buying house in devon... HELP!

gBay_2

hi guys,
im just about to buy a flat in devon for £134k, im morgaged up to the hilt and having to borrow money off my mum and dad.
what i want to know is am i doing the right thing? should i wait for a year or two. devon's not like other places as people are always wanting to move down here so teh housing markets always going to be strong(?). is there a chart i can see of what the house prices have been doing for teh past 30 years?
i cant belive prices wont come down becuase first timers cant buy.
someone please offer some guidance, people in teh business are telling me thyre never coming down, but then they would say that wouldnt they? that means this flat could be worth £190k in a few years which is just crazy, surely a whole generation is going to be living in council estates and affoirdable housing!
many thanks
- G

lisyloo

Hi gBay - I'm a doomster.

The graph you are looking for is here - top right. Goes back to 1970.

http://www.propertyfacts.co.uk/pricetrend/pricetrends.htm

Personally I think you are right to be concerned.
There will always be some demand in your area butthat doesn't help if people can't afford to buy.
Be careful also that interest rates are due to rise further.
Bear this in mind with the mortgage you are getting - you need to be able to afford at least 3 more 0.25% rate rises at the very minimum.

Yes - anyone you talk to in the market will have a vested interest.

Personally I think that prices will slow down and stop boomin, but prices falls are a real possibility.

At the moment I favour staying out of the market as the downside risks (price falls) are currently much higher than the upside risks (prices running away from you) in my opinion.

Do you have any pressing need to buy a flat now?
Would it cause you hardship to wait a few years?

t's very difficult to predict but my feeling is that things are about to change.
Also have a look at the hometrack report at
https://www.hometrack.co.uk

I haven't looked for your area but they show prices starting to fall.

I would certianly say think it about it a lot more and do some more research especially into how you will afford the payment if rates rise 1-2%.

lisyloo

BTW - interest rates are expected to peak somewhere between 5% and 5.5% (currently 4.75%).
So you MUST be able to afford AT LEAST another 0.75%.

Prefereably you should be able to afford more because obviously the predictions could turn out to be wrong. That't the absolute minimum I would consider sensible.

Have you also factored in costs of insurance for death, accident, sickness, redundany etc. or considered how you will cope in these situations?

Mortgage_Master

Hi,

I agree with a lot of what lisyloo has said, good advice. However, be careful with graphs though, they can tell a thousand stories. If you take each house price peak on the graphs and calculate the interest only cost of a mortgage at the BOE peak rate at the time, it can tell a different story.

lisyloo

I would agree with that,  however don't forget about the capital costs.

One of the reasons why we have  had a boom is that a number of people just look at the initial affordability i.e. what they have to pay per month.
Currently inflation is low and interest rates are low.

Subsequent affordability in future years will be much higher now, because inflation is not eroding the size of the debt in real terms (like it did in the 70s when we had high inflation).
Long term affordability of houses is bad, it's just that people look at what they need to pay per month at the moment.

Believe me - these high prices are going to unravel one way or another - the only thing that isn't clear right now is whether it going to be a short sharp crash or a longer period of lower growth.
Either way I can't see much danger of staying out of the market (unless there are compelling personaly reasons like a one in a life time opportunity to obtains your dream home).

Pal

It will be interesting to see what happens in places like Devon and Cornwall. Many properties are being bought as second homes for those in the south-east of the country, often using increased borrowing on their existing homes to raise the money.

In theory, if interest rates keep rising these holiday homes will be the first that are sold when people realise that they can no longer afford them, and as FTBs in those areas cannot afford the high prices, the prices should come down very sharply indeed.

As for buying now or later, it depends whether you want to or not. You might as well ask whether you should buy vodaphone shares now or will they fall in value next week. Who knows?

The question is, are you willing to pay the money you are borrowing and paying as a deposit, plus the mortgage capital and interest rate costs? Are you willing to pay those costs if interest rates continue to rise? If so, then buy. If not then wait a while and see what happens. The more people wait, the more likely house prices are to fall.

gBay_2

hi guys,
many thanks for advice. this has been playing on my mind so much. ill have a look at the links and try and come to some desicion.
- g