First Time Buyers want house prices to fall?? Catch 22!!

[Richard10002]

I've just read an article, (one of many over the past 2 or 3 years), which talks about first time buyers wanting the housing market to fall, and/or, the housing market needing to fall, in order to enable first time buyers to "own their own home", "get on the housing ladder", and such like.

However, over my almost 30 years at the sharp end of the housing market, it has been my experience that, when house prices are falling, first time buyers, (and other sectors), tend not to want to buy a property, for fear of its' value falling, and their being left in negative equity. This creates the self fulfilling prophecy where demand reduces and prices continue to fall.

It is only when confidence has obviously returned to the market, and prices are obviously rising, that first time buyers, (and others), begin to buy again, thus increasing demand and therefore prices. This is another self fulfilling prophecy, and prices continue to rise, and demand is outstripping supply and "first time buyers need the market to fall etc. etc. etc. ..... and so it goes on, (ad nauseum perhaps).

In the present cycle, (boom to 2007, bust to 2013, boom to date), I sensed a bit of confidence returning to the current market, (in Manchester), and prices beginning to firm up and rise in about June 2013. It became obvious to the wider market that this was happening perhaps around mid 2014, and I have lost count of the number of first time buyers who have been saying over the past 18 months or so, "I wish I had bought 2 or 3 years ago"

So... if the market falls, for any reason, it may help first time buyers to buy a property in the financial sense, but they will again resist doing so, until prices are rising again, up to the point where pundits are clamouring for prices to fall, "because first time buyers cannot afford to buy their own home".

 

[maby]

I think a lot of this country's economic problems can be traced back to a disconnect between general inflation and house price inflation over the last twenty or thirty years. We bought our first house close to forty years ago when I was a junior programmer fresh out of university. It cost three times my annual salary and we funded it with a 100% mortgage which, objectively speaking, we could not afford to pay. Our dining table for the first couple of months really was an old packing case and we really did live on beans on toast because that was all we could afford. We moved in in November and could only afford to heat one room all that winter. But... inflation was running at well over 10% and I got a great big pay rise after about six months - that mortgage suddenly seemed a lot easier to pay. Inflation carried on at those levels for several years and we were doing fine. We sold that house after close to twenty years for about three times what we paid for it and moved up the ladder taking advantage of my wife's income as well.

Thing is that I recently saw our old house advertised for sale. I'm forty years older and now a fairly senior salesman in a very successful FTSE100 company - and we would not be able to buy that house on a mortgage of three times my current salary! Moderately high inflation is actually quite a good thing - all those major purchases become perfectly manageable after a couple of years.

 

[LittleSister]

The other reason house prices may fall is because fewer have the money to pay the previous prices, so whether or not first time buyers were deterred by fear of continuing fall in 'value', most wouldn't be able to afford to buy.

 

[Hadenough]

And this has what to do with living aboard?

 

[laika]

And this has what to do with living aboard?

+1.

 

[Richard10002]

And this has what to do with living aboard?

Whoops! Obviously nothing!! no wonder there werent many replies I wasnt gloating, merely commenting. I wonder if a moderator could pop this into the correct forum... many thanks!

 

[macd]

I wonder if a moderator could pop this into the correct forum... many thanks!

I think you perhaps mean the incorrect forum, otherwise known as The Lounge.

 

[Lon nan Gruagach]

It probably meant to say that first time buyers want prices to have fallen.

 

[roblpm]

I think a lot of this country's economic problems can be traced back to a disconnect between general inflation and house price inflation over the last twenty or thirty years. We bought our first house close to forty years ago when I was a junior programmer fresh out of university. It cost three times my annual salary and we funded it with a 100% mortgage which, objectively speaking, we could not afford to pay. Our dining table for the first couple of months really was an old packing case and we really did live on beans on toast because that was all we could afford. We moved in in November and could only afford to heat one room all that winter. But... inflation was running at well over 10% and I got a great big pay rise after about six months - that mortgage suddenly seemed a lot easier to pay. Inflation carried on at those levels for several years and we were doing fine. We sold that house after close to twenty years for about three times what we paid for it and moved up the ladder taking advantage of my wife's income as well.

Thing is that I recently saw our old house advertised for sale. I'm forty years older and now a fairly senior salesman in a very successful FTSE100 company - and we would not be able to buy that house on a mortgage of three times my current salary! Moderately high inflation is actually quite a good thing - all those major purchases become perfectly manageable after a couple of years.

But now the problem is wage inflation is nearly nothing.

I just tried a compound interest calculation. Start with salary at 30k house at 100k. Wind forward 20 years and at 10% annual inflation the house is now 672k. The salary at 5% annual inflation is 80k.

So there is a whole generation who have done very well and think they are very clever. Leaving the younger generation totally buggered. If you have multiple kids it doesn't even help the rich people as in my example above the rich parents might try to help the kids but now the 10% deposits are 67k or nearly a whole year of the parents salary instead of a third of the original one.

House price inflation is a disaster over the long term. Just allows people to borrow more money. Totally unproductive and only benefits people who own more than one house. It has allowed one generation to go on a lot of holidays and we will now see the effects for decades.

 

[roblpm]

In fact just to complete my rant i cant believe my neighbours who still delight in the fact that prices near us are going up at a crazy rate. What are their kids going to do!!