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Why I don’t care about house prices

House prices are up again - but how does this really affect me?

 
Why I don’t care about house prices

This week the Department for Communities and Local Government revealed that house price inflation in the UK has climbed to over 10%.

This means the average house price is now £207,516, just 0.4% higher than in March.

But what does this really mean for me?

I am not even close to getting the tip of my big toe on the property ladder. In fact, unless I win the lottery (which is unlikely as I don’t play), it is inconceivable that I will be able to afford a house worth a couple of hundred grand for a good few years – if not decades. 

As a result, news about house prices doesn’t ever feel very ‘real’ to me, and to be quite honest it quite often goes in one ear and out the other. 

This isn’t to say I don’t care, I just often feel that fluctuating house prices and the availability of mortgages doesn’t directly affect my life – for now.

To me, the property market is something for other, wealthier people to worry about. It doesn’t really matter if house prices flit up and down by 10, 20 or 50 grand this week or next, because I wouldn’t be able to afford one anyway. I’m so far off owning my own house that there is just no point thinking about it.

Paying off my overdraft, clearing my credit card debt and squirreling away some savings are the sort of things I’m concerned with on a daily basis.

This is not to say I don’t want to own a house in the future. Ever since I was young I have had it drilled into me that when you grow up you buy a house.

‘By renting a house you are make someone else rich, but by owning a house you make yourself rich,’ to quote my granddad.

But the days of owning a house in your twenties seem long gone.

According to the National Housing Planning and Advice Unit, only a quarter of people aged 25 – 34 who want to buy in the next three years think they will be able to afford it.

The fact is young, first time buyers are completely locked out of the property market. And I just don’t see how we are going to change that.

19 comments so far. Why not have your say?

timothy burton

Jun 20, 2010 at 06:02

Reading this makes me realise how lucky many of the the generation that are now in their 60's were. We got an education, either a degree or an apprenticeship (the former often with the aid of a generous grant) and, after a few of years, managed our first house. Then steadily watched that asset increase in value, especially if one was handy and did a bit of improvement work. Judicious moves up the property ladder helped to consolidate this, without liability for any Capital Gains Tax. Then early retirement so as to enjoy the final salary pension many of us thought of as a natural entitlement.

Watching the recent election run -up I was amazed to hear that three of the four parliamentary candidates for the Newquay constituency in Cornwall (who were plainly in their 30's or older) were yet to get on the property ladder.

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Sharon Crossland

Jun 20, 2010 at 09:15

Nicely written and I'm sure many others around the same age view propery price fluctuations from a similiar perspective..

These are the people that will probably be using the private rental sector, not necessarily as a tenure of choice but a tenure of 'needs must'. Landlords must get their act together to ensure that they provide decent, well managed housing until those that really want to own a home are in a position to do so.

Miss Sharon Crossland AIRPM

Leasehold Life

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Chris

Jun 20, 2010 at 09:58

Don't worry Victoria, real house prices are going to halve in the next ten years or so.

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Dislexic Landlord

Jun 20, 2010 at 11:41

I find this most intresting

as a property investor im not really bothered about about the price of houses it may supprise you

When I buy Houses and Flats I buy for yeild at present i can buy good houses and make a 10% yeild if the prices fall I will get a bigger yeild on houses I buy

I have no intrest in selling any land or property

So I hope Chris Is right

When the avarage person buys a home you are in a starnge way renting it form a bank or a building society you pay a loan or a mortgage in the same way yo pay rent

if you stop paying you lose your home and maybe more if you rent you lose your home and nothing more

If you are buying a home lose your job you get very little help to cover your Mortgage

If You rent a house you get Local Housing Allowance

The only plus when you buy is that you can downsize have cash in the bank and live in a smaller house

the other plus is you can leave it to your childeren

you pay your money and take a chance yes its a chance even if your buying and its no more secure than renting when you look at the facts if you have a mortgage

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Danny Lovey

Jun 20, 2010 at 11:56

Victoria

I can understand your thoughts and the current younger generation are between the rock and the hard place with regard to owning a home. Much of this has been because the Labour Party ended 'boom and bust' - supposedly and built an economy built on a housing inflationary boom, so young people were unable to afford a mortgage. Now of course even if they could afford it the amount of deposit required is beyond them.

All I can say is try to keep the faith as this was also during a time when the Bank of England had control of the banking system taken away from them by the previous governemnt and given to the FSA, but now this disasterious tripatate system has been ended and the BOE will have control restored to them again. However the shortgage of homes remains a problem and has to be resolved and the last years price increases has been more due to this factor than anything else.

I cannot see anything dramatically helping young people for years yet until we get a better balance between housing supply and demand balanced with appropiate mortgage availibility. Unfortunetly the fiscal position in this country is dire and more we will hear about the pain to come in Tuesday's budget.

However this government I believe will try to rebalance the whole economy better, but it will take time, but at the moment young people can understandably think that they are impoverished in the property stakes and having a daughter in her twenties I am only too aware.

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Hugh Stewart-Smith

Jun 20, 2010 at 12:09

Yes, I agree with Chris.

Keep an eye on the House Price Index (Av.house price divided by average earnings) which will drop to 3.5 (historically it moves between 3.5 and 6 or 7, or more when prices are grossly inflated as happened in recent years). This is a natural cycle and highly predictable. We will get to a point when no-one evens mentions property as an investment - people are still talking about investing in brick and mortar. We need to reach the point of 'capitulation' where, just as in a bear market in stocks and shares, all thought of making money has been drummed out of us. That will be the right time to be buying property which once again will be the finest investment anyone can make and will once again be affordable.

The odd thing is that when the time is right (7-10 years from now) you won't even realise it - unless you keep an eye on that index!

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linda badham

Jun 20, 2010 at 12:26

If you look on Rightmove with Property Bee installed there seems to be an awful lot of proerties being ruduced, some numerous times, so it looks to me as if house prices are already falling. There are also an inordinate numer of empty homes on the market, maybe these are the Buy to Let brigade selling up due to the proposed hike in CGT. The next 6 months could see significant reductions I think, so first time buyers need to wait and watch. I dont think it will take as long as people think for property prices to come back down to earth.

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Barry Gardiner

Jun 20, 2010 at 13:00

All planning departments need to wake up and get there act together.

I would say all local authorities are light years behind the times.

Government must demand action from local authorities and get people housed

One solution might be, more caravan sites, quick, simple and cheep.

I cannot understand why this government will alow a terrorist rights under human rights act to stay and live in this country, when we do not have enough housing for our fellow english man.

Government need to govern and get the country back on its feet.

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Dennis .

Jun 20, 2010 at 16:45

I can never really understand why there is a housing shortage, if we were really short of housing we would have thousands of ordinary people sleeping rough every night. I live in a Dorset village which has just had 16 houses built, they are almost all sold to second homers and the few "affordable" are anything but that.

My second point is that "Dyslexic Landlord" claims to be able to make 10% on buy to let. You don't say whether this is gross or net - but either way, you can buy a £150K terrace house and make £1250 a month after expenses ? On which planet are these houses built?

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Hotrod

Jun 20, 2010 at 16:59

Property ownership is not for everyone. For many it is their most valued possession. For others it is a millstone around their neck. The means by which it can be acquired needs careful consideration. It must be borne in mind that a mortgage is to all intents and purposes no different than a hire purchase agreement. Until the mortgagee has paid the last instalment, the property belongs to the mortgagor. Also if you are considering a mortgage for twentyfive years at the relatively low current rates of 5%, it is worth bearing in mind that the total sum paid at the expiry date will have ammounted to more than double the capital advanced. Plus the mortgagee will be responsible for all repairs and maintenance during this period. Also because of the way mortgage interest is calculated the mortgagee will not see any significant reduction in capital repayment in the early years. A property will have to rise in value appreciably before an opportunity to sell at a profit and terminate the mortgage arises.

Personally, I disregard average house price statistics, they are completely meaningless to me. e.g. How can you compare properties in a select area which sell for a million pounds within a week, with others which cannot attract a buyer after two years despite only being valued at seventy thousand pounds.

And then there is the touchy subject of who can lay claim to a property or what are their equity stakes in it, in the case of cohabiting couples, joint mortgage holders, or tenants in common. Its a legal minefield.

If you are faced with uncertainties such as job security, career opportunities , or you may wish to live in a another locale in the not too distant future, in may be advisable to keep your options open.

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Dislexic Landlord

Jun 20, 2010 at 18:18

Hi Dennis

I live in the north East of England You can buy good 3 bed ex Local Authorty Houses for £75000 with a gross rental income of £625.00 per month

20% deposit £15000

Mortgage 5.99% fixed 5 years £60000 £299.00 per month

I know there ore other costs CP12 EPC and the costs of buying so Im makeing Profit of £326.00

As a point of Intrest Houses in this price bracket are about 30% below the market highs of 2007

The key is a good deposit paid in cash and a good long term fixed rate

I buy houses in a very small area which I know like the back of my hand as I grew up in the streets that I now buy in

Dont forget the rental market is very bouyant and rents are moveing up so in 5 years time I would think the rent wouldbe in the region of £725

If I could get 10 year fixed rate mortgages I would jump at them but ther not avalible

But Im sure of one thing rents will rise in future

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David White

Jun 20, 2010 at 20:12

Private Eye's "From The Message Boards" is the palest reflection of the unashamed illiteracy of Citywire's respondents

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Ines

Jun 21, 2010 at 00:30

The HPI (average house price divided by average earnings) is somewhat distorted by the fact that so many houses are now bought on the basis of two peoples' earnings. This means that single people are priced out of the market unless they are on a high salary or buy a property on a buy to let basis and let out rooms to pay the mortgage.

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Anonymous 1 needed this 'off the record'

Jun 21, 2010 at 02:46

average may be 200k but you have to start at the bottom with a studio flat which can be anywhere betwwen 50 and 150k depending on where you live

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Anonymous 2 needed this 'off the record'

Jun 21, 2010 at 09:25

anonymous 1 - I'd love to buy a studio flat to get myself and my family on the housing ladder, but unfortunately I've yet to find one with enough cupboard space to install both my children...

Maybe we could live in Barry's trailer park world - I could buy a pick-up truck, grow a straggly beard and a mullet, and change my name to Cletus...

In the meantime I'll keep paying £800 a month rent with council tax and bills on top, and dream of saving £40k for a deposit on a house, on a combined family income of £32k a year...

The average family like mine - who gets nothing in the way of benefits Dislexic landlord - no housing benefit to pay my rent... has no hope of ever getting on the property ladder, and are stuck lining the pockets of people like you who charge extortionate rents far in excess of their mortgage...

I'd be better off quitting my job and getting on the benegfit bandwagon - at least I could buy my council house at a reasonable price...

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James @TheBPL

Jun 21, 2010 at 09:30

Victoria,

If you have credit card and overdraft debt then I'm assuming you have no deposit and even if house prices were halved you would still have no deposit?

So of course interest rates and mortgages don't concern you.

Enjoy your life while you're young, live in the moment and spend as little time worrying about the future or past as you can. But don't EVER pay interest on credit cards!!!!!!! Move it around from 0% deal to 0% deal on transfers till its paid off then cut them up and throw them in the bin.

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Anonymous 3 needed this 'off the record'

Jun 21, 2010 at 17:30

@james. And do not think of getting a loan from anyone if you do that because your credit rating will be shot.

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Richard N

Jul 01, 2010 at 10:31

Victoria,

I believe current prices are unsustainable. Although I have been on the housing ladder for nearly 20 years (I got burnt in the late '80's boom on my first studio flat which I still own!), and have been in a modest family home for 10 years (I have a partner and two young kids), we cannot see a way to move up the ladder any day soon. We've been looking for 5 years or so, but without a 2nd income (my partner looks after the kids) or an interest only mortgage (which helped cause the mess we're in) we cannot move.

We are going to sit tight, and hopefully when interest rates go up (lots of repossessions to flood the market), and mortgage products are more sensible, we will be able to afford our next family home.

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Van Patten

Oct 27, 2010 at 16:25

Until such time as the taxation system is changed to favour people in the private rented sector (the true bedrock of the economy) I cannot see anything changing.

We need to make homeownership less attractive and this can be accomplished with three highly controversial but surely justified changes:

1/ Levying of CGT on Primary house sales - the rise in house prices is the clearest example of what the economists call 'unearned' income. Wholly artifical and created by suppressing supply and fuelling demand through unlimited immigration. This would suyrely be a pain free way of tackling the national debt.

2/ End the 90% 'cap' on Council tax for second homes. Allow local authorities to levy 900, even 1000% if they wish. Alternatively, instigate a 'Meacher' or 'Huttton' tax, wherein anyone owning a second home pays double the council tax, triple for the third home, quadruple for the fourth etc. should have the desired effect of moving the money out of property, where it benefits a very small minority, into shares where the benefits can be much more widely felt.

3/ Put a 'rebate' system in for private tenants whereby their Council tax is deducted by an amount equivalent to their rent. Private tenants, in my experience seldom use any of the services delivered by the local authorities beyond refuse collection - hence why should they subsidise homeowners and LA tenants who do?

Get these rules in place, which should make home ownership more economically viable and reduce the burden on the private teant, who has been treated disgracefully since 1997.

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