Singing Pig

interesting ... i do genuinely think that the UK market is unlikely to suffer the same fate as the US ..... different mind-set over here, most people firmly of the view that home ownership is "a good thing" ... (whether that will change, who knows?) ....... and while the demand is there, unless its backed up with the ability to raise finance we could suffer.  as long as employment is high, and interest rates are low, prices will be supported.  the longer the credit crunch continues, the more likely we are to suffer more significant falls than 5-10%.

that aside, this one is for the bears ..... when you buy (most of you admit you want to buy, price-permitting) ...... come the next recession ... would you sell up?  disrupt the family?  pay the selling and re-buying costs?  or would you sit tight ........ suffer the value drop, and trundle along paying the mortgage? 

Pod, I believe that what is happening has little to do with standard market psycology, but panic from the lenders and panic from the owners.  It will arrive on these shores in the not too distant future I reckon. 

I wouldnt sell, as I will have paid off the mortgage.  Once I have purchased my home, the value wont enter the equation.  It will be a home and not a piggy bank for retirement. THe point is, with my current savings, I cant afford the home I wish to bring my family up in. By sitting back whilst the crash unfolds and saving, I can.  No brainer really.  By sitting it out now, I dont have to fund the rediculous cost of moving, EA fees, Stamp duty, solicitor costs, conveyancing, surveys all add a significant premium on up/down sizing.  By avoiding these costs and minimising the interest I pay to the bank, I can afford to move to the top of the ladder as a first rung step.  THat wouldnt have been possible in 2005, nor would it even in 2003.  The difference is, the credit crunch gives me real consumer power, especially in securing a mortgage, something those D*ckheads who went out and purchased a home with no deposit down, 125% mortgage and tens of thousands on the plastic are going to wish they had done.

 As I have said before, current stats show that one in eight are forced sellers.  That figure will change as the recession hits, as far more individuals will be forced to sell, either to find new work, due to marriage breakdown (happens more often during a recession) or due to repossession/and or bankrupcy.

It is the forced sellers that set the value of the market, not those that sit it out.  You can believe your "asset" (home) is worth far more than it is, but as soon as you need to sell and move on, you get paid the market rate.  As I have said, this is one in eight sellers at the moment, I expect that number to climb significantly.
 

Good question Pod.

It depends whether you are talking about a family home or an investment property.

If it was a family home then it would be to live in and the value would be irrelevant. If it was an investment property then it would depend on a number of factors but ultimately come down to whether it was the best location for my money.

Of course if a recession hit then this would depend on me being able to continue paying the mortgage...
 

mbga9pgf3:

Pod, I believe that what is happening has little to do with standard market psycology, but panic from the lenders and panic from the owners.  It will arrive on these shores in the not too distant future I reckon. 

I wouldnt sell, as I will have paid off the mortgage.  Once I have purchased my home, the value wont enter the equation.  It will be a home and not a piggy bank for retirement. THe point is, with my current savings, I cant afford the home I wish to bring my family up in. By sitting back whilst the crash unfolds and saving, I can.  No brainer really.  By sitting it out now, I dont have to fund the rediculous cost of moving, EA fees, Stamp duty, solicitor costs, conveyancing, surveys all add a significant premium on up/down sizing.  By avoiding these costs and minimising the interest I pay to the bank, I can afford to move to the top of the ladder as a first rung step.  THat wouldnt have been possible in 2005, nor would it even in 2003.  The difference is, the credit crunch gives me real consumer power, especially in securing a mortgage, something those D*ckheads who went out and purchased a home with no deposit down, 125% mortgage and tens of thousands on the plastic are going to wish they had done.

 As I have said before, current stats show that one in eight are forced sellers.  That figure will change as the recession hits, as far more individuals will be forced to sell, either to find new work, due to marriage breakdown (happens more often during a recession) or due to repossession/and or bankrupcy.

It is the forced sellers that set the value of the market, not those that sit it out.  You can believe your "asset" (home) is worth far more than it is, but as soon as you need to sell and move on, you get paid the market rate.  As I have said, this is one in eight sellers at the moment, I expect that number to climb significantly.
 

i'm not sure your figures add up ....... £200k house (say), drops 30%,,,,,,,you buy at £140k.  you use yuor (self-declared) £37k deposit, less fees, and take a motgage of £105k. this costs you c. £550 interest-only per month.  without wishing to pre-suppose your personal details, lets say your job pays £40k gross,,,,, you net £2400 say after tax & NI.  say you manage to pay off £1000 capital per month ......... it will take you 105 months, factor in the extra repaymetns as teh interest bill falls (=7 years).  so, assuming that you can maintain that level of mortagage repayment, and that your outgoings don;t increase, and that you never trade up..........what happens if there is a HPC during your 7 years of mortgage-paying years?  (seriously!)  would you sit tight, or take a step up the ladder, or STR .......?!

also, i can tell you, having spoken to umpteen unmotivated, semi-motivated and very motivated sellers ......... there are not 1 in 8 sellers that are forced.  it is far, far fewer than that ........ i wish it weren;t!  also, it's interesting that you seem to be keen to buy BMV from fordced sellers ........ not quite the down-trodden put-upon, FTBer you like to portray yuorself as? 

as an aside, i was one of the "d!ckheads!" you so eloquently refer to who took out a 125% loan ........in 1999.  it was with northern rock, their "together" mortgage ....... i paid 5% deposit on an 88k house, and took a further 25% drawndown at mortgage rates.  i then took that 22k and bought 2 BTLs ........ which were high-yield houses in solid areas.  risk-wise, i only did this when i qualified as a chartered accountant with a big-4 firm ........ effectively securing my employment for life.  i then took out a bank loan for a further 22k ....... and repeated.  through the intervening years, these houses have almost doubled in value,,,,,,,,,and are massively cash-flow positive now.  meanwhile, i used my new "professional" wage to repay the loans at rate of £2000 a month.  i then started on my main mortagage ....... and sold my first house for 195k, investing the equity in my "forever" house in a cheaper town ....... and guess what?  i seem to have done ok, despite being a "d!ckhead" ........ get real mbga,,,,there are opportunities all around you, whether it be a rising, falling or flat market.  i took some calcualted risks, which paid off.  jusy thought you might like to know that........!

mbga9pgf3:

The game plan I am sticking is to wait until prices fall 30%, by which stage the recession will be hitting hard, people are going to be really really squeezed.  Once prices have fallen to what I would consider a more sensible level (yes, around 25-30% lower, inflation corrected), I will be looking to go out to find a distressed seller, and try to get whatever further discount I can, bearing in mind I am a buyer with a significant deposit.  Whether that means taking a direct approach, a la our BMV friends next door, or perhaps approaching the banks instead, I am not sure yet.  I believe I have between 18-24 months before we get anywhere near that stage; it may take far longer, it may spin itself out quickly.
But by buying from a distressed seller, I will be hedging against any further price falls, and protect the seller from having bankrupcy/reposession proceedings carried out against them; a big no-no if you are a professional.

 Typically, once everyone is screaming "dont get into property, its the worst investment ever" I will be looking to buy.   I will not be looking for an investment though, purely my own home.
 

Are you looking to buy anytime soon, or are you waiting by the sidelines? 

I would buy a property if it fitted my "investment" criteria- ie: good rental demand, good yield, +ve cashflow,  discount meaning chance to aquire with no money down presented itself, (as I am sure it will in the short term).

I see you are looking to achieve a discount of circa 40% on todays prices or a mortgage of around 50k, if i remember correctly you said your target property was around 160k?? that's quite some fall... may I ask what area you are looking to buy in? The other thing I note is that you are renting (albit at a discount to market value). I am sure you have factored that in to your figures but obviously this would be a loss, maybe close to 10% of your target properties amount? That is including inflation and cost of target property at time of purchase.

"dont get into property, its the worst investment ever" , lol... isn't that a quote from Rich dad poor dad?

I am curious whether rents will remain, slip or rise in a crash situation? What say ye....
 

Pod, I have 37.5K TODAY... In three years, saving at 3K a month (Wwhich I have been achieving about 50% f the time, the other 50% I save a little more, sometimes a little less) assuming a 5% return on bank savings, I will have a 160K Deposit.  Assuming the slump lasts 4 years, I will hold 205K in savings.

Target house has a current value of  400K, 25% off (lower end of crash range) =300K post crash (in todays prices) this does not include inflation of wages over the next 4 years.THat leaves 145k to repay, over 10 years @6.5% fixed is £1648 per month, easily achievable bearing in mind I am nailing 3K a month savings (2K my salary, 1K the wife, bearing in mind we pay 405 ppm on rent and council tax, saving 80% of take home. It IS possible if you cut back to the essentials.) the wife could  not work another day for the rest of her life, and we would be mortgage free after 10 years.

If prices were to crash, I say again, I would NOT sell.  I do not value property as an investment, but as a home for my family.  I have decided to "wait out" to ensure I am definately obtaining a property at nothing more than mean price over the housing market economic cycle. 

I may have been a poorly done by trodden on FTBer during the rediculous boom period, fact is, its now a buyers market and I am getting my bear teeth out. I know for a fact (having spoken to a numer) that I am a bank managers best freind at the moment.  How many are planning to purchase with less than 50% LTV?  The use of a distressed seller to obtain "best value" is to assure MY family reap the rewards of the risks I took by not buying during the boom period, some could argue a risky strategy.  I knew it wasnt, because, as I have said before, if an "investment" is too good to be true, it usually is. 

By the way, I am sure northern rock would have been very interested in you using their residential mortgage products in funding a BTL property... I am sure they would have something in their t&cs about that... 

 fourwalls, Quantify please.  What do you class as "good Yield"?  As I have said, anything less than 8% and you are underwater.  How are you financing your purchase bearing in mind most BTL lenders require upwards of 40% deposit now? Or are you planning to commit fraud and purchase a btl property off a residential mortgage?  I dont know where you think 40% comes from, I would assume 40% declines from peak as the furthest I would go to if things get REALLY bad.  Being a pessemist, I am planning for declines of 25% but hoping for 40%!!!
 

mbga9pgf3:

Pod, I have 37.5K TODAY... In three years, saving at 3K a month (Wwhich I have been achieving about 50% f the time, the other 50% I save a little more, sometimes a little less) assuming a 5% return on bank savings, I will have a 160K Deposit.  Assuming the slump lasts 4 years, I will hold 205K in savings.Target house has a current value of  400K, 25% off (lower end of crash range) =300K post crash (in todays prices) this does not include inflation of wages over the next 4 years.THat leaves 145k to repay, over 10 years @6.5% fixed is £1648 per month, easily achievable bearing in mind I am nailing 3K a month savings (2K my salary, 1K the wife, bearing in mind we pay 405 ppm on rent and council tax, saving 80% of take home. It IS possible if you cut back to the essentials.) the wife could  not work another day for the rest of her life, and we would be mortgage free after 10 years.If prices were to crash, I say again, I would NOT sell.  I do not value property as an investment, but as a home for my family.  I have decided to "wait out" to ensure I am definately obtaining a property at nothing more than mean price over the housing market economic cycle.  I may have been a poorly done by trodden on FTBer during the rediculous boom period, fact is, its now a buyers market and I am getting my bear teeth out. I know for a fact (having spoken to a numer) that I am a bank managers best freind at the moment.  How many are planning to purchase with less than 50% LTV?  The use of a distressed seller to obtain "best value" is to assure MY family reap the rewards of the risks I took by not buying during the boom period, some could argue a risky strategy.  I knew it wasnt, because, as I have said before, if an "investment" is too good to be true, it usually is. By the way, I am sure northern rock would have been very interested in you using their residential mortgage products in funding a BTL property... I am sure they would have something in their t&cs about that...  fourwalls, Quantify please.  What do you class as "good Yield"?  As I have said, anything less than 8% and you are underwater.  How are you financing your purchase bearing in mind most BTL lenders require upwards of 40% deposit now? Or are you planning to commit fraud and purchase a btl property off a residential mortgage?  I dont know where you think 40% comes from, I would assume 40% declines from peak as the furthest I would go to if things get REALLY bad.  Being a pessemist, I am planning for declines of 25% but hoping for 40%!!!