Jump to content
House Price Crash Forum
Sybil13

What Advice Would You Offer Potential Buyers ?

Recommended Posts

OK time for an update in thinking maybe.

We are in the midst of a so called "dead cat bounce" a "bull trap" most believe the blip in property prices upwards is ONLY due to instructions falling 60% whilst demand has picked up.

Most (and I don't mean HPCrashers I mean Nationwide / Rics etc), believe that should instructions pick up HPC would resume.

This summer was the "bounce" followed by contd HPC this autumn, even the survey of building societies concluded property would fall another 10% on top of the 22% to date by the end of the year.

For weeks and weeks and weeks all I have read in every paper is about the shortage of funds for lending with Rightmove saying in their June HPIndex that should there be an increase in demand lenders would resort to imposing even stricter criteria and put up interest rates.

For me at least, despite all the other factors:

Affordability / FTB's / historic loan to income / etc etc etc...........

FUNDING seemed to be the BIG one.

I was pleased to read that should QE be extended that the money would be going to business not mortgage lending.

I was pleased to read that if it was extended it would not be extended by very much.

I was pleased to read that the BOE believed that the government had not given the banks enough to lend and therefore artificially prop up hugely overvalued property.

I was pleased to read in an article last week "Lenders expect to extend more credit" that:

Lenders expect to make credit more easily available to households and businesses over the coming quarter but are not expecting much of a pick-up in demand, a survey by the Bank of England showed on Thursday.

The quarterly credit conditions survey showed government initiatives to boost lending had enjoyed some success -- secured credit to households increased in the second quarter for the first time since the third quarter of 2007.

But lenders expected spreads on new mortgage lending to remain wide, meaning borrowers would not see the full benefit of record low interest rates. And spreads on corporate lending were expected to widen further.

"While there are some encouraging signs in the credit conditions survey, the UK is certainly not out of the woods yet," said Colin Ellis, an economist at Daiwa.

"As long as credit scores continue to tighten, that will make it harder for households to get funding, which is likely to restrict activity, particularly in the housing market, for some time."

Economists are split on whether the central bank will extend its QE programme but all agree that credit conditions will be key to that decision.

......However, while lenders expected demand for loans from small businesses to pick up, they did not expect any increase in demand for mortgages.

There was also an expectation that default rates would continue to rise and little appetite to cut spreads -- the margin over the Bank rate that lenders charge for credit.

"The survey was not overly encouraging about the outlook for bank lending and therefore the prospects for overall economic growth," said Vicky Redwood at Capital Economics.

"The improvement in the balances may just have reflected the lending commitments made by lenders participating in the Asset Protection Scheme, rather than a fundamental shift in lenders' risk appetite."

So here we are half way through 2009.

At the start of the year Rightmove and Savills told sellers they needed to reduce property prices 25 - 30%.

By March 2009 RM said that even sellers who had "drastically reduced" were finding it hard to find a buyer who could get a mortgage.

We have heard from many sources that property is selling but mostly at 30% off peak, and heard that lenders valuations also are coming in well under peak and up to 40% for remortgaging. (Hard to see why that would be if lenders were not expecting considerably falls).

We have heard it costs a lender 5x's more to give a 90% LTV than a 60% one because of the risk.

We have heard that the FSA stress tested for 50% falls and that :

Marjan Riggi of Moody’s said: “What’s different is the loss expectation is higher than it was three or four months ago looking at the economic forecasts on housing.

“Last year we were looking at mortgage lenders and stress-testing a 25 per cent fall in house prices. In the past three or four months that assumption has changed to a 40 per cent fall, which is a considerable difference.â€

On Wednesday Adrian Coles, director-general of the Building Societies Association, said Moody’s had included an extreme stress test of a 60 per cent fall in house prices,

So the stage is set, RM and others have said since the beginning of the year :

Sellers Need to Reduce Prices

We have heard :

Why Property Prices Have Further to Fall

House Prices Might Have Another 40% to Fall

And been told to :

Stay Away From Property Because It Has Much Further to Fall

BUT we have seen property prices rise the past few months (not unusual I know in amongst falls it happened in other crashes), and we have been told this is due to falling instructions and growing demand.

However, throughout this process we have also been told that the government will do all they can to keep property prices high, yet to date they have done little to support the property market with the NAEA and CML response to the budget confirming they felt the government had done NOTHING to support the overvalued property market, "a water pistol to put out a fire" NAEA.

Indeed the Bank of England warned Darling :

Don't Try to Stop the Housing Crash

Saying it would be:

‘dangerous’ for policymakers to try to stem the relentless slump in the value of property.

So here we are 6 months through 2009 with the "assumption being 40% falls" and Merryn's:

all real bear markets tend to offer the unwary investor one last opportunity to lose money. The summer of 2009 is probably that opportunity this time round.

But with most agreeing that come the autumn people would be out of the denial phase and HPC would resume.

BUT and this is a big BUT, there is now talk of another £150bn of QE and I am wondering how likely it is that the government, seeing property prices going up will make a HUGE injection of cash into the property market hoping that can keep things ticking over at 2007 values until the election? Will we read throughout the winter how 2007 valued will be back by 2010? I have not heard any predictions, even those that expect further 10% falls this year, say they expected falls next year.

When I consider the big picture and all the opposing facts I think it is little wonder people are JUMPING.

If you are buying on a mortgage and can get a good fixed rate and are going to live in the property for 25 years ........well its not an easy decision is it, knowing if you jump now you may well see yourself in negative equity for quite a large % of those 25 years but interest rates going up to 10% (is that likely? I don't know), is not very appealing either is it?

If you have the cash to buy and getting little interest on your savings and meanwhile are eating into capital to pay the rent and property is not likely to fall until after the election and could then fall 40 - 50% or more.......well again not an easy decision especially with inflation just around the corner.

So will QE be extended and a % of that £150bn go to propping up the overvalued housing market, and will it be Q4 2010 or even 2011 before we actually see property marketed 30% off peak?

Share this post


Link to post
Share on other sites

If you want to do it, and you can afford it now, and you're sure you'll continue to afford it, do it. If not, don't. However, before you decide whether you can afford it, please go read around the subject for a bit, then work out your living costs from your old bank statements, not from what you think you live on.

Then again, that's what I'd have said at the peak as well.

Share this post


Link to post
Share on other sites

I'd say:

The only thing that can be guaranteed is that prices will not go up significantly in the next few years.

They may increase by a few percent but it is far more likely they will either stagnate or shrink downwards slowly.

If you save hard for the next few years you could end up with a better house for less money but if you really value the stability of home ownership - factoring in a return to 5% interest rates at least - then go for it

Share this post


Link to post
Share on other sites

The biggest boom in history where house prices went up 280% in a short few years is not going to be followed by the shortest bust in history....

house prices have got one way to go and that is down and down a lot more.

.look at all the figures and you will find out that the housing market in my opinion will not stabilize for years and years as can anyone tell me of a time when a bubble happened and burst and when prices did not revert back to the norm?

Share this post


Link to post
Share on other sites

Come on CONVINCE me.

I have seen the charts.

I have read ALL the reasons the market is not going to recover.

I have seen the figures re mortgage approvals and how many approvals are considered necessary before the market stabilises.

EVERYTHING tells me property should be trading at at least 30% off peak already, which is what Rics said in March 2009 .

BUT you can't blame people for thinking even now that we on HPC are living in la la land because from where they are standing property is going up and the government will print enough money to stop the market from falling.

SO CONVINCE ME............this is not going to happen and now is not the time to jump.

When I say CONVINCE ME ...........I don't mean ME.......I mean anyone looking to buy and thinking maybe just maybe I should jump now.............

Share this post


Link to post
Share on other sites
Come on CONVINCE me.

EVERYTHING tells me property should be trading at at least 30% off peak already, which is what Rics said in March 2009 .

A lot of property is already trading at 30% off peak, so I 'm not too sure what you are getting at. Also not sure if you want convincing that now is the time to buy, or NOT the time to buy? Everyone will be in a different position. I am activley looking to buy ( just back from 2 viewings). I will buy when I find the right house at the right price, and after that I couldn't care less what happens to the "value" of it.

Share this post


Link to post
Share on other sites
Come on CONVINCE me.

I have seen the charts.

I have read ALL the reasons the market is not going to recover.

I have seen the figures re mortgage approvals and how many approvals are considered necessary before the market stabilises.

EVERYTHING tells me property should be trading at at least 30% off peak already, which is what Rics said in March 2009 .

BUT you can't blame people for thinking even now that we on HPC are living in la la land because from where they are standing property is going up and the government will print enough money to stop the market from falling.

SO CONVINCE ME............this is not going to happen and now is not the time to jump.

When I say CONVINCE ME ...........I don't mean ME.......I mean anyone looking to buy and thinking maybe just maybe I should jump now.............

you shouldnt need convincing dispite unemploymeant and the gdp level dropping a massive 4.9% house prices are still holding up, they seem to be the only good investment to be made at the moment,

yes maybe they will drop another 5% or so

but we are more or less at the bottom of the crash

once QE gets injected into business that should kick start the economy again

dont listen to these DOOM MONGERS!!! they are just bitter people who missed the boat

all because they want it to crash more doesnt mean it will!!

Edited by bullsh1t

Share this post


Link to post
Share on other sites
Come on CONVINCE me.

I have seen the charts.

I have read ALL the reasons the market is not going to recover.

I have seen the figures re mortgage approvals and how many approvals are considered necessary before the market stabilises.

EVERYTHING tells me property should be trading at at least 30% off peak already, which is what Rics said in March 2009 .

BUT you can't blame people for thinking even now that we on HPC are living in la la land because from where they are standing property is going up and the government will print enough money to stop the market from falling.

SO CONVINCE ME............this is not going to happen and now is not the time to jump.

When I say CONVINCE ME ...........I don't mean ME.......I mean anyone looking to buy and thinking maybe just maybe I should jump now.............

Who are you looking to convince people? Most of the Bulls on here have gone so theres no real point of is it a good time to buy now thread plus there is a pinned thread?

Personally I would not get involved in encouraging people to buy or not to buy as people could come to resent you. Leave people to make their own minds ups.

If I could get a house at 25-30% of peak I would probably buy now but they are not available in my area so I will sit it out till at least next.

Share this post


Link to post
Share on other sites
If you want to do it, and you can afford it now, and you're sure you'll continue to afford it, do it. If not, don't. However, before you decide whether you can afford it, please go read around the subject for a bit, then work out your living costs from your old bank statements, not from what you think you live on.

Then again, that's what I'd have said at the peak as well.

I'm sorry but this is not good advice (IMO)! Just because you can afford to doesn't make it a good idea. There are LOTS of things I can afford to do, but that doesn't mean I am going to do them. Put it this way, even if you can afford it, you need to ask yourself if you really don’t mind it decreasing by 10 – 20 – 30 – 40 % and in particular what affect would the worse case scenario have on your life? For instance, if you want to have children and move to a bigger place, will negative equity prevent you from doing so? There are many scenarios (a lot unpredictable) that you need to think about other than the ‘I can afford it’ argument.

Owning a home was supposed to be something that gave us security and freedom but now – and potentially more in the future – it could RESTRICT your life choices because of the debt burden (even IF you can afford to service the debt).

Edited by MinceBalls

Share this post


Link to post
Share on other sites
you shouldnt need convincing dispite unemploymeant and the gdp level dropping a massive 4.9% house prices are still holding up, they seem to be the only good investment to be made at the moment,

yes maybe they will drop another 5% or so

but we are more or less at the bottom of the crash

once QE gets injected into business that should kick start the economy again

dont listen to these DOOM MONGERS!!! they are just bitter people who missed the boat

all because they want it to crash more doesnt mean it will!!

You read economics at primary school?

Share this post


Link to post
Share on other sites
dont listen to these DOOM MONGERS!!! they are just bitter people who missed the boat

"Sorry Sir, the Titanic is fully booked".

Share this post


Link to post
Share on other sites
you shouldnt need convincing dispite unemploymeant and the gdp level dropping a massive 4.9% house prices are still holding up, they seem to be the only good investment to be made at the moment,

yes maybe they will drop another 5% or so

but we are more or less at the bottom of the crash

once QE gets injected into business that should kick start the economy again

dont listen to these DOOM MONGERS!!! they are just bitter people who missed the boat

all because they want it to crash more doesnt mean it will!!

At least you have the correct user name.

Share this post


Link to post
Share on other sites
Guest KingCharles1st
Come on CONVINCE me.

I have seen the charts.

I have read ALL the reasons the market is not going to recover.

I have seen the figures re mortgage approvals and how many approvals are considered necessary before the market stabilises.

EVERYTHING tells me property should be trading at at least 30% off peak already, which is what Rics said in March 2009 .

BUT you can't blame people for thinking even now that we on HPC are living in la la land because from where they are standing property is going up and the government will print enough money to stop the market from falling.

SO CONVINCE ME............this is not going to happen and now is not the time to jump.

When I say CONVINCE ME ...........I don't mean ME.......I mean anyone looking to buy and thinking maybe just maybe I should jump now.............

OK Sybil

The "secure home/family/job/career/lifestyle demographic market WILL recover to some degree

However- the rest will also SHRINK- HUGELY, DRASTICALLY, SCARILY- It's already happened- can't you see that?

Share this post


Link to post
Share on other sites
If I could get a house at 25-30% of peak I would probably buy now but they are not available in my area so I will sit it out till at least next.

+1

sums up my area (S. Oxfordshire) very well.

regards

J

Share this post


Link to post
Share on other sites

Sybil, speaking personally I would wait and see what happens over the next 12 months - the fact is as you know there is simply nowhere near enough finance for prices to return to 2007 levels so worst case scenario (for us) is that prices more or less stay the same. So nothing to loose by waiting.

Best case scenario (and IMO by far the most likely) is obviously that prices continue falling; I believe that drops so far have been mainly the result of lending restrictions and drops due to repos are yet to come (someone doesn't loose their job and then the house the following week - this takes months, years even). The biggest variable as far as I'm concerned is how far they drop, however it is worth considering that even a further 10% drop saves £30,000 over a 25 year (assuming average 6% interest) £150,000 mortgage.

Also worth considering that the sub-prime minister is desperate to keep prices as high as possible whereas if/when David Cameron takes over it would suit him to have a lower starting point as it will be an inherited problem and the Tories can claim the 'credit' for future rises.

Of course having said that if a suitable house came along and the price was VERY right ie 30+% off peak then I would seriously consider and take the chance of prices falling further.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   296 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.