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[DaveyDavey]

A 7% fall in the next two years sounds a bit drastic. More likely the market as a whole will probably stay roughly where it is. Demand for housing far outstrips supply and that will help to keep prices up.

And fingers crossed that you get the opportunity then Tunnie, must say I've always fancied working aborad. Have to contend myself with holidays these days though.

If you're saving, make sure you use that ISA allowance, it goes up in the new tax year too. A 3% rise in 9 years, that's the way to encourage people to save Mr Brown  

[Paul M]

A 7% fall in the next two years sounds a bit drastic. More likely the market as a whole will probably stay roughly where it is. Demand for housing far outstrips supply and that will help to keep prices up.

It's much more complex than that.... property doesn't tend to follow the classic elastic supply and demand curves. For starters, it's an investment vehicle in a lot of cases, as evidenced by the large number of buy to let purchases over the last decade or so. If the short to medium term returns are not apparent, then the market for these buyers will dry up. That is exacerbated by higher interest repayments, meaning that the rental income may not be sufficient to cover the interest and they'll lose money on a monthly basis, before even considering any empty periods etc. If you don't make money on the equity, then it simply doesn't make sense to invest in such a climate.

Add to that the affordability issue. Many property sales are based on a chain of sales like a deck of cards -- new buyers come in at the bottom, the sellers of that property move to the next level, and so on. If the first-time buyers disappear from the bottom rung the system largely collapses, as the total demand stays flat -- it's only people moving around, reducing demand. Affordability is really stretched at the moment, and that will get a *lot* worse if the overall economy takes a nosedive, especially with inflation spiralling upwards again (reducing disposable income).

In addition to that, during the recent boom years the banks have been lending to every man and his dog, taking on far more risky debt than they had done in the past. Nowhere near as bad as the US, but they're still going to tighten up as repossessions are on the up, and with prices starting to dip there isn't the same security in equity as collateral. Banks don't like risks, contrary to popular belief, so the availability of credit to fund purchases will be reduced too.

The signs are all there, it may take a few years for them to bubble up to the surface. Definitely not a good time to invest in residential property IMO.

[Martin_1962]

I want to claim back as much as possible from the card issuers - what is claimable from them?

[albitz]

i think if they have charged more than £12 late payment fee you can claim back the difference ,other than that i,m not sure.have you checked out martin lewis money saving site,it can be useful for this sort of thing

[Markie]

A 7% fall in the next two years sounds a bit drastic. More likely the market as a whole will probably stay roughly where it is. Demand for housing far outstrips supply and that will help to keep prices up.

It's much more complex than that.... property doesn't tend to follow the classic elastic supply and demand curves. For starters, it's an investment vehicle in a lot of cases, as evidenced by the large number of buy to let purchases over the last decade or so. If the short to medium term returns are not apparent, then the market for these buyers will dry up. That is exacerbated by higher interest repayments, meaning that the rental income may not be sufficient to cover the interest and they'll lose money on a monthly basis, before even considering any empty periods etc. If you don't make money on the equity, then it simply doesn't make sense to invest in such a climate.

Add to that the affordability issue. Many property sales are based on a chain of sales like a deck of cards -- new buyers come in at the bottom, the sellers of that property move to the next level, and so on. If the first-time buyers disappear from the bottom rung the system largely collapses, as the total demand stays flat -- it's only people moving around, reducing demand. Affordability is really stretched at the moment, and that will get a *lot* worse if the overall economy takes a nosedive, especially with inflation spiralling upwards again (reducing disposable income).

In addition to that, during the recent boom years the banks have been lending to every man and his dog, taking on far more risky debt than they had done in the past. Nowhere near as bad as the US, but they're still going to tighten up as repossessions are on the up, and with prices starting to dip there isn't the same security in equity as collateral. Banks don't like risks, contrary to popular belief, so the availability of credit to fund purchases will be reduced too.

The signs are all there, it may take a few years for them to bubble up to the surface. Definitely not a good time to invest in residential property IMO.

Spoken like a fellow Economics graduate - although i know your field is elsewhere    good read  


Another side however is that as more and more are less likely to buy the demand for rental property increases - thus increasing rental prices...

....and you know what i am going to say next  

[tunnie]

good luck  

I have my student loan, (12k) but that just comes out of my pay packet. Its £60 a month out of my pay  

But thats my only debt.

Did you realy think it would be free cash!

And at 60 quid a month thats gonna take as long as a mortgage to clear!

Its all based on what you earn, at 25k its £60 a month. But soon as you get a bit more it shoots up.

£35k and its £170 a month.

I can choose to make payments on bulk if i wish, which i do have the funds to do, i could pay off a chunk. But saving for a deposit for a house... which willl take just about as long as a mortgauge to save  

Tunnie, thats the minimum payment per month.

I would get rid of it, if you keep it then its more money per month that cant go towards a mortgage payment.........and a good advisor will take into account the monthly out goings you have when considering your max loan amount.

I guess the minimum payment is set automaticly?

I am due to start repayments in March, if i do get to go to USA it will be much later in the year, probabbly Winter time, unless things REALLY take off.

Not sure i would want to live there, but it should have the chance to save more if i am out there.

By the time i am due to start payments, i could knock off 3k of it straight away. :S

[Bacon Butty Man]

I want to claim back as much as possible from the card issuers - what is claimable from them?

everything that includes penalty charges, late paymenys etc

[Paul M]

Spoken like a fellow Economics graduate - although i know your field is elsewhere    good read  


Another side however is that as more and more are less likely to buy the demand for rental property increases - thus increasing rental prices...

....and you know what i am going to say next  

Ah so you're an economist then, interesting. The burning question is: do you read "The Economist"?

I actually have almost no formal economics training/education, other than some very basic stuff I did as part of some MBA-level modules I had to take as part of another course (don't ask!). However I do like to keep abreast of what's happening in economics, as it affects us all and you can't expect to make sound decisions without at least a basic understanding of the underlying mechanisms. It amazes me the people who tell me that it's always a good idea to buy property, yet when I ask them why that's the case they either have no answer at all, or state some barely relevant nonsense like how their parents' house is now worth 3x what it was 15 years ago etc. Obviously they don't remember the recession of the early 90s that laid the groundwork for the boom cycle that fuelled those rises!

Back to the original debate, yes I agree that a reduction in the number of rental properties will push up prices (and I believe those prices are a lot more elastic than the price of the property itself), but it will take time for that reduction to occur. In my experience that rental market is already saturated in some markets, which is why for example I can rent a city centre house in Edinburgh with a private parking space for far less than it would cost me to just serve the interest on say a 90% loan-to-value mortgage on the house. Even if I had the money sitting in a pot right now, for me to buy that property at this time would be insane (or simply extremely mis-informed). My money is better off invested elsewhere, and I can quite easily move it into property in say 5 years if that market looks more attractive at that time. Moving your money out of property isn't always so easy if it becomes a buyer's market, unless you're prepared to take a substantial hit.

[Martin_1962]

I want to claim back as much as possible from the card issuers - what is claimable from them?

everything that includes penalty charges, late paymenys etc

Got 200 on one card, I asked for the account to be frozen while I sorted the loan but they all got more agressive and charged me more.

Still wondering if I can claim repayment cover off one company

[Markie]

Spoken like a fellow Economics graduate - although i know your field is elsewhere    good read  


Another side however is that as more and more are less likely to buy the demand for rental property increases - thus increasing rental prices...

....and you know what i am going to say next  

Ah so you're an economist then, interesting. The burning question is: do you read "The Economist"?

I actually have almost no formal economics training/education, other than some very basic stuff I did as part of some MBA-level modules I had to take as part of another course (don't ask!). However I do like to keep abreast of what's happening in economics, as it affects us all and you can't expect to make sound decisions without at least a basic understanding of the underlying mechanisms. It amazes me the people who tell me that it's always a good idea to buy property, yet when I ask them why that's the case they either have no answer at all, or state some barely relevant nonsense like how their parents' house is now worth 3x what it was 15 years ago etc. Obviously they don't remember the recession of the early 90s that laid the groundwork for the boom cycle that fuelled those rises!

Back to the original debate, yes I agree that a reduction in the number of rental properties will push up prices (and I believe those prices are a lot more elastic than the price of the property itself), but it will take time for that reduction to occur. In my experience that rental market is already saturated in some markets, which is why for example I can rent a city centre house in Edinburgh with a private parking space for far less than it would cost me to just serve the interest on say a 90% loan-to-value mortgage on the house. Even if I had the money sitting in a pot right now, for me to buy that property at this time would be insane (or simply extremely mis-informed). My money is better off invested elsewhere, and I can quite easily move it into property in say 5 years if that market looks more attractive at that time. Moving your money out of property isn't always so easy if it becomes a buyer's market, unless you're prepared to take a substantial hit.

Do i read the Economist - used to, do i tend to agree with it, used to.

My economics are a little more radical now. In so much that seeing as i am comfortable in financial aspects I am more of a calculated risk taker now... Just about to buy an additional house - it needs work, the price is rock bottom and it will aim at the Buy to let market - boosted by reposessions and out of reach mortgages for first time buyers. When the mortgage market is strong again i will sell it.

The whole situation has been made worse by the historic and ongoing inability of a new labour government (same old same old) to manage the economy and instead direct their focus towards the social politics. BofE and co needed to act quicker and sharper and act independantly of the government - yes i know there independant but who really believes it???

I fear like you we will stagnate and bubble under whereby more radical approaches would have us showing strong again later this year.

[Kevin Wood]

Definitely not a good time to invest in residential property IMO.

Not purely to invest, no. However, an alternative view is that if you need somewhere to live, does it really make sense to be renting and paying off someone else's mortgage just because you think there's going to be a downturn? Renting is money down the pan whichever way you look at it. Paying off a mortgage, even during periods of low or negative equity, is securing your position in the housing market if nothing else.

Buying your primary residence is a relatively long term investment, if you can call it that. Is there much difference today between the financial positions of those who bought houses in 1988 and those who bought in, say 1993?

I'd say get on the property ladder when it's the right time in your life to settle down and no later. The longer you leave it the harder it'll be.

Kevin

[Paul M]

Definitely not a good time to invest in residential property IMO.

Not purely to invest, no. However, an alternative view is that if you need somewhere to live, does it really make sense to be renting and paying off someone else's mortgage just because you think there's going to be a downturn? Renting is money down the pan whichever way you look at it. Paying off a mortgage, even during periods of low or negative equity, is securing your position in the housing market if nothing else.

Paying interest to the bank is money down the pan -- that's the bit people seem to miss. Unless you're making a substantial dent in the capital repayments, which I wouldn't be since it would cost me in the region of £300k to buy something similar to where I rent and thus is well out of my reach, then it's not a sensible approach. Remember that the longer you take to reduce the capital in the early years, the more it costs in total. Hence I'm better off paying rent (which is cheaper than the interest, let alone capital repayment) and investing the difference elsewhere, until such time that a property investment becomes more attractive.

Buying your primary residence is a relatively long term investment, if you can call it that. Is there much difference today between the financial positions of those who bought houses in 1988 and those who bought in, say 1993?

Agreed it's a long term investment, but that doesn't mean you should basically throw away large amounts of cash because it'll be paid off eventually. Those who bought in at the low point, if they played their cards right, will have cleared off the debt much more quickly than those who bought in high. The interest would be lower, thus they could make a bigger dent in the capital early, in turn reducing the interest further, and so on. The problem with many people is that they just reduce the repayments rather than try to clear it as early as possible, but a smaller starting capital value can knock 10 or more years off the repayment schedule, all else being equal, and as a result a huge reduction in total paid (far more than the initial price difference).

I'd say get on the property ladder when it's the right time in your life to settle down and no later. The longer you leave it the harder it'll be.

It's the kind of advice my mum used to always give me back when I stayed with my folks. However I think you have to look at the bigger picture, and I don't want to be a blind pawn in what is effectively an investment game, thus making money for the speculators who played their cards right. I don't believe that you have to own your property -- there are many scenarios where it makes a lot of sense, but others where it's more sensible to rent and invest elsewhere. I'll take each decision as it comes, and at the moment I'm strongly in the latter frame of mind.

I should also add that I'm far from settled, I've lived in this city for going on 4 years now (during that time I've been in 4 different places!) and I'm starting to get itchy feet again. I'll be finishing up at Edinburgh uni soon, and I fancy moving either down south, or to another country depending on what opportunities are available. So renting suits me in many ways, not just monetary.

[Paul M]

Do i read the Economist - used to, do i tend to agree with it, used to.

My economics are a little more radical now. In so much that seeing as i am comfortable in financial aspects I am more of a calculated risk taker now... Just about to buy an additional house - it needs work, the price is rock bottom and it will aim at the Buy to let market - boosted by reposessions and out of reach mortgages for first time buyers. When the mortgage market is strong again i will sell it.

The whole situation has been made worse by the historic and ongoing inability of a new labour government (same old same old) to manage the economy and instead direct their focus towards the social politics. BofE and co needed to act quicker and sharper and act independantly of the government - yes i know there independant but who really believes it???

I fear like you we will stagnate and bubble under whereby more radical approaches would have us showing strong again later this year.

Interesting stuff. I'm not quite at the stage where I feel confident enough in my understanding to take any substantial risks, but I feel that I may do so in future -- start with some relatively small investments and see how I get on from there. Of course there is the danger of initial success leading to too much confidence once the risks increase, but I'll worry about that if I ever reach that point.

I agree completely with the fiscal and monetary incompetence of the current government. If you'd asked me 5 years ago I'd say I thought they were doing a decent job, but I now understand enough to realise that Gordon's "prudence" only appeared to be so because the world economy was strong, and we were riding the crest of that wave. The reality is he has been anything but prudent, leaving little in reserve for the inevitable downturn. I think his CPI inflation headline is little more than spin covering up the real inflation which is of course much higher. Add to that the BoE is supposed to control CPI inflation as their primary goal with a target of 2% +/- 1, yet the rate has barely been below 2%. Doesn't seem to me like they're trying too hard to keep CPI inflation down, bearing in mind they just lowered interest rates in the face of rising inflation that is already above target. That very much seems to me like they're simply being government puppets and as such bowing to the stock markets and City in general. Rates should have been raised long before they did, as it was obvious we were in the midst of an unsustainable binge of credit-fuelled over indulgence, but they were more than happy to let the good times roll with no attempt to contain it, hoping that somehow the economic cycle would just disappear and we'd have indefinitely sustainable growth .

Anyway this is turning into a rant.... so I'll quit now

[albitz]

I want to claim back as much as possible from the card issuers - what is claimable from them?

everything that includes penalty charges, late paymenys etc

Got 200 on one card, I asked for the account to be frozen while I sorted the loan but they all got more agressive and charged me more.

Still wondering if I can claim repayment cover off one company

i think there may be something happening with loan repayment insurance and extended warrenties etc; at the moment,many have been missold and may be able to be claimed back

[Martin_1962]

Loan refused

Trying via an IFA now!