What Year Do You Want Property Levels To Be At Before You Buy

[Nowhere To Go]

We have had an offer accepted on a house for 147K which was previously listed with an estate agent for 199,950. When I search sold house prices for the street this house last sold for 190K in Mach 2006, 172K in Sept 2005 and 77.5K in June 2001 so we are buying at a guess around 2003 level.

I am just curious as to what level you think house prices will drop and whether you are waiting for a specific level before you would buy.

I listened to the Jonathan Davies radio piece yesterday and needless to say I am totally in two minds now!!!

[Aidan Ap Word]

I have to confess: a return to 2003 prices would mean I would be comfortable buying *a home to live in* and then I can get on with my life. That would mean something I could live in such a home with a long term view and a relative income that affords building up some savings for rainy days.

Aidanapword

edit: for grammar

Edited May 8, 2011 by Aidan Ap Word

[porca misèria]

Recently viewed a house formerly on at £250k, then £230k, now down to a worth-looking-at £180k.

Last sold in November 2003 for £238k.

[mercsl]

Location, neighbours from hell , something horrible being planned to be built nearby....if it's such great value I would be suspect why it is not being snapped up relatively quickly.....

[Executive Sadman]

Late 2000, early 2001.

Lots of stuff already at 2003 prices around here, shifts pretty quick though. Lots of stuff at 2006/7 levels too, doesnt shift

[libspero]

We have had an offer accepted on a house for 147K which was previously listed with an estate agent for 199,950. When I search sold house prices for the street this house last sold for 190K in Mach 2006, 172K in Sept 2005 and 77.5K in June 2001 so we are buying at a guess around 2003 level.

You'll get mixed advice.. each has their own view.

If you like the house and can afford it.. then I don't think you are making a bad choice.. as you say it has already fallen 25% from peak and it sounds like you've done your research.

Who cares if it falls another 10% or so.. it will go up again eventually and you are buying it as a home, not so much an investment.

If it WAS for investment.. there is no way I would be looking at property now.

[200p]

If you can get a house at 2004 levels, then that's pretty good going right now. You can get that now with keen sellers.

Who are the keen sellers? It's certainly not the recently retired with their homes paid off and final salary pensions. It is the working class who are being squeezed by inflation, loans, credit cards, redundancy of one partner etc. These are the keen sellers I've seen, and their frequency is on the increase.

If one is prepared to wait a bit more, I can see 2000 prices on the horizon in 2015 (Indices at £120K). Increasing oil prices rather than increasing interest rates being the bugbear.

If oil is this high during the recession (137p Litre unleaded), what is it going to be during an economic boom when the global demand is higher?

[jaydee]

We have had an offer accepted on a house for 147K which was previously listed with an estate agent for 199,950. When I search sold house prices for the street this house last sold for 190K in Mach 2006, 172K in Sept 2005 and 77.5K in June 2001 so we are buying at a guess around 2003 level.

I am just curious as to what level you think house prices will drop and whether you are waiting for a specific level before you would buy.

I listened to the Jonathan Davies radio piece yesterday and needless to say I am totally in two minds now!!!

I would be comfortable with 1995. The bubble was well under way in 2002 - and re-inflated with low interest rates. I think the UK is tanking - a trashed pound has not seen a bounce in exports - personal incomes are falling and inflation is up. The temptation to compare current prices with peak 'asking' prices is IMO best avoided.

Given the crisis perhaps think about all your outgoings and potentially increasing outgoings - add in holidays and other costs such as a car/s hobbies that will give you a reasonable quality of life - see what you have left and then look at what property can be afforded. In short I'd say hold off - the stress on overpriced property vendors is just beginning. King has admitted that he fears the consequences of an interest rate rise - if you buy now and rates go up - you may take a real caning in terms of increased outgoings and slumping property values.

[rantnrave]

No-one's mentioned whether we're talking real or nominal prices here...

[GordonBrownSpentMyFuture]

The Land Registry indicates that house prices doubled between 2001 and 2003.

This was the intentional consequence of mass credit expansion, fraudulently loose lending practices and deregulation of the financial sector, which continued, despite warnings from several sources including high-profile contributors to this site, right up until mid-2007 when the entire Ponzi / pyramid scheme collapsed with devastating effect. I highlight the "bleeding obvious" to provide some context to my view. I would like to see prices return to their pre-fraudulent levels of 1998-2001. However, this won't happen because too many pension funds, too many politicians and too many rich, powerful and influential people (see today's Times' Rich List) will lose too much of their imaginary "wealth" if this were to happen.

In nominal terms, I think the best we can hope for is mid-to-early 2003 prices - or late 2002 at a push. Anything before then is just wishful thinking IMO. They SHOULD return to pre-2001 levels, nominally, but I very much doubt they will. Instead, we'll just have to suffer as the price of EVERYTHING ELSE increases to match, which appears to be current government (interest rate) intention and policy. Current prices my way (West Midlands) are at mid-2004 levels. I suspect another 18-24 months time they'll be at mid-, maybe early-, 2003. It very much depends on the acceleration of the next leg down that we're currently seeing. I might end up being pleasantly surprised.

[GordonBrownSpentMyFuture]

You'll get mixed advice.. each has their own view.

If you like the house and can afford it.. then I don't think you are making a bad choice.. as you say it has already fallen 25% from peak and it sounds like you've done your research.

Who cares if it falls another 10% or so.. it will go up again eventually and you are buying it as a home, not so much an investment.

If it WAS for investment.. there is no way I would be looking at property now.

libspero is right but I think it's worth highlighting for the younger / inexperienced / casual reader that "house prices always go up" is only true in as much as the price of everything only ever goes up - petrol, food, water, gas, electricity, telephone bills, etc. It's called inflation. The notion that "house prices only ever go up" however is completely false, as we've seen over the last 3 years.

Property as an "investment" was so last decade. The smart money got out long before the 2007 crash. The next decade will see property return to its true value and its role as a home for people and their families. If this is why you're buying, and you can afford it, then go for it.

All I would say is make sure it's somewhere you'd be happy to live for the rest of your life (or at least the next 20 years). I know couples with young children, born post purchase, who are now wanting to "move up" the fictitious housing ladder into a larger home but they can't as they're trapped in negative equity with 1 or 2 bedroom slaveboxes. They would have been better off renting a family home but, then, renting is dead money. Isn't it? As one of them told me back in 2005: "House prices only ever go up".

[GordonBrownSpentMyFuture]

I don't think prices will return to pre bubble levels in nominal or 'real' inflation adjusted terms.

I think homeownership levels will carry on falling steadily. That BTL investors and particularly overseas investors will snap up a lot of the property before people can afford them.

I do think the currency adjusted, real house price level could fall to pre bubble levels but borrowing will remain tough for some years to come for those who need it.

A low transaction, cash and investor dominated market as the young end up in rented more and more and rising rents/tough borrowing requirements stop people being able to buy. More and more properties end up being hoarded and never come back again onto the home purchase market.

This is the future.

Yes, I think you're right.

Rent, save up and keep a squeaky clean credit file. This will be the only way; as it used to be. The main difference in the future will be that those who would have traditionally lived in council housing in the past will be living in private rental instead.

[Fromage Frais]

When its clearly cheaper to buy than rent.

when i say that I mean repayment mortgage, taxes, costs, arrangement fees etc etc compared to rent, not the usual interest only compared to rent payment they seem to use in the media.

As for investment I am getting the feeling that extreme lows in interest rates may be followed by extreme highs so i will not be investing in property until 10%+ yields or 10%+ interest rates (which then look like falling).

Saying all that unfortunately with the wife moaning every day I am probably just going to suck it in a loose 50k as cheaper than divorce.

Looking in Norwich its the same story as what others have been saying houses on for 300k and you can see that the ones selling have gone for 230-250.

[olliegog]

confession - I have bought at about 2004 level and sold my last house at 2004ish price. As I am usually well behind the curve I would expect anyone with time on their side and having to borrow money on a 25 year mortgage to buy should wait for about 2002/3 level which was when the last big bubble got going - up until 2007ish.

[Nowhere To Go]

Thanks for all the replies, it is always good to get other peoples perspectives about this madness of over inflated house prices.

I have been reading this forum for years and years but never really contributed much as I was too busy trying to get my head around what everyone was saying about the whole situation. It was thanks to the information on this forum that I decided to str last April with the intention of renting until house prices came down to a level I would be happy to part with my money for or finding a desperate seller. People would comment that I must be mad and I would explain my intentions and I would only get the reply house prices are not going to drop blah blah blah so I stated that I would wait for a forced seller and this is what I have now.

The house was originally up with a local estate agent for £199,950 for six months with only 3 viewings, the owner in March this year asked them to reduce the price and they said "Things will pick up now give it another couple of months" Anyway he never had another couple of months he wanted to sell his house before it was repossessed so he went to a national estate agent company that knocked 50K off the asking price expecting to get a bidding war going unfortunately for them we were the only ones interested.

As we have a large deposit we are borrowing 2x joint earnings but there is a little voice in my head still saying don't do it give it another 12 months and then see what has happened. I only have until Wednesday before they want to exchange so I had better get making the decision soon!

[Dorkins]

The year means very different things in different parts of the country. The boom started in London in 1996 and only spread to some parts of the country in 2000/1.

[“Nasty Piece of work”]

Be open with the vendor, give them a chance to make it worth your while to proceed, or walk away, preferably the latter.

[council dweller]

I am just curious as to what level you think house prices will drop and whether you are waiting for a specific level before you would buy.

140k is the level I'm looking for. As a council tenant it would mean paying 106k (34k discount)

No mortgage required at this level. One of my main concerns is if RTB suddenly ends!

I'll find out how much the council wants for this place at the end of the year, even if I turn it down I can always re-apply 6 months or so later.

147k? Sounds like a good deal, go for it.

[Priced_Out_GenXer]

When its clearly cheaper to buy than rent.

when i say that I mean repayment mortgage, taxes, costs, arrangement fees etc etc compared to rent, not the usual interest only compared to rent payment they seem to use in the media.

+1

I'm 36 and living with parents at the moment, it's far from ideal but it's the only way I can save a decent deposit.

I'm playing it by ear, much will depend on interest rates but I can't see myself buying for at least another two or three years. Unfortunately prices in Milton Keynes have held up quite well, at a rough guess I'd say average asking prices are 10 or 15% below peak. In two or three years time I hope nominal prices will be at least 20% lower than they are today and in the meantime I'll have saved a deposit of 25 - 30k.

I am still of the opinion that the worst is yet to come and that price falls will be at least as bad as the early 90s recession. I think that many people (even some people on here) have been lulled into a false sense of security. The fundamentals have not changed. Keep the faith.

Edited May 8, 2011 by monstermunch

[Cosmic Apple]

I'm guessing around 2003-2004 prices for me would be a spot where I'd say 'good enough' as I previously bought in 2003 and STR 2007 buying back in at this level will put me ahead of the game (compared to my peers who either haven't bought or bought 2006-2008. HPI was fairly late coming in my area, my previous place about 30% 2000-2003 and 125% in the 4 years after.

I've got my eye on a property that has dropped in price recently, last sold for £159k in 2007, on the market at £137k... going to view and will aim to make an offer under the stamp duty threshold. This will be the 2004 price for that street. This place will tick my boxes for 10years (unless unforeseen relocation due to work - or lack of!), 3bed, garage, driveway, nice spot with private back garden and space for some veg... good internet connectivity. My view is anyone buying now has to think about living there a while, not a 2-3year 'that will do until xxx' as seemed to be the norm during the boom years.

[Priced_Out_GenXer]

The other factors, of course, are how far and how fast prices are falling, and interest rates.

You could, for instance, say that 2002 prices would represent good value for money. But if prices reached 2002 levels and were falling by 0.5 or 1% per month you'd be crazy to buy at that point. Better to wait it out and see what happens.

Also, while 2002 prices may represent good value at present interest rates, they might not represent good value if interest rates are 4 or 5% higher than they are today.

[Mikhail Liebenstein]

Property as an "investment" was so last decade. The smart money got out long before the 2007 crash. The next decade will see property return to its true value and its role as a home for people and their families. If this is why you're buying, and you can afford it, then go for it.

Tell me about it, I was jammy enough to exchange 2 days after Northern Rock kicked off. Whilst I was pooing my pants (metaphorically), my buyer seemed strangely unaware of the knock on consequences of the first UK bank run for 100 years. Lucky escape for me, perhaps not for my buyer, though fortunately she was a boomer.

[Cosmic Apple]

The other factors, of course, are how far and how fast prices are falling, and interest rates.

You could, for instance, say that 2002 prices would represent good value for money. But if prices reached 2002 levels and were falling by 0.5 or 1% per month you'd be crazy to buy at that point. Better to wait it out and see what happens.

Also, while 2002 prices may represent good value at present interest rates, they might not represent good value if interest rates are 4 or 5% higher than they are today.

When using mortgage calculators I use 6% as the rate. I tend to use Eggs calculator as it allows you to put in over payments... I will be aiming to overpay enough to get the mortgage term bellow 10years while still having enough to eat well and do other things.

As for buying when house prices are still declining this is an inner conflict I have with myself many times... I want a garden and a garage. To rent that type of property would be £600 a month, but quite honestly I will not pay £600 in rent it is to high, so I live in shared accommodation and save hard. Buying and getting what I want will be fantastic, and I don't mind loosing some of what I've saved in order to achieve the jump to what I want. Of course I'll be buying at a level where I believe the falls won't be to great or particularly fast. Its all a balancing act....

[Mikhail Liebenstein]

I'm guessing around 2003-2004 prices for me would be a spot where I'd say 'good enough' as I previously bought in 2003 and STR 2007 buying back in at this level will put me ahead of the game (compared to my peers who either haven't bought or bought 2006-2008. HPI was fairly late coming in my area, my previous place about 30% 2000-2003 and 125% in the 4 years after.

Thing is you can get those prices now.

I paid £5k less for my current house in 2009 than it sold for in 2004 (when admittedly it was new). It is all about finding the right seller, even in a falling market you can still overpay, the trick is to underpay.

Edited May 8, 2011 by Mikhail Liebenstein

[jaydee]

Thanks for all the replies, it is always good to get other peoples perspectives about this madness of over inflated house prices.

I have been reading this forum for years and years but never really contributed much as I was too busy trying to get my head around what everyone was saying about the whole situation. It was thanks to the information on this forum that I decided to str last April with the intention of renting until house prices came down to a level I would be happy to part with my money for or finding a desperate seller. People would comment that I must be mad and I would explain my intentions and I would only get the reply house prices are not going to drop blah blah blah so I stated that I would wait for a forced seller and this is what I have now.

The house was originally up with a local estate agent for £199,950 for six months with only 3 viewings, the owner in March this year asked them to reduce the price and they said "Things will pick up now give it another couple of months" Anyway he never had another couple of months he wanted to sell his house before it was repossessed so he went to a national estate agent company that knocked 50K off the asking price expecting to get a bidding war going unfortunately for them we were the only ones interested.

As we have a large deposit we are borrowing 2x joint earnings but there is a little voice in my head still saying don't do it give it another 12 months and then see what has happened. I only have until Wednesday before they want to exchange so I had better get making the decision soon!

This property is still overvalued given the lack of interest. Listen to the voice in your head - it's probably telling you what your gut already knows - don't fall into the fear trap - there'll be more houses - at lower prices - the slow down has only just started. But if you must go for it - put in a £120K or less offer.