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silver surfer

Hpc 2 Is Close...

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With all the apocolyptical stories in the news it's easy to get carried away anticipating the property bargains that will soon be on offer. As a STR'r I'm just as liable to the same daydreams, but a bit of realism now will prevent a lot of disapointment later. I don't think the next few years will automatically prove to be a house buyer's paradise even after the crash,

1. When the market crashes many of the best properties in each price bracket will be simply withdrawn from the market. I was a buyer during the 1989-95 crash and it was a dispiriting experience to see EA windows full of the same old no-hoper properties with months between the rare appearance of anything decent. The headline grabbing distress sales disproportionately featured the sort of rubbish housing that no one here is dreaming about, bereavment sales that need a fortune spent on modernisation, or sales from the kind of inept DIY pebble-dasher twho is naturally first in line when a company's deciding who to chop. Conversely the best properties in each price band tend to be owned by the more experienced and organised buyers, who also tend to be the ones best able to pull in their horns and wait for it all to blow over.

2. If you do find your dream property you'll most likely have to sell your own place first. No easy matter when the market's hibernating, in 1991 I sold a house three times before the deal was finally completed, in fact my abiding memory from the 1989-95 market wasn't stories about great bargains, it was everyone's despondent moaning about endless property chains and the dearth of decent properties for sale.

3. Job security isn't great now, but when property prices fall it'll be far worse, after all that'll be one of the reasons why the prices fall in the first place. So committing to a mortgage will be as much an anxious moment as a happy one, not least because when you buy during a crash you're not expecting prices to increase in the near future, so if things go wrong with your job you know you won't receive a HPI get out of jail free card.

4. A major driver of today's market has been BTL, so when the crash comes it's flats that will fall first and fall furthest. Great news for first time buyers (good for them, they deserve a break), but not such good news for STR's like myself, who will generally be looking for houses. I wouldn't be surprised if the nominal house price fall over the next two years was about 20-25%, but equally I wouldn't be surprised if that average was comprised of flats falling 30 or 35% but houses only falling 15-20%. Inflation adjusted price declines will likely be greater, but that'll take years to work through just like it did last time.

5. And if you've found your dream home and closed the deal (and I sincerely hope you do), then you'll probably still need a mortgage. But they'll be harder to find and more expensive than they are today. So a buyer in 2010 or 2011 will feel every bit as stretched as a buyer in 2006 or 2007.

A house price crash is coming, but it'll still need perseverance, judgement and luck to secure the right property.

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Conversely the best properties in each price band tend to be owned by the more experienced and organised buyers, who also tend to be the ones best able to pull in their horns and wait for it all to blow over.

Yes. They aren't required to admit that they won't get their price unless they lose their jobs.

Forget FTBs, I think the Second Time Buyers are going to be key to the forthcoming situation. Here's some ideas about STBs:

They gloat about their tiny mortgages from yesteryear. They are the only people who have not yet bought in to the boom. Everyone else (older boomers, desperate FTBs, loss-maker landlords, city boys on XMAS bonuses, super rich untaxed foreigners) all these groups have already played their part and bought in, or don't need to, or are immune from this boom because of their position. But Second Time Buyers have not taken advantage of the low interest rates, and the chance to have a massive mortgage instead.

On the other hand, these STBs could be the group who expose the fraud. They stand to suffer when they discover that they can't sell for their price. Some of my friends are already discovering this, and the baby-to-youngster timebomb is already ticking. Over the next five years, these now-30-somethings-who-bought-7-years-ago are going to expose the market situation for what it is?

Edited by megaflop

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