years and still hassle free, for now! lol
People still looking to add to their property empire?
There must be some cash rich dumpers out there grinning from ear to ear whilst reading this stuff.
I guess their mantra is, nothing good lasts forever. Fair play to them.
5. str 2007 said...
Hi Jack
There's certainly been an easy ride over the last 30-40 years.
I know my parents bought in about 1969 for 7.5k and put 1/2 down (savings) within 4 years it sold for £22k the morning it went on the market.
And that must be the same story for alot buying at that time, how it must have felt to sit off for 4 years I can only imagine (with horror).
I'm sounding like a homeownerist there.
My point is, anyone putting down 50% now will still only have 50% equity in 4-5 years time IF the market holds together. Which I doubt it will.
On a slightly different note.
I've just been looking at US housing starts, nearly 600,000 this month. The equivalent, population wise of about 100,000 in a month here. (Twice as many as we have mortgage approvals).
That may have something to do with why prices are holding up here and not in the USA.
Does anyone happen to know our current monthly housing starts here ?
6. Thegwimweaper said...
@3 Well said Timmy T!
7. Vox Populi said...
Because I want to sell my house and get away.
8. timmy t said...
str - think we're on about 10,000 a month currently
9. jack c said...
Hello str 2007 - thanks for sharing info on your parents purchase - I dont have the stats or a graph to hand but remember prices subsequently falling in the 70's. Following on from your point on deposits/equity I see from the comments section Nic discloses he's in Camden (I have no idea if this is a "nice" area of London) but from my perspective someone buying his property for £980,000 with a 25% deposit would need a mortgage of £735,000 - a huge amount of money which would typically take a long time to repay. I'm guessing that if Nic was setting out to buy his own property now he couldnt afford to do so - as a freelance journalist I'm guessing he makes £100k which leaves a multiple of 10x salary.
10. str 2007 said...
I don't even think it needs to be a 'nice' place to get close to £1m in London.
BTW it wasn't to gloat just using anecdotal to show what an easy ride some had 30 years ago compared to now.
Jack
I can't remeber if you actually did mortgages or not, if so are there any self certs left now ?
11. str 2007 said...
10,000 a month
No wonder prices are holding up.
Just imagine how many jobs would be created by building 100,000 per month. (no more than america on a prorata basis)
Also quite a few of ours now must be getting fairly close to 'needing' to be replaced.
12. estrader said...
@4 str2007, that is barely keeping ahead of inflation which was very high in the 70's.
http://www.bankofengland.co.uk/education/inflation/calculator/flash/index.htm
Using the calculator, £14K basket of goods in 1970 would cost over £25K in 1975
13. str 2007 said...
If someone wants to give me a 1/4 acre plot for £100k (not an unfair figure IMO) I'll happily invest £200k in my local economy.
Hope you're reading this Mr Cameron & Clegg.
14. wdbeast said...
From Nic Cicutti's bio
"Before becoming a journalist, Nic also worked in the NHS as a registered nurse for several years.
In earlier incarnations he was a school cleaner and a dishwasher at Wimpy."
Explains a lot!
15. str 2007 said...
estrader
Well double inflation by your figures, but the point wasn't about investment so much as debt burning.
Imagine taking out a 50% mortgage now it becoming a 15% mortgage in the space of 4-5 years now, before any down payments are counted.
So I'm told, in the seventies they had 'real' inflation, by that I mean wages were going up with price of goods at 10-15% a year.
16. righttoleech said...
Another non story......VI spin.....sickens me if he earns a penny churning out this puerile sludge, nevermind £100k a year.
17. jack c said...
str 2007 - I still get involved but only when the opportunity arises and retain all of the search sytems - I can only find 2 lenders at the moment for self cert namely AToM and BM Solutions - e-mail me if you need more assistance.
18. Sarah said...
"Hope you're reading this Mr Cameron & Clegg."
They'll have a panic attack if they read it. Just doth your cap, hand over your money to them for daring to talk down their personal wealth and be thankful you're allowed to breath.
19. montesquieu said...
Love the guy who get wound up by all the negativity .. but is so negative himself he's leaving the country LOL
20. Crunchy said...
12. str 2007 said...So I'm told, in the seventies they had 'real' inflation, by that I mean wages were going up with price of goods at 10-15% a year.
No that's wimp inflation, real inflation is when the cost of living spirals upwards and wages remain static or deflate and goes into spiral
mode. Far worse than stagflation or any flation one chooses.
21. Crunchy said...
Mervyn King may as well stay in bed if things gets out of control.
22. mander said...
Not a lot money is floating right now, mortgage securitization is dead and it is only the taxpayer that can buy the risk for more house price inflation but this will be difficult to happen with this coalition government. I expect the government to stay away from manipulating the housing market and in these conditions there will be heavy drops in house prices for about 2 years or so.
23. mark wadsworth said...
STR, comment 4, where did you get that statistic about 600,000 new home construction starts per month for USA?
According to US Census Bureau, in 2006 there were one million new home sales in the entire year, which is pro rata about the same as us.
24. Crunchy said...
15. montesquieu said...Love the guy who get wound up by all the negativity .. but is so negative himself he's leaving the country LOL
A man must know his limitations. I just hope that ten positive people don't replace him from where he is headed.
25. str 2007 said...
MW
http://www.dailyfx.com/calendar/
See Tuesday 21st 12.30pm For results on permits and starts.
I assumed permits were our 'planning permission and starts were build starts.
It seemed alot to me, maybe I've misinterpreted the meaning, but it seems fairly straight forward by title.
26. dill said...
@17
Annualised run rate.
Latest here: http://www.census.gov/const/newresconst.pdf
27. str 2007 said...
Dill
That would explain alot, I thought it looked high. Ooops
28. Nic Cicutti said...
Hi chaps. Many interesting points. You're obviously good judges of the property market, so there's no need to tell you anything that might affect in any way your complacent beliefs.
But let me clear up a few personal points. In total, I've been a property owner for 27 years. I no longer live in Camden, although I did benefit from the London housing boom between 1994 and 2009, when I finally sold and moved to the country. Earlier in the 1980s, I owned a property in East Anglia, sold it after six years and banked the proceeds for several years more, before using that money as a deposit on the first London place.
Just to be clear, no, I'm not selling anything, so I have no axe to grind. The current property we own is likely to be a "keeper" for the next 15-20 years. I've never bought or sold to make money, only to live somewhere nice, so I'm no speculator. In doing so, I experienced two housing market depressions, buying and selling in the middle of both. In that time, to my direct knowledge and experience, almost no-one timed the market correctly. Everyone either bought or sold too early and too late. So for anyone here - myself included - to assume that they have the perfect insight that will allow them to buy at just the point where the market is at its lowest is, frankly, nonsense.
Happily, I've not experienced negative equity directly, because although the value of my home fell by almost 10% just after it was bought in 1994 I was still covered by the deposit. Also, I have always tried to pay off my mortgages at a higher rate than the agreed one. Over the first 5 years, for example, I repaid almost 20% of my first London loan, which in addition to the existing buffer meant I could always have sold and bought again, even if prices dropped significantly. My second London mortgage was virtually repaid in just under 10 years.
I wish I earned £100k but I don't. Our current mortgage is less than 10% of the asking price of the property, so I don't need to earn a lot to sustain it at 4.19% fixed for the next three years. Also, I've never needed a mortgage that wasn't available on reasonable LTVs for a reasonable "professional" income in London.
I'm glad one or two of you are amused by my dish-washing and nursing experiences. I used them to show that I know something of the "real" world. In fact I also have a degree in economics from the LSE and additional post-graduate qualifications. As a financial journalist for almost 20 years, I've written about the housing market ad nauseam in all that time, juggling statistics, interviewing economists and other experts and checking out more reports - both over-pessimistic and over-optimistic - than you could shake a stick at. Unlike one or two of you on here I'm not some Johnny-come-lately who refuses to engage with the facts.
Frankly, just as I've always been sceptical of the inflated claims of estate agents throughout the 1990s and mid-noughties, I'm as sceptical of trolls who have spent the past five or six years telling us there was a crash in the making. That includes some of you.
That's not to say there WON'T be a significant fall in prices at some point: even a broken clock tells the time correctly twice a day. But I don't know exactly when or to what extent it will happen - predictions that it was "due" in 2009 were plaintly wrong, as we all know now. Which means that to simply say "don't buy" strikes as irrational, in exactly the same way as box-suited estate agency spivs were when they told us the market could never fall. As my piece makes clear: take a 20- or 30-year view, buy what you can afford and only what you like and actually want to live in. Pay off the mortgage as quick as you can and be prepared to move to the next property every 8-10 years or so. I stand by my remarks.
Regards,
Nic