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stardust
Posted - 11 January 2017 13:28
Oh well, eh?
Wellington
Posted - 11 January 2017 13:33
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Agreed.

75% correction by May

Hotblack Desiato
Posted - 11 January 2017 13:35
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"stardust
Posted - 11 January 2017 13:28
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Oh well, eh?

unpresidented
Posted - 11 January 2017 13:29
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Yeah

Tuglite tbh"

Well prices falling in a London is a good thing for anyone looking to buy a house. It may be indifferent to people who own houses, but could be a big problem for the heavily mortgaged.

More importantly, the glut of supply of high-end residential property which is not going to sell at anything like expected prices could impact on us all, because such properties are built with mortgage finance and if the properties don't sell, the developers go bankrupt, and don't pay back their loans to the banks - on a large enough scale bad loans cause bank failures and this time round the debt positions of most developed world governments is such that they cannot sustain a further round of bank bailouts.

The collapse in the US housing market was a key driver of the 2008 financial crash which impacted all of us. If housing bubbles are popping in the UK (or elsewhere) that could snowball into a second financial crisis.


Abbeywell/NSA
Posted - 11 January 2017 13:36
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and your point is? and who cares
Hotblack Desiato
Posted - 11 January 2017 13:40
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"Abbeywell/NSA
Posted - 11 January 2017 13:36
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and your point is? and who cares"

Anyone who might lose their job?
Abbeywell/NSA
Posted - 11 January 2017 13:45
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More fool them for buying more than they can afford and more fool the banks for lending them the money to buy what they really can't afford and the Government should have dealt with all this earlier by not keeping intrest rates so low people think that everything is chusty and dandy when really the country is in the up to it's chin

Hotblack Desiato
Posted - 11 January 2017 13:45
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"Used Psychology
Posted - 11 January 2017 13:40
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Heh.

Only a crisis if you bought in to a £2m house on a 100% or 95% deal, which is unlikely."

Not necessarily.

Ireland and Spain have been decimated by speculative house building bubbles even though most Irish and Spaniards did not lose their jobs or their homes.

The increase in supply of high-end properties coming on the market in London has been exponential over the last 18 months. We are talking thousands of flats aimed at the "prime" market which are not going to sell at anything like the asking price. This translates into potentially billions of bad debts on those developments alone.
Hotblack Desiato
Posted - 11 January 2017 13:47
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"Used Psychology
Posted - 11 January 2017 13:44
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Also website pricing is not the most reliable - you may be getting "noise" as the agents adjust price to come top of the rankings/page views by updating their listings."

Or maybe not:

http://www.thisismoney.co.uk/money/mortgageshome/article-4006074/Chelsea-homeow ners-suffer-13-drop-property-values-house-prices-prime-central-London-fall-nearly-5. html
Mr Scarawanga
Posted - 11 January 2017 13:56
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This cannot be right. It would mean captain seing was right. This is not possible. Qed
🐝 buzz
Posted - 11 January 2017 13:58
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On my rare trips out east I don't see that many 60 year olds drinking soya lattes, going to the barbers and coming out with two haircuts on one head.
🐝 buzz
Posted - 11 January 2017 14:06
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As it happens, last time I visited Hyoo's mum.
Service charge
Posted - 11 January 2017 14:09
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What Brad meant was : bikes with brakes that he thinks have no brakes cause there are no wires.
Captain Mal
Posted - 11 January 2017 14:12
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What Brad meant was fixies - which have no brakes (you just stop peddling) and are / were popular with hipsters.
Service charge
Posted - 11 January 2017 14:13
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Did you trying pedaling backwards?
Moo is voting Lib Dem
Posted - 11 January 2017 14:14
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I've been saying for 10 years that a correction is on its way and that house prices are just mental London and within the M25 generally.

I've been wrong every time.

On my road in Sunbury (too poor to live closer into London) I've seen less ambitious asking prices June-December 2016 than there was in the first half of the year by 20-25K. Houses sell for £400-£500k here. I consider them overpriced by £200k but I'm a northerner who still thinks we should have 1980's house prices.

There must come a point where people realise paying £750k for a two bed terrace in Zone 2 is completely mental right? I can't believe its sustainable or healthy for the economy or from a public policy perspective.
Service charge
Posted - 11 January 2017 14:19
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But they have a brake. Just not a wire one.
Saillaw
Posted - 11 January 2017 14:20
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The US crash was more complicated than simple over supply and was related to the fact the same money had been lent over and over again in effect with the original lenders knowing that the borrowers couldn't afford to repay it but it wouldn't be their problem.

Yes it will have some effect from the top down but there will come a point where the ripple stops as the people competing for £200k flats in unfashionable parts of London will never be competing with people buying a £1m house in Balham. Certainly makes me ponder shifting my flat in Balham and renting for a bit though.
Service charge
Posted - 11 January 2017 14:21
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So to sum up: you can stop a bicycle with a break or by back pedalling.

You can't backpedal on your mortgage!
Service charge
Posted - 11 January 2017 14:26
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Eh UP all of those criteria are present in the Uk market. Add to that low margins. The Banks are taking risk for no return.

After the crash Ireland got rid of trackers, BTLs and interest only. As well as bringing in strong deposit rules and income caps.

PRA should have done the same.
🐝 buzz
Posted - 11 January 2017 14:27
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"I'm a northerner who still thinks we should have 1980's house prices."

Pretty sure they still actually do have 1980's house prices. I'm rarely jealous of my relatives but what my sister has just bought for £250k in scouseland makes me want to cry.
Wellington
Posted - 11 January 2017 14:34
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not to mention the fact that anyone who got a mortgage in the last few years was stress tested up to a much higher rate of repayments.

I think we will see a leveling off or, at worst a 10% correction, which combined with inflation will see prices plateau out.
Fosco
Posted - 11 January 2017 14:39
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Jesus fvcking Christ the ignorance about fixie bikes on here is astonishing.

*weeps into macchiato*
Saillaw
Posted - 11 January 2017 14:49
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We have already seen big falls at the top but won't see the same percentage drops at the bottom. Even then it's impossible to generalise about the London market and there will be areas that fall and a few that go up as property markets are very localised.
Abbeywell/NSA
Posted - 11 January 2017 14:57
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'Inflation will then reduce the debt and push up wages enabling higher house prices again.'

Whern is this supposed to happen, ecomomnists sat we are stuck in this shite for another 10 yrs
Service charge
Posted - 11 January 2017 14:57
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You are assuming the next crash will look like the last.

The insane competition in the sector means the banks are competing on price. When a correction comes the default rates will be magnified by the poor returns on the risks. So the default pool may be lower (assuming banks have properly implemented the affordability rules), but the banks ability to absorb losses will also be lower. Not to mention the shite state of the banks currently.

The regulators should have been super prudent until the sector had recovered. And the banks had shown tbey can run themselves properly.
Hotblack Desiato
Posted - 11 January 2017 15:01
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Service charge
Posted - 11 January 2017 14:26
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"HD, the problem in Ireland was thanks to runaway credit being available, little credit control and people being willing to lie in order to buy somewhere."

Eh UP all of those criteria are present in the Uk market. Add to that low margins. The Banks are taking risk for no return."

Anecdotally it seems that Service Charge is correct. Back when I bought Desiato Towers Mk1 (2005) any "How much could you borrow" tool on a bank/building society website asked for an indication of salary. Last year when I checked out of curiosity, none of the major bank lenders which such tools on their website seemed interest in something as mundane as salary. They just wanted to know what deposit you had and how much the house you were intending to buy was.

I have read various articles/web stories over the last year or so about salary multiples being offered to buyers well in excess of long-term norms, 30 year or 35 year mortgages, mortgages being offered to retired people etc. etc.
torontochicken
Posted - 11 January 2017 15:02
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We bought a house in zone 1 prime london in December for 20% less than it was last sold in October 2014. Prices are definitely coming off 10-15% from where they were a year ago. There's not a huge amount of supply though - there are lots of houses sitting there for ages not selling as the owners clearly aren't forced sellers and simply won't drop their price. A few developers have got absolutely rogered though.

Sh1t might hit the fan in a couple of years - but we mortgaged with a 40% deposit and have bought a family house for the long term so not too worried about any further price decreases as don't want to sell it in the next decade. I'm not sure there will ever be enough supply of family sized houses in central london for there to be a really large correction though.
🐝 buzz
Posted - 11 January 2017 15:04
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Yap, yap fucking yap, banks, blah.

Let's just ignore the most recent stress tests. Doesn't make for interesting posts that it might actually be ok does it? Soundbites much moor fun.
Wellington
Posted - 11 January 2017 15:05
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runaway credit being available

Except mortgages are harder to get than they've been ages when you actually come to apply for them. Online calculators are just marketing tools for sucking people in. Affordability criteria are much stricter than they have been previously

Wellington
Posted - 11 January 2017 15:06
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*reads toronto's post*

*reaches for the humblebrag gong*
🐝 buzz
Posted - 11 January 2017 15:08
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Heh. Nowt humble about that Wellers.
Service charge
Posted - 11 January 2017 15:21
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But if it is harder to get a loan you would see that reflected in prices. Especially outside London.

Affordability just turns a 25 year mortgage into a 35 year one.
Hotblack Desiato
Posted - 11 January 2017 15:30
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WOT SC said. The 35 year mortgage is increasingly common.

I found this from a mortgage comparison website:

"
According to Halifax, 26% of first-time buyers who took out a mortgage with them in 2015 opted for a 35-year mortgage, compared to 16% in 2007.[3]

Over the same period, the share of mortgages with a 20- to 25-year term dropped from 48% to 30%.

Read more at http://www.gocompare.com/mortgages/longer-term/#eKQKDhYBX7w4XYUl.99"

So how does this make banks more vulnerable? Well:

1. If your borrower could only afford the mortgage over 35 years, and they get into difficulty, it may not be possible to extend their mortgage term further to make the repayments more affordable (as they would still be paying off the mortgage into their 70s or 80s). If they were on a 25 year deal, however, there was always the option of avoiding a default by extending the term.

2. On a 35 year mortgage the debt amortises very slowly in the first ten years. Anyone who takes out a 35 year mortgage and only makes the monthly payment for ten years could still find themselves in negative equity despite ten years of repayments with a 25-30% drop in house prices.
Service charge
Posted - 11 January 2017 15:39
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Not forgetting the bank accepting this risk for a fraction of the margin they would have gotten even 5 years ago.
Wellington
Posted - 11 January 2017 15:39
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so what sort of correction do you think is coming HB?

10, 20, 30, 40% or more?

I just can't see London prices dropping by more than 20%, simple supply and demand will always prop it up, especially for family homes.
Maid_Marian02
Posted - 11 January 2017 15:40
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this started in the first quarter of 2016 with the threat of Brexit - what's your point? Prices have been falling in many areas since last spring.
🐝 buzz
Posted - 11 January 2017 15:40
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On the assumption that banks are generally unwilling to lend past a normal retirement age anyway the 30 year old getting a 35 year gidge is in a pretty enviable position.
Hotblack Desiato
Posted - 11 January 2017 15:46
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"Brad's big donger
Posted - 11 January 2017 15:23
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Desiato, on everyone of these how much can i borrow indicators you have to input your income. They've been like this for ages to stop time wasters then applying for a loan. Because when you do then actually apply for a mortgage you also have to provide evidence of your income and your outgoings."

I just speculatively put into the HSBC calculator the following details:

Deposit: £40,000
Gross Salary: £60,000
Monthly outgoings: £300
No other debts
Repayment Term: 30 years

And that said that they could lend me £360,000 based on 90% property value (i.e. they would lend me 6 times my gross salary)

In fact having tweaked around with the parameters, it seems that as far HSBC is concerned, you have to get up to 6.3 times gross salary before it starts to affect the amount that they will lend someone. The main thing that affects the amount they will loan is the deposit versus the value of the property.
Wellington
Posted - 11 January 2017 15:53
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errr you have monthly outgoings of £300?

Make that realistic and you'll find the amount they will lend you will drop significantly.

Plus those calculators are marketing tools, you won't find any lender who will actually lend you that much base don that criteria.
Hotblack Desiato
Posted - 11 January 2017 15:55
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"Wellington
Posted - 11 January 2017 15:39
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so what sort of correction do you think is coming HB?

10, 20, 30, 40% or more?

I just can't see London prices dropping by more than 20%, simple supply and demand will always prop it up, especially for family homes."

Why will "simple supply and demand" always prop up prices and what is this "simple supply and demand" of which you speak?

We already have more bedrooms per person than ever before, so we have an over supply of bedrooms. But prices haven't fallen thus far - in fact they have been rising (until basically now). Why?

A. Because there are a lot of under-occupied houses - empty nesters, retirees, etc. in family homes and at present these people are not forced to sell up (or don't want to sell up yet to fund retirement or care costs because why would you when prices only go up.

B. Because we have been relaxing credit terms (low interest rates, longer term mortgages, Help to Buy) creating artificially high demand.

C. Because in London at least property has been used as an investment vehicle.

The above factors can change quickly - And as regards the supposedly limitless demand for family homes, family formation rates are falling and falling. Fewer people are getting married and fewer people are having children.
Hotblack Desiato
Posted - 11 January 2017 15:59
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"Wellington
Posted - 11 January 2017 15:53
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errr you have monthly outgoings of £300?

Make that realistic and you'll find the amount they will lend you will drop significantly.

Plus those calculators are marketing tools, you won't find any lender who will actually lend you that much base don that criteria."

I just put monthly outgoings up to £1000 and the calculator indicated that I could still borrow £291,000, i.e. 4.85 times the gross salary. Over 30 years. With £1000 of monthly outgoings at an LTV of 87%.

And that is from HSBC, who are more prudent than most.
Azzit Goze
Posted - 11 January 2017 16:03
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Is this the same house price crash as Brexit was meant to cause or is it a brand new one which also won't happen?
Wellington
Posted - 11 January 2017 16:03
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so call it then. you're so convinced it is all about to come crashing down.....

how much will prices drop by?
Phoebe Caulfield
Posted - 11 January 2017 16:03
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I have a 32 year mortgage / \

I wanted 30 but I didn't pass the computer affordability even though the repayments were still less than I had been paying for the last three years a month in rent
pancake humper
Posted - 11 January 2017 16:05
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Hotblack, the payment on that is going to be what, about £1100 per month out of a post-tax income of £3500?

Doesn't seem that bad or unmanageable to me?
Wellington
Posted - 11 January 2017 16:06
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you're fvcked Phoebe. Might as well just default on your mortgage now and hand the keys to the bank according to HB.
Abbeywell/NSA
Posted - 11 January 2017 16:06
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M,y. don't a lot of you earn lots and lots of money
Service charge
Posted - 11 January 2017 16:15
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Oh look irrational behaviour in a bubble market.
Saillaw
Posted - 11 January 2017 16:18
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Whilst family formation rates may be declining that means there are more and more people like me who are 40 something and can comfortably live on their own and will buy family houses to enjoy the space and not having to deal with idiots who don't pay their service charge punctually, etc. As a result we need more homes than ever before. Population growth as a result of immigration also requires more homes.
🐝 buzz
Posted - 11 January 2017 16:20
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On your 35 (or 32) year mortgage the last 5/10 years of monthly repayments will be buttons in real terms. It's not the end of the world.
camenbert
Posted - 11 January 2017 16:21
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I like the idea of runaway credit - is that like an advance on your salary from the foreign legion/the circus/the navy?
Disaster Zondi
Posted - 11 January 2017 16:22
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Yeah it's lawyers website and lawyers usually make more than receptionists.

Your point?
🐝 buzz
Posted - 11 January 2017 16:33
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That would be Robert Holmes then?
Saillaw
Posted - 11 January 2017 16:37
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Penrose as I've said ad nauseam on property threads on this board there is no such thing as the London market and it's impossible to generalise. The market in Chelsea is certainly down 20% if not more but it's a totally difference market in terms of the kinds of properties and buyers to Wimbledon. Hence it's no surprise that the Wimbledon prime market may still be holding up and certainly there's rather less building in Wimbledon so that will support prices.

London is a thousand distinct property markets and yet commentators always try and make it seem like a single market.
Saillaw
Posted - 11 January 2017 16:50
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Unless it's say Mayfair where people buy trophies to shelter their wealth that they rarely use. These buyers are subject to global economic factors and can quickly decide that the capital is safer or better utilised elsewhere.
Hotblack Desiato
Posted - 11 January 2017 17:06
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Penrose2017
Posted - 11 January 2017 16:39
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Hotblack, you are also forgetting people who spend £2/3 MM plus on a gaff are not heavily leveraged at all. These are not the sort of people to get 90% mortgages, they are at worse I wold imagine borrowing half and usually much, much less.

So these properties are not subject to repos, and therefore there is no glut of them ever coming on the market."

Depends on the type.

There is undoubtedly a supply glut of new luxury homes (overwhelmingly flats, but some houses) built by developers. At some point these are going to enter distressed sale territory - if you built 100 luxury flats on Fleet Street and you have only sold 10 of them you are in a bit of fix with your finance.

There are then a number of flats, houses etc bought by foreign nationals as an investment/money storage/money laundering. These may well be leveraged as a foreign "cash buyer" may have unsecured loans in their country of origin or other debts (e.g. business debts). Also if they are only "in" London property for the gains, they have no reason to stay "in" if prices start to fall.
Hotblack Desiato
Posted - 11 January 2017 17:09
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"Funny thing is one of the local long standing Agents, who is an independent guy and has cornered the market of the "super prime" area of where we live (SW19) was tellling my father over xmas he doesn't understand this whole thing about property up 3/4M being reduced by 20%.

His takeway was when these properties come on the market he could sell them 3 times each, and super prime property on Wimbledon parkside Avenue, 5-25MM, never comes on the market, and when it does, it is sold to people on private waiting lists who ask agents if anything comes up on this road, can you tell me."

I am reminded of that quote about people not understanding things when their salary depends on their not understanding it.

http://www.rightmove.co.uk/property-for-sale/find.html?searchType=SALE&locationIde ntifier=REGION%5E87540&insId=1&radius=0.0&minPrice=2000000&maxPrice=&minBedrooms= &maxBedrooms=&displayPropertyType=&maxDaysSinceAdded=14&_includeSSTC=on&sortByPric eDescending=&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisplayPro pertyType=&oldPrimaryDisplayPropertyType=&newHome=&auction=false

Looks to me like a number of expensive Wimbledon properties are being put on the open market and having their prices reduced. Which apparently does not happen because your dad's mate could sell these properties 3 times over to.....Mr Imaginary.
Parsnip
Posted - 11 January 2017 17:41
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people sell because they have to in a downturn
so vulnerable properties are those off plan that are coming up to completion
if you have cheap debt, a job and can service your debt, and you don't need to move, you don't sell
people downsizing, might decide to take a price chip in an attempt to call the top of the market
but we don't have the liquidity crisis that leads to issues with the market
its stagnant
asking prices may fall a bit - but that's only from people who have made enough so as to be happy with their gain

Hand 2 Gland Combat
Posted - 11 January 2017 17:44
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Which original language should I select on Google Translate if I want to turn a Penrose post into something vaguely approximating to English?
Parsnip
Posted - 11 January 2017 17:47
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brad - I am talking about those who have bought them that can't now afford to buy them - because lending rules might have tightened, or they'd intended to flip or hadn't realised that they needed to fund the sdlt. not talking about the developers - although some of them will be nervous if they sold too many on low deposits as they will struggle to enforce against some buyers based elsewhere.
Disaster Zondi
Posted - 11 January 2017 17:59
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How are people defining "crash"? I would say it starts at 20% nominal from the top of the market. By way of a comparator early 90's prime central London tanked 40% nominal I believe.
Hotblack Desiato
Posted - 11 January 2017 18:07
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"So hotblack, nail your colours to your mast,by what percentage on average will prices reduce, in the more desirable areas in London that most of us live in or aspire to live in."

30% from peak to trough across 3 years.
Mr Scarawanga
Posted - 11 January 2017 18:18
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You've sold your gaff then hotto otherwise u'd look like a prick swingstylee
Saillaw
Posted - 11 January 2017 18:20
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Penrose I was talking about the £5m plus and really probably the £10m plus market which is people who don't need to be in London and will gladly switch to NY or Paris if they think the market is a better bet.

The kind of places you're talking about are relatively senior bankers who are earning £500k a year with a reasonable deposit and the ability to borrow £1.5m quite comfortably. That's a different market to the "I've got £10m in cash to spend" posse.

No developer really insists on exchange and completion in their timescale. They say it to make the place sound popular and encourage people to buy but I can't remember the last time a developer pulled a contract because we didn't hit the random target date stated in the sales memo.
Hotblack Desiato
Posted - 11 January 2017 18:30
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"Penrose2017
Posted - 11 January 2017 18:26
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If one broadly accepts property prices have doubled at least in the last 5 years, even if there is a 30% fall in say a 1 million pound house/flat, that still leaves any vendor sitting on 200k of equity. Even if one is heavily leveraged i find it hard to see how one can be in a position where his home is in negative equity, following the fall in price.Prices would have to fall by nearer 50% for people to have homes less than what they paid for it. That will not happen."

Erm depends when you buy it, though, doesn't it? If you buy at or near the peak, or bought prior to the peak but remortgaged to release some equity, a 30% fall over 3 years can put you in negative equity
Hotblack Desiato
Posted - 11 January 2017 18:39
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"amo amas awang
Posted - 11 January 2017 18:18
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You've sold your gaff then hotto otherwise u'd look like a prick swingstylee"

No I live in my gaff which I bought four years ago with a 43% mortgage which I have been furiously overpaying in the meantime. In order for me to end up in negative equity prices would have to fall 73% from the price I paid when I bought the house or 80% from what Zoopla says it is currently worth.
🐝 buzz
Posted - 11 January 2017 18:48
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Whether or not you'd end up in negative equity isn't the question. You stand a chance to make a killing and do extremely well for you and your family if you back your own view on the property market, sell, rent and wait, then buy an equivalent or better place in cash or a better one with the the same or smaller mortgage.

Willing to back yourself on this one?
Hotblack Desiato
Posted - 11 January 2017 18:48
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"Hot black, prices wont drop by 30%. It would help me if they did, but it won't happen."

Why not?

- There are lots of equity release products out there where the houses are to be sold by finance companies when the old biddy living in the house dies off. These are classic "forced sellers" - the equity release finance company or its creditors only get paid by selling the house.

- There are lots of old people living in properties who need expensive care. Especially dementia care. These are again effectively forced sellers.

- There are lots of baby boomers who are relying on home equity for their retirement. While these are not forced sellers, they may want to move quickly if the get the sense that they will get less for their house the following year.

- There are fewer and fewer first time buyers entering the market at the bottom (hence "Generation Rent").

- Bubbles have a life of their own. Once upwards or downwards momentum gets going it can become self-sustaining.

- The much vaunted foreign buyers may well be evaporating.
Disaster Zondi
Posted - 11 January 2017 18:55
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The problem is that a 30% drop doesn't really give you enough to work with as you will not sell at the top and buy at the bottom and you will have transaction costs as well as rent costs in the meantime. You could offset this by investing the proceeds somewhere but if housing is tanking 30%, the market in everything will be difficult unless you are a timing god.
Hotblack Desiato
Posted - 11 January 2017 19:05
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Also what are you going to do with the sale proceeds? Put them in a bank? Because they are definitely fine, and didn't go bust once already as a result of...a 30% fall in house prices. Oh yes, the Bank of England says that it has done a test and that it is all OK. Because these banks have got sufficient capital buffers. You know, proper Tier1 stuff. Assets you can definitely definitely rely on. Like Spanish and Italian Government Bonds.
🐝 buzz
Posted - 11 January 2017 19:22
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All of that is true but remind me how many depositors lost out last time? Sounds like you don't really believe it.
🐝 buzz
Posted - 11 January 2017 19:24
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PS the prediction was 30% down from now so you don't need to time the top. Just sell now. OK yes you then have to call the bottom but that's half that problem gone. Stick it across a number of the better capitalised banks and building socs and/or gilts. If you believed it you'd do it.
🐝 buzz
Posted - 11 January 2017 19:32
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Heh. I wasn't thinking of a furrin bank. One of the ones that did well in the stress tests in Nov. Not willing to take that risk but happy to accept a dead cert 30% loss?
🐝 buzz
Posted - 11 January 2017 19:32
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Less transaction fees obviously.
🐝 buzz
Posted - 11 January 2017 19:59
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**** all risk and a return in interest over three years while you watch house prices fall by 30%. In the meantime you rent a place at less than the monthly cost of your repayment mortgage. It's a no brainer. If you genuinely believe it will happen that is.
Lydia
Posted - 11 January 2017 21:04
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I am probably the only person on RoF who has owned property 33 years and sold not one but 3 properties (our last house and two buy to let flats - we sold all 3 to buy this house which we bought in 97) at a loss in London (I win the RoF prize as worst investor........) However notwithstanding that bad luck/poor skills.... it hasn't mattered.

If you need to own a home the reason most of us buy even if it halves in value as long as you can afford repayments over the 40 years many of us will own a home it all works out fine.

As people have said above there are at least two London markets and £2m+ has been deliberately scuppered presently by the state due to 12%+ stamp duties. That is not having any effect on the £200k entry level properties most people are after. Even the more expensive properties if rightly prices go very quickly around here (outer London zone 5). The over priced ones - like a neighbour's tiny box one they have been trying to sell at over £2m for about 10 years stick and don't sell and rightly so.

Let's do my regular zoopla check of the Lydia home which I keep lobbying zoopla to keep the price down (mansion tax being the fear)....
Lydia
Posted - 11 January 2017 21:06
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zoopla - down over 6 months (just 0.1%), up over last 3 months, up over last year (6%), 2 years 17%. I don't know where they get this from. I will be here unmortgaged for another 30 years, possibly 40 until I die so other than capital confiscatory mansion type taxes which are very popular with big state enthusiasts the property value is irrelevant.
Parsnip
Posted - 11 January 2017 21:47
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Earlier this year, I sold a flat above a bar in battersea (st johns hill end) for about 365k. It was 400 sq ft. That's nearly 900 PSF. It was above a noisy bar open until 2am with no outside space and needed a redecorate. The building wasn't well managed.

You couldn't live there as a couple.
Pre Brexit I was offered 390 for it but they bolted on the vote.

I think if you have a good place, then no worries. If you are siting on something that's a bit iffy - sell if you can.
Parsnip
Posted - 11 January 2017 21:48
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If you are spending 2mm of course you factor in sdlt. It's massive. You also worry once you're spending over 1.6 ish because when selling it could be an issue for your buyer.
🐝 buzz
Posted - 11 January 2017 22:10
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Oddly enough I wasn't suggesting that someone who believes it won't happen should act as if it was inevitable but why someone who believes it will happen won't actually in accordance with that belief ie the point was addressed to Hotblack.
nernernernerner
Posted - 11 January 2017 22:16
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House prices have never really crashed in London.

Every year people make predictions. Every year they're wrong.

Meanwhile, I have pretty much no pension, but a sh1t load of London property.

I know people who scrimped and saved and played the pension game. Because they're idiots basically.

Don't say it to their face. I just do my own thing. Buy a flat. Sell it on for more. Keep the profit and buy another.

Rock n' roll.
freek daze
Posted - 12 January 2017 06:54
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There is no "glut of supply" of family houses in nice neighbourhoods near tube stations. So I doubt I've got much to worry about.
freek daze
Posted - 12 January 2017 06:54
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Penrose, you are one of the most unusual users of the comma, that I have ever, seen?
freek daze
Posted - 12 January 2017 07:44
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I'll be looking to trade up soon mind u and my wealth is in USD, so if endgame gaffs tail off a bit I should be alright.
Service charge
Posted - 12 January 2017 09:59
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Parsnip illustrates the point perfectly.

We have all been talking about our happy homes and plush pads.

The crash will be driven by the hugh amount of shite and shite btls out there. They will drag the prices of everything and be the source of panic.

Everyone will suffer but good stuff will recover for the most part. But that still means years of pain, especially if you need to move or upsize/downsize, move closer to new job etc.

Saillaw
Posted - 12 January 2017 10:13
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AAAAAAAAAHHHHHH people there is no such thing as the London market. It is a thousand markets and making pronouncements about it a London market is as pointless as the statistic about the average house price in this country. Parts of the London market have already crashed, others going up, some are overpriced and some show good potential. Wimbledon is one distinct market and yet a stone's throw from there things are very different.

I live in Balham which I have thought for some time is ridiculous. Moving within London I'd go a mile or so down to between Tooting and Streatham as there the price of my one bed in Balham still buys a two bed with a garden and potential to extend.

Go another mile and a half and I can build and knock out a two bed flat in Norwood for £300k and still make a decent profit.
Back to Cyprian :)
Posted - 12 January 2017 10:17
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saillaw, have you been to that pasta place on hildreth?
Lydia
Posted - 12 January 2017 10:22
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This is over £2m - i remember seeing it from the outside in the street years ago - interesting to see http://www.rightmove.co.uk/property-for-sale/property-62511068.html

2 bed terraced £550k not too far from Harrow on the Hill tube and South Harrow http://www.rightmove.co.uk/property-for-sale/property-63429302.html

I don't we have a massive shortage of houses out here in zone 5 yet.

This flat is abouit £230k 1 bed and not too far from those 2 tube lines (Met and Picc) (and over ground to Marylebone is only 15 mins) http://www.rightmove.co.uk/property-for-sale/property-45678033.html
Saillaw
Posted - 12 January 2017 10:23
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Don't recall seeing a pasta place on Hildreth but don't often walk through the market.
Back to Cyprian :)
Posted - 12 January 2017 10:29
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it's a pop up. really, really good. A mate lives behind the sainsburys and he raves, so went just before Christmas.
Parsnip
Posted - 12 January 2017 10:49
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lydia that flat for 230k looks like an endless list of problems to me (its also clearly a repossession as the wording used by the agents is the wording they use when selling the same).

A FTB would need between £20k and £40k to put it right (and have to manage the works) - which requires cash better used as a deposit.

It will go to a developer.
Hotblack Desiato
Posted - 12 January 2017 11:06
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"AAAAAAAAAHHHHHH people there is no such thing as the London market. It is a thousand markets and making pronouncements about it a London market is as pointless as the statistic about the average house price in this country."

The "thousand distinct markets" argument is eerily reminiscent of the arguments used by mortgage brokers, and bankers who created CDOs, in the run-up to the 2007 crash, to explain why there was no chance that the "US housing market" could crash simultaneously. Which is exactly what it did. Because the markets are connected even across the US.

It is also not true. Prices in one area may be falling and rising in another area, but these factors may be directly connected. That does not make it multiple markets. There is a single stock market, even though shares in certain sectors might perform variably. By Saillaw's logic, there is no stock market, just a market for BT stocks, M & S stocks etc.

And the connection between areas runs deep. Someone who sells a small flat in Greenford to buy a bigger flat in Brentford provides equity to the seller of the Brentford flat to buy a house in Ealing. The purchaser of the house in Ealing provides equity to the seller of that house to fund the purchase of a house in Chiswick. The purchaser of the house in Chiswick provides equity to fund the purchase of a house in Wimbledon. The sale of the house in Wimbledon provides equity to the trading down owners to provide deposits to their two adult children who buy flats in Tooting and Kilburn

And those two adult children bought those flats in those locations influenced in part by affordability in comparison to other areas. Prices can be stagnant or flat in West Hampstead and Balham but rising in Kilburn and Tooting because people who want to live in that general area cannot afford to buy in West Hampstead and Balham can afford to do so in the next neighbourhood along and bid up prices but even in bidding up those prices it is still cheaper than the overpriced area.

Hotblack Desiato
Posted - 12 January 2017 11:08
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As the above demonstrates, prices of properties in various London neighbourhoods directly affect each other because it provides the equity to fund purchases higher up the chain in different neighbourhoods.
Hotblack Desiato
Posted - 12 January 2017 11:28
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The median London property price for all boroughs is apparently £380,000.

However the median London gross household income is approximately £40,000.

So even if you make heroic assumptions about the deposit available to a household on the median income, other debts etc. the median London property price should be circa £250,000.
Wild Stallion
Posted - 12 January 2017 11:37
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Streatham is absolutely fine for an early property ladder move. It has gentrified beyond recognition in the last 5 years in terms of restaurants and hipster coffee shops.

Tooting I wouldn't touch tbh as it's quite grotty and dirty.

Norwood is a bit no mans land and too far from any sort of tube.

People get in a tiz about all this sort of stuff, but eg 2 beds in the likes of Herne Hill are still perfectly affordable for London professionals.
Wellington
Posted - 12 January 2017 11:52
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Has HB called what % crash and what time scale we will see or is he still swerving the question because he knows he will be called out on his bullsh1t if he gives a number
🐝 buzz
Posted - 12 January 2017 11:55
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30% over 3 years.
Saillaw
Posted - 12 January 2017 13:29
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Yes Serge they are interconnected although I'm not sure to the extent that Hotblack suggests as people moving up the ladder tend not to move very far from where they started. It is still the case though that you cannot make a single prediction for the whole of London. Also very unlikely that someone who grew up in Wimbledon will buy a first flat in Kilburn rather than Raynes Park or South Wimbledon.

Hotblack yes there will be a correlation between all shares in listed companies because to some extent the companies are so large that they are all affected by similar external influences but within FTSE you will see very different performances between shares in different sectors. That is why commentators will often acknowledge that a day's rise in the FTSE was driven by increases in a particular sector.

I actually prefer Tooting to Streatham as Streatham gets nasty quickly if you get east of the High Street.

Norwood is my long term bet as it's 15 minutes by train to London Bridge and has gentrification coming down from Streatham, etc. and the redevelopment of Croydon coming up from the south.
Service charge
Posted - 12 January 2017 13:31
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Saillaw a market is characterised by many criteria and is a flexible concept. On your logic you can't even say wimbledon is a market, or perhaps even a street. One end of my road is kittens it ends at a council estate, but the far end can get £5m.

Reality is that markets are made up by characteristics such as property in proximity to the city for instance.

I can go to a fruit and veg market and get large difference in the price, size, colour. and quality of tomatoes. But they are all tomatoes. I can still leverage a good price on one stall to at least seek a price drop on another.

Hotblack Desiato
Posted - 12 January 2017 13:41
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"Also very unlikely that someone who grew up in Wimbledon will buy a first flat in Kilburn rather than Raynes Park or South Wimbledon."

Enormous heh at this, which takes an early lead for the most gin-soaked, telegraph-reading, privately-educated, sexually inhibited, holidays in Puglia middle class post of the year.
🐝 buzz
Posted - 12 January 2017 13:44
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"There is a single stock market, even though shares in certain sectors might perform variably. By Saillaw's logic, there is no stock market, just a market for BT stocks, M & S stocks etc."

I'm still bewildered as to what that is supposed to mean or demonstrate.
Saillaw
Posted - 12 January 2017 13:59
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That is based purely on anecdotal evidence but everyone I know who grew up in London and was given cash to buy a property bought as close to where they grew up as they could. So family of mine who grew up in Hampstead bought in Queens Park and Brondesbury, friend who grew up in Wimbledon bought in Wimbledon then Raynes Park.

Conversely as I didn't grow up in London I've lived all over town and ended up buying close to where a few friends had already bought.

Yes SC there are numerous factors which influence the market some of which are local and some of which are regional or even national but they will influence each market in a slightly different way. Yes there is a clear argument that even within a market for a region of a town there will be many smaller markets. My point is the level at which you generalise and it's much easier to generalise about say, the market in Tunbridge Wells than the market in London as the former is a much smaller group of individual markets with fewer distinct factors.

Trust me I have a distinction in masters level real estate economics so have spent a while studying the theory.
Service charge
Posted - 12 January 2017 14:15
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I'd love to trust you, and you make solid points. But your headline that London isn't a market is untrue. It is a market. What you are trying to say is that changes in the market overall don't mean changes for every participant and outliers can be identified etc
Service charge
Posted - 12 January 2017 14:17
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Btw do you mean you got a distinction in one unit on your masters? What was the rest of it in?

Saillaw
Posted - 12 January 2017 14:22
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Got a distinction overall and it was in Real Estate and is a course that is kind of the equivalent of the LPC for surveyors who haven't done a land related degree.

Whilst there is an overall London market a general prediction for it is meaningless because the individual markets are affected by such different factors. Mayfair will be affected by a swing in foreign exchange rates but that will have a minimal effect in Deptford.
Service charge
Posted - 12 January 2017 14:27
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My brother has a degree in property economics. He also has a million in debt from the Irish crash. Still the proud owner of a set of foundations on one of his sure things.
KeithCurle
Posted - 12 January 2017 14:35
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"There isch no such thing as a single tulip market yesh"

A Dutch tulip trader, March 1637
pancake humper
Posted - 12 January 2017 14:46
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There was a program on BBC 2 a while back about the dutch flower markets. Traders in a room sitting in front of 8 monitors each buying and selling tulips. Bloody interesting.
Wellington
Posted - 12 January 2017 14:49
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Tooting is a weird place. Drove through it once, lots of hairdressers open at 11pm at night.
Saillaw
Posted - 12 January 2017 14:52
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If you think Tooting Bec is rough you ain't been down the Broadway on a Saturday night.
Service charge
Posted - 12 January 2017 14:56
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Sorry Penrose. I don't live in wimbleton, was trying to illustrate point that a market can be variable. But see where you got it from.
🐝 buzz
Posted - 12 January 2017 15:07
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In the hope of getting a bite

"There is a single stock market"

That's confusing a market in the sense of a place at which buying and selling takes place with the market ie supply and demand for the things sold at the former type of market.

" even though shares in certain sectors might perform variably. By Saillaw's logic, there is no stock market, just a market for BT stocks, M & S stocks etc."

And he would be right.
Service charge
Posted - 12 January 2017 15:11
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Eh?
Service charge
Posted - 12 January 2017 15:13
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Ah!
🐝 buzz
Posted - 12 January 2017 15:16
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Serge, hadn't you promised me a grisly trip on the way to joining the choir celestial? I've got that trip to visit zzettes relatives to get out of so of you could find a way to bumping me off by Saturday morning that would be much appreciated.
fork
Posted - 12 January 2017 15:29
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2 bed off plan flats (Q2 2018) are selling for £465k in West Drayton. West Drayton is in zone 6, and is an awful place.
🐝 buzz
Posted - 12 January 2017 15:33
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Let's face it, Tooting has a lot of fried chicken outlets and fried chicken = crime.
Saillaw
Posted - 12 January 2017 15:37
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I've clearly been hanging out in a different Tooting then over the last few years. The Castle and Selkirk down at Tooting Broadway are both nice places for a few drinks and the Selkirk has a big garden for the summer. The Little Bar is also good for late night cocktails even though it's rather small.

Agreed on the traffic and I avoid driving down Tooting High Road if humanly possible.
Wellington
Posted - 12 January 2017 15:41
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I've clearly been hanging out in a different Tooting then over the last few years.

who the fvck hangs out in Tooting?

Get yourself up to Clapham for a few cheeky beers then bish bash bosh youre infernos with rupert and bunto. Top bantz mate.
Service charge
Posted - 12 January 2017 16:13
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Nice view of the m25 then fork? Wonder how they describe it in the brochure.
Service charge
Posted - 12 January 2017 16:18
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I found it on interweb fork. You forgot to mention that 465 only gets you a ground floor.

In fairness tho, the desk in the living room is well located beside the fridge.
🐝 buzz
Posted - 12 January 2017 16:20
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WTF is a fracker?
Service charge
Posted - 12 January 2017 16:23
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A fookin great tracker natch.
Saillaw
Posted - 12 January 2017 16:44
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There are plenty of ways to avoid the High Street and a few other good places tucked away. Living on the main drag would drive me mad as it's loud enough in Balham with all the ambulances on the way to St. George's.

I often hope when I meet friends in the Castle that I'll find a nice nurse or doctor to date.
Saillaw
Posted - 12 January 2017 16:58
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Yes if you a bit further east can buy a nice bed garden flat for £475k or £500k which is a lot cheaper than £500k than a 1 bed with no outdoor space in Balham.
Service charge
Posted - 12 January 2017 17:28
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So a couple of first time buyers. Let's say solicitor and doctor, both 2 years pqe.

By the looks of things they would struugle to afford a 2 bed in poxy tooting.

And ppl say a crash isn't coming!
minkie
Posted - 12 January 2017 17:28
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Lots of people will argue there is a perfect storm brewing of Brexit/interest rate rises/lower demand with forrins leaving/ recessionary growth which will drive house prices down.
Yes yes yes, these things might happen.

The key question should be, how quickly will they then recover? Which they most certainly would, unless some catastrophe dri ves people away from London altogether. Will that ever happen? Probably not.

Think about it- the only difference between house prices in London and the rest of the country is insufficient supply to met growing demand. All the other factors make little difference.
I know this is stating the obvious, but surely it is the only thing that matters when you are considering the direction of travel.
🐝 buzz
Posted - 12 January 2017 17:40
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Swing has predicted 14 of the last zero housing crashes mind you.
Service charge
Posted - 12 January 2017 17:47
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Same said about Ireland pre-crash.

Youngest population in Eu, massive influx from central europe, highest birthrate in developed world, low housing stock.

Fundamentals the called em.

Crash was impossible.

Soft landing would naturally happen.

Wild Stallion
Posted - 12 January 2017 17:50
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Nobody in London feels entitled to home ownership at 2 PQE.

It is at about 5 PQE+ that the frustration and disillusionment set in.
Wild Stallion
Posted - 12 January 2017 17:53
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And with doctors it is more like 10 years qualified...

I have thought that we are reaching a turning point with London - if first step on the property ladder becomes any more difficult then London will begin to seem a bad move for people, or at least a bad place to stay in the medium term.

That would clearly be an unsustainable state of affairs.
Jethro won it for Labour
Posted - 12 January 2017 17:54
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You've changed your tune Swing.
Saillaw
Posted - 12 January 2017 18:05
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Penrose I just ignore my sat nav and cut down through Earlsfield then round the stadium if I want to get Wimbledon. It's a thousand times faster.

Balham used to be the cheap alternative to Clapham and bought my place back in the day for a shade over £200k. Back then Tooting was the grim place that nobody wanted to live but first of my friends moved there about 4 years ago and it's shot up in that time. Similarly Streatham has also come up and became popular a little before Tooting. Now if you want reasonable value on the Northern Line you buy in Colliers Wood.
Wild Stallion
Posted - 12 January 2017 19:26
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... and you buy in Colliers Wood if you also want to be able to get on your northern line train at morning rush hour.
Lydia
Posted - 12 January 2017 19:33
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Solicitor and doctor 2 years PQE stage. They can buy in London just as they could 30 years ago (out in my area).

Remember L3 postman can borrow about £100k so two post men £200k for example and most of us buy with two full time worker salaries. Buy before you breed has always been wise.
🐝 buzz
Posted - 12 January 2017 20:12
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"Buy before you breed has always been wise"

Has anyone got a good knocked in cricket bat I can borrow right now?
🐝 buzz
Posted - 12 January 2017 20:26
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I had a cracking SS Jumbo as a teenager. I'd kill for that now.
Saillaw
Posted - 12 January 2017 20:38
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I bought as a 3 and bit PQE in Balham and paid £235k which was much less than I could have borrowed and just off the top of my head I know at least one part of London where you can still buy a 1 bed for that and it takes half the time to get into the City that it takes me from Balham.
🐝 buzz
Posted - 12 January 2017 20:43
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Weight not in the wrong place as important as it is being in the right place.
🐝 buzz
Posted - 12 January 2017 20:47
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WTF are you on about? Cookie and I were talking about cricket bats.
Saillaw
Posted - 12 January 2017 21:36
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I'm still in it Penrose. Could've got it for less all those years ago as they accepted my opening offer below the asking price within a couple of hours of me making the offer.
Service charge
Posted - 12 January 2017 22:03
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But that was my point a tun and a half ago.

PRA should have introduced more measures to combat price inflation. You should only be able to borrow 4 times your income.
Lydia
Posted - 13 January 2017 08:39
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Pen, I just think you aren't quite up to date on income multiples, that's all. I don't disagree it is hard to buy. 3 of my children have bought in the last few years. I know as much as anyone how hard it is to buy. The postman the mortgage broker said could borrow about £100k from memory, it was at least £100k which was 4x salary but that was with a big deposit so by all means discount it.

the reason the multiples are better than when I bought when it was 3x salary or 2.5 joint salary and was for decades before that too, is because I was paying 12% interest rates and people pay 2 - 3% now so obviously people can afford more than before in that sense.

I don't agree I would not today get a law job in London because I live in zone 5 rather than zone 4. There has neveb een some kind of Ealing effect with recruitment where X will get a job because they live just close enough , say Ealing, but not someone in zone 5. Plenty of partners commute from well outside London but if someone is a very long way out with bad train lines (Brighton is suffering from the rail strike issues I think at present for this reason as people are thinking twice about moving there to commute to London due to train problems) then it might be an issue.

So our two young professionals (like my grandparents and parents and me all choosing to buy before they breed - my grandfather didn't have my father until he was almost 50 and my parents were married nearly 10 years before I came in all cases because they wanted to buy a house and it was very very difficult and even harder if you had a baby) let us put them both on £70k each. I think they can borrow £500k and someone agree above. Professionals are still preferred over call centre workers and the like because we tend to get pay rises.

The hardest thing for them is always the deposit particularly given stamp duty costs.

So let the young couple who are house sharing and sharing a room together in that shared house to save money or living with parents if they can rent free for the 2 years before save some money in our example. Do we think they take home £4k a month each ad let us say they are sharing a room in a shared house for £800 a month so 10% of their net salaries go on current housing or nothing if they live at home. I think they could save £5000 a month easily. so that is £60k a year so yes ov er 2 years they can save their deposit, then borrow £500k and buy.

Now if you make a mistake of dating some low income loser girl with the big breasts but nothing else to show for her and minimum wage earnings then you brought it all on yourself and life will be hard.
🐝 buzz
Posted - 13 January 2017 08:46
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Heh.
Service charge
Posted - 13 January 2017 09:16
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Ludia, you make sense. But you are missing one key point.

What do our fictional couple get with 500k? A shitehole flat in tooting or a new build shoe box in west drayton?

And they are fully dependent on selling that at a profit 3/4 years down the line when they need to up size.
🐝 buzz
Posted - 13 January 2017 09:18
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Isn't it strange that with a **** off big deposit a bank is willing to lend at higher earnings multiples? Anyone would think that they might have given consideration to the risk involved or something.
Hotblack Desiato
Posted - 13 January 2017 09:32
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Just by way of further evidence in support of my suggestion 30% price drops from peak to trough over 3 years being driven down in part by oversupply at the top end see the below search results for London in the £1-£1.5 mil range:

http://www.rightmove.co.uk/property-for-sale/find.html?searchType=SALE&locationIde ntifier=REGION%5E87490&insId=2&radius=0.0&minPrice=1000000&maxPrice=1500000&minBed rooms=&maxBedrooms=&displayPropertyType=&maxDaysSinceAdded=1&_includeSSTC=on&sort ByPriceDescending=&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisp layPropertyType=&oldPrimaryDisplayPropertyType=&newHome=&auction=false

Again a fair number of reductions in there - probably 1 in 5 maybe 1 in 6 (the above £2 million range about 1 in 3 of the properties were reduced. And a lot of new build high-specification flats that are ready to occupy but unsold. And many of the new properties being added seem more reasonably priced - even then many of them won't sell at that price but the initial asking price is less barking mad than it was say 6 months ago.

Ultimately, you can run as many "this time it is different/its a thousand different markets" arguments as many times as you like, and there are various factors such as cutting interest rates, help to buy, changes in tax regimes, interest only mortgages, equity release which can influence the effects but you can ultimately never escape from basic demographic and economic facts:

1. We actually have an oversupply of bedrooms. We have never had more bedrooms per capita in the UK - see Danny Dorling's All that is Solid for the research to establish this. The problem is that it is massively unevenly distributed with many large 4, 5 and 6 bedroom houses occupied by retired couples or widows. This oversupply is not currently reflected in prices, but it will be eventually.

2. Prices at whatever level in the market are inter-connected, and without a steady stream of debt-free, good income, buyers with cash deposits coming in at the bottom of the market, prices cannot be supported at or indeed near current levels. Due to high rents, low interest rates, high levels of student debts, and stagnant graduate salaries (did you know that the average graduate starting salary today is on average £1000 LOWER in nominal terms than it was IN 2000. That's right I said nominal terms. The average graduate started on £22000 in 2000 and got paid in 2000-era pounds, when you could still get change from £3 for a pint in most London pubs. The average starts today on £21,000 in 2016 on 2016 era pounds when you need a fiver to buy a pint. And that is even before you factor in the much faster increase in rent and the far greater student debt load.

3. Prices are at historic highs in comparison to median incomes. There is no obvious route to additional productivity gains which would enable real wages to catch up. So either general price and wage inflation will have to take place (which does not affect house prices) or house prices will have to fall.

4. People are not getting married or having children at anything like the rate that they used to. 1 in 4 British women will never give birth. The median average British person is a 40 year old woman. There are more single households than ever before. The old nostrum that family homes will always go up in value because they are in such short supply does not necessarily hold good if families to fill them are in short supply.

Lydia
Posted - 13 January 2017 09:41
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Service, our mytghical £70k each couple for their £500k can only afford what Mr XL and I could afford in 1984 - the 3 bed tiny terraced out here in zone 5. I was on £10,500 newly qualified (bought just before that) and I was 22. (I graduated in law aged 20 so a bit younger than most) and he was head of a department in school on I think £7500 (we were both on that when we bought).

This is the house next door to where we bought £475k roughly
http://www.zoopla.co.uk/property-history/63-hillside-crescent/south-harrow/harrow/ha 2-0qu/37748251

Yes the hour commute door to door was a pain particularly when you've a baby at home - she was born a few months later after we bought.

So in my view our couple can buy this 3 bed house Mr XL and I did in 1984. Now they may think God has decreed that all young lawyers can live in Mayfair or zone 2 but they would be deluding themselves.

I am not saying it is easy at all. The stamp duty would be nearly £15k. Big state, high taxes. Dreadful.
🐝 buzz
Posted - 13 January 2017 09:43
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"I graduated in law aged 20 so a bit younger than most"

*lovingly applies fresh linseed oil*
strutter
Posted - 13 January 2017 10:01
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Lydia is of course completely wrong on this.

Let me give you an actual example - lady s and I bought our first flat (big 2 bed Victorian, zone 2) on a 2.5 times multiple of joint income.

I looked up that same flat a month or two back and for people in the same jobs now as we had then that flat would be an 8 times multiple - just not happening.
Service charge
Posted - 13 January 2017 10:06
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But LYdia!

Our mr and mrs rofferson are 2pqe, you were zero. And the gap between legal and ps salaries is now a lot bigger. So at the very least the Roffersons have salaries 10% or 15% higher.

Also factor in interest rate. You were probably paying 7/8%? The Roffersons pay 2/3. That should give them greater buying power.
KeithCurle
Posted - 13 January 2017 10:12
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Everyone willing to put their money where their mouth is and compare house price models then? Think Swing has thrown down the gauntlet
curiouslyorange
Posted - 13 January 2017 10:49
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you can just about get a decent place on two MC salaries - say you are 1 year PQEs:

Sallys are around 80 (forget Links and CCs headline figures, base sally is like 80, plus bonus which counts x0.5 towards multiplier).

So that is 160K joint income, x 4 multipler = mortgage of £640K

The problem would be deposit at that point - however if you were frugal for your 2 year trainee life and NQ year you could realistically put away £30K

This still wouldnt get you a nice place, because of stamp duty and transaction costs you would probably still need input from BoMaD or you would have to wait another couple of years to build a 80-90K pot between you.

Bear in mind on the multiplier front that you cant get more than 4x over £500k mortgage and you would probably want a 15% deposit to get a more reasonable rate.

Lydia
Posted - 13 January 2017 10:57
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I was a trainee and Mr XL 6 years older. We dont' have to be exact. But the bottom line that £495k house in South Harrow can be bought by two people on £70k. £70k is the £10,500 equivalent NQ salary I got in 1985 at S&M. S&M NQ salary now is £78k.

You can read law, graduate at age 21, LPC over at 22, TC over at 24, qualify age 24 or you can piss around doing gap years, reading subjects other than law, not sticking to anything and be very old by the time you get sensible enough to think about relationships and houses. Your choice.

You can also choose not to be able to succeed in life by saying woe is me, isn't life hard or you can get onw ith it and buy that £495k house in South Harrow when you're 25 and NQ with your NQ partner/husband.

(We were paying 12% interest not the lower rates sugggest above of 8%)

Also if you always wait for house price crashes you tend to wait too long - just best to get on with it.

then our mythical slaughters pair are now 30 - they have 5 year PQE each - actually 3 years PQE puts them on £108k each. They have probably saved up a bit more, house prices may have gone up or down and they might move up to something a bit bigger perhaps before baby 1 comes.

(And I don't write about my older children that much as it's not fair but they have all bought in their 20s so it's not impossible even with awful stamp duty rates).
Saillaw
Posted - 13 January 2017 10:59
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I didn't seriously consider buying until I was past 3 PQE and even then only bought 1 bed as buying two beds would have required an absolute stretch which I wasn't comfortable with. I could still buy the equivalent for less than I paid 10 years ago within 3 miles of where I live and as I said earlier have a much faster commute.
curiouslyorange
Posted - 13 January 2017 11:08
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I got a 1.99% rate on around a 600K mortgage with the other half - repayment is around 1800pcm which is not too much more than you would pay in rent anyway.

Borrowed from the 'rents which I am paying back at the same rate as my mortgage which will take around 2 years to pay off, but on 2 lawyer sallys that isnt actually too much of a stretch.

Brexit is a bit of a concern, but I guess if house prices go down I will simply sit on the property and wait for a recovery as its entirely affordable at present.

Only time it would really hurt would be price crash plus interest rate hike.
curiouslyorange
Posted - 13 January 2017 11:10
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Anna - 1/2 bed new build in east london maybe?

Probs not a great investment at present, but it would at least be affordable on 80k if you had any form of BoMaD?
🐝 buzz
Posted - 13 January 2017 11:14
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Fucking classic rof.

Q: What should I do if I don't have a big deposit?

A: Get a big deposit off your Ma and Da.
🐝 buzz
Posted - 13 January 2017 11:17
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Oh look I made the 20% on my starter home. That's great if the next home hadn't also gone up by 20% of a bigger amount.
curiouslyorange
Posted - 13 January 2017 11:17
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Anna - Most city firms pay 70 to 80 though don't they?

As for BoMaD that is a good point - My dad liquidated a bit of his pension to help me out on the grounds I have to repay him ASAP (otherwise he will be in the poorhouse later).

If you have no BoMaD (not even a cheeky 5K liquidity loan to cover transaction costs) then it is far more difficult as the deposit and costs will kill your chances unless you live like a hermit for 5 years. This is even if if you are a HENRY (high earner, not rich yet).
curiouslyorange
Posted - 13 January 2017 11:19
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Swing - It depends how they react when the trashed currency translates into inflation, its at that point rates may need to rise.
Hotblack Desiato
Posted - 13 January 2017 11:36
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Lydia
Posted - 13 January 2017 10:57
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I was a trainee and Mr XL 6 years older. We dont' have to be exact. But the bottom line that £495k house in South Harrow can be bought by two people on £70k. £70k is the £10,500 equivalent NQ salary I got in 1985 at S&M. S&M NQ salary now is £78k.

You can read law, graduate at age 21, LPC over at 22, TC over at 24, qualify age 24 or you can piss around doing gap years, reading subjects other than law, not sticking to anything and be very old by the time you get sensible enough to think about relationships and houses. Your choice."

Let's look at some facts, shall we Lyds, dear?

- You like to portray you and Mr Lydia as some heroic titans of Ayn-Randian sacrifice, but you were in fact beneficiaries of massive state subsidies:

1. University education was free. Now it is not.

2. And this is the one that really makes me furious at your sanctimonious posturing:

"Mortgage interest relief at source


From Wikipedia, the free encyclopedia


Jump to: navigation, search


Mortgage interest relief at source, or MIRAS, was a scheme introduced in the United Kingdom from 1983[1] in a bid to encourage home ownership; it allowed borrowers tax relief for interest payments on their mortgage.

In the 1983 Budget Geoffrey Howe raised the tax allowance from £25,000 to £30,000. Unmarried couples with joint mortgages could pool their allowances to £60,000, a provision known as Multiple Mortgage Tax Relief. This remained in place until the 1988 Budget, when Nigel Lawson ended the option to pool allowances from August 1988. Lawson later publicly expressed regret at not having implemented the change with effect from the time of the budget, as it is generally accepted that the rush to beat the deadline fuelled a sharp increase in house prices.[2]

MIRAS was completely abolished in April 2000 by Gordon Brown, who argued it had become a middle class perk.

Receiving MIRAS was one of the justifications given by mortgage advisers when selling endowment mortgages.[citation needed]"

So back in 1985 when you without any student debts, bought your house with your student debt free husband, you could (and no doubt did) claim tax relief on the interest payments.

So less of the "hardscrabble" bullsh1t, Mrs "I benefitted massively from state handouts".
Fosco
Posted - 13 January 2017 11:45
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Buzz I'm struggling with the cricket imagery here.

Are you preparing for a bit of the ultra violence, or merely implying that Lyds is an old bat?
🐝 buzz
Posted - 13 January 2017 11:46
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Ultra violence.
Fosco
Posted - 13 January 2017 11:49
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Mmmm thought as much.

The thought of you lovingly applying linseed oil to Lydia really is something though.
Gravitas? What Gravitas?
Posted - 13 January 2017 11:53
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Sometimes when gloomy i remember that Captain Swing has and maintains (in its 27th iteration no less!) a house price model. This never ever fails to lighten my mood.

Also, did Lydia actually just swear up there?
Hotblack Desiato
Posted - 13 January 2017 12:02
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Lydia you are also clearly lying or omitting certain facts in your story (like the size of deposit daddy gave you).

This property which you purchased with a mortgage of 2.5x joint salaries of £7,500 (i.e. with a mortgage of £37,500) which you say is equivalent to the £475k house on the market.

Attached is a link to Nationwide's House Price Inflation calculator:

http://www.nationwide.co.uk/about/house-price-index/house-price-calculator

Now I neither know, nor care, whether Harrow counts as "Outer South East or "Greater London" (there being no option to select "smug hell" as the area, but whichever way you slice it, it seems that a £475k property in Greater London in 2016 was worth approximately £55k in 1985, or (if in the South East, worth approximately £75k)

Now with your £37,500 mortgage, you still need at least £17,500 deposit to buy a £55k house (i.e. a 32% deposit) or, if £75k is the correct comparator, another £37,500 (i.e. a 50% deposit).

So basically Daddy gave you between at least a 32% deposit or a 50% deposit to buy your first property.

🐝 buzz
Posted - 13 January 2017 12:06
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*reads suggestion that Lydia may have made kittens up simply to suit her own agenda*

*shocked face*
Service charge
Posted - 13 January 2017 12:18
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Bit harsh HD. She did say the joint salaries were 10 and 7.5.

Lydia, you forget that while you and the roffersons get the same house, you got it for 2.5 tines your salary while they are 4,5 or maybe 6 times.

So they have twice the debt. Not to mention a 30 or 35 year mortgage.
Hotblack Desiato
Posted - 13 January 2017 12:21
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"I went to a top public school in London where fees are now 35k. I can think of a handful that had BOMAD assistance. Ditto Law school and University."

To be fair, at least as regards your public school, there might be a direct correlation between going to public school and not being able to provide BOMAD assistance - if you have to spend £30k a year out of your after tax income to educate each of your children, you might well not have anything left to BOMAD then. But if you don't privately educate your children (maybe because you cannot afford the £30k per annum) you might nevertheless be able to put a fraction of that for BOMAD purposes.
Service charge
Posted - 13 January 2017 12:23
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Penrose, you can get 4 and more.

In many cases it means 35 year term.

Banks usually are allowed lots of exceptions to underwriting policy. Scary if you now how many are normal. Which is another concern for the state of the banks and the crazy competition in the market.
curiouslyorange
Posted - 13 January 2017 12:43
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Penrose - You can get up to 4x Joint for mortgages above £500K, up to 5x if the mortgage is smaller or if you have a better LTV (speaking as someone who went through the process last year).

I took out a 38 year term (although I plan to remortagage and reduce that term once I am over the initial home set up costs and I can overpay up 10% a year anyway)
curiouslyorange
Posted - 13 January 2017 12:48
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Penrose - depends on your LTV - 4x at 10% from Halifax would get you around 2% interest rate 2 year fix.

curiouslyorange
Posted - 13 January 2017 12:50
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I know you can get a 38 year term, 600K mortgage at 85% LTV, 2 year fix, 1.99% rate, so monthly repayments around 1800 PCM at 4.5 x multiplier
litenbjorn
Posted - 13 January 2017 12:53
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HD might have a point about school fees. I went to a state school and all of my friends that have bought had help from BOMAD with amounts varying between about £20k and £400k.
Very_Bored
Posted - 13 January 2017 12:59
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Prime central London has already fallen substantially. However, I'd hesitate to say the whole of London will fall by as much as 30% over three years (which is obviously equivalent to unwinding a larger percentage growth figure than 30% - as it's 30% of a larger number). Lots of it deserves to fall by at least that purely on a common sense appraisal of what people are asking for their tiny shítboxes. The difficulty is that too many people with money believe in London property long term and several of them will start buying into the falls at some point.
Service charge
Posted - 13 January 2017 13:00
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4.5 is fine for most banks. Anything above will usually need an extra layer of approval. So they generally go to the most valuable customers etc.

Maybe try Handelsbank, they have an unusual model of approving at branch level and having more flexibility.
curiouslyorange
Posted - 13 January 2017 13:05
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Anna - Yeah pretty much.

There was BoMaD involvement there for the deposit as we had only managed to save around £50K. It would have taken another couple of years to be in the same position otherwise and 2bh it was a bit of a pain budgeting all of the time and never going on holiday etc.

Captain Mal
Posted - 13 January 2017 13:05
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My mate wanted a bigger house so he just asked the in-laws for a million quid so they could trade up (on top of the massive deposit for the first house and the massive lump sum to start the wife's property development business).

I don't see where the problem is TBH.
curiouslyorange
Posted - 13 January 2017 13:15
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Agreed I dont think the london property market is viable unless:

A) you have 2x decent salary (so pick your sprogging partner carefully)
B) you are either mega-disciplined over the medium term (5 years of frugality, living in a kittens hole etc. to build a deposit) or have BoMaD; and
C) you are careful about where you want to live (again its only viable in "up and coming areas")

that would be a fairly small pool outside city lawyers, bankers, bean-counters, management consultants or other mid-high earners.
curiouslyorange
Posted - 13 January 2017 13:18
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Penrose - It depends of the size of the loan and LTV.

If you are looking at 10% deposit or less the multipliers are tighter. If the loan is above £500K no one is getting more than 4x tops, unless you go with Kent Reliance who will lend anything to anyone but want 4.5% interest and £3K arrangement fees.

If you have 85% LTV up, you can get between 4 and 5 depending on provider even over £500K, deffo max 5 if less than £500K

These are apparently market standard since the MMR came in and tightened lending criteria.
curiouslyorange
Posted - 13 January 2017 13:24
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what about elite singles or similar websites (or does actually signing up to one of those things make you either automatically a nob or a gold-digger?)
Hotblack Desiato
Posted - 13 January 2017 13:40
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"Service charge
Posted - 13 January 2017 12:18
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Bit harsh HD. She did say the joint salaries were 10 and 7.5."

Not really, that only reduces the size of the Daddy deposit by £6,500. It is still a sizeable deposit however you slice it.

The only reason for wading in so heavy was the tone of Lydia's post - based on those mortgage figures the house she bought was either much cheaper, or she got a big boost from Daddy. But neither of those two facts sit well with riffing about the Herculean Labours of Lydia. So they are just omitted. And instead it becomes some hardscrabble story about pulling herself out of poverty by the bootstraps, as opposed to a fairly mundane story of self-perpetuating wealthy privilege.
curiouslyorange
Posted - 13 January 2017 13:44
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Penrose - its a good idea to engage multiple mortgage brokers as well to look into it.

Although all will claim to be "all of market" they have different relationships with different underwriters so some may be able to get more out of a given provider than others where there is not automated underwriting decisions being made.

Also never pay an upfront fee for your broker - if you are looking to borrow a lot of money they get decent proc fees from the lender anyway, so simply say you have another broker who is willing to do all of market for free (they will waive the 300 to 400 they want to charge you at that point simply for the business).

Hotblack Desiato
Posted - 13 January 2017 13:46
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A further thought occurred to me this morning about the affordability squeeze which supports my prediction on prices.

- At present the only way that many people with reasonable deposits and good salaries can afford London properties is by taking out very long term mortgages.

BUT:

There is a cut-off age after which most lenders will not lend beyond certain periods. If you are over 35, then good luck getting a 35 year mortgage, because this would require you to continue making repayments in your 70s.

So what is developing now is a sort of house-buying window:

- You have to be old enough to have cleared your student debts, got promoted sufficiently far up the greasy pole to get a good salary and (if buying a larger property) formed a stable relationship/got married
- But you have to be young enough to be able to get a long enough mortgage to afford the repayments.

curiouslyorange
Posted - 13 January 2017 13:48
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To be fair Desiato - the long terms are less about actual affordibility (in that 1800 for example is easily affordable on our joint income), but about passing the lending criteria.

There is nothing stopping you taking out a 38 year term and overpaying the hell out of it if you have the spare cash.
Hotblack Desiato
Posted - 13 January 2017 13:50
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Likewise with trading up. Even if you are already on the ladder in a flat/small house, to buy a larger family house to accommodate your growing family, you have to be earning enough and have owned your first/second property long enough to have built up some equity in it, and have got promoted further up the greasy pole, but still be young enough to get the mortgage over long enough.

If you are say 45, and looking to buy a 5 bed house, is anyone going to give a 35 year mortgage (which you will still be paying off aged 80?) You might be lucky to even get a 25 year mortgage, of if you can get such a long mortgage you may well get penalised on the rates.

Hotblack Desiato
Posted - 13 January 2017 13:52
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There is nothing stopping you taking out a 38 year term and overpaying the hell out of it if you have the spare cash.

At your age, no. But at my age (38) I for one would be a leetle surprised if a sane mortgage lender would lend me money on the assumption that I would be working until 76.
Saillaw
Posted - 13 January 2017 13:53
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Penrose to be fair you're looking in a fairly small area which has consistently been one of the most expensive areas in SW London. I think coming from outside London I have less attachment to an specific part of town and my criteria are simply south of the river and within striking distance of the A3.
Lydia
Posted - 13 January 2017 14:29
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I can't trail through everything as I;ve a lot of work but
1. I had no parental help for a deposit or costs. My parents did make my very meagre university grant up to the "full grant" (full grant not being a massive sum by the way).
2.Only 15% of us went to university in my day so 85% had no chance at all. I was one of the only people from school to get in or try because I worked harder than everyone else and got the best A levels in the school. Nowadays you can get the university loans. In my day you could not so if parents woudl not make your grant up to the full grant you were stuffed unless you could get a job. I do not accept it is harder nowadays for people.
3. MIRAS as withering on a vine when we were buying in my 20s by the way. It did not relect London house prices and was not worth much. However i agree you can apply 33% tax rate tax relief to £25k of your borrowing.
4, Don't have earlier part of the thread above but I doubt I lied as I tend not to. Also someone saying our example was a doctor on £35k is wrong. Our example is 2 young professionals both on £70k. They can afford the £495k house Mr XL and I bought in 84.
5. I agree with the comment above about how you "move up" - it was never just about rising prices . It was about those very few of us who choose to work hard and smart enough and do well. People who take 2 weeks of maternity leave (did your mothers - did your mothers always work full time for 30 years? If they didn't then it should be the sexist of your parents' marriages you are now cross about as your parents cannot assist you in buying and presented you an example of women serving and men working who have also damaged your own prospects)m, always work full time, work hard, work smart etc etc . We tend to get out what we put in in life. If you think otherwise you tend to damage your prospects and make yourself unhappy so there's not much point in having an opposite mind set but go and cry in corners if people prefer saying there is no way they can buy.

6. Amazingly people can save money whilst working! I know it soun ds incredible to many but my couple above on their £4k a month net pay or whatever it is each living at home or paying £800 a month for their shared room CAN save for a deposit on that £500k place. Then when their £70k salaries are nearer £100k after 3 years at their city firms they can move up.

7. One of the most interesting issues is people thinking they can have all their jam today - that there is this basic entitlement to buy the "forever perfect" home in the lovely area close to work right at the start instead of 10 years in a rat infested tiny hell hole etc etc.

8. Mr XL had owned a small house with mortgage on a council estate in the NW and he had some equity from that and by the time we bought I had savings too. We obviously used every penny of savings too. We also did the same in 97 when we moved here - even the children's life savings had to be used.

By all means ask further questions although I'm trying to do some work and just completed a sale and had a very nice lunch too here.

I continue to say it was never easy and it is very hard now, particularly saving for a deposit in London (not of course all over elsewhere) if you do not pick high paid work but then if you don't more fool you.
🐝 buzz
Posted - 13 January 2017 14:33
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" if you do not pick high paid work but then if you don't more fool you"

You really are an unspeakable kittens of a human being Lydia.
Hotblack Desiato
Posted - 17 January 2017 12:12
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Abbeywell/NSA
Posted - 17 January 2017 12:19
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give it a rest luv
chimp_
Posted - 17 January 2017 12:34
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Jesus Christ Lydia is absolutely fucking infuriating. "Just be a City corporate lawyer married to another City corporate lawyer at the age of 24. More fool you if you're not!"
chimp_
Posted - 17 January 2017 12:39
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As a junior doctor without any parental help, I would never be able to contemplate buying in London - it's totally beyond my reach as a first-time buyer. Happily, perfectly desirable accommodation exists elsewhere in the country. The vast majority of my peers will be in an identical position. I can't help but wonder what will happen to medical care in London for the vast majority of the population who are not able to afford private attention.
chimp_
Posted - 17 January 2017 12:56
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I must say, reading this board is a useful corrective for one's ego. Sometimes it's possible to labour under the illusion of being a reasonably successful early-career professional, never once considering that earning under £80k actually marks you out as an idiot loser.
Hotblack Desiato
Posted - 17 January 2017 13:57
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"chimp_
Posted - 17 January 2017 12:39
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As a junior doctor without any parental help, I would never be able to contemplate buying in London - it's totally beyond my reach as a first-time buyer. Happily, perfectly desirable accommodation exists elsewhere in the country. The vast majority of my peers will be in an identical position. I can't help but wonder what will happen to medical care in London for the vast majority of the population who are not able to afford private attention. "

My wife and I have a theory about the junior doctors' strike that the resentment about pay and conditions from junior doctors was partly about how little their pay buys them these days than about the nominal pay and hours - because junior doctor pay and hours were always awful in the 1980s and 1990s but the difference was that (a) you didn't have the same level of debts (b) you could buy a flat in your 20s as a junior doctor and reasonably expect to have traded up to a house by your early 30s.

So you could justify putting up with a few years of terrible hours and stress because a comfortable middle class professional life awaited you at the other end.


Hotblack Desiato
Posted - 17 January 2017 14:03
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The data in this report is also food for London housing bears (by which I mean pessimists, not hairy homosexuals)

https://www.london.gov.uk/sites/default/files/housing_in_london_2015_v3.pdf

Page 29 is particularly telling.

In 1990, 24% of London households headed by a 16-24 year old owned their house (most probably with a mortgage, but that is still ownership) by 2014 that percentage had fallen to just 6%

In the 25-34 age group, 57% of London households owned their house (with or without a mortgage) but by 2014 that had fallen to just 26%

The 35-44 age group fell from 69% home ownership rate in 1990 to 47% in 2014.

_ Al _
Posted - 17 January 2017 14:07
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Most of those 'UNSOLD' properties were added today or yesterday.
chimp_
Posted - 17 January 2017 14:09
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You're correct, HD. If you live in the North (as I do), you are still doing comparatively well as a junior doctor. If you are a junior living in London, I pity you. Pay has not kept pace.
  
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