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Jonnybegood

Ftb Feels House Prices Are Affordable With Good Deposit

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Talking with my Nephew this afternoon around the dinner table when I got round to asking how his house hunting was going.

Having not seen him for around 2 years I honestly expected him to say outright that prices were now silly and he would not be buying, but he told me that property was more affordable to him and his G/F now than 2 years ago.

He his 27 and his G/F 25, they both work full time and earn around £50k between them per annum.

They have saved between them around £45k for a deposit and continue to save.

I told him he should of bought 5 years ago when he starting earning decent money but he feels he has not missed out that badly, he and his G/F still live at home with their parents and so are able to save each month a percentage of their earnings and this as allowed them to save a good deposit.

The 3 bed semi's he is looking to buy were selling for £100k 5 years ago, now they sell for £150k.

If he had bought 5 years ago with the mortgage and buying bits and pieces for the house he would not of been able to save anywhere near what he has saved to date so the £45k in savings offsets the increase in prices and he and his G/F have had a good time for the past 5 years being mortgage free and enjoying a couple of holidays each year.

But now he feels the time is right to take on the commitment and having spoken to a few local Estate Agents gets the feeling that the prices that will be "Accepted" will be very close to those being offered 2 years ago but now he and his G/F have 2 extra years worth of savings to put down as a deposit.

And yes I have told him that I expect prices to fall 20% over the next 5 years but he is not too bothered, he is buying a bigger house from the start with a plan on not moving again for another 10+ years.

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If he feels he's ok with it - go with it.

As for him not being better of buying 5 years ago - crock of shi+

100K versus 150K (minus 45k) - worse off 5k not including 5 years worth of repayments + interest saved.

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I just thought I would share it with the Forum as something just did'nt seem right, £45k deposit is alot of money but only a small amount of the property is being paid off, it still leaves a fairly big mortgage.

But then again they want to move in together , they both earn good money with good prospects of earning far more over the coming years as age is on their side.

What other options do they have? Rent for the next few years?

After all the mortgage will be around 2X joint incomes which today is seen as being very sensible and maybe fixing long term will give security over the long term.

As for keeping their jobs, well if that happens there will be more than a few up the swany.

But from it all it does show that those prepared to save can put themselves in a position to buy quite comfortably, nothing is given to anyone and those expecting to buy with just a £5k deposit and £40k mortgage are living in coo coo land.

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Silly question: they don't live together, right? And now they want to to both - buy a house and move in together?

Why wouldn't they rent first, NOT because it's cheaper but just to make sure they can pull it off living as a "family" and breaking up won't ruin their life financially.

Living with parents is a holiday.

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If he feels he's ok with it - go with it.

As for him not being better of buying 5 years ago - crock of shi+

100K versus 150K (minus 45k) - worse off 5k not including 5 years worth of repayments + interest saved.

I think he was saying that he was 5 years younger and so enjoyed himself a bit instead of having a mortgage round his neck at a younger age, Now he feels ready to buy and actual mortgage will not be alot different from that taken out 5 years ago.

But yes if he had bought like I told him he would be in a better position now but maybe not been to all 4 corners of the world.

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I think he was saying that he was 5 years younger and so enjoyed himself a bit instead of having a mortgage round his neck at a younger age, Now he feels ready to buy and actual mortgage will not be alot different from that taken out 5 years ago.

But yes if he had bought like I told him he would be in a better position now but maybe not been to all 4 corners of the world.

do they pay rent etc at parents' houses, and is it market rate or discretionary/small?

Edited by Si1

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However you look at it, hat off to them both for saving £45k in 5 years, thats a very good effort!

Depends on how much rent and housekeeping they've been paying to parents.

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House prices are affordable with a good deposit - the problem being where to get a good deposit from! A good deposit, in my case, would be about 66%! I worked out that, on my income I shouldn't borrow more than £55K to avoid disater at a later date. Fine, but that leaves me needing about £110k for a deposit and, again based on my income, that's going to take me about 50 years to save! Property will always be affordable with a good deposit, but for ordinary folk to be able to afford a property a good deposit means about two thirds of the price... and to save that much in a reasonably short time they'd need to be earning many times what they are, thus negating the need for such a big despoit. Can you see where I'm coming from?

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The only advice I've been giving people when they ask is wait until after Christmas and see what the market is like then. After asking them if they've seen the forest of boards that are all around us, have you been watching the news, interest rates might go up again and saying that the market is at its peak even the sheepiest sheeple has understood this logic.

I personally believe that prices have peaked and will not be going up any more. What I want to see if this is a plateau (dont think so) a slow decline or going to be quicker. In 4/5 months we will have a much better idea of where the market is going as the credit crunch plays out.

So my advice to your ftb is wait - another 4/5 months isnt going to make much difference after 5 years.

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This is very much like my own situation, except I've got a fixed contract. It's just about affordable with my big deposit, but if (when!) prices fall, that big pile of cash I've saved will be wiped out. And that will be a bad feeling.

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