Hey all

Been here a few months and wanted to share my thoughts and views on house prices. Can't say I'm an expert on house prices, but then again, I doubt any of us have a crystal ball that's shinier then anyone else!

Anyway, amidst all the doom and gloom on here I though I would write a contrary and perhaps optimistic post on why I have just bought a property.

Now, before you all start feeling sorry for me I have been following property prices for a year, and feel that the current debate has been slightly polarised with some very broad brush strokes.

Incase your wondering, my house was bought in Norwich (I work in London). What were my main drivers:-

a) Cost of buying has reached the point where for me, it become cheaper to buy then rent. If interest rates continue to drop, I see the differential widening further which made the stimulus to buy now even greater.

The property I bought was on the market for less then 2 weeks. That is not a typo - 2 weeks! In that time, it had 2 offers - one fractionally below asking price and my own. What does that tell us - that first time buyers are still active and are looking to get on the property ladder - albiet at the right price for the right type of property.

c) Location, location, location! Ok, I'll be the first to admit, property in Norwich is depressed right now due to a reasonably large overhang of trendy yuppy riverside flats. And yet, as with all things, its not merely a question of finding a cheap property. This property was located on one specific road that we had been looking to purchase on for over a year. Infact we would probably have paid above asking price if it had gone to a bidding war.

d) Lack of decent supply. In some respect, it made bugger all difference to us that Riverside prices in Norwich had dropped 10%-15% last year as we never had any intention to buy in this area anyway. Where we did find suitable properties at inflated prices, the sellers refused to negotiate on price and generally speaking removed the properties from the market. Where people were in chains, they simply ended up renting the properties out (although I would add I would have negotiated as Norwich is now awash with rental properties).

So what does this all means. If you bought a yuppie flat in an area of substantial over-supply in the last 12 months then your sitting on a 10%-15% loss paper loss and even more if you bought looking to rent.

If your selling a good quality property at a realistic price then you will find buyers.

Admittedly, finding a good mortgage these days is becoming more of an issue, and to some extent, subprime is negating the effects of cheaper interest rates, but they can be found if your willing to do some hunting around. For example, First Direct offer a 2 yr fixed mortgage at 4.75%.

Do I worry about prices falling further - absolutely. BUT, I had reached a point where I felt that prices were cheap enough and interest rates were low enough to outweigh any future falls in property.

Cheers - Mike

what if interest rates rise?then your maths wont add up.

Good luck to you, if it was right for you at the time then great. For most, they want financial security (at least to a better degree).

If interest rates rise then its a different picture, but I just cant see that happening. Commodity prices are rising, but I see that feeding through to lower consumer demand, which will ultimately feed through to unemployment. I see unemployment, corporate solvencies and personal bankruptcies all rising through the year, which will a) depress the effects of higher input / commodity costs and keeping downward pressure on interest rates.

I think its come down to the following question for Central Banks - do we end up having a degree of inflation for limited growth, or no inflation with no growth. Quite simply, no Central Bank in its right mind wants to end up like Japan, and end up governing a deflationary economy as it did in the 80s / 90s.

Yep and it will also see house prices drop like a stone.

Well done Mike, you've made the right decision, you clever thing you.

Long Island, Congratulations on your new house. I hope you will accept that posting your good news on HPC.co.uk will result in a few negative reponses.
I have a few concerns. Firstly, why if you have watched this forum for a few months, why have you never engaged in any conversations or asked any of the many wise people for advice.
What on earth attracted you to HPC.co.uk in the first place.

These forums are great for the ability to reply to posts.

In my honest oppinion, you are either a Troll or a complete do-nut. I suspect that you are the latter and will live to regret your decision.

Reminds me of someone who has been watching adverts for the dangers of drink driving and like a big fool you have had your 10 pints, got in the motor.

We can`t wait for the CRASH

Hey - I have no problem with healthy debate. Life would be boring if everyone agreed wouldnt it?

If I am wrong, will the world end? Not really. I'll simply enjoy living in a beautiful house which I hope to bring up a family in. Isnt that the whole reason we all decided to buy a house in the first place?

I have no issue with people taking a contrarian view, but to derive pleasure from people losing money on property is frankly bizarre. You can't wait for a crash? Is that because you can't afford to buy at present, or for other reasons?

lol like the analogy about drinking. As it happens, I've already watched properties fall 10% to 15% and have taken the view that for the right property, they may / may not fall much further. Of course, if your stuck in the wrong type of property where there are no buyers, you are in trouble and I absolutely sympathise with people in that situation.

As for posting on here - I am something on a contrarian and thought a different perspective would add to the debate on here.

Is it me, but are nearly all the new members (who have started a debate) pro house rises, (VI's me thinks, trying to keep there dream alive)

tolduso - I dont actually expect prices to rise. I was pointing out that for me, based on my own circumstances, it made more sense for me to buy.

I think as a whole, the market is still moving down, but I dont think it will be as universal as people suspect.

Good luck to you, assuming you're not a troll.

I wouldn't fancy commuting from Norwich to London every day though....

It takes 3hrs to get from norwich to london and 3hrs to get back, So if you worked a 9hr day plus 6hrs travel thats 15hrs that leaves 8hrs to eat and sleep and have a social life, ????????? mad?

Agree, not the shortest of commutes, but I can work on the train and am able to take off most Fridays (or come to think of it any other day when Anglia's finest has a twig on the line)!

The actual numbers of 2hrs each way - so Im going to spend 2 hrs less in the office each day which net net means my working day will be the same as it is now. (Although to be honest, I wouldnt not have moved to Norwich if I wasnt self employed and could vary my working hours!)

I STR last August at the peak after paying off my mortgage and I have no debt. The point I am trying to make and many others try to make, many, many time to people like you is.

Lots of us on this forum feel very strongly that the whole market is going tank (Lots more than 10-15%). My wording about "can`t wait for a crash" is maybe a tad selfish and a bit sensationalist.

I do truly believe that anyone buying now is a fool. That is my oppinion and I stick by it. I also welcome healthy debate.

I really did feel/felt, and even more so now that the only way to enter 2008 is debt free. I want to upgrade houses in a different area in the future for my family.

I take no pleasure from people losing money on a crash except the BTL`ers and EA `s etc

After lurking and posting on this site for a while I have watched and contributed to many debates and I have learned so much from many people who can express themselves far better than I ever could.

There are many posters on this site that just can not afford to do what you have just done.

There are many that did exactly what you have done and felt the same way you feel now just before the last big crash and maybe if you lurked a little more and really listened to some of there tragic stories your view may be slightly different and possibly less smug.

I am very fortunate and do not struggle and have my own reasons to visit HPC.co.uk but after a while on here I realised how and why HPI is crippliing many good people.

I reserve the right to call you and others doing the same, Do-nuts and I thought my analogy was quite good.

Nothing personal..

As it happens, my fiancee wanted to buy last year, but I explained at great length that I felt property prices were over priced and ended up finding this site to justify my position to her for not buying then!

I dont mean to come across as being smug and apologise if that is the case.

I also agree that I am not your typical house buyer, but then again, I am moving from West Sussex to a place where I consider property to be far more reasonably priced, so I have had to change my lifestyle to find a place I consider affordable.

I agree that the government / house companies need to find a more appropriate way for typical FTB's to get on the property ladder based on typical incomes. Property builders will be aware of shifting mechanics in the market place and are starting to focus on more appropriately priced properties / key workers etc.

Ultimately however, the only way to solve property in the UK is too substantially increase supply, and that unfortunately is not something that is ever going to happen due to vested interests.

Trust me on this one, Mike; you don't come across as smug.....

Do you know this for a fact or are those figures printed in the time table? Do you have actual experience of using this line daily, how will working on the train be when you have to stand up most of the way (might be fine on the way in, would imagine it wouldn't be so great on the way back).

I moved out of London to Kent to an area where the trains took an hour.... yeah right. Two things, they are always late and this sort of service only runs once or twice an hour, often the trains get cancelled. It's all well and good when there is a twig on the line on the way in not so great when that twig drops on the line during the day and you can't get home again.

The other thing is how far are you from the stations at each end, where I live I was about a mile and half, not really walk able and the buses stopped at 6pm.

Not trying to be negative but I have been there and done that, ruinned my life for 3 years and drove the wife and I nuts.

Leave Mikey boy alone. The man's an un-smug genius for buying a house (just after the peak of a bubble) in Holland when his job is in London.

gilf - well aware that the east anglian line is about as reliable as a politician's promise. Made sure property was within distance of station (ie 5 mins).

I already commute about 3hrs per day so its something Im already used 2 (and its something you do get used too for those who wonder how we all do it).

We're going to give it a go for a year and if its not working, we're off to Brighton. And if house prices do crash, believe they will fall proportionately faster in Brighton then in Norwich.

Paddles - I know I'll be ok if property prices continue to fall. So no need to worry about me :-)

Based on what?

God, I love these folk! They buy a house and then log on to HPC to tell everyone about it, for whatever reason christ only knows. And the funny thing is, we all read the posts and think to ourselves, "oh dear", but they still think they are the new Warren Buffet.

Paddles

You clearly have a point of view - which I have no issue with. This is a site devoted to house prices crashing so its fair to expect people will be somewhat biased.

Never have I said buy now as house prices are going to rise, I am going to be right, your going to be wrong.

I merely wanted to offer a reasoned argument as too why I felt now was the right time to buy based on my own circumstances. I have read many arguments on here, some very reasonable, other plainly personal, that take an opposite view. It would perhaps do you credit to accept that people may take a different view from your own.

No reasoned arguments from Paddles/Cipriani and those of their stamp - just quick one liners, which in their jaded boredom they think passes for wit. Check that guy out (Paddles I mean) he posts from morning to night - he needs to get out a bit in my honest view. Take no notice - anyone who doesn't take the orthodox line is flamed, abused, roistered so what does it matter - it bores the sh1t out of me to tell the truth! - Ron

You see I would have expected this place to be reliant on anecdotals so as not to have to rely on the stats and the media who are so often touted as vested interests (who isn't!). It's the internet my man, who can believe anyone?

I guess the moral is, troll or not, one is no better just by flapping your hands in your ears shouting "ner ner nernerner".

Nobody disagrees that people have a personal choice in buying and will buy as and when it suits their personal circumstances - but if it's just a personal choice that suits your individual circumstances, why come on a forum like this to look for approval or debate? It's my personal choice to keep a flat bought in 2001 and let it out (in another country) while renting here and saving / investing about 50% of our monthly post-tax income to build a warchest for the coming recession. That choice suits our (including OH here) personal circumstances. I wouldn't go on www.housepricesonlyevergoupandrentingisdeadmoney.com to share this with people as - like I said - it's just my choice so why would this affect anyone else's point of view?

I'm not being hostile as anyone can post anything they want obviously but I genuinely just don't get what response you expect from posters here. There are almost daily posts now from people asking "should I buy or rent?" and "I bought because I wanted to - leave me alone, horrible HPC property crashers!" and they always get the same invariable bored response of - "you're mad but it's your funeral"

Please tell us the secret of being OK if prices fall? Lets say they crash in Brighton by 20% and in Norwich by 10%, how are you going to convince the bank to let you off the 10% in value you would owe them if you sell to cash in on Brighton?

Ultimately however, the only way to solve property in the UK is too substantially increase supply, and that unfortunately is not something that is ever going to happen due to vested interests.
[/quote]


Have you seen how many properties are up for sale, there is no problem with supply it's the price.
You keep on building and the problem is only gonna get worse, God almighty some people just haven't been paying attention.

loz

C'mon, you're not bored by visitors to Housepricecrash.co.uk seeking validation for purchasing a property? The clue really is in the name, don't you think?

Is now a good time to buy? I dunno, but the CML figures are a pretty good leading indicator for the direction of house prices, and they're saying no.

As for the reason why I'm always on here not being witty or verbose; I've got ACD and my wife left me and I'm sleeping in me Jag.

Paddles, Shame on your wife for leaving you, just because you like heavy metal, You can always squat in the soon to be empty F#ckstons office in Islington

Congrats, longisland.

Can I ask whereabouts in Norwich you bought? Close to Thorpe Station, I hope.

Property prices sure seem to be heading gradually southwards here!

An bearin bui - To quote 'why come on a forum like this to look for approval or debate?' With all due respect, a forum is an exchange of views hopefully done in a constructive way, which is something I had tried to adhere too. The majority of people on here have a particular point of view which is absolutely fine with me (and in some respects I agree with). However, I think some of the arguments have been slightly too simplistic, and it was that issue that made me post. I dont pretend to know whats going to happen in the future, but it does amuse me to see other people posting on here with total certainty that they do know the future - that kind of confidence is very scary!

I also enjoy healthy debate and knew my post would generate some interesting comments :-)

Gif - I'm borrowing 60% of my available limit, so could easily raise additional finance. I am also fortunate to have a healthy cash balance should prices continue to fall. So as you can see, I am very much hedging my bets should things get worse.

Loz - supply and demand is not a linear equation. If it was, we would all be reducing our gas consumption. As mentioned previously, just because there are hundreds of unsold yuppy flats in Norwich, that doesnt mean every other property in the area will fall by a similar magnitude. Indeed, for a first time buyer like me who had very specific criteria, it was almost irrelevant. The point I am trying to make is that for prices to dramatically fall, we need to build more properties for FTB's rather then over expensive developments that only cater for a small niche in the market.

MattW - yep in the Thorpe area.

Someone lock the thread this chaps a troll

Where's Charlie when you need him, to out the VI.

Welcome longisland. It's a shame that you didn't post over the last year, before making your purchase, but now is better than never I suppose. Didn't you have any questions or comments to make over the last year?

I'm glad that you've hedged well for falls as well as rises and I hope you're in a semi-detached house because:

Norwich over the last quarter

All properties -4.0%

Detached -12.5%
Flat -9.1%
Semi-detached +4%
Terraced +0.8%

Good luck.

Just to clear something up:

Prices Go Up Then
Prices Go Down Then
Prices Go Up Then
Prices Go Down Then
Prices Go Up Then
Prices Go Down Then

Repeat until dead.

When I read one of these (possible troll) posts the phrase "a fool and his money are soon parted" springs to mind.

If a FTB is thinking of buying, even if they could, dont.

Disillusioned - I actually knew of this place last year, and agreed that prices had risen beyond any sensible rational perspective, so in some respects I didnt have any reason to post!.

However, moving into this spring, the economics of the situation meant that it was cheaper for me to buy then rent, and when the right property came up at the right price, I decided to buy.

Im not suggesting anyone on here is wrong. I think its a 50/50 right now whether the Western economies do fall into the abyss but I have to live my life and one day have a family. I want stability for my family and place we can call our own, and based on my own financial circumstances I was very comfortable buying a place even knowing that the said property could fall another 10% etc.

ps incase your wondering, it was a terrace place.

pps as for own thoughts on where property will find a floor...I think that's down to the buy-to-let people and when the economics of renting a place out start to outweigh the costs of the mortgage. I think we need another 25bp to 50bp off interest rates - which i expect to happen over the next 3-6 months, if not faster.

Then inflation goes up, then people have less to spend on items, companies go bust, or offshore due to people wanting bigger wages = recession!!

NICE!!!

Whilst I appreciate that, at face value, you are posting on here as an anecdotal and maybe looking for some healthy debate; there are a few things that don't stack up. You write as if you are fairly well educated and I would therefore guess that you are fairly well informed about financial events - and you say you've be reading posts on here for several months. Yet strangely you mention FTBs and ability to purchase without mentioning the biggest effec of the credit crunch to the UK housing market which will be (IMO) the recent removal of vast swathes of high LTV mortgages by lenders. Do you not think this is going to have a major impact on prices? In my opinion, this massive shift which must be currently removing the ability of a lot of FTB will, in itself, be the reason why prices will head south to start becoming more affordable.

Additionally, you mention the rent vs mortgage equation above in a contradictory manner. I can only assume that you're cercumstances are not those of the average or 'normal' FTB as the economics of the latter's decision between renting and buying is definitely skewed towards renting.

All my humble opinion of course...

Thats a good point about people withdrawing 100% mortgages and 95% mortgages. All I can say is that I got a 95% mortgage that was 0.75% below base for the first year, reverting to 0.49 above base in the second year, with the ability to remortage after 2 years. And yes, the maths from the lenders point seems a bit mad, but they charged a high initial fee which was rolled into the debt.

In some respects, I think the removal of 100% mortgages will provide the market with better long term stability. Where's my incentive to stay in a property if I can walk away from it at any point without losing anything other then a credit record? If reasonably sane people like me are entering the market now with sounds financials and real deposits, that makes for a more sustainable market moving forward (imho).

I did have to look reasonably hard to a mortgage provider that I considered offered very good value, but all I can say is that they do exist. It also helped that I was borrowing at less then x4 salary and had a large bonus in the background which I didnt actually use to leverage against.

I cant talk for other FTB's other then I used the last 2 years to save up for a deposit hoping that prices would fall to the point where they have. I think I save about £100 per month at present buying compared to renting an equivalent property, but suggested another 25bp to 50bp fall before a typical BTL person would feel comfortable (ie taking into account voids and other costs).

So are you saying you have borrowed 95% LTV? Or was that a general example?

Correct - 95% LTV.

I'll tell you why you were wrong to buy...

You say you are going to try out living in Norwich for a year, and if it doesn't work out, you'll move to Brighton.

How much have you paid in stamp duty,solicitor's fees and mortgage arranement fees? If you move, that's money thrown away. Silly. That's if the market is static.

He doesn't LIVE there................. He only sleeps there...........................

Haven't read all the posts but my immediate reaction is

f**k me! Why the hell buy in Norwich if you work in London? I used to do the daily commute to Kings X from Norwich and the service is as appalling and unreliable as it is lengthy and balls aching.

I admit Norwich isnt quite as close to SE1 as SE2 but for me, its an extra 20 minutes on the train there and back. Infact for me, commuting is a way of life (alas) so I dont consider it to be anything other than normal. Longer term, I intend to be mortgage free in 5 years and will look to work locally (wherever I end up) so consider this simply a means to an end (and yes, I am very lucky being able to contemplate earning that kind of money to say that).

As for moving in one year - I agree it would be daft - but I have already saved up sufficient monies to cover that contingency if it ever arrived.

I'll reiterate my original post - for me, based on my own circumstances, it made sense for me to buy. I know people won't agree, but that makes for healthy debate, when constructively exercised.

To be honest, it sounds to me like you are not really a 'typical' FTB in that you've had the required deposit for your purchase price and your salary multiplier sounds to be in the more sensible range. From this, and the bonus comment, I am estimating that you earn a good wedge down in London - good on ya!

However, I disagree with your view of the market as, IMO, the average buyer in the rest of the UK (i.e. away from the high salary, top jobs that can be found in the capital at FTB age) will struggle to save a 5% deposit for, say, a £120k purchase (I would guess you've paid substantially more than this!!!) and hence that's why the 100% deals etc have been so popular and helped prop up the bottom end of the market. With such deals having been removed, and even the 95% becoming harder to find, the route to access the market for many FTB is becoming longer and harder. And of course, to repeat what has been said elasewhere on the site, a change from 95% to 90% LTV has a huge impact on buying power resulting, practically, in the potential borrower having to put the purchase off and double their deposit savings.

The other point is your 'typical BTL person'. Would that be those who MEW to get the deposit for the BTL place, the 100% brigade or seasoned landlords?

Hi there

Again a very interesting comment. I think this is very much the crux of the matter ie who was buying last year, compared to might be buying this year.

I think last year FTB's constituted about 10%-15% of the 'so called' bottom rung on the market, with the remainder being BTLs. I think the removal of 100% mortgages will have removed perhaps 25% of those FTB's, but then again, with house prices falling, perhaps those FTB's are now in a position to buy even at 90%?

So that leaves the BTL people as the main support rung on the 'ladder'. Now, for those people who have established portfolios giving them good yields, I think they are potentially coming back into the market on a selective basis. If they have a friendly banker and can show consitently high incomes with low levels of debt, they'll be able to get finance - no isse about that. However, what I dont know is the amount of people who fall into the 'I bought it last year cuz everyone else seemed to be and I dont know anything about the market truth be told......' Most BTL's when questioned, suggest thta they are in for the longer term and are happy to accept short term fluctations. Again that might be the politically correct thing to say but I believe that if bought well, are getting decent yields and are in a position to fund any short falls through reasonably stable jobs then they will hold. However, if they bought poorly, in over-serviced areas with a glut of properties (inner city yuppy flats) then they might not be able to sell at any price.

So, what am I saying. Basically, its going to be the BTL brigade who will determine the bottom rung of the level - and that'll be when the maths makes sense. It did in my case, and it may do for others.

No doubt London / SE will find that level quicker then anyone else. I would genuinely be interested to hear from some of the BTL people on here in terms of how they are approaching the current market?

So, assuming you bought a place for 250k (it would probably be more, but for arguments sake):

95% LTV = £237,500 Mortgage & £12,500 deposit
Approx fees £3,100 = £2,500 Stamp Duty & £600 Misc
2 year fix Repayment mortgage @ 4.75% = £1405 (Interest only = £1179)

To make this work (and to do it sensibly), it would be wise to spend only HALF of your take-home pay on the mortgage. So that would be around £2810 (after tax). If my numbers are correct, that means you are on a salary between 35k to 45k. Obviously, with a partner the figures would be a bit different.

If that is what you earn, then fair play to you. Just forget about move 'up' the ladder. Looks like you might be stuck there for a long time. Of course if you want stay there for 15+ years, then it doesn't make any difference to what I say.

Oh god - he put something flammable against something touchy and blue-like....