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Timing And The Buyer

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Read an article on the front page

http://www.moneyweek.com/blog/there-are-fewer-homes-for-sale-in-britain-than-you-think-12901

It got me thinking about when someone should buy. Its not only about location (London, suburbs)

If you exclude London....

If you have 100% funds, then the ideal time to buy is when you see a fire sale of properties - Sellers racing to the bottom to get shot of their property and you buy in November (IR gone up perhaps - unemployment rife). The question is when will that happen? it might not!

However, if all you have is a 20% deposit, the timing above is not correct. The buyer has to take account of the availabilty of affordable mortgages in the near term.

Now the problem here, is that current IR is low and so mortgages are artificially low and affordable. They may not be soon though. It may be that the firesale mentioned above still shuts out the "deposit" buyer because the mortgage cost is too high (that's why they are selling init?)

It doesn't suprise me that London prices are holding firm. I personally think they won;t go down much more.

As for everywhere else?

I personally think no less than 10% in the next 5 years.

If that is the case - why are people waiting?

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Read an article on the front page

http://www.moneyweek...you-think-12901

It got me thinking about when someone should buy. Its not only about location (London, suburbs)

If you exclude London....

If you have 100% funds, then the ideal time to buy is when you see a fire sale of properties - Sellers racing to the bottom to get shot of their property and you buy in November (IR gone up perhaps - unemployment rife). The question is when will that happen? it might not!

However, if all you have is a 20% deposit, the timing above is not correct. The buyer has to take account of the availabilty of affordable mortgages in the near term.

Now the problem here, is that current IR is low and so mortgages are artificially low and affordable. They may not be soon though. It may be that the firesale mentioned above still shuts out the "deposit" buyer because the mortgage cost is too high (that's why they are selling init?)

It doesn't suprise me that London prices are holding firm. I personally think they won;t go down much more.

As for everywhere else?

I personally think no less than 10% in the next 5 years.

If that is the case - why are people waiting?

Some of us are not waiting.

We found a forced seller with a house that needed work and have taken out a 10 year fixed rate. Maybe other people will get better deals than we have, but we have secured a home (house) that we can easily afford at a price fixed for a decade. That would never have been possible for us to do five or even ten years ago.

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Some of us are not waiting.

We found a forced seller with a house that needed work and have taken out a 10 year fixed rate. Maybe other people will get better deals than we have, but we have secured a home (house) that we can easily afford at a price fixed for a decade. That would never have been possible for us to do five or even ten years ago.

Thats interesting - Lets say that IR increases in 4 years time with inflation and continues to do so.

In ten years, People will probably look back on what you've done and wonder why they didn't do the same when they has the chance.

i.e. they "missed the boat" of low IR.

In the end, its not about winning or losing - its about doing the best you can

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I guess not everyone agrees with the OP about the rate of decrease or the assumptions made.

I am hopefully looking to buy outright (but modestly - small terrace or cottage in one of the less expensive areas of the country). At the moment the houses I want to buy are decreasing faster than my monthly rent plus I'm increasing my savings at the same time - which increases my choice enormously. I can now buy houses which were effectively pie in the sky last year.

Not to mention, of course, that once I buy I then have maintenance and insurance costs I don't currently have.

I also have a finite need for shelter. For each year that goes by, the length of time that I need shelter reduces and so I am looking for a reduction in house prices which reflects my reduced need for shelter. It's unlikely that the missus and I will need shelter for more than 40 years (we don't expect to have any dependents so no-one to leave it to either). Coupled with that our rent has been static or falling at at least the last 8 years.

The flipside of this - the missus is desperate to have a home she can call our own so she can decorate, have pets, garden etc. Those are not unreasonable expectations out of our short lives and getting the best out of our money isn't everything (You can always earn more of the stuff). If the right house turns up for the right price, we will buy it.

Then, of course, there is the nuclear option. Move overseas and effectively retire while living pretty comfortably. The price of a modest house here buys a jolly nice one plus good lifestyle in other parts of the world.

Edited by StainlessSteelCat

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I've always argued that people often forget to take IRs into consideration. The total cost of ownership will include any interest. I bought houses in 2005 and 2010 and both times secured cheap mortgages and bought from couples that had emigrated and needed a quick sale.

Timing is absolutley everything and the reality is nobody can predict with 100% accuracy when the "ideal" time will be (except those who suffer from hindsight bias!!). As with any market transaction more often than not you won't get the cheapest possible price but we have to accept that we cannot predict that with certainty. It therefore makes sense to buy at a price that makes sense to you.

And I also enjoy knowing that I'm less than 20 years aways from not having to pay acommodation costs - most likely less as my wages *should* (touch wood!!) only go up and I plan to overpay.

Seems to make sense to me but each to their own.

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Read an article on the front page

http://www.moneyweek.com/blog/there-are-fewer-homes-for-sale-in-britain-than-you-think-12901

It got me thinking about when someone should buy. Its not only about location (London, suburbs)

If you exclude London....

If you have 100% funds, then the ideal time to buy is when you see a fire sale of properties - Sellers racing to the bottom to get shot of their property and you buy in November (IR gone up perhaps - unemployment rife). The question is when will that happen? it might not!

However, if all you have is a 20% deposit, the timing above is not correct. The buyer has to take account of the availabilty of affordable mortgages in the near term.

Now the problem here, is that current IR is low and so mortgages are artificially low and affordable. They may not be soon though. It may be that the firesale mentioned above still shuts out the "deposit" buyer because the mortgage cost is too high (that's why they are selling init?)

It doesn't suprise me that London prices are holding firm. I personally think they won;t go down much more.

As for everywhere else?

I personally think no less than 10% in the next 5 years.

If that is the case - why are people waiting?

I was waiting for a long time, I STR'd at the end of 2005, but now I've run out of time.

I'm taking early retirement next year and wanted a house with a garage/workshop big enough to support my boatbuilding plans, and security to plant a garden. I can't get either of these by renting, so I've bought.

It's the right house in the right area with a distressed seller who needed a cash buyer. Could I have got a better deal by waiting a few more years? Very possibly. But then there's the question of would a house still be available which met a very long list of specifications?

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Some of us are not waiting.

We found a forced seller with a house that needed work and have taken out a 10 year fixed rate. Maybe other people will get better deals than we have, but we have secured a home (house) that we can easily afford at a price fixed for a decade. That would never have been possible for us to do five or even ten years ago.

Congratulations Timm.

I am considering a very similar strategy. In my area prices are still too high (South), but unsold stocks are piling up fast, and prices will fall in the next 3-6 months. If they fall enough until Jan-Feb 2012 (near -10% will do), then we may go for it, also fixing it, for at least 5 years, probably 10. I think IR will still be low by then. And if IRs go up, prices will come down even more. ( --> OP, notice this. One way or the other, we'll be fine.)

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It got me thinking about when someone should buy.

The ideal time to buy is when you see a fire sale of properties

Sellers racing to the bottom to get shot of their property and you buy in November

The question is when will that happen? It may not be soon though.

It may be ........................2013, 2014 and 2015

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The buyer has to take account of the availabilty of affordable mortgages in the near term.

Now the problem here, is that current IR is low and so mortgages are artificially low and affordable. They may not be soon though. It may be that the firesale mentioned above still shuts out the "deposit" buyer because the mortgage cost is too high (that's why they are selling init?)

If that is the case - why are people waiting?

At present there is a chasm between what buyers are willing to pay, and the amount the sellers would like. The sellers are comfortable because of low rates as we all know. But your analysis takes no account of the fact that the prices buyers are willing to pay are also based on low interest rates. Also, the low rates / no forced sales means that sellers have greater power. But when when forced sales happen, there will be a power shift. Prices will not be determined by seller aspirations, but buyer ability.

When rates rise, we will have forced sellers, but more and more buyers will see their spending power eroded by higher interest rates. As such, an imaginary buyer with a 4% interest rate (repayment over 25 years) would currently pay £533 for every hundred k he borrows.

But if the mortgaged buyer can only borrow at 6%, for £533 a month repayment, they can borrow £82k.

People are borrowing based on affordability criteria. I think its clear to see that a 2% increase in interest rates would severely damage the affordability for buyers and mean that prices would have to fall even further in order to get volumes back up.

It is safe to say that an increase in rates will force a few sales, but will mean prices have to fall by more than the current gap between sellers aspirations and buyers affordability as the power shift from seller to buyer emerges and buyers have less spending power.

Edited by Caveat Mortgagor

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It doesn't suprise me that London prices are holding firm. I personally think they won;t go down much more.

As for everywhere else?

I personally think no less than 10% in the next 5 years.

If that is the case - why are people waiting?

Because it's still cheaper to rent! (whatever the newspapers pretend)

tim

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Dont think thats true, I can would be paying £1,200 pcm for rent but a mortgage would be £1,000 with repayments 9so £600 in interest.

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I'm renting a lovely place that I can't buy.

Happy to live in comfort for a while and not rush to buy.

The village I want to buy in is small and desirable so will just wait for something to come along that fits my requirements. If the worst happens jobwise etc I'll buy somewhere smaller outright if I have to.

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The buyer has to take account of the availabilty of affordable mortgages in the near term.

Now the problem here, is that current IR is low and so mortgages are artificially low and affordable. They may not be soon though.

I don't follow this logic at all. Flat rate deals are timed to be available over periods which the lenders are pretty confident that rates wont rise (otherwise they wouldn't be offering them). If you buy now at low flat rate thinking your going to beat the hikes you wont because the BoE rate wont significantly rise until all the cheap deals have come to an end (or are coming to an end within a year or so), the BoE will see to that. By the time the BoE rate hikes are upon us there wont have been any chap FR deals available for a long time before.

So come the rate hikes, new and most existing mortgage holders will be hit, at best some people who timed their RF deals with get maybe 6 months to a year of shelter over the rising rates. The big upside of waiting is that the rate hikes get priced in. House prices are a function of affordability and your much better off buying a cheap house on a high rate than an expensive one on a low rate.

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It doesn't suprise me that London prices are holding firm. I personally think they won;t go down much more.

As for everywhere else?

I personally think no less?? than 10% in the next 5 years.

If that is the case - why are people waiting?

Even if there is only a 10, 5 or even zero percent fall over the next 5 years, it can still make sense to live at home or rent a cheap property.

Say properties don't drop at all, the interest on the house you might like to live in could be, say, £1000 per month.

By renting a smaller flat it saves the expense of the intermediary smaller property buying/selling costs, insurance repairs etc. It also means you remain more flexible in the job market.

Your rent in the smaller flat might be, say, £500 (or if you are lucky enough to live at home, zero).

The difference is saved towards a deposit and is money you won't ever need to pay interest on to borrow. It may also earn you money and it will definitely (as your LTV decreases) make any future borrowing costs lower.

Unless house prices are likely to increase noticeably over the next few years (which seems very unlikely to me at this juncture) , then I can't make a case where it is better to buy unless you really are not bothered about the financial aspect of buying, or you are planning to buy a much cheaper house than you are currently renting.

Edited by libspero

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Miss the boat of low interest rates? They may be low but mortgage rates are not. Mortgage rates were lower in 2004/05 IIRC.

I did work out this scenerio some time ago. That as house prices fall interest rates rise too you have to make some assumptions but for me it was by far better to wait for the falls and pay a higher rate. But I have a 50% deposit. I understand it may not work so beneficial for those with a 20% or less deposit.

But there are other things to consider too, if you buy now on say a 80% LTV mortgage and prices fall by 10% over the next few years then you will be unable to move as you won't meet the mortgage criteria anymore as you LTV would have moved up to 90%

Also, fixed deals don't last forever. Even if you have a 10 year fix there's another 15 years to go. I think you have to assume long term average rates for this as around 6/7%

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Miss the boat of low interest rates? They may be low but mortgage rates are not. Mortgage rates were lower in 2004/05 IIRC.

I did work out this scenerio some time ago. That as house prices fall interest rates rise too you have to make some assumptions but for me it was by far better to wait for the falls and pay a higher rate. But I have a 50% deposit. I understand it may not work so beneficial for those with a 20% or less deposit.

But there are other things to consider too, if you buy now on say a 80% LTV mortgage and prices fall by 10% over the next few years then you will be unable to move as you won't meet the mortgage criteria anymore as you LTV would have moved up to 90%

Also, fixed deals don't last forever. Even if you have a 10 year fix there's another 15 years to go. I think you have to assume long term average rates for this as around 6/7%

I bought yesterday.Quite simply I needed somewhere to live and they wanted over £400 fees to rent plus £600 a month.I saw a reasonably priced 3 bed semi for £129,995 and haggled it down to £111,000 for a cash sale and immediate exchange.I think the vendors were in a spot with it but it made more sense than getting 2.75% on the money.

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Another issue is pushing the mortgage into or close to retirement age. Though retirement for many is now a moving target....

At high LTVs house price falls faster than capital repayment are going to cause problems. Though they will have a higher risk appettite in that they want to 'get on the ladder at all costs'.

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Was getting a two pronged attack on EA Today recently for being a silly little renter (two different posters in two different threads blink.gif).

They seem to completely ignore market timing.

My circumstances are somewhat different - I'll post what my thinking is and would appreciate either any confirmation or corrections that are needed.

Returned to the UK from a decade overseas in 2008 (bummer of a choice of decade!). We're not sure we are going to stay in the area where we currently are (Shrops), but prices here are pretty close to the Halliwide mythical average, so I'll use that number.

Savings in early 2008 = 50K. Average house prices circa 185K. Had I bought the average pad then, I would have needed a mortgage of 140K (allowing 5K for Stamp Duty and other costs). Throw in interest payments over 25 years, and double that to say 280K.

I however rented, spending about 19K over the last three and a bit years.

Savings in mid 2011 = 85K. Average house prices circa 165K. Allowing for the same 5K in costs, I would need a mortgage of 85K to buy the average place. With interest that becomes 170K.

I haven't factored in any maintenance costs saved because there hasn't been much done to the two properties I've rented.

280K - 170K - 19K = a theoretical 91K in my favour?

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I bought yesterday.Quite simply I needed somewhere to live and they wanted over £400 fees to rent plus £600 a month.I saw a reasonably priced 3 bed semi for £129,995 and haggled it down to £111,000 for a cash sale and immediate exchange.I think the vendors were in a spot with it but it made more sense than getting 2.75% on the money.

You need to try harder.

I have my money invested at 5%

tim

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You need to try harder.

I have my money invested at 5%

tim

But you can't get 5% if you want to be able to access the money, in case the right buy comes up at the right price.

And who knows when that will be?

Some people are happy to wait a few more years. For others, life's too short.

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Buying at three times gross income putting down at least a 10% deposit, keeping a little cash back, a 25 year long term fixed repayment loan, payments not exceeding 35% of income, a nice area, close to work, that will fit requirements for min the next 10 years.....better still buying a low energy cost home....can't see a problem...... ;)

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But you can't get 5% if you want to be able to access the money, in case the right buy comes up at the right price.

And who knows when that will be?

Some people are happy to wait a few more years. For others, life's too short.

most of these deals you can get out of for a small penalty. I've got a 5 year bond at 5.15% with a 90 day loss of interest on early withdrawal. Read the small print and do the maths.

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Buying at three times gross income putting down at least a 10% deposit, keeping a little cash back, a 25 year long term fixed repayment loan, payments not exceeding 35% of income, a nice area, close to work, that will fit requirements for min the next 10 years.....better still buying a low energy cost home....can't see a problem...... ;)

Except you'll get raped by the interest rate. And wont be able remortgage after prices fall even a small amount. 25% or it's not worth contemplating.

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I've got to a stage where income rather than deposit is the limiting factor and i'm still miles away from affording the sort of house I'd like. In which case the time is coming to decide what to do instead of buying a house and wasting the bet years of my life to pay for it.

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Timing And The Buyer It all depends how much you've got.

nope. it depends on how dumb you are. who right now would possibly want to chain themselves to a lifetimes worth of decay ?

the games up. even the fat lady has left, yet the nimby audience wont leave there seats.

lights go off next. then the heating.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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