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What Is The Real Value Of Property Right Now?

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Guest mattsta1964

I bought my first home at the end of 2001

I missed buying the same property a year earlier because the chain collapsed and it cost me an extra 10K to buy the same property one year later (Madness!)

I paid 110K with a 15K deposit. I've just had it valued at 165K (Would be more but needs heating system, new flat roof bla bla bla and I can't justify spending the money to do it up cos I refuse to borrow anymore money)

I've got 85K left to pay over the next 16 years. It still scares the hell out of me as I am a single and self employed. I'm trying to make overpayments on the mortgage to reduce my liabilities in the event it all goes tits-up.

By comparison with a lot of other people, things could be an awful lot worse but I have to say, I am not at all comfortable with my situation. It still worries the shit out of me. I feel desperately sorry for any FTB's who bought after me. Property was already overvalued in 2001

I've ofter wondered, what is the real value of my home based on what is affordable for someone on an average salary borrowing 3x their salary. I reckon about 80-85K is the real value of my home, so after paying god knows how much in interest for 5 years, if the value of my home fell to its real value and I was forced to sell it, I might just about be able to redeem the mortage with the proceeds of the sale.

What would you do folks? Sell up now or hang on?

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The long term average is 3.75x average income, so this could be used as an estimate, but you should bear in mind that an 'average' house has always been higher than this level in some areas, and has probably historically been lower than this level in others.

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Guest mattsta1964

The long term average is 3.75x average income, so this could be used as an estimate, but you should bear in mind that an 'average' house has always been higher than this level in some areas, and has probably historically been lower than this level in others.

I'm surprised. I thought the multiple would be a bit lower

So the next silly question must surely be, what is a sensible, sustainable multiple of income when calculating the affordability of a mortage, taking into consideration the range of interest rates over a period of time?

Surely, the old 3x salary that banks used to lend in saner times still holds true.

U couldn't buy a garden shed around here with that. Tragic..

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I think you're safe from negative equity even if you may regret not cashing in now. If you are self employed then you may be in a position to actively use the equity you have built up?

Mortgage multiples by and large nestle at the level interest rates are. 5x now is just as affordable as 3x in early 90s when rates were high. However, as someone pointed out they would prefer a small debt at high rates than the other way around.

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The ratio is 3.5x1

It was never the case that the average single person could buy a house.

The ratio's are not a true representation as its all down to affordability and interest rates.

I think ratio's are a thing of the past, in my experience I purchased my first property within the 3.5x1 ratio then we had 18% interest rates, so I was well and truly stuffed.

Borrow what you can afford today, and for Gods sake fix the rate, money is far too cheap and one day the banks will reel in the mugs who are sitting out there without a fixed rate.

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Guest mattsta1964

Yeah!

I got the rate fixed for 5 years, and I can make overpayments too so I'm just gonna stuff every penny I can into the accursed mortgage while the going is good.

I'm still not optimistic about things getting easier, especially if interest rates rise to more average levels, 8-9% in a few years. I'll get a shock when I have to renew the mortage again next time.

Whatever, I'm keeping a very close eye on the US economy and the impending dollar collapse. I'm positive it'll happen before the end of the decade and probably sooner.

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I bought my first home at the end of 2001

I missed buying the same property a year earlier because the chain collapsed and it cost me an extra 10K to buy the same property one year later (Madness!)

I paid 110K with a 15K deposit. I've just had it valued at 165K (Would be more but needs heating system, new flat roof bla bla bla and I can't justify spending the money to do it up cos I refuse to borrow anymore money)

I've got 85K left to pay over the next 16 years. It still scares the hell out of me as I am a single and self employed. I'm trying to make overpayments on the mortgage to reduce my liabilities in the event it all goes tits-up.

By comparison with a lot of other people, things could be an awful lot worse but I have to say, I am not at all comfortable with my situation. It still worries the shit out of me. I feel desperately sorry for any FTB's who bought after me. Property was already overvalued in 2001

I've ofter wondered, what is the real value of my home based on what is affordable for someone on an average salary borrowing 3x their salary. I reckon about 80-85K is the real value of my home, so after paying god knows how much in interest for 5 years, if the value of my home fell to its real value and I was forced to sell it, I might just about be able to redeem the mortage with the proceeds of the sale.

What would you do folks? Sell up now or hang on?

If you want a thumbnail valuation for your property's underlying value find out how much you could rent it out for (per month) and multiply it by 150 + or - 10%

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An alternative method of valuing houses is that a typical return for renting a house is 7.5% gross yield. So, work out what the house would rent for, and divide that by 0.075.

So if your house is valued at 165K, the rent that makes your home worthwhile to a BTLer would be £1031.25 a month. Looking at rents for similar properties will tell you whether your house is overvalued given this measure.

Billy Shears

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Guest mattsta1964

Thanks for those tips chaps

Looks like I'm reasonably safe.....providing nothing absolutely catastrophic happens.....and then we're all stuffed..... property or no property.

Keep on watching the US economy!

M

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Yeah!

I got the rate fixed for 5 years, and I can make overpayments too so I'm just gonna stuff every penny I can into the accursed mortgage while the going is good.

If you think that prices are going to fall or stagnate then you are doing exactly the right thing in reducing your gearing (borrowing as %age of your property's value).

If you think that prices are rising (and you are bonkers) then the correct thing to do is to gear up and get the biggest house you can find.

The ultimate in reducing your gearing would be to STR or move to a cheaper house.

Good luck

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  • 302 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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