property price bubble

[boobesque]

hi guys. in the last 5 years or so house prices have risen at an insane rate. i am looking to buy a house within the next year or two but am worried at the prospect of ending up with negative equity. what are the chances of this bubble bursting and would it be wise or foolish to wait?
im aware that there are no certainties but there must be some general guidlines that can show if a collapse in the property market is inevitable or highly unlikely.
the way that i see it is that a lot of people can no longer afford to buy their own home, so people will be unable to seel their houses when they want to. this will drive prices down ya? but then abbey national brings out 57 year mortgages and 5.5 times salary mortgages to allow people to borrow more to compete in this market.
surely this cant continue but if it does continue for the next 10/20/30 years i cant wait that long.
any advice or opinions anybody?

[kwicky]

My observation is that anybody who now tries to get on the UKs housing ladder must be a fool. I believe saturation point has arrived and prices can only go one way leaving many with negative equity. I visited France last year where we searched for property that needed renovating. There were many and with 5 acres of land for less than �40,000. Now with access using the channel tunnel in less than 2 hours or even a budget flight these travel costs could easily be assimilated. It night explain the high number of emigrants from the UK last year!

[jake-the-peg]

I think the first run in I had with someone on Answerbank (who shall remain nameless) was over houseprices.

This was 2 years ago and they were insisting that the property bubble was about to burst and anyone who bought property was a fool.

I don't think the house market will collapse because the demand for housing in the UK is unlikely to drop and prices are kept high by reasonably low interest rates and people inheriting property that has gone up significantly in price.

Long term mortgages, interest only mortgages and high multiples of income also add into the mix.

Personally I wouldn't pin my hopes on a price collapse if I were you - remember if conditions are such that there's a sudden drop in demand - those conditions are likely to affect you too.

Normal advice - look at places that need a bit of work - although all the "distroying houses" programs seem to push up these prices too with all the wanna-be property developers out there. Look at areas further away - I'm sure you've heard it all before though - no easy answers I'm afraid

[kwicky]

It is very difficult to predict the housing market in any great detail. For instance there could be a hard landing (or crash) or a soft landing where the prices ease off gradually with a percentage drop over the period of the slump.

But instead of getting out the crystal ball lets examine some facts:

1. After near full employment the figures are risng month by month.
2. Following on from low affordable interest rates they have increased twice recently and economists predict we are due for some more rises next year.
3. Personal debt is now at record levels and many bankrupties are said to follow.
4. House prices have increased way beyond inflation and many predict a swing to the norm.
5. The trend now is for people to borrow more than 100% of the property value which could result in negative equity.

It may be simpler to look on the positive side and believe that house prices can increase infinitely but I would prefer to stick to the facts above or ignore them at your peril!

[jake-the-peg]

I'd agree with much of that and I think in a lot of areas you're seeing a bit of a cooling off from the recent rises.

But I can't see any reason to predict a dramatic crash.

The Daily Mail seems to have been predicting a property crash for nearly a decade - I guess if you stick at it long enough you'll be right one day

[lilynmax]

Having sold my house 18 months ago and going into rented accomodation I suddenly saw how much I was losing out by not being on the property ladder. I have just bought again, but for anyone unsure of what to do I would heartily recommend getting on the ladder as soon as possible, but ensuring you have a property that you are willing to keep for approx 5-10 years in case of any slumps in the view of keeping it and riding it out. I'm of the opinion that prices may at some point fall slightly, but I do not particularly beleive that interest rates etc will allow a crash to the standard of the 80's. Wait too long and you'll never afford anything. Just my opinion though!! ;-)