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House price fluctuations
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michael


Posts: 3,198
Joined: Mar 2005
Post: #1
11-01-2008 01:44 PM

Following a recent blog article on house prices in Brockley
http://brockleycentral.blogspot.com/2008...ckley.html
I thought people may be interested (and possibly pleased or depressed depending on your situation) in the house prices for Forest Hill:
http://www.home.co.uk/guides/house_price...lastyear=1

Overall house prices increased by 24% in 2007 in Forest Hill. This is faster than the 10% rise seen in Brockley, but less than East Dulwich (42%). Catford saw 15% increase, Dulwich -2%, Crystal Palace 9%, and Upper Sydenham 0%.

Average price for a flat is ?225,000 and average for all properties is ?300,000. A flat in Forest Hill costs the same as one did in East Dulwich just one year ago, semis in Forest Hill are still below the East Dulwich price last year.

It will be worth checking back to this site to see if Forest Hill house prices suffer from a suggested national slowing of house price growth or if they benefit from joining the tube map.

Having recently purchased a new house I have little direct interest in short term price fluctuations. My self-interest until the end of 2007 prevented me from mentioning anything on this subject until now in case it positively or negatively affected the value of my property (or if somebody accused me of trying to influence the entire housing market for my personal interests).

I will leave others to comment on whether house price rises are a good or bad thing, whether properties in Forest Hill and Honor Oak are under or over valued, or whether house prices ever indicate the true value of an area.

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Johnc


Posts: 138
Joined: Jan 2007
Post: #2
11-01-2008 03:11 PM

I don't think rampant house price rises are a good thing. I bought my 3 bedroom end of terrace in 1992 for ?80k and since then, according to the above its risen in value by around 300%. My salary in the meantime has (and this includes a promotion or 2) only risen by 60%. It doesn't take an eistein to work out if I was first time buyer in Forest Hill today I couldn't even dream of buying my present home. This just increases the gap between the have and have nots and the knock on social ills that brings.

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Triangle


Posts: 133
Joined: May 2007
Post: #3
11-01-2008 03:58 PM

I can understand having to pay a additional premium for a property that is located in what we might perceive to be a "nice" area. But when over a period of time the same property increases in value by 4 or even 5 fold then you have to ask yourself what has really changed during that time to justify it? If the size of the property and the plot of land it sits upon remain unchanged, how can it be worth so much more? Properties that cost around ?200k in the early 90's are now commanding close on a million pounds. If you knocked them down they wouldn't cost anywhere near a million to rebuild them on the same plot. Quite simply I think all properties are way overvalued regardless of area. No surprise then that we have so many property developers getting rich quick.

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Sherwood


Posts: 1,349
Joined: Mar 2005
Post: #4
11-01-2008 04:26 PM

Property prices do not really realte to the true value of properties. Theoretically they should be the sum of the cost of the land and th building cost. Unfortunately, they have been driven significantly higher by lack of supply and high demand and the willingness of financial intitutions to lend increasingly larger amounts of money to purchasers. We have seen recently that the ability of the borrowere to repay the loan has not always been a factor taken into consideration.
Of course, it suits lots of people for prices to remain high. Estate agents are paid a percentage commission on the sale. The Government gets stamp duty based on the purchase price.

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shzl400


Posts: 729
Joined: Oct 2007
Post: #5
11-01-2008 04:54 PM

On the one hand, I could feel smug that the property I bought nearly 15 years ago (Good Grief!!) has more than quadrupled in value over that time.

On the other hand, the size of my family has also double in that period and I am precluded from moving up the ladder because the "percentage" effect magnifies the gap between properties. I would now have to spend double the value of my present property to get the property I would like to move to, instead of, say, half as much again.

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shzl400


Posts: 729
Joined: Oct 2007
Post: #6
11-01-2008 05:00 PM

Sorry, I've just realised that I am essentially saying the same as JohnC above.

Also does the fact that I cannot move up prevent someone else getting on the ladder - would the whole market not become hopelessly illiquid? We hear a lot about "City Bonuses", but in order for the market to work smoothly, there needs to be a chain (and let's assume for the time being that there is a chain, as there is in most cases, and exclude retire to the country, new build etc.) and if it gets stuck in the middle, the whole lot could seize up.

Out of our now magnificent total of subscribers to this site, will anyone admit to being an estate agent and explain the market?

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hilltopgeneral


Posts: 156
Joined: Mar 2004
Post: #7
11-01-2008 05:18 PM

Sherwood Wrote:
Property prices do not really relate to the true value of properties. Theoretically they should be the sum of the cost of the land and th building cost. Unfortunately, they have been driven significantly higher by lack of supply and high demand and the willingness of financial intitutions to lend increasingly larger amounts of money to purchasers.


Not true. There is no "magic ingredient", mojo or goodwill in a property; its price is equal to its value is equal to the (current) cost of the land, the cost of building it and an element of profit for the parties involved in the process.

Property prices have far outstripped rising building costs and rising margins for builders but this does not mean that some sort of gap has opened up between the constituent costs. The gap is taken up by a rise in the value of the land. This is the element that takes up the slack. If it were otherwise then we would all find ourselves sites and have houses built for ourselves, hence getting a house at not far off 1997 prices. Not easily done I concede but you can't separate this from what you would have to pay for a site with planning permission.

The massive growth in buy-to-let lending has meant that every single property in the UK is now worth about 20 times what you could rent it out for per year, i.e. the reciprocal of the 5% rate at which you have been able to borrow money. Relatively simple economics...

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hilltopgeneral


Posts: 156
Joined: Mar 2004
Post: #8
11-01-2008 05:22 PM

So saying, wonder if you meant the acquisition cost of the land rather than its current value?

In which case your post makes sense. I'm also guilty of using "cost" and "value" slightly indiscriminately in my post.

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Sherwood


Posts: 1,349
Joined: Mar 2005
Post: #9
11-01-2008 05:39 PM

Does anyone seriously expect there to be many City bonuses this year when most financial experts appear to have got things wrong and even M&S are struggling?

I was trying to differentiate between the actual production cost of a house and its resale value.
There is a website that allows you to calculate the rebuild cost.
Many factors affect the price of an item.
Really, you can only say that something is worth what someone will pay you for it.
Buying-to-let has driven up prices.
Years ago building societies would only lend approximately 3 times a person's salary. Now there seems to be no restriction on how much they will lend some people. They will lend a 70 year old person money based on a fictitious salary of ?50,000.

I think you have got to preapare your selves for a price crash or at least a reduction.

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Triangle


Posts: 133
Joined: May 2007
Post: #10
14-01-2008 10:48 AM

shzl400 Wrote:
On the one hand, I could feel smug that the property I bought nearly 15 years ago (Good Grief!!) has more than quadrupled in value over that time.

On the other hand, the size of my family has also double in that period and I am precluded from moving up the ladder because the "percentage" effect magnifies the gap between properties. I would now have to spend double the value of my present property to get the property I would like to move to, instead of, say, half as much again.


Many people find that they are unable to afford to move to a larger property. However, one solution (if you have the space to spare) is to extend your existing property. It is both cheaper than moving to a larger property and can increase the value of your existing property. However, it's also a great way of falling out with your neighbours! In fact, having had around one extension built near my property every year for the past ten years, I'm sick to death of them! But there is no doubt that they are a popular alternative to moving, especially if you like your existing area.

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shzl400


Posts: 729
Joined: Oct 2007
Post: #11
14-01-2008 11:44 AM

Triangle Wrote:
Many people find that they are unable to afford to move to a larger property. However, one solution (if you have the space to spare) is to extend your existing property. It is both cheaper than moving to a larger property and can increase the value of your existing property. However, it's also a great way of falling out with your neighbours! In fact, having had around one extension built near my property every year for the past ten years, I'm sick to death of them! But there is no doubt that they are a popular alternative to moving, especially if you like your existing area.


Plans aleady in hand, Triangle!! We might well go in all directions, back, side and roof and have already bounced the idea in principle off our immeidate neighbours who didn't voice any objection. Of course, the objections may come flooding in when we put in for planning.....

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shzl400


Posts: 729
Joined: Oct 2007
Post: #12
14-01-2008 11:45 AM

P.S. I am on the lookout recommended architects/builders for the aforementioned extension....

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