House price anxiety

[DovertheRoad]

I have long tied my sense of personal financial "worth" to the price of my house in East Dulwich. I prefer not to condsider that actually the bank own it. I had also thought that I was a property expert having watched it double in value in just 5 years. I sometimes like to mention this at dinner parties.

However post Brexit I'm deeply concerned that my ordinary, slighty cramped terrace in a pleasant but unremarkable part of South London is no longer worth ?1.9M. In fact I'd planned for it to reach ?4.5m by 2025 and fund my pension.

My parents recently told me that in the 1990s house prices actually FELL and that interest rates were once as high as 5%!! Still that's my dad for you....always having a giggle about huge bubbles of debt.

Can anyone offer any words of reassurance? Things will just keep rising and we'll all slowly adjust to any new norms won't we? Am I still a property guru?

[Salsaboy]

Interest rates at 5%. Pah! When I first had a mortgage interest rates were 15%.

[Alan Medic]

I suggest you decline dinner party invitations for a while. You're probably a lost cause but better you hear it here than be embarrassed over an aperitif.

[nxjen]

Far too many variables and unknowns for anyone to be able to offer you any reassurance. And those that try to I would not place too much reliance on as we are in uncharted territory. Just keep your head down, continue paying your mortgage and hope for the best.

ETA I'm not sure it's desirable for wider society that house prices in London continue this crazy upward climb. We already have one generation largely excluded from home ownership - do we really want this to affect a second generation?

[Jules-and-Boo]

sell your house, realise the profit from equity over your mortgage balance and buy a place outright somewhere nice.

Then you would own it and wouldn't be a slave to the bank.

I think you would be horrified if you actually calculated the amount you have paid for your house and mortgage. It's far far more than the purchase price.

[Phlox]

You say it's worth ?1.9 million? How is that an ordinary house? Put it on the market and see what offers you get, after having a few valuations done. Is it in the Dulwich Village primary catchment area?

[TheArtfulDogger]

Oh lord dovertheroad

Did your father not also tell you about a very negative event in the late 80s where interest rates were over 15%, house prices tumbled into negative equity (where you paid more than it was worth) and unemloyment was at record levels.

I think if you want to brag at dinner parties you can also mention this in hushed tones, like a ghost story designed to scare the youth of today, and then mention people who got stung on the foreign property market (Spain, Dubai ...) where they paid for off the plan properties that never materialised then and only then should you mention your sub 2million property and ask "I am doing alright, aren't I? "

Be afraid , be very afraid because in foxtons no one can hear you scream !

[jaywalker]

We can do a little calculation.

In 1992 I decided against modest 3 bed semi-d houses in E Dulwich for ?120,000 for one of equivalent price in Kennington (at that point both were not very fashionable). AT THE TIME this seemed over-priced - to the extent that I could get ?10k off on the morning of exchange by threatening to withdraw. Mortgage company said it was WAY over-priced.

Inflation multiplier to convert 1992 pounds into 2016 pounds is 1.94

These houses before brexit were selling for 1.4m.....

Yours is a little larger at 1.9m,

My estimate is that my house is now worth ?213,400 on a long-term average basis. Scaling up values your house at ?289,614.

Of course we can inflate these figures to represent the sudden fashion of living in East Dulwich. But pay attention to the (marvelous) polyglot nature of that popularity: the exit negotiations may have some adverse effect here I fear. As with house prices, bubbles of popularity can easily burst.

My assumption is that the dire PMI data yesterday was not just a blip and that we will now go through a long-drawn out recession/stagflation period, as we did in the 1990s. Oh, and interest rates on savings accounts in 1992 were 8%. There is net migration FROM London in this bracket, about to accelerate to Frankfurt. House prices will return to their natural rate.

[DulwichFox]

Salsaboy Wrote:

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> Interest rates at 5%. Pah! When I first had a

> mortgage interest rates were 15%.

Yep and for a couple of months it was 17% 2/3rds - 4/5ths of my income.. It was hard.

and now I'm an old git with savings I'm getting 0.5% interest so I'm still paying the cost of other peoples cheap mortgages.

Foxy.

[miga]

Good trolling DoverTheRoad, 7/10.

[malumbu]

I moved to London in 87/8. The talk of the dinner parties wsa "oh I don't need to work any more as my flat is making more in a month than I do".

Then two years later "I can't afford the 15% motgage and have given the keys to the building society.

The Labour came in promising to end the cycle of boom/bust. Cue 2008 dinner parties - oh my kids of have got into this or that school and my house has doubled in two years.

Then 2016 - oh your house must be worth ????

ZZZZZZzzzzzzzzzzzzzzzz shallow, shallow, shallow, shallow

Look at historic house prices vs averabe earnings and you get peaks and troughs. Function of wages, interest rates, confidence, demand and supply. Still expect lots of money laundering from abroad so top end to retain value. As for those in the middle??? Clearly uncertain times ahead.

Some people may have watned this out of Brexit.

[Help-Ma-Boab]

House prices lowering but I recently observed the average height of people in ED seems to be rising. At one point I wondered if the British rowing team were staying at Dulwich College.

[Alan Medic]

miga Wrote:

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> Good trolling DoverTheRoad, 7/10.

10/10 for good humour in my opinion.

[Pugwash]

A neighbour purchased a leasehold flat which was a former right to buy council property ( in a semi detached house)

1 bed flat now going for ?575,000. He probably paid around ?150.000 for it at the time.

I purchased my house originally for ?16.300 in 1975. However have re mortgaged the property several times to pay for essential work. In 2004 it was valued by surveyors at ?250.000. In the 80s when interest rates seemed to rise every month. I increased my payments but did not change them when rates dropped. Consequently paid off the mortgage almost a year early.

We want to downsize but want to remain in ED - even by considering property with 4 rooms less, by the time we pay legal fees and tax etc the cost of a smaller property would still be so high that we would gain very little (if anything)from selling. Both of us have mobility problems so a very large flat (3 bed) ground floor with garden is the basic requirement. We also have 8 grandchildren who when visiting stay overnight as do not live in London . We may end up renting out a Monday - Friday room to help pay the heating costs. 2 bed terraced houses seem to be going for over ?875,000.

[Otta]

miga Wrote:

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> Good trolling DoverTheRoad, 7/10.

Nah, people just took it at face value and answered politely. Poor trolling, 3/10.

[Alan Medic]

Well on that basis it would be 0/10.

[Jules-and-Boo]

oh, was it just to get a reaction? how dull of you, Dover.

[nxjen]

Reminds me of the old Great Bores of Today feature that used to run in Private Eye

[Alan Medic]

Sounds like you are bitching about taking it seriously.

[nxjen]

Not at all, the Private Eye column was very funny

[Alan Medic]

Ah go on. Read your post. Admit you took the OP seriously.

[nxjen]

Happy to admit I took it seriously but when it was pointed out it was not quite what it seemed (would not go so far to say it was a troll) couldn't help but notice the similarity. I was paying a compliment!

[Mick Mac]

I think there is an element of truth in the OP....

[miga]

Otta Wrote:

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> miga Wrote:

> --------------------------------------------------

> -----

> > Good trolling DoverTheRoad, 7/10.

>

>

> Nah, people just took it at face value and

> answered politely. Poor trolling, 3/10.

Disagree - surely the point is to elicit serious reaction from people who're unaware they're being set up?

[malumbu]

Another things that affects the market are empty nesters sitting on large property, the lack of smaller homes for empty nesters or as exemplified here, financial disincentive to downsize. Perhaps TM should look at helping people in this situation as well as those trying to get on the ladder.

Pugwash Wrote:

-------------------------------------------------------

> A neighbour purchased a leasehold flat which was a

> former right to buy council property ( in a semi

> detached house)

> 1 bed flat now going for ?575,000. He probably

> paid around ?150.000 for it at the time.

>

> I purchased my house originally for ?16.300 in

> 1975. However have re mortgaged the property

> several times to pay for essential work. In 2004

> it was valued by surveyors at ?250.000. In the 80s

> when interest rates seemed to rise every month. I

> increased my payments but did not change them when

> rates dropped. Consequently paid off the mortgage

> almost a year early.

> We want to downsize but want to remain in ED -

> even by considering property with 4 rooms less, by

> the time we pay legal fees and tax etc the cost of

> a smaller property would still be so high that we

> would gain very little (if anything)from selling.

> Both of us have mobility problems so a very large

> flat (3 bed) ground floor with garden is the basic

> requirement. We also have 8 grandchildren who when

> visiting stay overnight as do not live in London .

> We may end up renting out a Monday - Friday room

> to help pay the heating costs. 2 bed terraced

> houses seem to be going for over ?875,000.