pslewis

I have been dipping my toe into the market over the past 5 days and have got an accurate feeling all the way to my head!!

The REAL situation on the Berks/Hants border is as follows:-

No chains are able to build up - this is due to a lack of first-time buyers being able, or not wanting to pay the prices being asked at the bottom end. This a new phenomenon, developing over the last 3 weeks. Now, apparently, whats happening is this:-

House X is on the market for, lets say, £750k, buyer y wants to buy it at the asking price and puts House Y on the market for £550k. Buyer w wants house Y at the asking price so puts house W on the market. Buyer z comes along and wants house W at the asking price so puts house Z on the market - he gets NO buyers as his is an overpriced first-time buyers house .... Therefore NO chain and hence NO sales!! BUT, everyone up the chain thinks they have a buyer at their asking price and are VERY reluctant to drop to get the market moving!!

This can have ONLY ONE result, Buyer z HAS to drop his price AND demand a resultant drop up the chain, so, you heard it here first - the writing is on the wall Autumn will see a price correction downwards. (If this co-incides with a hike in rates then its going to be a juicy fall!)

All IMHO of course!! But I do my homework thoroughly

Pete

John Catlin

Agree completely with what you are saying.

My son and partner are first time buyers and people are asking far too much at the bottom end and most will not take an offer.

No sale at the bottom means no sale at the top.

Once people realise this and adjust accordingly market will start again.

From the beginning of year when they started looking the asking prices seem to have jumped from about 110k up to 150k for the same poor quality house.

All the best

John Catlin

Luke

Pete
Very true words

dnb

Been expecting this since last August when I moved out of London.

CrisPDuk

Pete, the general gist is correct, but I think you will find this is a South East phenomenon rather than a nationwide one. The problem is the effect will spread to the rest of the country as the first time buyers move farther afield to get a foothold, then move back in as finances permit.

ian/555

I think you can safely say that the only people "talking the market up" at the moment are those that earn their living from the housing market. Most people who are not on the ladder at this point in time are not, because they feel that the Market is over priced and they cannot find the right property in there price range that they would be prepaired to pay over the top for.

Interestingly enough one of my neighbours has put her house on the Market for what I would consider a vastly inflated asking price. I will be very shocked if anyone pays what she wants as it seems very overpriced for what is just a very small 2 bed Mid terrance house.

ian

Robyn

I agree with you but reading on the BBC website they rekon demand is growing and there are not enough houses to buy.

They dont see it falling till next year www.hometrack.co.uk have some figures on this.

still I could not afford to be a first time buyer now! I dont know how any first time buyers can! Its got to start dropping soon.

ChrisB

Interesting reading

Diablo

Pete,

Agree to a point, but if the house at the top of the chain was £100k less, then the next one down could be less and so on until you get down to the first time buyer house which can then be cheaper.

Think is a bit unfair to say the bloke at the bottom has to lower his price as there is clearly an element of greed/over expectation call it what you will all the way up the chain.

Problem in Scotland for years was that no one would buy without selling first due to caution. Now, problem is you sell within days and cannot find anything to buy

As you may know we have different laws in relation to sale and purchace up here. (Given your extensive knowledge of Scotland I'm sure you do )

On the plus side, you conclude the missives (contract) very early and sometimes months before entry date and cannot then be gazumped. On the down side, we have this daft case of "offers over" with closing dates which see many properties going for up to 50% - 60% over base "asking" prices. Makes it extremely difficuly to buy as you are in a sealed bid situation.

Some fixed price houses out there (usually new build) but not many

We are seriously thinking of selling at huge profit, renting somewhere for a while and then buying when the prices get more sensible.

D

MarkO

Probably pretty true. However, the point made about a shortfall of houses is pretty relevant here - lots of people need/want to move/buy but the properties still aren't really out there to satisfy demand.

It's very complicated. For example, if first-time buyers can't find something they can afford, they will be forced to rent. This feeds into the (albeit flagging) buy-to-let market, meaning that fewer houses are available to buy. It's a vicious circle.

The bubble probably will burst, but when it does I think we'll just see a slow-down (or temporary halt) to the market for 6-12 months. I don't think there'll be a crash, but the WorldComs and Xeroxes of the world aren't helping confidence. Of course every time confidence takes a bash, the market risks slowing down a little. But if that happens, the BoE will be less likely to hike interest rates severely (although a 0.5% rise is probably due in the next 6 months). And of course low interest will keep the market boiling.

We're putting our house on the market this week, and the 4 valuations we've had put it far higher than we'd expected. However, since we're not in a chain and not in a rush, we figure we can dabble a bit, so we're going to have a punt. It remains to be seen as to whether these agents can put their money where their mouth is and actually get a buyer at something near the price they've suggested....

MarkO

Dablo - re: renting and then buying "when prices become more sensible", don't bother. Most people are fairly certain that whilst the market needs to slow down, any 'adjustment' is likely to be in the region of 1-2%, not 20-30%, which is what you'd need to make such a plan work.

And, of course, unless you need to, it's just not worth getting off the housing 'ladder' - otherwise you could find yourself having difficulty getting back on at the same position.

David Lock

Re first time buying. I would be interested if anyone has some real figures to see how things have changed over the years. Say in the SE (outside London) a first time buy is £120k. Earnings for a typical 20 year old buyer say £15k per annum perhaps with partner on £10k? So property is 8 times main income. My first buy was £9000 in 1974 but I just can't remember how much I was earning. IIRC about £1200 pa which would mean property was 7.5 times earnings with interest rates higher and in days when less buyers had partners. Are my figures way out? Any thoughts? PS. I think what has also screwed it for first time buyers is the "buy to let" trend. David

MarkO

Here's one figure that was published recently - Sevenoaks in Kent is now the most difficult place to buy a first house. First time buyers are paying an average of over 200k there!

Nimbus

We are trying to move at the moment. We bought our house for £50k 8 years ago as first time buyers. It was not a bid price for a three bed detached with garage. Now we are selling for £117k. I don't know how any first time buyers could afford that. We cirtainly couldn't if we were in the same position all those years ago.

The problem we have now is that we just can not find anything to buy. I don't want to be spending £250k on an "ordanry" house. Problem is we need something bigger so will probably have to take the plunge, but I'm tempeted just to sod it all and stay were we are for a bit longer. But, if things are going to continue the way they are then I guess it's better to move now.

We had also though about selling, then rent until prices fall, but decided not too... I don't think they will fall enough (as someone said)...

It's the most stress full thing in the world....

MarkO

It's bloody daft, isn't it. Our current 4-bed house is a beautiful design, looks lovely, has an okay-sized garden, and is fairly new (still covered by the NHBC guarantee). We bought at 225k having moved from Godalming where a similar 4-bed house would have cost over half a million ( daft!).

We're now in the situation where our house could be worth as much as 350k. We initially looked at moving back to Surrey, but after we started getting details through for 3-bed semis with little or no garden for 475k it just confirmed that it was ridiculous, so we're going to follow our hearts and move up to Scotland. House prices are rising fast there, but at least they're not quite so silly....!

Diablo

MarkO
Agreed, should have explained a bit more.

At the moment, we should get silly money for our property. Bear in mind its different in Scotland and properties are going for way above what they are being valued at buy professional surveyors. Although overall values will not necessarily fall, the daft money people are prepared to pay is likely to calm down a bit.

Reason for renting and waiting is not to get what we are looking to buy cheaper than it may be now, but more to wait for market stability and actuallu be able to get something for closer to its real world value.

Of course value can be subjective as to what someone is prepared to pay .

Here's an example I saw locally.

Priced at offers over £120k by estate agent. "Valued" by buildings surveyor at £160k. Sold for in excess of £200k.

Its anticipated that while the "valued at" figure (the one the Lenders use) will continue to rise (albeit slowing down) the sale prices will start to more closely follow valuations instead of being crazy as they are now.

Of course lenders only lend on surveyed value. How a first time buyer manages without a huge cash deposit is beyond me.

D

Diablo

Marko, meant to add,

Yup, moive to Scotland. Its still silly, but only relative to what we are used to.

£350 k will buy you a mental house, as long as its not within 30 minutes commute of Glasgow or Edinburgh.

Last week a 3 bed semi bungalow sold for £310k round the corner from us in Glasgow's West End.

We could, however, sell our 2 bed flat and buy a 4 bed modern house with d/garage within reasonable (45 min) drive from Glasgow city centre for same money right now.

Dilema is we love the flat and its 10 mins from work and all ameneties

D

MarkO

We'll be moving to Peebles/Galashiels/Melrose - that sort of area. Not cheap as chips, but although I like the prices in Aberdeen, getting work there is not guaranteed (whereas it is - pretty much - in Edinburgh).

We won't be spending 350k up there - we should be able to get somewhere very nice for about 250ish, and end up with a nice small mortgage. That's the plan, anyway.

MattW

Same problems in Swindon. Moved here from Shropshire 5 years ago, paid 85k for a 3 bed detached new house. I thought that was incredibly expensive then, coming from my 2bed semi which I sold to the company I joined for 37k.

Moved 2.5 years ago to 4 bed detached which was 2 year old (paid 145k, selling at 119k)

House is now worth 210k+, so to get something bigger means paying at least 250k+ with the stamp duty hike that involves, most new builds are no bigger than ours but seem to command a massive premium over the cost of a 2-3 year old property.

So we are considering putting a 15x10 Conservatory on the back for a bit of extra living space, which will cost us 10k.

MarkO

37k for a house? Stick that on the credit card then.

I know what you mean about new builds though. It's astonishing how bad the design and room-sizes are on most new houses these days. We're keen to find a new build, but want a smaller independent developer - Berkley homes etc are just crap.

Regardless of how big the actual house is, or how much it costs, their definition of a 'double bedroom' is 10ft x 10ft, and they all seem desperate to put an 8'x6' box room into the house. I mean, FFS - our walk-in-wardrobe is bigger than that!

Dave P

Gazundering will be the way forward. The opposite of Gazumping. People at the start of the chain offer full asking... everyone has everything in place, large amounts of money have been paid out on solicitors etc. ans then..... the day of exchange the people at the start say we have to come down £10,000... and lo, because of the costs incurred an arrangement is reached and the whole chain drops. Everyone still gets their house so there are no real losers. Was quite common during the early 90's.

Also the 50 and 100 year mortgage will come along which reduce monthly expenditure (of course it increases the total loan but such is life). These are already common in Japan... although I believe whole families live together and the mortgage passes down the line. Although with niminal interest rates (about 1%) it's not a huge issue.

Dave

Neil Smalley

100 year Mortage

No WAY I would ever willingly and knowingly thrust my depts onto my kids.

Puff The Magic Wagon!

iTrader: (2)

Interesting thread.

For various reasons (mainly skint but neighbours too) thinking of "downsizing" & moving really into the boonies round us (it can be done).

We have a new 4 bedroom house that came out of an old flint barn etc etc. Loads of space, front/rear gardens, double garage etc. Cost £265K 2.5 yrs ago. We were able to buy it 'cos we got that for our 3 bed terraced house in E.London that we bought for £100K yrs before that!

Anyhow, came across a couple of candidates whilst out driving & looked 'em up. They were both 3 bed bungalows, with either a garage or an out-house & undoubtedly small ~ £250K

I think they've been around for a few weeks as no-one in their right mind would want to spend that on a small bungalow! & as Pete says, no 1st timers can afford that...

Wonder what mine would "go for"!

dsmith

bungalow prices near me (Suffolk) are just ridiculous. Too many people retiring to the country have got the cash though - its an extra silliness within the general silliness.

My 4 bed house, dbl garage = small 3 bed bungalow in price.

MattW

37k for a house? Stick that on the credit card then

Lol at MarkO

You can still get one for 45-50k, buy two and knock em together!!. Oswestry, Shropshire

Pete Croney

What I find absolutely numbing is that the Council of Mortgage Lenders formally asked the Bank of England to raise interest rates last week, to curb demand in the housing market.

What creche do these people normally spend their day in?

If they just insisted that their members lend sensibly then demand would be controlled by ability to pay. People selling a first time buyer type house would only get £100k for it, in the SE, and would only be able to afford £150k for a 3 bed semi etc, etc.

When you have lenders offering out 5 times main income, first time buyers are going to have £200k for a house. But they won't ever be able to afford a night out and that's with interest rates at these levels. If the Euro continues to rise in strength, interest will have to go up to prop up sterling. If they don't go up, the cost of imported goods will push inflation beyond the BoE's target and this certainly prompt a rise.

Banks and building societies lost billions in the last crash, due to indemnities not covering the sale prices realised at auction. They seem to have learnt nothing.

MarkO

Wise words, Pete. Couldn't agree more.

Same goes for credit cards etc. There's a lot of first-time buyers who would be able to buy the houses they wanted if 30% of their income wasn't going straight out to pay off the monthly bills for consumer credit....

alcazar

iTrader: (2)

Agree with Pete.
When I bought my first house in the late 70's we had to wait 7 months for the building society to loan us the money. We bought the house on a "letter of intent" from them. Mortgage interest rates were low, as were house prices.
However, as long as governments keep encouraging investment in the south east, and keep putting eveything they do in the same region, we're bound to have a situation where demand outstrips supply there, prices rocket, first time buyers have to borrow more, etc, etc. Catch22 isn't it?

Graz

PeteBrant

Why didnt you just say that FTB's are being priced out of the market?

I dont think you can claim to have thought of particular phenomenon "first"