First-time Buyer fear - Will house prices crash??

lightspeed

Its a simple matter of calculated risk and math's.

The bigger your deposit - the more you are protected against a crash in prices.

If you can afford the mortgage payments at current levels and at 2 - 3% higher then you are in a better position to cope with a possible crash.

money management - I believe that you should only ever have 2 loans in your life, a mortgage (the average person will probably never be that cash rich) and a student loan (the cheapest loan you will ever get). For everything else, if cant afford to buy it outright, dont!!!

Job security - sometimes very difficult to assess, however, how employable you are isnt. If you are skilled/qualified in a particular area, employment should be obtainable.

Lifestyle - if you live above your means, eventually it will turn round and bite you in the !!!. Always be realistic and always have some form of savings to access.

If you listen to some posters on here and on other forums you will soon realise that buying a property during the past 2 -3 years would have been a gamble, however, if you listened then and not bought, you will be much worse off now. In my area it is getting to the point at which a 25% fall in prices will still leave the average price twice that of pre 2001 therefore i really dont see affordability reverting back to what it once was with/without a crash.

I do agree that there are uncertain times ahead and people will often only tell you what they believe and others will only believe what they want to believe.

Buying for investment purposes at present could be very risky. A home for the long term, in the right area, at the right price (for todays market of course) will always be more desirable and more protected from a crash.

I think affordability really depends where you live in the country - i am appualed at what your money will buy down south, however, in the north there are still what i would call affordable houses.

You must go into any purchase with your eyes open and protect yourself against any crash as best as possible. Only you really know what you can afford and cope with.

Viz_2

I was in a similar situation to the OP last October. However, I decided to go ahead and purchase a new home for £185k. My mortagage started at £167k.
Across the street someone is selling an identical house for £215k. Obviously their home is only worth that much if someone is willing to pay.

RHemmings

Viz wrote:

I was in a similar situation to the OP last October. However, I decided to go ahead and purchase a new home for £185k. My mortagage started at £167k.
Across the street someone is selling an identical house for £215k. Obviously their home is only worth that much if someone is willing to pay.

Have any houses made their way into the land registry since yours? What has the price trend been? I won't ask you to name your street as there is no way I'd give that much personal information about myself away online.

Viz_2

There are still new ones yet to be built selling cheaper.
Although more expensive than a year ago.

desperadoV2

I'm really worried now after reading different posts.

Personally I don't think we will see house prices crash like 1970s but I think house prices will drop atleast 25% as it can't sustain this kind of growth forever.

Maybe we could see, house prices neither increase nor decrease. It could stay the same for 4 or 5 years, who knows.

I would blame the banks for all these house price increase. If banks don't offer mortgage 5 or 6 times the salary then house price wouldn't increase like this because people won't be able to afford it. A steady 2-5% increase per year is good for the economy and good for everyone. Not 100% in 3 years. That's ridiculous.

I know people say, if you manage your money properly you shouldn't have to worry about house price crash and you could survive it without any issues. But its not just about money management, the real worry is, you will be paying more money for a property that is not worth that much. For a market to recover after house price crash may take 10 years. Imagine overpaying for 10 years??? Also after 10 years your house will be worth the same money you bought it for. So what's the benefit in that? All these loss is because you bought the house at the wrong time! That's my only worry.

It all comes down to luck, doesn't it?

What should I do??? I don't know.

Maybe I'm asking the wrong question here. People jump on property ladder to make good profit (ie. £10,000 - £15,000 increase in a year).

Maybe I should ask the question, Other than property ladder, what does offer good, safe & secure investment and the profit as good as properties.

Any ideas?

meanmachine_2

Prices didn't crash in nominal terms on the 70s. And that's largely because they never had a chance to rise to ridiculous levels.

A few years of growth then, oops, recession and correction.

The fact is, we've never experienced a boom like this one. Ever. So predicting its bust is very difficult.

It might go on for another five years. As Lush Walrus says, banks seem determined to keep lending going to the point of desperation.

But it will correct in the end. The housing stock is too expensive to pass on to the next generation at these prices, without prompting a massive depression (and not just amongst FBTers!)

F_T_Buyer

desperadoV2 wrote:

What should I do??? I don't know.

Firstly I think you should pay off your debt. Then save for a 5% deposit at least. By the rate your going, this should be within a year.

You can always ask the same question again in the future. I'm sure in a few days someone will ask the same question, and we'll all give the same answers...

PoorDave

ravenfield wrote:

if there is such magic person who can predict the future property market, our life will be very easy because everyone will buy when he said price will go up and everyone will sell when he said price will go down.

Thus making the cycles even worse?!

RHemmings

PoorDave wrote:

Thus making the cycles even worse?!

It wouldn't work that way. If we know exactly what fair value is, the prices should go straight there and stay there.

jamminjamaica

personally i would still buy. and am buying my second home. 2 1/2 years ago bought a semi detached in Northern Ireland for £53,000 sold it last friday for £112,000. now if i had taken the advice that a lot of people on this site have been giving about not buying then i would not be sitting here today with around £60,000 to put down as a deposit on the £165000 house i went sale agreed on on Friday. you just have to ensure that you will be able to afford your mortgage should the interest rate go up a % or 2. which i seriously doubt. Housing prices are doing really well in Northern Ireland and i do not see that it will change in the short term.