3 Friends Just Bought

[dude wheres my house]

Three of my friends have just bought flats, 2 with parental help and one without

1 has bought a new build city centre flat off plan for a LOT of money

1 has bought a couple of years old flat outskirts of the city for a considerable amount of money

1 has bought an ex LA house for a fair bit of money

I did try my hardest to dissuade them from doing this but i guess they all think i am a nutcase. And to be honest it has become a bit of a running joke to mock my crash views.

How do you think the three of them will fare in the next few years?

[redgenieuk]

Three of my friends have just bought flats, 2 with parental help and one without

1 has bought a new build city centre flat off plan for a LOT of money

1 has bought a couple of years old flat outskirts of the city for a considerable amount of money

1 has bought an ex LA house for a fair bit of money

I did try my hardest to dissuade them from doing this but i guess they all think i am a nutcase. And to be honest it has become a bit of a running joke to mock my crash views.

How do you think the three of them will fare in the next few years?

I have the same problem.... It is def a souce of fun and amusement for friends and family alike.. they just dont think it will happen!!

[Hard-up]

Personally, in the event of a crash, I don't think they'll fair well.

From a friendship point of view, I'd advise keeping shtumm about HPC from now on in their company.

Feel free to continue the sentiment elsewhere tho

[harris]

If they are on a fixed rate deal and can afford the payments they'll be fine.

[Disillusioned]

I'm certainly careful about who I badger about the imminent HPC. Telling most people once is fine but the problem with going on about it is that you won't be very popular when it happens. No matter how hard you try to not say 'I told you so' whatever you do say will be interpreted as such!

[Disillusioned]

If they are on a fixed rate deal and can afford the payments they'll be fine.

So long as they don't plan on moving in the next 20 years.

[Harry Sacks]

Three of my friends have just bought flats, 2 with parental help and one without

1 has bought a new build city centre flat off plan for a LOT of money

1 has bought a couple of years old flat outskirts of the city for a considerable amount of money

1 has bought an ex LA house for a fair bit of money

I did try my hardest to dissuade them from doing this but i guess they all think i am a nutcase. And to be honest it has become a bit of a running joke to mock my crash views.

How do you think the three of them will fare in the next few years?

Relax, don't interest yourself in their business, get on with your own life.

Your friends will be casualties of the bank cycle, just as my friends were in the early 90s. Back then those of us who rented were out all weekend having the time of our lives, while the ones who had bought in the late 80s were in their tiny flats eating beans on toast, seriously, this is how it was. This time, however, I think it will be much worse.

Even today I meet the casualties of the last crash. Guys who lost everything and are now in their mid fifties and sixties, living in bedsits with nothing and no one.

[precipice]

So long as they don't plan on moving in the next 20 years.

Indeed, and what's a £100K or so difference, anyway. It's only money. Grows on trees.

P.

[234SALE]

So long as they don't plan on moving in the next 20 years.

Because in five yars time it's likely that the properties will be worth 30% less and the repayments 30% more

[Orbital]

How do you think the three of them will fare in the next few years?

As long as they can afford it then they will do just fine. Maybe this helps you to understand why a quick end to this isnt going to happen.

I know its comforting to come here and reassure your gamble on a crash is the right move, but lets be honest - no one knows for sure what will happen next. GL !

[crashtastic]

If they are on a fixed rate deal and can afford the payments they'll be fine.

The problem comes ofc when in 6 years time they have a couple of kids, and a wife/hubbie and a whooping mortgage for 150k+ for a place that is now worth around 90k.

That's when the problem comes...

[precipice]

As long as they can afford it then they will do just fine.

Yep. Buy now. Buy lots. There's never been a better time.

Look, the housing market is substantially sentiment driven, and even you have surely noticed sentiment's a bit less rosy than usual at the moment. Advising people to buy now just seems a bit evil, to me. Still, I'm sure you've got a good reason.

P.

[harris]

The problem comes ofc when in 6 years time they have a couple of kids, and a wife/hubbie and a whooping mortgage for 150k+ for a place that is now worth around 90k.

That's when the problem comes...

That's being over dramatic. What they'll have in six years time is place that is worth in nominal tems about the same or 10% more than it is now (albeit less in real terms) and about 20% of the mortage paid off. They won't have made a huge gain but will be earning more and will have a 10% deposit to be able to trade up to a new place which will cost less in real terms than it does now.

In pure financial terms they'll probably be slightly worse off than someone the same age who rented and managed to save the difference between the rent and mortgage payments. In reality most people don't manage to do this and in any event having your own place for six years instead of renting is far more pleasant in most cases.

Edited May 9, 2007 by harris

[Casual Observer]

That's being over dramatic. What they'll have in six years time is place that is worth in nominal tems about the same or 10% more than it is now (albeit less in real terms) and about 20% of the mortage paid off. They won't have made a huge gain but will be earning more and will have a 10% deposit to be able to trade up to a new place which will cost less in real terms than it does now.

In pure financial terms they'll probably be slightly worse off than someone the same age who rented and managed to save the difference between the rent and mortgage payments. In reality most people don't manage to do this and in any event having your own place for six years instead of renting is far more pleasant in most cases.

Good post. I agree entirely.

[the end is a bit nigher]

That's being over dramatic. What they'll have in six years time is place that is worth in nominal tems about the same or 10% more than it is now (albeit less in real terms) and about 20% of the mortage paid off. They won't have made a huge gain but will be earning more and will have a 10% deposit to be able to trade up to a new place which will cost less in real terms than it does now.

the one buying the new build off-plan is already in negative equity - at least the other 2 will be benefitting from somewhere to live

unless they are overpaying, they won't have paid off anywhere near 20% of their mortgage

[deano]

I have the same problem.... It is def a souce of fun and amusement for friends and family alike.. they just dont think it will happen!!

And when it does happen they will treat you with disdain. Better off keeping your views closer to the chest IMO.

[Timm]

1 has bought a new build city centre flat off plan for a LOT of money

1 has bought a couple of years old flat outskirts of the city for a considerable amount of money

1 has bought an ex LA house for a fair bit of money

How do you think the three of them will fare in the next few years?

The truth is, no-one knows for sure. But lets take the doubt out of it and look at how I think they will do if the market stagnates:

My guess is that the city centre flat buyer will do worst, if it's Leeds or Liverpool particually badly.

The 2nd hand flat on the outskirts will do a bit worse than the market as a whole.

The XLA house guy might do OK. In fact, I have a theory that over the next decade, XLA houses of standard construction will actually do quite well, as the middle class work out they are good solid homes often in reasonable locations, with proper infrastructure and their own patch of garden. In ten years time the previous occupents will be living in Luxury flats in unsupported urban wastelands.

But it's just a guess.

[JumboMills]

If your friends are happy with their repayments, then good luck to them. It is you that will look stupid if you are still prophesising a crash in 3 years time. You may mock... but people have been saying the crash is 'just around the corner' for years!

[nohpc]

So long as they don't plan on moving in the next 20 years.

So long as they don't plan on downsizing. If they want to move up the ladder on their fixed rate they will be fine.

[Harry in Germany]

Anybody buying now is going to lose money in the short term IMO. If prices don't drop in the next two years I will eat my own shoes.

Anybody buying a new build two bed flat (zzzz) at the moment is an idiot and should be mocked accordingly.

[dude wheres my house]

If your friends are happy with their repayments, then good luck to them. It is you that will look stupid if you are still prophesising a crash in 3 years time. You may mock... but people have been saying the crash is 'just around the corner' for years!

Yes it is all a big gamble and that is what is so frustrating. I dont think that this should be the case, if i knew that houses were expensive and had always been and always would be then i could say, "fair enough" and start ploughing through the payments

But all this HPI is a new phenomenon, and everything points to a drop in the future so what the hell are you supposed to do. Jump in with both feet when you think it is a mistake?

[Guest Cletus VanDamme]

Even today I meet the casualties of the last crash. Guys who lost everything and are now in their mid fifties and sixties, living in bedsits with nothing and no one.

Jeez, that sounds depressing.

[Hard-up]

Jeez, that sounds depressing.

Aye, but the correct response is to come up with a plan to avoid such an eventuality for yourself (assuming your in the same initial state)

[Johnny Cash]

So long as they don't plan on downsizing. If they want to move up the ladder on their fixed rate they will be fine.

Do you really not understand this or are you purposely being obtuse?

If there is a downturn, probably accompanied by higher interest rates, and you're in negative equity to the tune of say £20k, if you want to "move up the ladder" you have to take out a new mortgage for the cost of the new house plus the amount of negative equity on the old property.

This means you will probably need a mortgage for more than 100% of the purchase price of the new property - at market rates. You can't take a fixed rate deal with you. It ends when you take out the new mortgage and you have to take the best deal you can. This wil be at a much higher rate of interest than your old fixed rate deal, if indeed you can get the mortgage. When times are hard 120% mortgages are not exactly easy to come by you know.

In case you havn't worked it out yet, the answer is, you're stuck!

[Ignorant Steve]

Yes it is all a big gamble and that is what is so frustrating. I dont think that this should be the case, if i knew that houses were expensive and had always been and always would be then i could say, "fair enough" and start ploughing through the payments

But all this HPI is a new phenomenon, and everything points to a drop in the future so what the hell are you supposed to do. Jump in with both feet when you think it is a mistake?

You've only just left university (I think I saw that a few days ago).

The biggest difference you can make in your life at the moment is to concentrate on a profitable career. You have serious doubts about buying property so rule that option out for 5 years, review again in maybe 2 years. Spending more than 10 mins a week on websites like this isn't going to solve or change anything.