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Shamatti

Is the UK housing bubble about to Burst?

33 posts in this topic

I have been telling people this for a while now, but I keep hearing 'you should buy asap'. I'll wait til next year, thanks.

 

I think there will be a massive prolapse soon. Conservatives will be annoyed, this is all supposed to happen after the general election!

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Well Help to Buy was just a vote winner for the Tories in next years elections I think. If it all comes tumbling down before then it will be interesting but I had always expected it to happen around 2016/17.

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I have heard from a friend of a friend,who is an estate agent, that next year there will be a property price crash.If this is the case and you are considering buying,i would wait till next year and see if that is the case could save thousands. Another friend who has split from his wife,his house is going through next week is renting for a year to see what happens.

On the selling side i think you sell when you need to ,if your house is down next year so is the one you want to buy.

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I kinda hope it does just a year or 2 to give people like me who was in school when the prices was lowish a chance to get on the ladder 

 

Currently saveing for a house but god knows when ill buy all i know is if i do see a drop weather it be 10-15-20 grand a house ill be on it like sonic 

 

wish me luck haha 

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i think were approaching a bubble more so on larger price properties , they seem too expensive and in parts of sheffield  2 bed terraces with a wc in the back yard are around £140k   summats gunna blow 

also the ratio x earnings to mortgage is way out  years ago when we got our first mortgage 3 x my salary and 1 x my other halfs would buy a decent semi detatched  

not a chance today  that 2 people on around £18k  can buy mutch with a small deposit 

Edited by craig12

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i brought after the last bubble so im already happy, I need to start putting money a side for a deposit on another house, as im 27 and not going to bother with pensions, just going to get some buy to lets  

 

my house sold for £75,000 in 2007

I brought it in 2010 for £69,000

 

and they had done loads to it new doors, plastering, whole new heating system (didn't have one before), and loads more. I worked out with the over payment it will be paid off in 15 years   

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With homes under the hammer on everyday it could be an idea but you never see the failures that cost the buyers everything!

 

I've had quite a bit of involvement working on these projects (as a sideline) and i would advise most to stay away from such as they can really be a danger to your health and wealth.

 

When i do pick up my tool kit it usually because friends have contacted me sayin HELP we've run out of money and if the electrics and plumbing aren't sorted out by the end of the month we can't move in and we'll be owing the bank £xxxx's

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It's got to burst sooner or later..

We bought our flat in 2011 for £260k, and similar flats are appearing on the market today with asking prices of 420-440k. Gross yield is about 3.5%, net yield.. 3%? I'm sure that it wouldn't be hard to find areas with gross yields of 2.5%.

 

It's all driven by stupidity like this:

http://www.bbc.co.uk/news/business-39803515

"Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "With HSBC launching the cheapest five-year fix on the market at 1.69% and Yorkshire Building Society introducing a record low two-year discounted rate at 0.89%, the market is more competitive than ever."

 

Who the hell loans money for less than the rate of inflation? Those are pure BUBBLE loan rates. 

arcglide likes this

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Bubbles in housing

What next a year down the line, Negative interest rate mortgages ?

It has happened with savings, nobody thought it was possible 

Bubbles in personal borrowing, lowest loan rate is TSB 2.8% APR 

It got to make you laugh they can lend wholesale rate money at near zero percent yet your average credit card for 'Joe Public' APR for borrowing is 15-20% for most

Let them bubble away, glad i am no part of it 

 

 

 

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The problem with these loans is people gear themselves to the max. So they can afford a discounted rate of 0.89%. They buy the £420k flat [ignoring stamp duty and fees] on a 90% mortgage so 'owe' £380k.

So they annually pay £3 382 interest. So £280/month. They can manage that well enough but these fixed rates eventually end, they are bait.

The top line Google search put a typical variable rate mortgage interest rate is 2.25%. The interest on this loan jumps to £8 550 or £721.50/month.

The Bank of England website says the variable rate mortgage is 3.33%.

The payments come to £12 650 a year or £1054/month.

10 years ago, in May 2007, the base rate was 7.5%

http://www.housepricecrash.co.uk/graphs-base-rate-uk.php

Now the payments rise to £28 500 a year or £2 375. The mortgage rate in these circumstances would likely be around 10%. The monthly interest payments rise to £3 166.

When we started out the monthly payment was £280/month. If the rates of 10 years ago are applied the interest only payment rises to £3 166/month or 1131% higher.

There are plenty of people would not be able to afford that. The banks would move in and take the property. Prices are determined by prices at the margin. That is the value of your house is dictated by the selling price of the 1% being sold, not the 99% that aren't.

If you have a decent number of distressed sales appearing on the market, prices quickly start following. Those making an offer anticipate prices will fall so they put in low offers. A spiral down has started and we see a property crash.

Edited by sixgun
Paul and arcglide like this

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49 minutes ago, vand said:

Things are certainly softening up here in London. It may prove to be another false top, but perhaps, just perhaps, the market has peaked:

https://www.theguardian.com/business/2017/may/03/buy-a-home-get-a-car-free-offers-galore-as-london-estate-agents-struggle-to-sell

 

Prices are dictated by what people can afford to pay. With properties that usually means what they can borrow. I remember when the building societies would lend 3x salary plus 1.

From the chart we can see London prices were always more expensive but they are now even more out of kilter with the rest of the country. If you want to get on the property ladder in London you will usually have to max out on what you can borrow.

i see Barclays were doing 5.5x salary no deposit a year ago.

http://www.telegraph.co.uk/personal-banking/mortgages/barclays-no-deposit-mortgage-lets-you-borrow-55-times-your-incom/

The chart shows London property is getting increasingly unaffordable. Lending multiples are a function of interest rates. When interest rates are low, you can afford to borrow higher multiples of your salary. When rates go up, difficult to afford prices become impossible. Prices have to fall and people late into the property market find themselves dispossessed and in negative equity where their homes aren't worth what they borrowed. We have seen this before and with properties even more unaffordable when we see it again the crash will be much harder and the misery caused much worse.

house-price-to-earnings-ratio-600x536.png

Edited by sixgun
arcglide and vand like this

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I am currently buying in the midlands/north and can confirm that prices have not moved much for the past 5 years from an anecdotal perspective. 

That said, since looking for somewhere I have noticed the market is very active which was surprising, as I expected BTL tax changes and the stamp duty increases to kerb the interest in houses (on the buy to let/second home side) somewhat but it has not happened here yet. The majority of houses coming on are being sold within days, longest they go is a few weeks before someone buys. Perhaps it is just the time of year. Perhaps it is blow off top time, but as prices have not moved in years, perhaps not. My other thought was that government HTB ISA's for a couple would be filling up nicely for a small deposit by now, so perhaps that is encouraging the next wave of ponzi victims to get on board. Mortgages are just as cheap as they were 5 years ago so not much has changed on that front. It is a puzzle. 

If I could, I would wait for a few more years and see what happens, as there isn't much upside left in the case of lending, politically things are turning, and we are well overdue for a recession. As it stands my circumstances have made the decision for me, meaning I can buy now and not in a few years as planned. The fact I am buying is perhaps a good indicator the top is in. Should be all down hill from here :P

Roy likes this

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House prices use to be priced to income eg 3.5* income plus 20% deposit, I know it was a long time ago, that way people could afford a home.  Wages have in general stagnated for most of the UK population for many years now, this has lead to most of the country the house price only remaining high because of excessive demand through immigration and poor government policy, in effect not building enough homes for the expansion of population.  Gone are the Thatcher days of a home owner society at these prices! 

IMO something will be done either there will be a crash and the under 40's get to buy or the older generation die off leaving the younger generation to vote in change.

Also the BBC reports bank of mum and Dad are funding more and more deposits/ mortgages, the report was set about in a way to make it the new norm and a gentle nudge to make people feel guilty if they do not give or can not give the funds. 

Edited by Pipers

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On 2017-5-5 at 12:59, sixgun said:

Prices are dictated by what people can afford to pay. With properties that usually means what they can borrow. I remember when the building societies would lend 3x salary plus 1.

From the chart we can see London prices were always more expensive but they are now even more out of kilter with the rest of the country. If you want to get on the property ladder in London you will usually have to max out on what you can borrow.

i see Barclays were doing 5.5x salary no deposit a year ago.

http://www.telegraph.co.uk/personal-banking/mortgages/barclays-no-deposit-mortgage-lets-you-borrow-55-times-your-incom/

The chart shows London property is getting increasingly unaffordable. Lending multiples are a function of interest rates. When interest rates are low, you can afford to borrow higher multiples of your salary. When rates go up, difficult to afford prices become impossible. Prices have to fall and people late into the property market find themselves dispossessed and in negative equity where their homes aren't worth what they borrowed. We have seen this before and with properties even more unaffordable when we see it again the crash will be much harder and the misery caused much worse.

house-price-to-earnings-ratio-600x536.png

Interesting chart and as we are 'up north' I have to agree that house prices and wages haven't changed much in the last 10 years making it almost impossible to now move to anywhere else in the country. Properties still seem to sell quickly though with buyers from all types - students, new graduates, employed school leavers and families.

The difficult to sell properties seem to be larger new builds (e.g. 4 beds) which are much more expensive - southern prices - than slightly older properties and those that are leasehold (lots of houses are leasehold up here including whole estates of new/recent ones and some of the banks will not even give mortgages on them!). Fortunately we had already bought the freehold for our house and I still can't get over how many sovereigns that would have got😀

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I wish the bubble would burst & reduce prices. I got my little terraced house 3 years ago when I was 24 & now I have a daughter we want to move into a bigger house but with all this new lending criteria its a pain in the arse so I am having to remortgage to save £100 pm on the mortgage & I am over paying by £200 a month so that next year I can get what I am after. Why they won't lend the money is a mystery considering the mortgage would be less than I pay now.

 

 

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6 minutes ago, shawy2510 said:

I wish the bubble would burst & reduce prices. I got my little terraced house 3 years ago when I was 24 & now I have a daughter we want to move into a bigger house but with all this new lending criteria its a pain in the arse so I am having to remortgage to save £100 pm on the mortgage & I am over paying by £200 a month so that next year I can get what I am after. Why they won't lend the money is a mystery considering the mortgage would be less than I pay now.

 

 

I agree common sense seems to have vanished, but in my case it is probably my age getting in the way😄 just an extra bedroom here appears to add about £70K to the price! and we have no space for an extension🙁

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A house is a home. If it is treated as a substitute for income, you had better be careful, lucky, or quick. Many people have made off like bandits with buy to let in a Blair overborrow government and those on the wrong end of his era - the youth now and pensioners, housing, factory workers hospitals and education) will/are ending up in debt with interest with increasing costs and a stagnating incomeplus reduced government services as the government realise they cannot promise more but are forced to placate the voting populace by other measures.

Edited by Oldun

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It was just on the BBC 1 o'clock news about the property market. About prices slipping a little. Why put a piece of the news it there is little to say?

Probably the controllers are telling those who are listening attentively.

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Buy to let now is quite tricky from what I hear & found with my dad. He bought a new build flat to rent out for £120k & even though he has no mortgage on his house he had to put down £60k just to get it.

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Grab yourself a couple of quiet hours, a cold beer or glass of your favourite tipple and watch this. It includes the Blair years.....but no cheating. 

 

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16 minutes ago, shawy2510 said:

Buy to let now is quite tricky from what I hear & found with my dad. He bought a new build flat to rent out for £120k & even though he has no mortgage on his house he had to put down £60k just to get it.

i think entering the buy to let market is dodgy at the moment, unless you are buying a run down property on the cheap and doing it up. i found the return about interest, insurance, boiler certification, fees and so on meant there was not a lot of profit in it. Gains were long term and very much depended on property price appreciation. If you pay today's prices and there is a price drop, the investment doesn't look good anymore.

Edited by sixgun

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