Trainee neophyte
Established Member
It's a fine quote, but lots of people have used it. I just don't know who was first.
House Buying - Advice?
- Thread starter BearTricks
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It's a fine quote, but lots of people have used it. I just don't know who was first.
simisworkshop
Member
I totally get where you're coming from. The housing market has been crazy since COVID, and it's hard to know what the right move is.
Glossopguy
Established Member
We were in a similar boat recently. We put offers on a few houses but kept getting outbid, even on properties that needed a lot of work.
We decided to pause and re-evaluate. Prices might stabilize or even drop, so it could be worth waiting a bit if you're not in a rush.
We decided to pause and re-evaluate. Prices might stabilize or even drop, so it could be worth waiting a bit if you're not in a rush.
Apologies if what I am about to say is obvious...
House prices (as almost anything) reflect a supply-demand relationship. In the short term, house supply is a good example of “perfect inelastic” supply curve: it can’t react quickly to match changes of demand. So, unless the area you are targeting already has a major development underway, don’t expect new supply to change in that area shortly.
That brings us to demand (the total number of people interested in and capable of buying a particular product or service). In general, demand for homes in the UK is much higher than the supply. As the supply curve is inelastic, any factor that increases demand (like the stamp duty holiday of 2020) will directly hike prices up and any factor that reduces demand (like the recent increase on interest rates) will push prices down. Unless you have information that the area that you are targeting has a particular recent or incoming factor to change demand (like a recent increase in crime or the opening of a new top-grade school), you may expect it to follow the macro trends.
So, it might be the case of checking the current manifestos and BoE interest rates forecast and make your decision (and pray that nothing crazy like COVID and WW3 happens). I would personally ignore any manifesto promises on the supply side (like easy of planning permissions, etc) as it would take a couple of years for the effects to be felt on house prices. If you believe that "stamp duty holiday", "help to buy" and other demand-side support are coming, then I would expect prices to increase in the short term.
House prices (as almost anything) reflect a supply-demand relationship. In the short term, house supply is a good example of “perfect inelastic” supply curve: it can’t react quickly to match changes of demand. So, unless the area you are targeting already has a major development underway, don’t expect new supply to change in that area shortly.
That brings us to demand (the total number of people interested in and capable of buying a particular product or service). In general, demand for homes in the UK is much higher than the supply. As the supply curve is inelastic, any factor that increases demand (like the stamp duty holiday of 2020) will directly hike prices up and any factor that reduces demand (like the recent increase on interest rates) will push prices down. Unless you have information that the area that you are targeting has a particular recent or incoming factor to change demand (like a recent increase in crime or the opening of a new top-grade school), you may expect it to follow the macro trends.
So, it might be the case of checking the current manifestos and BoE interest rates forecast and make your decision (and pray that nothing crazy like COVID and WW3 happens). I would personally ignore any manifesto promises on the supply side (like easy of planning permissions, etc) as it would take a couple of years for the effects to be felt on house prices. If you believe that "stamp duty holiday", "help to buy" and other demand-side support are coming, then I would expect prices to increase in the short term.
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Glossopguy
Established Member
Given the housing market's ups and downs, I thought my experience might still be relevant. Prices have remained unpredictable, and many of us are still navigating a tricky market.
My brother sold his house 3 months ago and he can also confirm the market is unpredictable. He sold his old house, opted to sell it for cash thrugh some cheap estate agents that took care of all the process. This decision sped up the process and gave him the flexibility to move quickly once he found the right place.
My brother sold his house 3 months ago and he can also confirm the market is unpredictable. He sold his old house, opted to sell it for cash thrugh some cheap estate agents that took care of all the process. This decision sped up the process and gave him the flexibility to move quickly once he found the right place.
aaronjose
Member
Would you guys completely wipe your savings to buy a house? We would need close to 50k in closing costs bc we would also pay part of the commission and all of the transfer taxes that the seller is supposed to pay. This is in addition to offering 10k over asking. This is a house we absolutely love so I know we need to really give it our all if we want it. Depending on the competition which I’m sure there will be a lot of others who also make offers.
Tris
What am I doing here?
No, I'd always want some money in hand because there's going to be things you'll want to do to the house, or things you'll have to do
When we bought our new home two years ago, we made two crucial financial decisions: we kept savings equivalent to six months of our total living expenses, and we ensured that the mortgage would not exceed 40% of my net salary alone. This strategy was designed to protect us in case of job loss or salary reduction, allowing us to manage with just small temporary sacrifices if that happened. Although this meant compromising on the house and location, resulting in a move further than we preferred, it provides us peace of mind knowing that we can handle our financial obligations without undue stress. We weighted one against the other and made our decision. Fortunately, both my wife and I have stable jobs that pay reasonable well, so we can afford to be cautious.
For context, I grew up in Brazil, where 12-month inflation regularly soared to 2500%, peaking at 4923% in June 1994. Even after economic stabilization in the late 1990s, inflation remained above 9%. When I left in 2016, the maximum mortgage available was 70% loan-to-value (LTV) with interest rates around 12.5%. This background instilled in me a risk-averse mindset.
Everyone has different appetite for risk and different life situation, so you have to play with the hand you are dealt. Nobody can judge your decision, in the end.
For context, I grew up in Brazil, where 12-month inflation regularly soared to 2500%, peaking at 4923% in June 1994. Even after economic stabilization in the late 1990s, inflation remained above 9%. When I left in 2016, the maximum mortgage available was 70% loan-to-value (LTV) with interest rates around 12.5%. This background instilled in me a risk-averse mindset.
Everyone has different appetite for risk and different life situation, so you have to play with the hand you are dealt. Nobody can judge your decision, in the end.
Yes. Move in, live like a church mouse for a year, get a second temporary job in a pub for example. Each month save a bit and hey presto!!
They sell houses rather than killing mouses.
Jacob
What goes around comes around.
Not obvious and not true.
House prices are subject to financial constraints/incentives.
In a so-called "free" market prices go as high as they can.
Tightening up on lending limits, higher interest rates, taxing capital gains, inheritance taxes, regulating the rental market, tightening up on building regs, taxing development land profits etc etc etc could produce massive and rapid bursting of housing bubble. First thing to go could be 2nd homes, then landlords selling up..etc etc. Add compulsory sale of empty buildings, undeveloped land with planning permission.
Bring it on! Banning no fault evictions would be a start but not likely to happen with our new-conservative Labour govt.
Hi Jacob, apologies but I don't understand what you you meant with "not true".
I believe we are actually on the same page at least on some points:
I wrote "As the supply curve is inelastic, any factor that increases demand (like the stamp duty holiday of 2020) will directly hike prices up and any factor that reduces demand (like the recent increase on interest rates) will push prices down." You listed several factors that reduces demand such as "Tightening up on lending limits, higher interest rates, taxing capital gains, inheritance taxes, regulating the rental market". I agree with you that these factors would have a positive effect in reducing house prices. I mean, if by "bursting of housing bubble" you mean reducing the price of homes.
Now, where you and I probably disagree:
I believe, that "tightening up on building regs, taxing development land profits" would have the opposite effect as both cause constraints on supply.
I can see the moral argument for the compulsory sale of empty buildings and undeveloped land with planning permission, and the no-fault evictions ban. On moral grounds I tend to agree, however I have to disagree on pragmatic terms. These initiatives add to the risk profile of the investment. As we know more risk = more required premium, hence the effect would be an increase in price.
Cheers,
Bruno
Jacob
What goes around comes around.
Yes sorry didn't read all your post!
Surely increasing "the risk profile of the investment" would deter investment and place the onus for housebuilding where it should be - with the state and "council housing" of one sort or another.
Ideally with an eco update on Parker Morris standards, which were dumped in 1981 "when the incoming Conservative government sought to reduce the cost of housing and, generally, public spending" and general quality of course, as with so many other things.
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