In The Game Of Property Snakes And Ladders

[munimula]

Without decent HPI and with the huge costs now needed to move most people will be forced to move down the property ladder.

I use my parents as an example. They are looking to sell a £450K house - to sell and buy a similar priced property will cost around £20K in fees so they will only be able to buy a £430K house max.

They are going to be forced to move down the property ladder.

This has got to put downward pressure on house prices.

Stamp duty was sneaked in during period of rampant HPI which masked the real effects + house prices weren't so ridiculous before so costs were lower.

Now for large family homes in most areas the costs associated with moving will force people to move down the property ladder in the absence of HPI which I think we all agree has gone for a few years now.

Edited March 2, 2006 by munimula

[non-FTBer]

Unless people borrow more to cover the fees/costs and stampd duty.

This was common during the boom years of massive HPI, but is it sensible with flat/falling prices?

This angle, IMHO, also hinges on availability of credit and sentiment (liek everything else).

If credit is available to include these fees into a new mortgage then the cycle CAN continue.

If credit is available and sentiment is positive then people COULD and MIGHT continue to move up the ladder by adding these costs into their new mortgage.

[munimula]

Unless people borrow more to cover the fees/costs and stampd duty.

This was common during the boom years of massive HPI, but is it sensible with flat/falling prices?

This angle, IMHO, also hinges on availability of credit and sentiment (liek everything else).

If credit is available to include these fees into a new mortgage then the cycle CAN continue.

If credit is available and sentiment is positive then people COULD and MIGHT continue to move up the ladder by adding these costs into their new mortgage.

But my parents, probably not unlike many other are asset rich, cash poor. In a mortgage free position there is no way they would borrow money or take out a mortgage to stay in the same position. They will have no choice but to move down the ladder and I'm sure there are many that will be in the same position when they sell.

[right_freds_dead]

this is too true.

you never hear much of people 'upsizing' on these property junk progs.

"this hard working family of 4 from essex really need to move out of the 3 bed terrace to a bigger 4-5 bed semi in romford." (cue contemporary beats and 25º flat angle pans of new property).

[backtoparents]

What's wrong with downsizing?

It is perfectly sensible in a market like this. Sell out, buy less, keep some equity.

It is halfway to STR

But who buys the stuff at the top, apart from those dumping their BTL portfolios, if the rungs are further apart?

btp

[munimula]

What's wrong with downsizing?

It is perfectly sensible in a market like this. Sell out, buy less, keep some equity.

It is halfway to STR

I think it is worth recognising this change.

Downsizing is something that is generally done to release money, release equity, move to somewhere cheaper if you are struggling with costs of current property.

This is forced downsizing, they are forced to buy somewhere for less because of huge costs associated with moving.

Before high house prices, there was no stamp duty and EA fees were considerably less because they are based on a percentage

Now with high house prices stamp duty is considerable, as are EA fees.

The sum of money now required to move will force many people to downsize, not to release cash but because they are left with considerably less money to move.

I think that during rampant HPI these costs were masked, now they are clear for anyone moving to see

This has to put downward pressure on prices because those coming up will not be able to afford the jump up the ladder and those moving across will be forced to pay less for their next house.

Edited March 2, 2006 by munimula