http://www.telegraph.co.uk/finance/pers ... value.html


All the efforts from the government have been to support house prices and eventually they will fail because virtually the entire housing market is like a house of cards. I said two years ago that the housing market was 40% over valued and even this fall will not bring it back into line with its long term value. I suspect that if the government intervene that all that will happen is that the problem is stretched out for another couple of years longer.

Why should the Government intevene - it's not their problem, it's ours (ably supported by the stupid banks). If common sense had prevailed and people had borrowed only what they could really afford, then house prices wouldn't have go through the roof and past the TV aerial. Problem was, the banks were only too willing to lend money, often with no proof of earnings, and so the prices went up. If they'd risen in line with inflation they'd be about 40% lower than they are now.

But they have been intervening on a massive scale. What do you think all that QE was for?

As for people being sensible if that had happened then we would not have half the problems that we do. Though every government since Thatcher, has talked about letting the market decide, and scrapping regulations that would have prevented this problem. The coalition are not even suggesting any form of sensible rules that will stop a housing bubble. Simple rules such as a fixed 3 times income and a minimum 25% deposit would have seriously reduced the bubble. With buy to let landlords needing 50% deposit would have reduced their impact as well. Simple rules about bank capital would have stopped them from lending excessively. I think that part of that problem is down to bank lobbying to get the Basel bank rules watered down, so the UK government are not totally to blame Though if you look at who was asking for all these changes it comes back to the banks lobbying for such changes, and they are still at it.

Good - if house prices fall substantially then I might be able to buy one!

It'll only be a short term drop. We're not building houses fast enough to cope with the growing population. Supply and demand will eventually force prices back up.

I felt kinda happy when my house was worth 3x what I paid for it... but in reality, it doesn't matter to me. I need to live in a house. If prices were higher, it would cost more for me to move to a nicer one and insurance would be more than it is. Therefore, even as a home owner it's better for me if prices are low unless I plan on selling up and emigrating! That is a possibility, but not this year. Even if I did, I'd probably rent out the house rather than sell as a source of income and for the security of having a "home" to return to.

Of course, some people are well aware of the problems that can be caused by "negative equity". Luckily for me, I'm not one of them. Even if my outstanding mortgage was more than the house is worth, the repayments are still less than rent would be and I do not need to sell today.

Yes demand will always exceed supply but the not everyone will have the means to buy. Mortgage restrictions are already creating a two tier mortgage market. Also greed by owners will mean that prices will fall slowly, then by a lot as they get desperate. It is known as the stickiness problem. Even if people want to buy the problem is that most will struggle to get a mortgage at a reasonable rate so will be stuck in rented accommodation.

Plus it will be very reagional. I think the SE will not have the falls as there is still low ish unemployment and so demand for properties

Theres nothing wrong in renting. Most of Europe seems to function quite well with the majority renting.

I agree. I rent. I think that many people have been seduced by the illusion of easy profits from property. It has worked for my parents generation but my friends have definitely not benefited anywhere near as much. Many are in serious debt with large mortgages. They need serious price rises to enable them to benefit to the extent that their parents have.

I’m sure Big_D can fill us in on the German model but apart from the UK obsession with buying most rentals are for 6 or 12 months. It can be very hard for people to get longer term tenancies which means that you are at the whim of the landlord re rent increases / being asked to leave at short notice

The other side of course is that once the mtg is paid off then housing becomes free where as if you are renting you need to find that even after you have retired

My house is somewhere I live not an investment. My Mortgage is roughly what I would pay in rent so apart from repairs that the landlord would have to pay for there is no extra costs in buying v renting and of course I do have an asset I can sell if needed

Though the total cost of buying a house factoring all the interst that gets added and sometimes (not allways) it costs just the same amount. The people that really benefit (apart from the banks) are your kids when they inherit as they get an asset for nowt.

Only if you have not changed homes and got a bigger mortgage. One of the problems is that many pensioners are still in debt and having to get housing benefit to cover cope. So no inheritance for their kids.

+1

+3

Edit: I mean +2. Actually, I'm thinking of buying a place in France.