To Buy or Not To Buy..?

Coffee_Bloke

Hello,

After many years saving (£20k) and a bit of inheritance (£15k), I've got enough for a deposit. I earn enough (£26k) for perhaps £110k mortgage. So I could possibly look to buy a property for around £140k. Won't get me much here in Herts, but can get something.

From everything I hear and read property prices are still dropping and expected to fall during 2012. I'm conscious as I ask this that nobody can know what will happen but I'm interested to hear if people think prices are likely to fall so much in the next 12 months that it's worth holding on before taking the plunge?

I pay £600 a month in rent so if I continue to do that for the next 12 months I've thrown away £7,200 in rent. Is it really that likely that any potential property I buy (as stated - around £140k) is really likely to fall by more than £7k (5%) in the next 12 months?

If not - I should just look at buying now, shouldn't I? I just feel torn between the idea of holding out in the hope of 10% further drop in house prices or just going for it now, knowing that there's also a chance that in 12 month's time they won't have dropped further at all, and I'll have spent £7k more on rent.

Any opinions welcome, I'm a self-confessed complete novice here...

Running_Horse

How long is a piece of string?

If you don't need to buy right now, then not many are predicting a booming market in the next year or two. A lot could depend on what type of property you want and where. Are there lots of the type of property you want, or could an unmissable property tempt you? Very few are clever or lucky enough to predict the bottom of the market; you just buy when the time is right for your circumstances.

What areas are you interested in?

Coffee_Bloke

Running_Horse wrote: »

How long is a piece of string?

I'm aware that's all anybody can really say (I did mention that in the OP). Just wondered what opinions were really.

I'm looking to buy in Watford, which limits me to a half decent 1 bedroom flat or not so great 2 bed (though would prefer that as gives me flatmate/lodger option). I don't have any desperation to buy or anything specific in mind right now. Guess I'll just keep my eye out for a bargain over the coming months...

FireWyrm

I've been a keen lay student of the property market for some years now. All the signs are good that property prices are going to continue to drop, perhaps not in such drastic amounts as 40%, and certainly not back to 2002 prices, but a drop none-the-less. If you have that much money handy, I would be looking towards the midlands, south of Birmingham would be a good place to start. You can still get relatively good properties for reasonable prices there. I bought our mid-terrace late victorian house for £142 with a £30K deposit, so it's very possible. I would start watching the markets carefully and seeing which way the wind blows. Start looking at houses out and about and plan to spend about the next 6 months just dabbling in the market and seeing what is available. Lots of people are experiencing financial difficulty as food prices rise etc, so there are going to be many more casualties of the boom years who are forced to sell. While property prices fall, there is always the chance of running across someone who is quite desperate and there are certainly bargains to be had. I know it sounds sordid, to profit from someone elses misfortune, but this is business and to get what you want, you are going to have to negotiate hard for it.

Mr_Moo_2

You could try looking in the West Watford area - with the recent decision to proceed with the Met Line extension, this will pass through the area giving you good transport links both into Watford and parts north, and into London.

begemed

Interest rates are low at the moment, and likely to be going up again. So it is a good time to get a mortgage especially if you can do a 15%/ 20% deposit
(Example I got a 3.69% 3 yr fixed rate in August for a property, it fell through but can port mortgage product, lucky as same mortgage is now offered 4.09%)

With a low mortgage you are likely to be paying less than you would on rent, therefore saving yourself money.

As long as you find yourself somewhere you ll be happy in for a good few years, then you can ride out this dip.

If you save £7k a year on rent its unlikely to drop £35k in 5 years say? and even if it does you would of lost that anyway.

Go for it, just make sure you find somewhere you like for a home, rather than just looking at it for making you money.

domcastro

Don't hold out - just buy when you are ready. People have been waiting for huge crashes since 2008 and nothing really materialised. I bought in 2009 - everyone said I was stupid but my house hasn't lost value. I'm now buying again and everyone is saying I'm stupid - eurozone, double dip recession etc etc - but my view is when they start going down, people start buying, which makes them go up again (there's lots of FTBs out there waiting). Where I was buying, the flats were going like hotcakes. Fix a mortgage for a few years and also if you buy before March a FTB doesn't have to pay stamp duty

Emmzi

if you borrow £100k and interest rates go up you could easily be "wasting" £5k a year on interest with the added bonus that you now need to pay for the windows/ door/ roof to be fixed if it breaks cos there ain't no landlord. Plus you now need buildings insurance, to pay the gas engineer yourself, etc etc

Home ownsership does come with many benefits. I'm just suggesting rent is not as "wasted" as you seem to believe.

hazyjo

Personally, I wouldn't buy a one bed flat. If you can save any more towards a 2 bedder over the next year, I'd be tempted to wait. One bed flats aren't exactly known for holding their value, and seem to be much harder to sell on when the market's rubbish.

Jx

DVardysShadow

Coffee_Bloke wrote: »

... I pay £600 a month in rent so if I continue to do that for the next 12 months I've thrown away £7,200 in rent. Is it really that likely that any potential property I buy (as stated - around £140k) is really likely to fall by more than £7k (5%) in the next 12 months?

Make sure you compare like with like. The interest on a mortgage is rent on money. It is equally as thrown away as rent on property.

So if you borrow £75000 at 5%, the interest is £3750, So you are throwing away £3450 more by renting than by buying. so the question you ask should be:

Is it really that likely that any potential property I buy (as stated - around £140k) is really likely to fall by more than £3450k (2.5%) in the next 12 months?

Coffee_Bloke

DVardysShadow wrote: »

Make sure you compare like with like. The interest on a mortgage is rent on money. It is equally as thrown away as rent on property.

So if you borrow £75000 at 5%, the interest is £3750, So you are throwing away £3450 more by renting than by buying. so the question you ask should be:

Is it really that likely that any potential property I buy (as stated - around £140k) is really likely to fall by more than £3450k (2.5%) in the next 12 months?

Good point, thanks - hadn't looked at it that way.

I think on balance, given that I don't have a desperate need to move, and am saving an extra £500 per month anyway, I'm going to take it steady and use the current climate to only take something on if I'm convinced it's at a very good price (i.e. a good bit below the going rate in the area for the house type). No need to rush into anything but will start looking in any case.