True Doom and Gloom in the Housing Market for 2011?
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I have always said that 2011 will be a disastrous year for the housing market, particularly for first time buyers. The report below seems to support this but does leave the door open for the economy to boom unexpectedly and all could be well.
http://uk.finance.yahoo.com/news/Why-house-prices-fall-2011-yahoofinanceuk-475627704.html
I am keen to predict what may happen as I need to refurbish my house this year and downtrade to another area and buy something more manageable. I will have no mortgage requirements so it will be just an exercise in buying and selling. The theory is that with buyers having to accept deflated offers, you should be able to carry that loss onto the next property but does that logic follow? And presumably downtrading will mean a bigger loss?
I have worked with Estate Agents in the later eighties and remember well the greed that people exhibited in the market. Gazumping was still prevalent and people would risk heavy bridging loans simply to not lose a sale. But I could never agree with a bouyant housing market being an indicator of a a sound economy. Sure it was fine for vendors, selling agents with massive commissions and of course the government in taxation. But with spiralling prices, the true value of property became an enigma, with first time buyers struggling to pay the prices.
I have this theory that the housing market is a pyramid where the first time buyer market fuels and maintains stability in sales and movement. Take that away and what are you left with? Very few people upgrading I suggest. And with a massive contraction in mortgage funding availability, a depressed economy, lack of business confidence, VAT rises, job insecurities ( after all a mortgage is very much a working lifetime commitment ), rising unemployment, massive reductions in public spending and of course new buyers with little or no money to invest ... I suspect the whole housing market picture looks increasingly gloomy.
So what are your thoughts? Do you agree that as a nation we have all been too greedy in the past? Who was to blame for the boom year prices ... sellers or agents? Do you agree that taking away the need to sustain a base of first time buyers will push the market down even further? Do you agree that first time buyers should always have an availability of affordable stock and that the market must come down to their level to get it rolling again? Should the brakes on prices then be sustained? And how do we stimulate mortgage lending that remains affordable and responsible at all times?
The sub-prime market and non-status lending should be a thing of the past I propose. But what are your thoughts on the whole issue? Any any glints of sunshine coming our way? I do hope so .....
Responses (2)
My boyfriend and I want to look into marriage, a family and home ownership in the future. Unfortunately, it looks like something will have to give somewhere along the line, and I think it's clear what that'll be!
Currently, we rent a city centre apartment. We're paying high prices for rent and ridiculous prices for city centre car insurance, and the truth of the matter is that we have no space for even basic furnishings, and I'm beginning to feel too cramped. I'm also constantly jumpy thanks to the local chav population.
Fortunately, it looks like there'll finally be a way out for us this year. By May, we should hopefully have saved up the £2000 required just to move somewhere else to rent outside the city centre. We want to rent a house, and then we'll start saving all over again for the marriage and the family-starting. Unfortunately, with moving to a rental property costing so much alone, and with the cost of marriage and children being so high, we're facing facts now that we may not be able to find a way to buy a house. The result? We need to make sure our next rental property has everything we want for the long-term future - enough bedrooms for future kids, a secure garage, a garden, some office space and (ideally) somewhere that'll allow us to have a pet. It's a lot to ask for, and even rental properties are limited at the moment, but what choice do the younger buyers have?
It's just frustrating. If we could get a 100% mortgage, or if we needed a lower deposit, we'd be fine. The amount we're paying in monthly rent now, we could easily cope with monthly mortgage repayments. It's just getting there, and when you're feeling your biological clock ticking at 23 purely through fear of never getting that family home, and never being able to save for everything you need, well THAT'S depressing!
The problem is that we have become conditioned to think of house purchase as a right and as the only way to make substantial amounts of money for retirement when we downsize. At the moment it seems that there are still plenty of people around with sufficient cash (for buy-to-let) to keep house prices at a level that is unaffordable for young first-time buyers. Until the buy-to-letters stop buying, or start selling their investments, I can't see the housing market easing for first-timers.
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Thank you cpi1987. I really empathise with your situation and know just how hard a mountain it is to climb. There is nothing quite as fullfilling as having your own safe, secure home to do with as you want. But really your biological clock is not under too much pressure. My wife was 31 when we had our first child and my daughter in law 34 when they had theirs. And when I bought my first home in 1980, I had worked nights for ten years to fund it all. And even though we lived in Greater London at that time, it was a lot easier than today even though lenders were very strict on lending ratios i.e. three times single income or two and half times joint.
I don't know whether you have spoken to a Housing Options Officer at your local authority? They may have some advice on the matter. Have you looked at Shared Equity Schemes? They may be the way forward and out of the expensive flat but I have no idea of the facts and figures involved.
I have listed a link that's quite useful here:
http://www.shared-ownership.org.uk/
I wish you well here.
Thank you. I'll have to look into those schemes!
Yes, I know I'm fine really, but there's always a reason to worry with me! I'd always hoped to have my first child in my late 20s, and now it looks like it's a choice between that and a house purchase. Fortunately, things always work out in the end!
cpj1987 - it seems that this is probably the beginning of an era when house purchase is not considered to be the norm as it has been since the 1950s. Renting will be the norm for most young people. It sounds as though you are making the right choice by renting somewhere that you can settle into for some time - I hope that you can get a rental contract that makes you feel secure enough to make decisions about marriage and family without worrying about saving for a mortgage deposit. BTW - I heard today that there is a general feeling amongst experts that house prices will fall this year.