AndyT

It's a fair point and it's not one I've had to deal with until recently: my mother is retired and spends most of her time back home (in another European country) and recently she decided that to simplify her life, she should sell her freehold property (shop plus flat above). The only problem is that it earns her an income and its around 6.5% which is not available almost anywhere else, so she is thinking about putting it in the hands of an agent so she can move back home and not have to deal with tenancy issues directly.

This confirms what you were saygin about returns - there are not many classes of investment that do as well as property which is why it can be compelling and so much money ends up there. This may be obvious for most, but its taken me until this point of having to help deal with 'excess cash' to realise that property 'makes sense'. It is surely insane to keep stoking the bubble but I'm finally starting to think that my 'priced out' generation may be priced out for good and the crash simply wont happen (or at least it may not be dramatic).

Sorry for delay replying - don't look in that often. Deposit was about 30 grand I think. They used help to buy and have a mortgage of £385k which is fixed for 2 years at 1.99%. What will happen if/when interest rates go up who knows. That said, they could move home and rent it out if things get sticky. And they are both relatively at the beginning of their careers so should earn more as time goes on.

 

I was in two minds about their decision to buy. On the one hand it seems nuts, but we have been waiting for a correction since the early 2000s and, even with the 'global financial crisis' of 2007/2008 - prices didn't go down that much (where we live) and recovered again within a few years. They only moved in a couple of months ago - but the house was reserved by someone else 6 months earlier but they failed to complete. My sons bought it at the '6 months ago' price. Now, let's say about 8 months on from when that house was first reserved, houses on the next phase (which are a little bit smaller and not so well specified, are going for £40k more than they paid.

That makes sense now as they're not paying for the £100k or so from Help to Buy for 5 years. Im not one to push this, but if I was going to buy a new property I would definitely use the scheme especially in London where its 40% contribution. That figure itself demonstrates the insanity of our current situation!

Like you I waited for the crash that didnt really happen. I think that if it ever does, it will crash everything in the country and that's will stop at nothing to keep it going.

Just reading the post above about Barrat's - I thought I would have a look at the share price of Berkeley Homes - the developers of the house I mentioned in the post above. Their share price went from 3285 on the day of the referendum down to 2685. So they fell 18% while Barrats fell 50%. I wonder why Barrats fell so much more.

I think Barratts are much larger and more diversified.

I'm intrigued by the example of your sons who are paying £1200 per month, where the rent would be circa £1900. If you dont mind me asking - did you put down a very large deposit? It sounds like an enormous difference. I've been waiting to buy for years (in my 40s now) but I havent seen sucha wide gap between renting/buying.

Help to buy distorting the market? I have two young adult sons - both earning decent money (say, about twice the UK average each). They have been looking at getting on to the bloody 'ladder' and, if they buy together, can get a mortgage of getting on for half a million. (I know, I know.) They have been looking at local new builds (East Berkshire in 'Silicon Triangle' between Reading, Bracknell and Basingstoke) and I am now convinced that builders are simply adding on the 20% help to buy discount to the price. A new build 3 bed semi was sent to them the other day - in a (reasonably pleasant) road in Wokingham - with excellent ability to hear the M4 just up the road. The builders want £595k for it. Which is probably £150k over the top. There is a bit of volume housebuilding going on in the same area - all bang next to the motorways. The prices are eyewatering - a 4 bed town house with a back garden barely big enough for a table and chairs - £485k - AFTER THE DISCOUNT!

 

I tell you, the builders are adding the 20% on to the price. So much for helping first time buyers.

 

And a final little moan - what on earth are planners up to these days? The car parking on new estates is a joke. There is an estate near Bracknell with about 1500 houses on it - you get wheel clamped if you park on the main road! Most of the houses are about 4 feet from the pavement - so, no chance of off road parking, and the larger (I use the word loosely) 4 bed houses - have a single garage and one parking space - buried somewhere out the back. Yet if you have the cheek to want to build an extension on your house, the idiots demand two or three additional off road parking spaces and a turning circle. The world is going nuts.

This is surely the case... even if I take off my cynic's glasses, the developers at best are chasing the market up and at worst slamming 20% on.

I never thought I'd check out this government scheme but out of desperation I did. Conclusion? Looking through the stuff on offer through Help To Buy, its like they want to squeeze everyone into high-rise flats if they ahve anything less than 500k to spend. We might just about stretch to a house but will be overleveraged and buying into what feels like an insane market place (prices shooting up easily 10% a year) even in the less glamorous NW London suburbs.

On a personal note, I can get a 280k mortgage which on a 55% basis means we could 'afford' a 510k house. There's nothing like that in the new build sector... the cheapest we can find is £585k (http://www.bellway.co.uk/new-homes/north-london/abbotswood-park). Our only choice will be to move further out. I dont know if we'll see the end of this crazy setup in my lifetime anyway (im in my 40's).

EXCERPT from the article by Dominic Frisby

 

Housebuilders are warning of a potential peak in house prices

...I like to watch the house builders. By that I mean the likes of Barratt (LSE: BDEV), Persimmon (LSE: PSN) and Taylor Wimpey (LSE: TW). They have, over the years proven to be reliable indicators as to the future direction of house prices.

. . .

In each move, Barratt has been ahead of the housing market. Intraday, Barratt actually peaked in 2006 and retested that peak in February 2007, while house prices themselves peaked in late 2007.

So, to 2014. Having been as high as 450p in early March, Barratt touched 360p on Monday. That’s a fall of more than 20%. In other words, it’s bear market territory.

==

 

> more: http://moneyweek.com/money-morning-dont-speak-too-soon-but-the-housing-bubble-may-be-peaking/

Thanks for that... will keep an interested eye on it... do you keep that data on here somewhere or do you just post charts now and again?

I agree !

A very poor policy.

Short term gain, long term pain.

The whole idea was to get some politicians reelected.

 

May they wear their blunder proudly, like a Gordon Brown mask, stitched on their faces

You could be right - it might be a ploy to develop a 'goodtimes' sentiment prior to election - FWIW, I think it will work too.

I think they looked at the 'recovery' unfolding at snail's pace and thought that they should add HTB to the other strategies in place. I dont htink they expected the other 'positives' to develop so fast though - unemployment going below 7%, wages rising a bit, inflation dropping off, consumption up etc. If they could have seen that coming, would they have thrown further fuel on the fire in the shape of HTB?

Maybe they didnt expect HTB to be so successful - they have started to use 'reigning-in' language now they can another bubble forming. The horse has well and truly bolted though, based on personal experience as I am literally priced out, despite a £75k income. If houses in the suburbs are now over £400k and I can't afford them, who is buying? It can only be the desperate, well-off, BTL landlords, or HTB-supported buyers. And I guess that they will be pleased that they've been able to achieve their own place, understandably. I am kicking myself for hesitating and not buying at £375k a year ago.

This is like deja-vu... we'll be asking in a couple of years how come we were so stupid as to allow HelptoBuy or whatever it's called.

Please hurry up and top dear market! And then start correcting!

I should change my name to Mr Angry - even with a half-decent job plus good deposit, in the far reaches of Zone 5 (Harrow/Hillingdon), I am looking at £400k+ for a 3-bed semi. It used to be £50k less till everyone went nuts and wanted some of the action! Seriously you have to see some of the crap on offer for £300-350k to understand how screwed up things are.

I keep thinking I should give up on buying something for my family (of four) but in the back of my mind I pray things unravel so I can buy something.

We're going Japanese where low rates and long mortgages are "normal".

 

Perhaps high rates and short mortgages were a historic "luxury" and that window has passed - along with free university education, final salary pensions, jobs for life, etc!

 

This is the "new world order" perhaps people have been talking about that starts in 2012.

A historic luxury... you put it so well!

And it's defintiely a new world order... I mean most of us ordinary folk have had our expectations massaged down and accept the new norm:

- You should be grateful you have a job and if you have to work harder for a slightly lower standard of living, that's how it is.

- You will work till you're 67 so you are braced for it (assuming you paid off your sudent loan by then)

- Erosion of public services like health - very gradual but definitely there from expereince and what my wife (a nurse) tells me is going on.

- Add on top of that, the fear factor built into our daily lives about things like extremists etc

I dont think we'll go back to the old 'good times' anytime soon. The landscape has changed entirely and survival is a much tougher fight than it used to be.

Check this from the CML...

 

http://www.home.co.uk/guides/news/story.htm?lending_for_house_purchases_bucks_seasonal_slowdown

 

"Supporting potential buyers to take out a 95 per cent mortgage will help the market return to a normalised state..."

 

OMG

He goes on "...and gives consumers the opportunity to jump on the property ladder without having to scrimp and save for an unrealistic deposit."

Honestly, please throw yourself off a cliff and take your empathy with you.

Van, I share your positions and have done for years... it's criminal what's going on and I can't begin to explain how pissed off I am that I am almost priced out of the market... A personal scenario to show briefly my quandry:

With a 40% deposit saved, in 2006 I nearly bought a 3-bed house in Harrow for £270k. I chickened out - we could afford the mortgage but with no breathing room. Fast forward 7 years and that house is on the market at £365k (but probably sell for £340-350k). If I had bought it then, I would have been a third of the way through my mortgage (hindsight is great!).

In the meantime I'm renting a 3-bed flat and with 2 little kids now (and a half-decent job) we want our own place/garden.... And in the market right now? People have plumped up their asking prices because the government is bank-rolling mortgages. The thought of continuing to live in a place I don't especially like is not good, but the alternative is buying at these prices, which I agree are due a fall inside a few years. How I'm going to convince my wife that it's another 3 years of waiting though after I told her that story 3 years ago is another problem. I have no idea how typical my situation or the follwoing is, but here's the history of the house I nearly bought:

June '06 - Sold for £272k

Sep '10 Marketed for £300k

Dec '12 Marketed for £320k

Nov '13 Being marketed at £365

If I'm not mistaken Help to Buy government cash will end up in the pockets of developers and people that have inflated their asking prices. This would be funny if it wasn't so tragic.

Looking at goldmoney's chart there doesn't seem to have been much of an increase on gold held this year. Silver has shown a steady increase during 09:

 

I'm just guessing, but the growth in silver ounces is probably more due to the fact that people are opting to buy it from GM where it's VAT-free!

Not to mention that on a 60:1 ratio, you would need to dig a far bigger hole to hide it in