Property Price Boom

So please everyone start shorting

The first time this was suggested was in May 2003 and guess what ? You would have lost a fortune. What is to stop the UK going the same way as Germany with 100 year mortgages ? Nothing as far as I know and that would mean that those who cannot currently afford to buy on the old 25 year mortgage could do on a 100 year one. I suggest that attempting to "predict" the top of the housing market is fraught with danger.

I suppose if you brought a house then opened a short position against house prices in your area, at least you would have hedged any loss you would make if you do buy a house at the top of the market.
Japan also has such huge mortgages. All it means in effect is that you will never own your house. So its like renting but where you get the growth margin back when you sell! A 100 year mortgage wouldn't really cost that much per month, so you could still pay the mortgage when you are retired! Infact, I am thinking of getting an interest only mortgage, for a £200K mortgage you save yourself about £300 a month.

I dont believe there will be a big 'crash' of house prices either. with such large mortgages and such a large amount of debt in the UK it would start such a huge depression that it would devastate UK economically for decades. No one would have any free equity to spend on anything! They are also well aware of the effect interest rate increases will have. They will ease it up a bit, but they wont dare to put it up too high as they'll shoot themselves in the foot! They dont want to cause an economic disaster they just want to cool down an overheated economy! Also, look at the so-called crash in the 80s... it was actually just a large corrective move in an overall bullish trend, those people that struggled through negative equity were the very same ones 10 years later with £150+K profits!

Remember: prices are never too high to go higher! We will probably see a slowing down in prices, a consolidation period for a number of years until wage catches up! As the way things are, first time buyers just cant afford to get into the market.. and without fresh buyers there is nothing! How much is a stock worth if no one wants to buy it from you? It wont cause a crash... all it will mean is people have to stay put where they are which most people do anyway. A classic stagnation of a market! Properties costing at least 5 times salary is too much, and a consolidation would probably happen until wages increase which actually doesn't take that long! I remember my mother telling me that a mere 20 years ago she was getting a few grand a year as a teacher! So its not impossible that the average wage might increase from £20K to £40K in a decade!

An evaluator I got chatting to actually recommended selling every two years regardless.. to make the most use of house price growth. And I'm following that philosophy in a way. I plan to buy the most expensive property I can afford in a growth area and rent it out. The renting will cover the mortgage and in 10 years time I will have made a good percentage on my investment with only having to put an initial outlay for the deposit! Dont get emotionally attached to your stock! I have a friend in london who is sitting on a gold mine! He's got a house worth £350K with a £100K mortgage.. but he wont move because its home! I told him... move out of london and get a gorgeous cottage in a less expensive area! You can get lovely places for £200+K if you dont mind living in the midlands! Better still, buy something in france.. its still reasonably cheap.. for 100K you can get yourself something wonderful, and you can still trade for a living there! I've got my beady eyes on Spain... its warmer all year round and is a good tax haven!
Hell what does it matter if you buy at the top of the market!

It's all relative providing you sell somewhere first.

The very first house I bought was sold three years later for a small loss. But I also traded up cheaper. I remember paying something like 13% interest on the mortgage as well.

You need a house to live in.

The thing to remember if you have a mortgage you are geared. If house prices go up over the long term you will make a big return for what could be a modest investment.

For instance 7 years ago I had £15,000 equity in a house now I have £300,000. It could go back down but in 10 years more I expect it to be considerably more given that over 1 milion new houses are required over the next 20 years or so.

Property how we Brits love it...I may have heard every conceivable argument why property MUST go up,down,sideways..but the fact is property "MUST" not do anything will however probably do something rather than something else..and whether you profit from that something will depend very specifically on you and what you actually do..generalities always so popular in the media belong in the waste bin by your desk...
for my two-penneth i have to agree with one comment made by PKFryer about his chat with an evaluator -

Quote -An evaluator I got chatting to actually recommended selling every two years regardless.. to make the most use of house price growth- end quote

I looked at my property sales in the last 3 years, where i have bought and sold 3 properties. We moved as we simply needed a bigger house due to the arrival of children, and sold a small house for double what we had paid for it three years prior, at 65k. We moved area, payed 54k, didnt like it and 10 months later sold to return for 74k. At this point i was becoming more financial savvy, and decided to "strap myself up" and go for the biggest property i could afford, and bought for 135k, (mortgage 93k)
Now 2.5 years on i have come to two conclusions.
1. i dont want to be around with a large mortgage if interest rates start climbing up = sell
2. if i had stayed in property no. 1 and was NOW looking to move into my current property i could sell it for £130k but my current is now sold for £250k. i would need a mortgage for £150k. i could never do it, so by making the moves in between, and trading reasonably frequently with the market, i have traded up and up without having to make huge investments.
This simple issue is what causes most people not be be able to afford to move.

But i have hopefully devised another option for myself. Let me see what you think.
my one objective in life is to be mortgage free. I know all about using other peoples money to my advantage etc etc, butfor the safety of my family and there security this is my one objective.

If i now sell ( currently about 2 weeks from completion) for 250k, i have made 115k profit in 2.5 years.
i intend to buy a similiar house in an area that is going through massive regeneration for 200k, with the hope that once the regeneration is complete the area will be much more desirable, hence better property prices. So no real loss in standard of living in the move.
i could simply move all my profit and have a 50k mortgage (after sol. fees, stamp duty etc).
Nearly there with my martgage free plan then.
i could actually increase my mortgage and use the cash short term in a market that is showing all the signs of major growth, if i can find one. i am not confident enough to trade with big money at the moment, and am looking for an easier way to in effect pay off that last 50k.
i therfore decided to see if i could find my solution in property abroad.
Spain, france italy is out, as prices there have sky-rocketede, probably die to us brits cashing in and buying holiday homes. I then came across bulgaria, due to join the EU in 2007, prices of property has tripled in the last 2 years and is set to follow a similiar path to spain 15-20 years ago.
So, take an additional 35k on my mortgage here, making 85k in total. Thats still less than i am currently paying. Buy over there, sit back in my new home in the UK, watch my UK property either increase in value if we never see market crash, or decrease if we do. But also watch the bulgarian market, which has a much faster potential or growth. If i can get that property to double at 70k plus, then it does not matter what happens here in the UK.

Bit longwinded i know, but thats my plan. i am in effect hedging my uk property purchase.
What do you more educated people think to my logic?
What about the currency risk?
Why not Croatia where the rich and famous are now buying?

well, of all the eastern block countries, bulgaria has been the most stable for the longest. no civil wars, political uprisings etc for adecent period of time. it also has the best financial market of those countries, the bulgarian stock market was actuallyt eh best performing market in the WORLD last year.
the currency has stayed reasonably static for long enough as well, as far as i can tell anyway.
Croatia is definatley an upcoming country, but given its more recent military history i decided to look more into bulgaria instead.
Friends of mine have just bought property in Bulgaria and they echo what you are saying. There is undoubtedly excellent opportunities in property at this moment in time. Also because they are othodox in origin there is not the same liklihood of religious extremism that is found in some of the other countries.

Paul me this is like buying the weakest stock in a bear market..yes it might go where I want it in time,but by then I will be fertilising the plant life..