Incredibly Uncertain.

[AFineMess]

Hi,

this is the first time I've posted here, but I've been listening in for a while.

My own experience is that I am approaching 40, I live in London, and I'm still renting. Having held on so long, me and my partner now have a reasonable deposit, but have been unwilling to buy at prices we felt sure were unreasonable. Despite claims of affordability, I've heard analyses claiming that, in the long term, it's not nearly so affordable due to the debt not eroding so fast.

Likewise, I can't believe that a house price crash would be good for any of us, due to the knock on effects on the rest of the economy. I'd sure like to see more affordable housing though. I have only two friends with property in London - both earning significantly above average; one with rich parents, the other with a partner also earning significantly above average. Myself and my partner earn above average, but not significantly so.

We would love our own place, not in least because you really are a second class citizen in the UK if you rent after a certain age, but it strikes me now, as it has done for the last 5 years in London, that now would be a really, really bad time to buy.

So what is it? Am I crazy to hold on for so long? Is there ever a good time to buy?

[Jason]

Hi,

Likewise, I can't believe that a house price crash would be good for any of us, due to the knock on effects on the rest of the economy.

Why are you blaming the symptom, and not the cause? A Major Credit Boom wouldn't be good for -most- of us, due to the knock on effects on the rest of the economy.

Oh, and welcome to HPC!

Edited December 6, 2005 by Jason

[BandWagon]

In a property market that has been booming for years(UK) people will tell you that it's crazy to rent.

In a property market that has been falling for years (Germany) people will tell you that it's crazy to buy.

You're just ahead of the crowd on this one.

[frugalista]

We would love our own place, not in least because you really are a second class citizen in the UK if you rent after a certain age.

To be happy it is necessary to ignore how other people see you.

Anyway, it could be that in a couple of years you are a 3rd class citizen if you own a property millstone!

So what is it? Am I crazy to hold on for so long? Is there ever a good time to buy?

Well, looking back, perhaps you should have bought 5 years ago.

I tried to buy in 1997 while I was a research student but my parents backed out of guaranteeing the mortgage. So in the end I did not buy until 2002, 4 1/2 years later, and after all the easy money had been made. I sold up again in late 2004, with a small profit, which I believe was a lucky escape.

But one salient point about finance is that there is no point looking back. There is no point me looking back to 1997 (a good time to buy) and trying to draw conclusions about the present. The conditions are completely different now.

The fact that you held off buying through the huge boom does not make now a good time to buy. To put it another way, we may never see 1997 prices again, but we may well see the prices of 2001, sooner than you think.

frugalista

[AFineMess]

Why are you blaming the symptom, and not the cause? A Major Credit Boom wouldn't be good for -most- of us, due to the knock on effects on the rest of the economy.

I don't think I'm blaming anything. I'm just trying to understand what the pros and cons of the situation might be.

Oh, and welcome to HPC!

Thanks

[Jason]

I don't think I'm blaming anything.

Ok, fair enough.

Why don't you compare what the costs are of renting compared to buying. I.e. Is your rent less than the interest part of a mortgage? Then add on house maintenance costs that you don't pay and any other benefits you get (e.g. gardener?). Compare this again if mortgage interest rates were modestly higher.

Then ask yourself what you expect house prices to do over the next few years. Even the most opomistic say house prices will flatten out (apart from Kirsty Allsop who is stupid). So, you are not going to lose on capital appreciation.

If house prices fall, you will be far better off, and I think they will fall.

Be warned tho, if you are ititching to get the fabled property ladder you may as well bite the bullet, as patients is needed. Large falls probably won't be publicly acknowledged until the end of 2006. The bottom of the cycle will probably be several years.

Edited December 6, 2005 by Jason

[AFineMess]

To be happy it is necessary to ignore how other people see you.

Very true, and something I forget sometimes.

But one salient point about finance is that there is no point looking back. There is no point me looking back to 1997 (a good time to buy) and trying to draw conclusions about the present. The conditions are completely different now.

The fact that you held off buying through the huge boom does not make now a good time to buy. To put it another way, we may never see 1997 prices again, but we may well see the prices of 2001, sooner than you think.

I agree that now seems a risky time to buy, against the whole economic and political backdrop. I think there may be some reversals in house prices next year, but who knows? I won't be looking to buy a place until at least mid next year in any case, as I have too much on right now to even think about looking...

Thanks for the advice,

AFineMess

[frugalista]

I agree that now seems a risky time to buy, against the whole economic and political backdrop. I think there may be some reversals in house prices next year, but who knows? I won't be looking to buy a place until at least mid next year in any case, as I have too much on right now to even think about looking...

I may well be in a similar position at some point between Autumn 2006 and Autumn 2008 when I move back to Blighty.

My strategy will be this:

1. Buy something which I could imagine being in for the rest of my life.

2. Buy something I will always be able to make the repayments on assuming I have some kind of reasonable job.

3. Haggle like a hard-nosed armadillo. As someone on HPC.co.uk put it "you can pay for your own dreams, or you can pay for theirs"

2. and 3. are just common sense really.

My justification for 1. is that I think the property ladder is finished. It is a product of high wage inflation, and I think high wage inflation in the UK was a one-off aberration of the 70s and 80s which has now gone for the forseeable next 20 years.

frugalista

[VacantPossession]

Hi,

this is the first time I've posted here, but I've been listening in for a while.

My own experience is that I am approaching 40, I live in London, and I'm still renting. Having held on so long, me and my partner now have a reasonable deposit, but have been unwilling to buy at prices we felt sure were unreasonable. Despite claims of affordability, I've heard analyses claiming that, in the long term, it's not nearly so affordable due to the debt not eroding so fast.

Likewise, I can't believe that a house price crash would be good for any of us, due to the knock on effects on the rest of the economy. I'd sure like to see more affordable housing though. I have only two friends with property in London - both earning significantly above average; one with rich parents, the other with a partner also earning significantly above average. Myself and my partner earn above average, but not significantly so.

We would love our own place, not in least because you really are a second class citizen in the UK if you rent after a certain age, but it strikes me now, as it has done for the last 5 years in London, that now would be a really, really bad time to buy.

So what is it? Am I crazy to hold on for so long? Is there ever a good time to buy?

With the greatest respect, and welcome too, it is exactly the sentiment you are expressing which is partly the reason why the property market gets away with being as outrageous as it has been for the last ten years. It is this very lack of faith in your own instinct that allows prices to have got out of your reach. Your posts admirably demonstrates the irrational fear that somehow NOT buying makes you a second class citizen, and that even if you lose a pile in negative equity it makes sense (apparently) for you to make the insane decision to buy in a market which is both falling and which is also exploiting your fear.

On both counts I feel you ought to have a little more confidence, at the age of nearly 40. It is a profound misunderstanding to say that a property crash would have long term bad consequences for "us". The precise opposite is true, unless you have been profligate in obtaining 100% mortgages in order to climb on the bandwagon for investment purposes. The high capital cost of housing is a stranglehold on personal budgets that would be more sensibly spent elsewhere. It would be infinitely better for all of us if we didn't, on average, have to spend nearly all our disposable income on a roof over our heads. Instead the equivalent funds could be released to invest in actual production of goods and services, and NOT on a static asset which has no actual dynamic worth beyond its function as a dwelling.

The perception of being an inferior person on account of not owning a property is possibly the most lilly livered of all your points, especially when you stop and consider that hardly anyone else owns their property either....for it is generally "owned" by a building society and in many cases just creates a huge debt despite the illusion that you "own" the bricks and mortar that your bank will swoop to repossess at the slightest sign that you can't keep up the payments.

If you multiply your fear and anxiety by a few million, you arrive at the exact reason why there is a delay in the onset of a full blown crash. Millions of people like you are thinking, and acting, in the same way. Their paranoia of being "left behind" is the very last staging post before a crash finally asserts itself. All this attitude does is delay the inevitable.

Please have a look at Holland, or Germany, or Belgium, where renting is NOT considered to be the refuge of the inadequate, but a sensible and canny option. The result is that in these countries property is not a yardstick by which to measure people's status, and renting is considered in many cases a far superior thing to do rather than splashing out on a mortgage which saps your resources. As a byproduct, rental properties in these countries is also about HALF the cost of the equivalent in the UK, and often TWICE the size for half the rent.

Forgive me if this appears a harsh response to your very first post, but after forty years of life we ought to have a bit more courage of our convictions.

VP

Edited December 6, 2005 by VacantPossession

[Guest]

Your posts admirably demonstrates the irrational fear that somehow NOT buying makes you a second class citizen

I am a second class citizen.

I am a property bear.

BEAR PRIDE - PROUD TO BE A PROPERTY BEAR

Don't abuse me! Bear basher!

Soon, I believe it will be acceptable for property bears to marry other property bears.

So there.

EDIT - I told my friends I did no DIY. They pointed out that I don't own a house. Some friends they are! Huh!

EDIT 2 - I was so excited about doing the coloured text, I forgot to quote.

Edited December 6, 2005 by megaflop

[VacantPossession]

IEDIT - I told my friends I did no DIY. They pointed out that I don't own a house. Some friends they are! Huh!

Worthwhile noting that B&Q are currently struggling because those mad keen DIY'ers are not so mad keen nowadays.....there is no profit in doing up and selling their houses any longer.

I recall that in 1990 the first businesses to go down the drain were bespoke kitchen shops, DIY shops and other businesses serving the house improvement mob.

VP

[right_freds_dead]

So what is it? Am I crazy to hold on for so long? Is there ever a good time to buy?

its a see-saw. when prices are low IRs are uncomfortable.

when IRs are comfortable. prices are too high.

i often wonder if its always a struggle when approaching your fist house purchase. i remember before i got all qualified guys in the 1987 buyin a 19k house on 8k salarys. at 8% i think IR. either way it made up trainee killers gulp at the costs.

what went wrong ? this now seems like an uber bargain, but back then there simply wasnt so much money about. then, what do i really know. i know its never been appealling.

i think this is why your still renting like me.

we saw the opps, but chickened out. that first 5 years always seemed impossible throughout ALL the booms and busts.

IMHO

[brainclamp]

You will hear all sorts of rubbish about a coming HP crash on this board, people claiming they will just move abroad.

The one thing you will never hear is of people unionising and taking poltical action.

There is very little chance of a significant house price crash, or a pension for that matter for most people.

A long history of legal changes and tax breaks from 1997 mean that most real assets are owned by the rich, while the youngs workers assets and savings have withered away. The killer was mass immigration which created massive labour competiton and falling/slow rising real wages and falling per capita wealth.

The only way that incomes over taxes will catch up is with the force of unionisation.

Edited December 6, 2005 by brainclamp

[frugalista]

You will hear all sorts of rubbish about a coming HP crash on this board, people claiming they will just move abroad.

The one thing you will never hear is of people unionising and taking poltical action.

There is very little chance of a significant house price crash, or a pension for that matter for most people.

A long history of legal changes and tax breaks from 1997 mean that most real assets are owned by the rich, while the youngs workers assets and savings have withered away. The killer was mass immigration which created massive labour competiton and falling/slow rising real wages and falling per capita wealth.

The only way that incomes over taxes will catch up is with the force of unionisation.

How is mass immigration (if indeed it has happened at all) going to continue with a weakening pound and a severe recession? There are going to be fewer and fewer jobs for prospective immigrants to do and if they do get one, their pay packets are going to be worth less and less in their home currencies. Furthermore, with ever increasing globalisation of capital, more jobs are springing up in their home countries. The current immigrants will be returning home and new ones won't be arriving to replace them. There is nothing special about the UK from the point of view of global capital. The UK is now a very bad place to invest in. Capital will move elsewhere for the next few years, and migrant workers will follow that capital as they always have done.

frugalista

[VacantPossession]

How is mass immigration (if indeed it has happened at all) going to continue with a weakening pound and a severe recession? There are going to be fewer and fewer jobs for prospective immigrants to do and if they do get one, their pay packets are going to be worth less and less in their home currencies. Furthermore, with ever increasing globalisation of capital, more jobs are springing up in their home countries. The current immigrants will be returning home and new ones won't be arriving to replace them. There is nothing special about the UK from the point of view of global capital. The UK is now a very bad place to invest in. Capital will move elsewhere for the next few years, and migrant workers will follow that capital as they always have done.

frugalista

Oh don't worry, it's just Brainclamp's normal excuse to insert immigration into any available discussion. I had a headache while driving to the shops today. I have no doubt this is all due to immigration. What's more, the supermarket shelves had been emptied of spring onions, which I particularly enjoy. They must have all been swiped by the overun of immigrants. To cap it all I got back to my car and it had a parking ticket. Definitely put there by an immigrant.

I think I my great great great great grandfather was an immigrant. In fact I think all members of my family were immigrants at sometime. Does this mean I should be deported. I am obviously the cause of the entire country's problems.

VP

[CrashConnoisseur]

...I can't believe that a house price crash would be good for any of us, due to the knock on effects on the rest of the economy.

On balance the current 'disorderly readjustment' will be good for many people although not for everyone. The cause of the "knock on effects" was the unsustainable boom, not the inevitable readjustment which follows it. House prices should never have been allowed to get out of control in the first place. Have you seen Riser's famous graph of 'Recessions and the Housing Cycle'?:

http://img82.imageshack.us/my.php?image=recessions9vl.png

We would love our own place, not in least because you really are a second class citizen in the UK if you rent after a certain age,...

Most people in their 40s who have their 'own' place are still renting -- they rent money from a bank or building society. What's second class about paying less in rent for a house than it would cost to rent the money to buy the same property? Avoiding a capital loss sounds like a first class strategy to me.

[assetpriceinflation]

Absolutely do not buy now.

If you have spare cash -- buy precious metals.

However you have to be prepared to sit tight for a while. Personally I don't foresee significant downward movement of house prices until 2007 and even then it will take two years to reach the trough.

Remember the old chinese proverb, 'Everything comes to him who has Balls of Steel'.

[rockdoctor]

I rented for 6 months between flat and house ownership.

The only time my second-class status came up was when I received a call from a breathless woman who had "very exciting news for you", but first needed to confirm that I was a homeowner. She was audibly taken aback when I told her I was renting, but I convinced her I would be buying soon from my stash from the flat sale (I was curious to hear what the scam would be), so she carried on.

Apparently I had 'won' a luxury holiday for the whole family, flights, accommodation, spending money, all included, choice of dates, choice of destinations.....all I had to do was attend a ceremony where it would be awarded.

I said "thanks", and declined to attend the ceremony. "Oh no, you can't have the holiday unless you come to the ceremony". "Where is it then?", "Oxford, and your family has to be with you". "In that case, no thanks, I believe this is a time-share scam and I wouldn't dream of wasting my time or my family's on your illegal scheme". "<stunned silence>...<gabbled denials>". "<click>".

I looked it up later - it was a time-share scam - at the event they claim you were only told you were entitled to be entered into a draw for the holiday, and only one is handed out, to a planted family, after an interminable time-share hard sell presentation"

So it's better to rent - because you won't get time-share scam calls (presumably because renters are too poor to afford them - or is it because they are too canny?).

[Magpie]

AFineMess

I'm in a very similar position as you and I'm trying to buy in the new year. Here's my reasoning:

One complicating factor I have is a daughter, nearly four who really needs a bedroom (we're in a one bedroom flat, rented cheaply). To rent somewhere acceptable with a garden is going to cost almost (not quite) as much as a mortgage. (yes we could get something cheaper but not anywhere we'd be happy)

I'm pretty sure house prices will fall at least a bit, maybe a lot over the next few years, but I think I need to consider all options from say a 10% rise to a 30% fall and see how they will affect me. I'd much rather not pay current prices given what I could have paid five years ago if I'd had the security at the time (long story...), but given the prices now, what do I do? If I wait and they rise that's even worse. On the other hand if I buy now and they fall, I am losing money. My hope is that if that happens the fall will be only the equivalent of losing my deposit but that it won't actually cause negative equity in which case at least moving up the so-called "ladder" will be more possible.

I'm 38, my partner is 41, so already my bank will only give me a 24 year mortgage. Every year we wait will mean that our mortgage becomes shorter and therefore more expensive. I can barely get there now and would be distraught if it once again became impossible rather than difficult.

Even if prices fall significantly, will good areas in London fall by much? I'm not sure. A lot of people on this forum aren't from London and might disagree. But I see London as having stagnated about 3 or 4 years ago, while other places have caught up. Bad London areas are overpriced, but decent areas haven't gone up in proportion. So a good (and by good I don't mean Kensington, just a pleasant area with tolerable schools and not too many crack dens) area in London at present is not as overvalued as a bad London area or pretty much anywhere outside London. I might be wrong about that but it's my opinion.

So for me, reluctantly buying and risking losing some or all of the equity in the short term seem the best bet. It also definitely means that we have to find somewhere we'd be happy to hold out in for ten years or so because it's no good assuming we'll be able to move easily in the short term.

I think a lot of people here are quite correct to wait for their own reasons, and I think the site does a terrific job in debunking VI spin and nonsense. This is clearly an overpriced market. But each of us has to make a personal decision about how to deal with our own situation. Some of the earlier replies seem to me to be egging you on to make a decision for reasons that may not apply to your own situation.

[VacantPossession]

AFineMess.......

....I think a lot of people here are quite correct to wait for their own reasons, and I think the site does a terrific job in debunking VI spin and nonsense. This is clearly an overpriced market. But each of us has to make a personal decision about how to deal with our own situation. Some of the earlier replies seem to me to be egging you on to make a decision for reasons that may not apply to your own situation.

Looking at my reply to AFineMess, I ought to qualify it by saying I had no wish to persuade him to do other than follow his instincts. However I also implied that the decision to buy should not be predicated on fear or on anxiety but on a positive desire to buy, rather than feeling bulldozed into buying just because VI spin says you must.

VP

[Magpie]

Looking at my reply to AFineMess, I ought to qualify it by saying I had no wish to persuade him to do other than follow his instincts. However I also implied that the decision to buy should not be predicated on fear or on anxiety but on a positive desire to buy, rather than feeling bulldozed into buying just because VI spin says you must.

VP

That's a fair point, I think you're quite right that fear and anxiety are the wrong reasons to buy. It's hard but you have to try to put them to one side and make the most rational decision you can - for me the anxiety is hard to ignore, but there are some concrete factors too. I don't think AFineMess necessarily should make the same call as me because I don't know enough about his situation to give any real advice.

[Smurf1976]

Worthwhile noting that B&Q are currently struggling because those mad keen DIY'ers are not so mad keen nowadays.....there is no profit in doing up and selling their houses any longer.

I recall that in 1990 the first businesses to go down the drain were bespoke kitchen shops, DIY shops and other businesses serving the house improvement mob.

VP

A couple of years ago my neighbours got a new kitchen. It took months from when they first enquired until work started because there was a huge waiting list. It then took literally 3 months for each of the trades - plumbing, carpentry, electrical and so on to do the work. End result is that they had their new kitchen probably 12 months after they first made moves to get it.

Now theres someone advertising very heavily on the radio and they promise that it will be complete in 10 days from when you call.

If that's not a sure sign that demand for home improvements has dropped then I don't know what is.

[erranta]

...I can't believe that a house price crash would be good for any of us, due to the knock on effects on the rest of the economy.

I find it very hard to read discussions just about the UK Boom!

A boom is happening simultaneously, Globally in Westernised countries - unprecedented!

Don't you question that and ask yourselves - WHY?

We are at the peak of the oil age. House prices have shadowed the boom/rise in use of oil discovery, wealth and use.

It would not surprise me one bit if OPEC and colluding Govts are sitting tight on the Peak Oil Global bomb-shell at this very minute!

That is why the colluding Global finance community are screwing the Western Worlds herds just one last time before the bombshell information is released!

Post Oil is downhill all the way - until the inevitable climb up the other side with new technologies.

There will be a massive human population reduction during this time - if no alternatives to oil based chemicals/fodder/fertilizer are found!

Oops spelling

Edited December 7, 2005 by erranta

[IMupNorth]

AFineMess

Even if prices fall significantly, will good areas in London fall by much? I'm not sure. A lot of people on this forum aren't from London and might disagree. But I see London as having stagnated about 3 or 4 years ago, while other places have caught up.

Ahh, not the first person to have seen London prices stagnating for the past 3 or 4 years.

But thats impossible according to the members of this forum !! - prices either go up or they crash !!

Reality is that the rest of the market may well do a London and just stagnate for 3-4 years - it is possible you know, even if you can't stomach this thought, it is extremely likely that is what is going to happen.

[Magpie]

Ahh, not the first person to have seen London prices stagnating for the past 3 or 4 years.

But thats impossible according to the members of this forum !! - prices either go up or they crash !!

Reality is that the rest of the market may well do a London and just stagnate for 3-4 years

To be fair I've only really watched one small bit of the market closely - that is the cheap end of 2-beds in particular areas. If anything the asking prices have drifted up very slightly at the end of this year, but the ones that go up by £5 or £10K seem to be the ones that don't sell, so it's probably an illusion. Mostly they haven't budged much since late 2002.

From what I've been seeing, I think there's further stagnation on the cards in this narrow band. Prices are a bit beyond what anyone would sensibly pay, but vendors are very reluctant to drop price. But there's just enough activity to keep this rather unhappy state of affairs going for the time being.

What happened last time in London was the viciously overpriced areas (Hackney, East End, bits of South and Outer West) fell much more than OK areas, which fell a little but not a lot. I fear the same may be true this time. However I find it hard to believe that the country in general can stagnate - prices I've seen in satellite towns and up north seem far more out of whack than London prices.