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  • New Members

    Quick Question on Resi mortgages

    Hi John

     

    Very in depth post, thank you it gave me much insight.

     

    However, it only part answers the question I was looking for.

     

    I was actually looking for the process/trigger that sets off property prices rising and I gave the 100k example to ask/make easier the answer I was looking for.

     

    Value is value: there are different types of properties which have different values in accordance to what people are prepared to pay in any given town.

     

    We have established that higher income mutiples will not increase/up the value of the property for reasons stated above.

     

    To explain again, I'm looking for what points cause the prices to rise: value is value and going back to above, lets say that properties in X area are roughly worth 100k.

     

    Interest rates are low and lenders are pretty much lending now, so there is a flow of credit. Inlation and wage growths are higher.

     

    It is a sellers market, so property prices are likely to rise.

     

    So lets say prices have NOT yet started to rise and are worth 100k: house is valued at 100k, so in order for this property to rise, buyers think that as there is a flow of credit and a bigger risk from other buyers outbidding him, he offers as above 130k.

     

    Bidding wars take place and property prices rise.

     

    My question is, will a party ie a house buyer need to start off the chain, aparting from bidding higher, need to put in a larger deposit first to start off the process of house prices rising:

     

    eg MV 100k

    Valued 100k: typical LTV 90% 90K - 10K deposit

    Buyer knows others are interested, so bids 130k

    Puts in 40k deposit and property sold at 130k

     

    Other start doing the same until it gets to the point that surveyors value/up the price of similar props at 130k as they have risen because demand is outstripping supply.

     

    Sorry to labour on, but I was looking at one of the factors which lead to prices rising.

     

     

     

     

     

     

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    The trigger for a price rise is when someone decides to pay more. 

     

    There is no rule or the market or even a real market. Individual transactions are taking place and the parties to the transactions are rarely the same. Even the assets being sold are different. Averages and comparisons are used to get a feel for the market. While the valuation process tries to make the process consistent, we are still taking about unique transactions over a period of time.

     

    The trigger is a buyer paying what they feel they need to pay to get the property they want. The buyers set the price.

     

    If easy credit terms makes it easy for buyers to obtain the cash needed to back up their offer they might be more prone to pay more as the monthly impact of a £10K increase in the price can feel rather small when the interest rate is low.

     

    John Corey

    Follow me on Twitter-> https://www.twitter.com/john_corey

    https://www.ChelseaPrivateEquity.com/blog

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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.