Right time to buy a House?

R8JimBob88

R8JimBob88

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James Stockton
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Right, lets open this can of worms....

Me and Laura have been together for just over 4 years now, first time buyers and we have enough for a nice little deposit and currently there are some bargains in our price range, about £150k.

Laura thinks that now is the best time for us to buy a house, on the other hand, I think the opposite. We have no rush, both currently living at home and think that if we wait longer, we'll have a bigger deposit and the houses will be cheaper.

What do you think? Buy now and risk missing out on the further price drops, or hang one for another 18-24 months untill they hit rock bottom and start climbing again but at the risk of the banks not lending what they will lend us now.

I am confused!!! :eek:
 
Ummm, it is a tough one, what percentage is your deposit, you say a nice little deposit, is it just that or as I think you mean quite alot of cash in the bank ?

Its good that you are not renting but be aware your other half may take delay in buying as you not wanting to be with her ;)

My mate has just put an offer in on a house 50k below the asking price of £250k I reckon they will get it for less than £225 !
 
At the moment we have a 5% deposit that will leave a little left for other stuff. In 18 months time we will have closer to a 15% deposit.
 
dseered said:
Ummm, it is a tough one, what percentage is your deposit, you say a nice little deposit, is it just that or as I think you mean quite alot of cash in the bank ?

Its good that you are not renting but be aware your other half may take delay in buying as you not wanting to be with her ;)

My mate has just put an offer in on a house 50k below the asking price of £250k I reckon they will get it for less than £225 !
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Blimey, a house for £225...up here you can't get much for under a grand :lol:
 
Depends on how long you intend on staying in said house imo, if you intend on staying long term then i don't think it will matter to much if you buy now you will still make money on it when you come to sell (unles the market slumps again at the time you want to sell). If its only a short term and using it as a stepping stone to a biger house then i would wait :thumbs:. The other point is theres nothing like having your own place i loved it when i moved out :thumbs:
 
There are some daft deals around on property at the moment, a mate is an estate agent up Minehead way. A developer is trying to shift houses on a new build estate and is doing a 2 for 1 offer just to get shot. I also heard of 3 one bed flats sold as a job lot for 70k.

Anyone who's got a matress full of cash could make a nice profit in a few years time.

As for the OP, hard to say what state the market will be in in 18 month but 5% equity doesn't give you much room should things go bad...
 
R8JimBob88 said:
At the moment we have a 5% deposit that will leave a little left for other stuff. In 18 months time we will have closer to a 15% deposit.
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I would think the days of zero or 5-10%deposit mortgages are well and truly over, but even if you can get that sort of deal you still need a safety net of,say, 6-months to a year's worth of payments saved up just in case something happens and you find yourself out of work or something like that.
 
most banks wont give more than 85% LTV at the moment.

Im renting and looking to buy, but on the basis the so called financial gurus predict house prices will be 50% of what they are now in 3 years im definitely going to hang on and see what happens.
 
What with so many being jobs at risk right now, most banks being at breaking point, people not being able to get mortages for sensible prices, and many simply waiting for that rock bottom moment, theres a serious lack of house buyers around at the moment.

Its this lack of buyers thats forcing house prices downwards and I'm afraid to say I don't see any of this changing anytime soon. In fact, I reckon things are gonna get a whole lots worse before they start to get better.

If its any consolation at all, we have exactly the same problem :(
 
Monkey said:
most banks wont give more than 85% LTV at the moment.

Im renting and looking to buy, but on the basis the so called financial gurus predict house prices will be 50% of what they are now in 3 years im definitely going to hang on and see what happens.
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I think if we get to the point where house prices have halved in 3 years then you'll be needing a mortgage for a loaf of bread too ;)

At the moment all that is happening is prices are settling to realistic levels - up here prices didn't have the daft levels of increase that they did in some parts of England, so they don't have as far to drop.

I looked into buying a newbuild to rent out a couple of years ago, but every plot was snapped up on my chosen site within days of being put on offer. I drove past the site a couple of days ago and work has ground to a stop, houses that should have been ready for occupation now (like the one I was after) haven't even had their foundations started yet and a lot of the stuff that has been completed is up for sale again or to let.
 
Flash In The Pan said:
I think if we get to the point where house prices have halved in 3 years then you'll be needing a mortgage for a loaf of bread too ;)
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its not impossible, remember they have doubled in 10 years, if they bottom out in 3 years it will be only have took 4 years to drop.

Houses are currently worth 10-12% less than this time last year, so if it continues at the same rate it could happen.
 
It could, but if it does the country will be in the grip of a major recession and there'll be no chance of getting a mortgage anyway...
 
I find it odd that you would ask a load of people on the net that you have never met nor know.........:shrug:

None intended,just an observation.

Damn, I`m paranoid now.
 
Flash In The Pan said:
It could, but if it does the country will be in the grip of a major recession and there'll be no chance of getting a mortgage anyway...
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i agree, but believe its still possible.

House prices are governed by the ability to purchase, the only reason prices rose so high was lenders would do 6xincome over 35 years.

now the lenders are paying the penalty.

Simple fact is house prices will fall and fall until mortgages are easily obtainable again.
 
Thing are getting worse with unemployment really starting to shoot up so I think price will drop even more over the coming months, I doubt they get to the same stage as in the late 80s when you could buy a whole street in Salford for a couple of hundred quid (not a joke)

I bought my house 13years and 11 months ago (I know because I got a 15 year mortgage and I'm now counting the weeks till it's all mine :lol:) at the time it was valued at 35K last year it was 110K so they could drop a huge amount yet.

Waiting will give you time to save for a bigger deposit, the bigger the deposit the better, easier to get a mortgage and less to pay in the long term.
 
I agree with the prediction that house prices will halve from their peak value last year.

Lots of factors...banking crisis, increase in lending interest rates (not bank), lower income multiples for mortgages and poorer max LTV, inflation pressures which may not be eased by commodity price falls and could be fueled by the aftermath of bailing out the banks, rises in unemployment, a reversal of the supply and demand equation led by builders still needing to build and sell houses to stay in existence, and finally the large threat of recession.

My recommendation, don't buy, save as much money as you can, and then buy the biggest house you can afford when the market hits rock bottom. I speak from experience as I was fortunate enough to do this at the the market's previous rock bottom and have never regretted it.
 
Monkey said:
Simple fact is house prices will fall and fall until mortgages are easily obtainable again.
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That's a very simplistic way of looking at it. Houses prices directly effect every other facet of the economy, if the value of what is most people's biggest asset falls by 50% then the rest of the economy would suffer.

Say, for example, you had bought a house last year for £300k and in three years it was only going to be worth £150k, then you'd still have the payments to make on the £300k, leaving a huge amount of negative equity.

In that position you wouldn't be wanting to splash out on a new car, or furniture,etc, so those business sectors would suffer, leading to job losses, leading to house repossessions, leading to a further drop in house prices, more cutbacks in spending, more job loses and on and on.

The whole reason behind the injection of cash into the banking sector this week was to try and prevent all of this.

I realise from a first-time buyer's standpoint it might sound like a great thing if house prices went into freefall, but in reality it just ain't so....
 
Flash In The Pan said:
The whole reason behind the injection of cash into the banking sector this week was to try and prevent all of this.
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The reason they did this was to stop a modern day depression occuring rather than just a standard recession. It was also aimed at stopping the complete collapse of the banking system which would have been catastrophic. It was not aimed at restoring the housing market.

The boom in the housing market was fuelled by all the things that caused the crisis in the banking sector. By definition, that will not be allowed to continue to happen and therefore the housing market will significantly contract, not withstanding all of the other negative economic factors.
 
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It depends a lot on what your job security and income prospects are in the current climate. If you're buying the house in the long term and can weather the storm, you'll probably be OK, but some are predicting a 40% drop in house prices over the next couple of years, which could see you with a house worth a lot less than you owe if things go bad for you.

I think the best advice is wait a while, I think prices are likely to go a lot lower yet. Keep tucking the money away and be in the best position when the time is right.
 
Defiance said:
The reason they did this was to stop a modern day depression occuring rather than just a standard recession. It was also aimed at stopping the complete collapse of the banking system which would have been catastrophic. It was not aimed at restoring the housing market.

The boom in the housing market was fuelled by all the things that caused the crisis in the banking sector. By definition, that will not be allowed to continue to happen and therefore the housing market will significantly contract, not withstanding all of the other negative economic factors.
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I didn't say the injection of capital was aimed at restoring the housing market, I said it was to prevent the collapse of the economy, which in the main is driven by house prices.

A collapse in the value of houses would have a knock-on effect on the rest of the economy.

The main reason for the bailout was to allow the banks to start lending to each other again and therefore be able to lend to the public, allowing them to buy houses.
 
Defiance said:
1995
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I don't know about down your way but up here house prices didn't drop by 40-50% around that time. I bought in 1991, the value of my house didn't drop over the next 4 years, however it didn't increase by very much either.

If prices are going to drop by 50% I'm selling up now, going to live with my folks for the next 3 years and then buy something worth twice as much as my current house :lol:
 
wait. houses will be cheaper, mortgage rates will be cheaper makes more sense.

Also, make sure when you buy you take some legal advise in case you split. Sounds horrible, and I am sure that it is something neither of you will consider at the minute, but if you bought now, prices dropped, you split, one of you wanted to buy the other out, but in negative equity/a little equity. Makes it virtually impossible to sort without selling the house.

I have had three friends go through this problem, and everytime financially they have lost out. draw up a legal agreement over what happens when you split, who put deposit in, who earns more, so pys more of the mortgage etc etc.
 
Flash In The Pan said:
I don't know about down your way but up here house prices didn't drop by 40-50% around that time. I bought in 1991, the value of my house didn't drop over the next 4 years, however it didn't increase by very much either.

If prices are going to drop by 50% I'm selling up now, going to live with my folks for the next 3 years and then buy something worth twice as much as my current house :lol:
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The fall happened from around 1987 to the early ninties and dragged along the bottom for several years thereafter. At that time there was a bigger divide in house prices between north and south (i lived in the north back then) than there is today and therefore the north was less affected. The same is not true today. Today, it would be more expensive to live where I used to live in the north than where I live now in the south which is a reversal of when i moved here. I expect both north and south to be more equally affected.

Selling up would be an interesting investment strategy if a) you could sell your house and b) if your better half (if you have one) would stick living with the folks :bonk:
 
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1987? When I bought that house the pices were going up and up and the average time on the market for one of the houses in the street was a week. Six months after I bought the next house that came up was on the market for a year.

Mind you that might have been down to me moving into the neighbourhood :lol:
 
Flash In The Pan said:
I don't know about down your way but up here house prices didn't drop by 40-50% around that time. I bought in 1991, the value of my house didn't drop over the next 4 years, however it didn't increase by very much either.

If prices are going to drop by 50% I'm selling up now, going to live with my folks for the next 3 years and then buy something worth twice as much as my current house :lol:
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thats actually a really good idea, the problem is there is that much for sale at the moment, and no mortgages, you would struggle to sell.

at the end of the day, if you are planning to stay in your house for a long time it doesnt matter if its in negative equity, because it will climb back up over the next 10 years after it hits rock bottom anyway.
 
40% drop is the worst case scenario. If that happens, then Pretty much everyone who has bought over the last 4 years will be in negative equity, which as Flash says, will have a knock on effect to the rest of the economy.

There's not many people I know who have 50% equity in their homes. Obviously there are quite a lot of people across the country, but your average man on the treet is likley to have a mortgage above 50%
 
CT said:
It depends a lot on what your job security and income prospects are in the current climate. If you're buying the house in the long term and can weather the storm, you'll probably be OK, but some are predicting a 40% drop in house prices over the next couple of years, which could see you with a house worth a lot less than you owe if things go bad for you.

I think the best advice is wait a while, I think prices are likely to go a lot lower yet. Keep tucking the money away and be in the best position when the time is right.
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We were discussing this yesterday, and basically CT is saying exactly the same as we were. Yes, house seem bargain prices now, but they are set to drop much further. Should the worse happen you may find yourself in trouble a couple of years down the line. Stash your deposit money safely and add to it as 95% mortgages will become much harder to come by, and think about buying as things stablise later on.


Disclaimer: This financial advice is NOT regulated by the FSA and is in no way insured, it is merely the opinion of the speaker. :D
 
Wait.

The economic bubble in the UK has been built on the back of unrealistic house prices and easy credit. The bubble is bursting prices are going to continue to fall. Too many people are sitting on mortgages that they can not afford and as the asset backing that debt falls in value the banks will be shutting them down or taking equity off them.

When you look at standard earnings and the basic outgoings needed to live you can see that the income available to pay mortgages is not going to go very far.

The whole basis of these 6xsalary and self cert deals was that the rising price of property would cover the mortgage if the buyer defaulted. Suddenly it has been realised that this is not the case.

That said it depends on circumstances, my brother moved into his first house last week. He negotiated a very good deal (vendor had to move for work reasons), and his mortgage (on a low multiple) is less than he was paying to rent the flat he was in.

But you are not paying commercial rent (I assume). If you really want to move in together you might think about negotiating a 6 or 12 month lease at a good price. Then look at buying next year.
 
The market is dropping by more than 1% each month at the moment, so on a £200,000 house, you'll be losing more than £2,000 each and every month!

Wait until it has hit bottom then buy.
 
Certainly wait and save hard to increase your deposit oveer the next 6-8 months. Prices are only going one way currently. Even if the decrease stops you will be no worse off, better with more deposit; and living at parents will enhance your chances of this.

The only issue buying later will be the number of properties available - a lot of houses were for sale 6 months ago purely through people bailing out at the top of the market and buying smaller properties and using the money to fund luxuries. A lot of those 'we don't know where we are going, but thought we see if we could sell this house' people are now off the market. Those owners with small deposits and big mortgages are certainly on thin ice at present. I've been looking at houses recently and at least 2 of the 7 i visited have been repossessions.

New building has basically stopped - all the housebuilders have skeleton crews on sites to finish off or slow build another few plots, all aimed at keeping prices up. One development i looked at had taken 3 reservations in one week, no mention whether the resevrations were at anything near the advertised prices mind !
 
The house builders have probably had their credit pulled by the banks, the price of the houses being built hasn't dropped it's the value of the land that's dropped,
They paid top price for the land they're sitting on, it'll cost them the same to build the house if it sells for 150k or 250k so they may as well wait until prices recover before continuing to build them.
 
wack61 said:
The house builders have probably had their credit pulled by the banks, the price of the houses being built hasn't dropped it's the value of the land that's dropped,
They paid top price for the land they're sitting on, it'll cost them the same to build the house if it sells for 150k or 250k so they may as well wait until prices recover before continuing to build them.
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That's partly true. However, these are still businesses with huge overheads still to pay, debts to service, and shareholders to satisfy. They can't simply stop building as they would stop the flow of cash to fund all of this. The lack of cashflow would very quickly force them into administration. Therefore they have to continue to build even if it means reduced margins or losses.
 
The greed of people buying to let which played a large part in the increase in house prices making people think that the equity in their properties equalled their own personal wealth and encouraged them to spend has brought us to this situation.

I'd love to see those BTL'ers who profited in the short term financially ruined by this. I'd love it!
 
Defiance said:
That's partly true. However, these are still businesses with huge overheads still to pay, debts to service, and shareholders to satisfy. They can't simply stop building as they would stop the flow of cash to fund all of this. The lack of cashflow would very quickly force them into administration. Therefore they have to continue to build even if it means reduced margins or losses.
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I can assure you that there are plenty of building sites where work has stopped. It means that they don't have to pay the subbies who do the work. Expect to see the amount of work going on drop to a minimum.
 
who? said:
I can assure you that there are plenty of building sites where work has stopped. It means that they don't have to pay the subbies who do the work. Expect to see the amount of work going on drop to a minimum.
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There will be while they can sell houses that are already built which can be sold and generate enough cash. The point is they can't stop building everywhere indefinitely and this is going to be a lengthy downturn for them to survive (or not).
 
just think of all that rumpy pumpy you will be missing out on if you wait another 18 months:thumbs:
 
I work in conveyancing, unfortunately due to the market, banks are very wary of giving mortgages etc. but saying that now is the time to buy for price reasons, houses are just not selling at the moment and people are desperate to sell their houses so you can make them a low offer and i have found at the moment people will sell for cheaper, then given a few years you should find it has gone up in value and you will have made money. Good luck with your decision.

In the legal aspect of it all, if you do split up you don't necessarily have to buy the other out, you can reach some sort of agreement by transfering the equity and getting the other's name of the register at Land Registry. You can also sign a seperation deed whereas if you did have to pay her out for say £10,000.00 (just a round figure) she would sign a declaration to say that she will have no more interest in the property so therefore she could not claim if the house goes up in value in the future.
 
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