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House Prices Up 2% in Jan, End Of Recession?

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Just to correct/clarify a few figures, and give the local picture:

 

So for the people who have been hanging on for 2 yrs paying rent at 500 a month.

 

24 *500 = 12000

 

Yes, two years' rent @ £500/month = £12,000. Fine.

 

If I recall house price average from 2009 has gone up 1.5% accoss all house types from an average of £161373 to £163814 meaning a difference of £2441

 

Looking at the Land Registry figures for South Yorkshire over the last two years (from 12/2008 to 12/2010), the average price fell from £116,641 to £110,795, meaning a difference of -£5,846.

 

So in 2 years you could have paid £142441 in capital and interest payments on a mortgage.

 

Starting with your figures, £12,000 + £2,441 = £14,441 (not £142,441).

 

Your figures were based on a purchase price of £161,373. Assuming that you put down a 10% deposit (so this opportunity was only there if you had access to £16,137, which you could have earned perhaps £320/year on if you'd left it in the bank earning ~2% interest), you'd have borrowed £145,236. As a first time buyer with a small deposit you wouldn't have got a particularly good mortgage rate, so let's assume 5% (although it could well have been higher). Your mortgage interest payments would have been £7,262/year, or £14,524 over the two years.

 

So based on your figures, your repayments of £12,000 wouldn't have covered your mortgage interest, and the £2,441 equity you'd have gained from the increase in the value of your property would have been more than offset by the £2,524 increase in the size of your mortgage due to your underpayments and the loss in interest on savings of £640.

 

On your house price figures, a typical first time buyer would be down about £723.

 

On the local changes/averages, assuming again that you bought an average house two years ago: Let's say you put down a deposit of 10% or £11,664. £11,664 losing 2%/year interest if you'd kept it in savings = £233/year = £466 over the two years. And let's say you borrowed the remaining £104,977 at 5% (again, it could well have been higher) costing £5,249/year = £10,498 over the two years.

 

£12,000 (saved rent) - £5,846 (fall in value) - £466 (lost interest on savings) - £10,498 (mortgage interest) = -£4,810.

 

On local Land Registry house price figures, a typical first time buyer would be down about £4,810.

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Just to correct/clarify a few figures, and give the local picture:

 

 

 

Yes, two years' rent @ £500/month = £12,000. Fine.

 

 

 

Looking at the Land Registry figures for South Yorkshire over the last two years (from 12/2008 to 12/2010), the average price fell from £116,641 to £110,795, meaning a difference of -£5,846.

 

 

 

Starting with your figures, £12,000 + £2,441 = £14,441 (not £142,441).

 

Your figures were based on a purchase price of £161,373. Assuming that you put down a 10% deposit (so this opportunity was only there if you had access to £16,137, which you could have earned perhaps £320/year on if you'd left it in the bank earning ~2% interest), you'd have borrowed £145,236. As a first time buyer with a small deposit you wouldn't have got a particularly good mortgage rate, so let's assume 5% (although it could well have been higher). Your mortgage interest payments would have been £7,262/year, or £14,524 over the two years.

 

So based on your figures, your repayments of £12,000 wouldn't have covered your mortgage interest, and the £2,441 equity you'd have gained from the increase in the value of your property would have been more than offset by the £2,524 increase in the size of your mortgage due to your underpayments and the loss in interest on savings of £640.

 

On your house price figures, a typical first time buyer would be down about £723.

 

On the local changes/averages, assuming again that you bought an average house two years ago: Let's say you put down a deposit of 10% or £11,664. £11,664 losing 2%/year interest if you'd kept it in savings = £233/year = £466 over the two years. And let's say you borrowed the remaining £104,977 at 5% (again, it could well have been higher) costing £5,249/year = £10,498 over the two years.

 

£12,000 (saved rent) - £5,846 (fall in value) - £466 (lost interest on savings) - £10,498 (mortgage interest) = -£4,810.

 

On local Land Registry house price figures, a typical first time buyer would be down about £4,810.

 

I was going on figures from the month the thread was active (June 09).

 

And also with renting you would be £12000 down.

Edited by Bonjon

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I was going on figures from the month the thread was active (June 09).

 

In the two years to June 2009, the average house in Sheffield fell in value from £136,744 to £115,593, meaning a difference of -£21,151. That's a much bigger fall than we were working with before, so is only going to make buying rather than waiting for two years look like a worse decision.

 

And also with renting you would be £12000 down.

 

This was adjusted for in the figures by adding £12,000 in savings on rent. Without adjusting for rent, a typical first time buyer would have been down £12,723 on your figures or £16,810 on the Land Registry figures.

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I'm on about June 2009 to now, not the previous two yrs, before June there was a slight fall in some areas.

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In the two years to June 2009, the average house in Sheffield fell in value from £136,744 to £115,593, meaning a difference of -£21,151. That's a much bigger fall than we were working with before, so is only going to make buying rather than waiting for two years look like a worse decision.

 

 

 

This was adjusted for in the figures by adding £12,000 in savings on rent. Without adjusting for rent, a typical first time buyer would have been down £12,723 on your figures or £16,810 on the Land Registry figures.

I would agree mostly with your historic figures, in terms of house prices for the next few years who knows, many people want to buy their home we have one of the highest ratios of home ownership in Europe although the percentage as fallen recently, to own one's home is the aim and asperation of the majority of people in the UK and is an emotional buying decision not a logical one.

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I'm on about June 2009 to now, not the previous two yrs, before June there was a slight fall in some areas.

 

The "slight fall" in Sheffield in the year to June 2009 was 15.7%. No wonder you want to exclude it from your figures.

 

You were on about people who had waited two years, paying rent instead of buying, and how much better off they'd have been if they'd bought:

 

So for the people who have been hanging on for 2 yrs paying rent at 500 a month.

 

24 *500 = 12000

 

If I recall house price average from 2009 has gone up 1.5% accoss all house types from an average of £161373 to £163814 meaning a difference of £2441

 

So in 2 years you could have paid £142441 in capital and interest payments on a mortgage.

 

As you were calculating how much they could have paid on their mortgage based on two years' rent, to work out what would have happened to the value of their house while they were making those payments you need to look at two years' house price changes too. Just looking at six months, ignoring a year in which prices fell by 15.7%, is misleading, as my figures showed.

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