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Would You Be Satisfied With A 35% Drop In Prices?

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In 2006 when we got married I decided not to buy. People were saying prices would only get further out of reach so we better buy as soon as possible, but I couldn't believe that. I knew that if I had trouble affording somewhere then other people would be in the same boat. At some point something would have to give - namely the prices, duh. It's just common sense yet few other people seemed to see that. Ah well I guess most of us on here know that story.

Anyway back then I thought there might be something in the region of a 20% drop in the next few years. But prices rose for another two years and a 20% drop barely takes us back to 2006 locally. Then people like Vince Cable, Financial Planner and others started talking about 50% drops and I got quite excited. I could buy a nice place outright if prices drop 50%. But I am beginning to doubt it will happen to be honest.

Talk of green shoots is getting me down. House prices up. Job losses not as big as expected. GDP growth again. Is the crash behind us now?

If think most of us a few years ago would have been very pleased with a 35%. And the bulls absolutely terrified! But expectations of greater drops have built up on this site to such an extent that a 35% drop would in some way seem like a bit of a disappointment now. What's your take?

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1) If petrol is £10/litre, & a loaf of bread is £20, house prices might not fall

2) If bread & petrol stay as they are, expect the average house to be one third of what it is now;

or for a desperate seller whatever they can get

No2 is considered most undesirable.

Suggest you move any savings away from paper.

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Yeah, 35% would do me, assuming there was an element of sensible resolution to the banking situation, as they'd start looking long term affordable around that point, as opposed to the current situation which is akin to being told by the mausoleum staff that Lenin's only sleeping.

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What a loaded set of options!

What I WANT or would grudginly (or not) pay is totally irrelevant to the question. Peak to trough is going to be around 60%.

If you've bought before, and the mortgage is a significant portion, and you're on a tracker, then you are going to be stuffed when the higher interest rates kick in.

With house prices at 60% off peak, affordability will remain approximately the same, because of the punitive interest rates that will be offered.

Simples.

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Yeah, 35% would do me, assuming there was an element of sensible resolution to the banking situation, as they'd start looking long term affordable around that point, as opposed to the current situation which is akin to being told by the mausoleum staff that Lenin's only sleeping.

That is a very valid point. I do think though that prices will drop a lot more before inflation stops nominal drops. I suspect that a lot of the spring bounce sales are going to be back on the market as morgages are refused and chains collapse. The bulls seem to believe that normal is 2006-2007 lending levels. I suspect that sort of lending is not going to happen again for at least a generation, more probably more.

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>50% peak to trough is inevitable and there will be deals at the very bottom which enable you to buy at even lower prices. If you have savings then why would you want to literally give them away by buying a depreciating asset?

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Anyway back then I thought there might be something in the region of a 20% drop in the next few years. But prices rose for another two years and a 20% drop barely takes us back to 2006 locally.

Interesting. So if the crash ends in 2010, thats 4 years of rent that could have gone towards the mortgage. If it ends in 2012, thats 6 years...... So you have to see price drops that equal 4-6 years rent, from 2006 prices, just to break even????? :blink:

You must have a very understanding wife.... :P

Then people like Vince Cable, Financial Planner and others started talking about 50% drops and I got quite excited. I could buy a nice place outright if prices drop 50%. But I am beginning to doubt it will happen to be honest.

It won't. Well done for realising this now. ;)

Talk of green shoots is getting me down. House prices up. Job losses not as big as expected. GDP growth again. Is the crash behind us now?

So the fact that less people are going to endure unemployment than previously expected "gets you down"???? :blink:

Always knew you bears were a callous lot, but thats repugnant, even by HPC standards.

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Interesting. So if the crash ends in 2010, thats 4 years of rent that could have gone towards the mortgage. If it ends in 2012, thats 6 years...... So you have to see price drops that equal 4-6 years rent, from 2006 prices, just to break even????? :blink:

Hamish, your lack of grasp of numbers is staggering.

The fall in prices erodes your equity - that's real money disappearing. A fall in the average price of a house from £200,000 to £160,000 is a £40,000 loss.

Rent is a substitute for mortgage interest not capital. I am renting for less than the interest on a mortgage on the property I rent. So I'm better off on both an income and capital basis.

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Interesting. So if the crash ends in 2010, thats 4 years of rent that could have gone towards the mortgage. If it ends in 2012, thats 6 years...... So you have to see price drops that equal 4-6 years rent, from 2006 prices, just to break even????? :blink:

You must have a very understanding wife.... :P

It won't. Well done for realising this now. ;)

So the fact that less people are going to endure unemployment than previously expected "gets you down"???? :blink:

Always knew you bears were a callous lot, but thats repugnant, even by HPC standards.

:rolleyes:

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I have to admit that i like some of the Mctavish rambling, they are just so funny. :lol:

He's like a spinning top and it dosen't matter what you throw it, it comes back spun !!! :lol:

So what happens when rates rise and all the remortgagers who have been sat on low rate svr's for months suddenly try to get new deals and are competing for the limited funding?

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Guest Steve Cook
What a loaded set of options!

What I WANT or would grudginly (or not) pay is totally irrelevant to the question. Peak to trough is going to be around 60%.

If you've bought before, and the mortgage is a significant portion, and you're on a tracker, then you are going to be stuffed when the higher interest rates kick in.

With house prices at 60% off peak, affordability will remain approximately the same, because of the punitive interest rates that will be offered.

Simples.

exactly

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Interesting. So if the crash ends in 2010, thats 4 years of rent that could have gone towards the mortgage. If it ends in 2012, thats 6 years...... So you have to see price drops that equal 4-6 years rent, from 2006 prices, just to break even????? :blink:

Flippin' priceless! Cos mortgage payments in the early years lop chunks off the capital of a mortgage :lol:

You come on here daily pontificating X, Y and Z setting yourself up as some sort of guru yet fail to understand such a basic concept? For the first few years of a mortgage you should check your annual mortgage statement just to see how much you actually paid off the loan. Come back and tell us what you found.

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Hamish, your lack of grasp of numbers is staggering.

The fall in prices erodes your equity - that's real money disappearing. A fall in the average price of a house from £200,000 to £160,000 is a £40,000 loss.

Rent is a substitute for mortgage interest not capital. I am renting for less than the interest on a mortgage on the property I rent. So I'm better off on both an income and capital basis.

Your lack of grasp of reality is staggering.

Not all areas have rent cheaper than mortgages, or even mortgage interest.

To give you a real world example from Aberdeen, If someone elected not to buy a 100K flat in 2006, and instead paid a rent of £550 per month, (which is what it would cost) they would have spent £26,400 in rent by 2010. That money is a straight addition to lifetime housing costs, as it could have gone towards their mortgage.

Prices in Aberdeen have not quite slipped back to the level they were at in January 2007, and are still well above 2006. At peak (late 07), that 100K flat (in 2006) would have been worth 130K. Today, in most Aberdeen areas, it would still be worth around 110K.

Given that capital values in many places are still higher than 2006 or early 2007, and that rent is similar to or higher than mortgage costs in many areas, can you dispute that a buyer in one of those places has to see prices fall by the amount of rent spent waiting for prices to drop, from the date they postponed purchase?

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Your lack of grasp of reality is staggering.

Not all areas have rent cheaper than mortgages, or even mortgage interest.

To give you a real world example from Aberdeen, If someone elected not to buy a 100K flat in 2006, and instead paid a rent of £550 per month, (which is what it would cost) they would have spent £26,400 in rent by 2010. That money is a straight addition to lifetime housing costs, as it could have gone towards their mortgage.

Prices in Aberdeen have not quite slipped back to the level they were at in January 2007, and are still well above 2006. At peak (late 07), that 100K flat (in 2006) would have been worth 130K. Today, in most Aberdeen areas, it would still be worth around 110K.

Given that capital values in many places are still higher than 2006 or early 2007, and that rent is similar to or higher than mortgage costs in many areas, can you dispute that a buyer in one of those places has to see prices fall by the amount of rent spent waiting for prices to drop, from the date they postponed purchase?

You sling "worth" as if it is an authoritive figure. I think you'll find that these figures you're suggesting the house/flat is "worth" are actually asking figures. Are they selilng like hotcakes, Hamish? I very much doubt it. I put it to you that your "worth" figure is actually how much the property owner wishes they would get for it, rather than what they would actually get for it.

Your peak price of £130k flat is going to drop to £50k. That will buy a nice few years of renting, thank you very much.

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Um, the peak values are now irrelevant, as they were funded by massive reckless lending and the rest, so you really have to ask what is a fair price accoriding to wages, it's the only thing you can go by. A 35% fall would not bring house prices to affordable levels, so it will be more than this.

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What a loaded set of options!

What I WANT or would grudginly (or not) pay is totally irrelevant to the question. Peak to trough is going to be around 60%.

If you've bought before, and the mortgage is a significant portion, and you're on a tracker, then you are going to be stuffed when the higher interest rates kick in.

With house prices at 60% off peak, affordability will remain approximately the same, because of the punitive interest rates that will be offered.

Simples.

I agree with this. We could have a scenario where a 35 percent drop in house prices buying would cost more with the reduction than without. The economy is fooked. When the interest rates are forced up, prices will drop significantly.

As for the original poster and his redundancies haven't been as much as expected, I thought we were having significant rises in unemployment. The government is borrowing now. When that dries up and all those public sector workers jobs go albeit in a couple of years time, the carnage will continue.

The Indexes are down 18 to 20 percent and this crash hasn't even really begun yet.

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You sling "worth" as if it is an authoritive figure. I think you'll find that these figures you're suggesting the house/flat is "worth" are actually asking figures. Are they selilng like hotcakes, Hamish? I very much doubt it. I put it to you that your "worth" figure is actually how much the property owner wishes they would get for it, rather than what they would actually get for it.

No, jackass, that's actual sold prices, as per registers of scotland. I have no doubt owners think they are worth more. But that is what buyers and the banks are willing to pay..... ;)

Your peak price of £130k flat is going to drop to £50k. That will buy a nice few years of renting, thank you very much.

Only in your dreams, odd little tin-foil-hat wearing person, only in your dreams.... :lol:

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No, jackass, that's actual sold prices, as per registers of scotland. I have no doubt owners think they are worth more. But that is what buyers and the banks are willing to pay..... ;)

Only in your dreams, odd little tin-foil-hat wearing person, only in your dreams.... :lol:

Errrr, probably not. Don't see that as being particularly unlikely in two years time.

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No, jackass, that's actual sold prices, as per registers of scotland. I have no doubt owners think they are worth more. But that is what buyers and the banks are willing to pay..... ;)

I'll ignore the taunt, however do you have the figures to back that up..?

Only in your dreams, odd little tin-foil-hat wearing person, only in your dreams.... :lol:

...and in your nightmares.

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1) If petrol is £10/litre, & a loaf of bread is £20, house prices might not fall

2) If bread & petrol stay as they are, expect the average house to be one third of what it is now;

or for a desperate seller whatever they can get

No2 is considered most undesirable.

Suggest you move any savings away from paper.

Spot on. Trying to measure houses priced in a currency that is being printed on mass is like trying to shout at someone on shore hanging a picture trying to get it level while your sat on a boat on a choppy day.

Would I be happy with a 35% fall compared to what??

If its sterling, who knows. PPP, no.

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Interesting. So if the crash ends in 2010, thats 4 years of rent that could have gone towards the mortgage. If it ends in 2012, thats 6 years...... So you have to see price drops that equal 4-6 years rent, from 2006 prices, just to break even????? :blink:

You're a very confused fella. My STR fund for example provides me with £1100 per month interest after tax. My rent is £575 per month.

Shall I run you through it again?

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http://www.houseprices.co.uk/e.php?q=river...ampton&n=10

the £75k and £188k are both three bed detached. The £75k one was up at £99995. The buyers of no. 32 must feel right mugs.

Id want a better area, although ive moderated my view from accepting a 80-90% discount from peak to 60-70% down. Ive seen a fair few examples of 50-60% off now, although all in not great areas. The good areas will get there eventually.

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It just depends on how much you are happy to lose as a buyer , as a seller you have not got those kind of choices anymore, if you haven't had an offer on your property by now you will be lucky to get an offer of 30% off peak, July being the peak moving month and winter 2009 being the time that sellers and EA's come out of denial.

Buyers have to consider if they buy a £300000 property 25% off peak (which it should be ) they will pay £225000

If it loses another 10% (35% off peak) they will lose £30000 probably by the end of the year.

By January / February I am sure sellers will have to accept 40% off peak so the loss on the above purchase would be £45000.

By winter 2010 , 50% , so loss would be £75000.

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