Monday, January 12, 2009

More silver linings

House price decline 'makes moving from bottom of property ladder easier'

Falling house prices have made it easier to trade up from the very bottom of the property ladder than at any point in the past five years, figures suggest. But because larger properties have held their value better it has become even harder for families in middle-sized homes to move into more spacious houses. The decline in the value of two-bedroom homes has been sharper than any other property type, with such properties losing about 12 per cent of their value compared to a drop of eight per cent in the price of one-bedroom homes, according to the estate agents propertyfinder.com. The difference in price between the average one-bedroom property and two-bedroom house is now some £31,000 - £10,500 less than it was a year ago and the lowest level for five years.

Posted by drewster @ 03:05 AM (1269 views)
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12 thoughts on “More silver linings

  • last_days_of_disco says:

    “People higher up the ladder will naturally find it easier to gain access to finance in order to move, but because of this the price of four-bed properties has only fallen five per cent, compared to around 12 per cent for two- and three-beds, so the financial gap has actually widened.”

    Hubris hubris hubris. It just hasn’t really bitten this group yet, they are still feeling superior. Its the dynamics of the system. Poor folks when they can’t get the money are more willing to own up. Its the yuppies that go bonkers and kill their kids because its so humbling and they can’t stand it. So the solution is to just wait. I mean prices have fallen from 390 to 370 on average four bedroom house. Pulease, no one can dream of affording that. Its lala land. Lets do the math. You need a 37 pound deposit minimum, oh and a whole lot extra to pay off your negative equity. Also you need 370000/3.5 = 105700 salary or the bank won’t touch you and most loans need a 25% deposit these days.

    Its being so cheerful that keeps me going.

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  • “People higher up the ladder will naturally find it easier to gain access to finance in order to move”

    LoL. Not if they bought anywhere near the top of the market – their problems are actually going to be worse (in finding a larger lump sum to cover neq and big deposit) than those near the bottom. More twistery.

    I suppose they are at least acknowledging in some way that trading-up is easier (but fail to point out that those who will really benefit in trading-up are those that bought before the bubble and have paid off a substantial part of their mortgage). Who knows, in time they might even come to the realisation that a lot of people will be better off if they don’t have to pay so much to buy a house.

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  • What these people don’t get is it is completely irrelevant how rich you are – all that matters is how leveraged you are. If you have big debts or mortgages relative to your income, you are in the schtuck. Doesn’t matter if you have £50 million, you can still go bankrupt in quick order.

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  • Disco,

    The vast majority of people in these 300k homes are people who bought 10 years ago or more. We are not talking about first time buyers looking for a 300k mortgage – I would say the typical mortgage is less than 100k. They are under no pressure to sell and, with that kind of equity, have no trouble getting a very low rate mortgage. Even if they lose their jobs the banks are happy to give them a mortgage holiday – with or without the tax payers help.

    I’m in this market place. I sold a 3 bed house at the start of the year and I’m now renting. I’m waiting for four bed homes to come down in price but it is taking a loooong time. I do wonder if this is a permanent change in the market – a stretching out of the gaps between the rungs making it easier to get on the ladder but harder to progress up.

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  • You could be right luckyjim

    Maybe now is a good time to invest in a company making childrens bunk beds.

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  • str 2007

    LOL. I could sell one of the kids to Madonna to finance the investment.

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  • tyrellcorporation says:

    What we want is a growth inhibitor. Kids these days are enormous and in the future this will be a real problem. Most shoe boxes thrown up by Persimmon etc, are small on the verge of being cruel. We need to return to C18 sized people!

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  • bear is right – it comes down to debt to equity ratios.

    luckyjim is saying the same thing, just a specific example.

    I got my fist junk email offering pawn broking today; sign of the times (it didn’t say pawn broking, but rather offered loans for valuables).

    str 2007 – yep… except you’ll need to find a company that’s cash rich to avoid the current inherent default risk of debtors ;p

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  • I just don’t buy the idea that there will be a permanent stretching of the gaps between the ‘rungs’. We are looking at 3 bed properties heading towards £100K and 4 bed staing around £300K? It’s not going to happen, no matter how much equity these people have.
    The lower end of the market will always crash first, but when the new reality of prices is established, the higher end will come down as well, no matter what the ‘fundamentals’ are.
    If people want to move they have to sell, so prices will some down to what people can afford, simple as that. The middle class aspiring rich that own larger houses will always think that the rules don’t apply to them, that they ‘deserve’ their wealth and their jobs while the proles should take all the hits in the bad times. So may have still to face reality.

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  • It doesn’t make any sense that more expensive houses will somehow be islanded at some very high price while everything cheaper falls away. Whether someone is forced to sell or not may affect the rate of price falls, but prices will fall in the end because there will always be house sales, even if there are fewer now. If the buyers for bigger houses can’t afford them, prices will inevitably fall. They’re gradually dropping around where I live, despite plenty of wealthy people here, though perhaps fewer than there were.

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  • crash bandicoot says:

    It’s all denial. How many houses in this bracket are on short-term lease until the “market recovers”?

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  • Perhaps I am reading this wrong… “Falling house prices have made it easier to trade up from the very bottom of the property ladder than at any point in the past five years.” How? Who are they finding to sell to at the very bottom of the ladder to kick-start the cycle? The shutters have well and truly come down on even the best-placed FTB. And even if money WAS available, who in their right mind would buy into a falling market? I see decent family homes falling to an average of £90k before long – a breadwinner income of £30k multiplied by three surely paints an accurate picture of middle Britain mortgage criteria to come…

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