Recession?

Romani_Ite_Domum

boyse7en wrote: »

Option 1:


Option 2:
You sell, you rent, prices stay the same as interest rates rise. You lose!

Option 2 is debatable. If nominal HPI is 0% over a long enough period when IRs are high, then the equity from your house sale will be gaining more and so you win!

Alan_M_2

boyse7en wrote: »

Option 1:
You sell, you rent for a year, prices drop and you buy back. You win!

Option 2:
You sell, you rent, prices stay the same as interest rates rise. You lose!

Option 3:
You sell, you rent, prices rise. You can't buy. You lose!

Option 4:
You don't sell, you pay mortage. An honourable draw!

Given that the chances appear 2:1 against you making money, I'd keep the house. If you can afford the mortgage OK, then you will still have a house even if prices drop, rise or fall through the floor.

Option 1: Makes sense, but it takes closer to 5 years for prices to stabilise after corrections/crashes, so rent factors and stability needs to be considered,

Option 2: Why is this a loss? Your mortgage costs would go through the roof, rents are very unlikely to follow, I don't see how you log this as a loss, it looks break even at worst, small benefit in best case scenario.

Option 3:Makes Sense

Option 4: Draw? Depends on what happens to the housing market, can you afford to keep the mortgage payments up? If there is a recession, how secure is employment etc?

Doozergirl

pinkshoes wrote: »

I guess the whole recession thing is a catch 22 situation then! The only rental properties that would go up would be either council ones, or ones where people have only a small mortgage remaining. There's lots of rental properties here, but most seem to be highly mortgaged...

No, again . Council rents can only rise by what is deemed fair. Landlords with little or no mortgage still have to compete. If supply is high then prices cannot rise regardless of the landlord's financial situation. Rent in that situation is based on what people want to pay.

Just like the sales market - you cannot dictate what the house is worth, you go according to the rest of the market and what people are paying.

How you have any idea of Landlord's financial situations I have no idea. I cannot even think of a way to work out how people have paid for a property. Even spending £3 on LR details will only inform you if there is a mortgage in existance, not how much.

kingkano

Alan_M wrote: »

Option 1: Makes sense, but it takes closer to 5 years for prices to stabilise after corrections/crashes, so rent factors and stability needs to be considered,

Option 2: Why is this a loss? Your mortgage costs would go through the roof, rents are very unlikely to follow, I don't see how you log this as a loss, it looks break even at worst, small benefit in best case scenario.

Option 3:Makes Sense

Option 4: Draw? Depends on what happens to the housing market, can you afford to keep the mortgage payments up? If there is a recession, how secure is employment etc?

Depends how you look at it. You say 'rents are unlikely to follow' yet you assume a crash, which means many LLs will be desperate to sell, along with sections of the population who need to sell (bankrupt, moving jobs, need to upgrade etc) = more people who need to rent along with less properties available. LLs get a sniff of this and rents slowly start rising as supply of properties dries up but demand increases exponentially with people who dont want to buy/cant afford to.

Crashes don't happen in isolation to everything else.....

Garnet_Gem

If you can afford the mortgage and you like where you stay - stay. You could move to a house/area you hated and not be able to move again for a while.

LandyAndy

hellies wrote: »

Thanks for all of your advice. The problem is oh doesnt know much about property, he just get his info from internet and tv. He is panicking that the house is going to be worth half of what we owe on our mortgage and we will be stuck there forever, although I think we should 'ride the storm' if there is a recession- i like our house, it is our 'family home' and i have no desire to go through the stress involved in moving as we have already done it twice in 2 years and i am pregnant.

As far as I can see (and I am by no means experienced in property!!) it must be better to stay put and if it does drop it will go back up again?

xx

Exactly. If you plan to live in your house for the next, say, ten years forget all this doom mongering. At the end of that time it will be worth more than your mortgage and, 99.9% certainly, more than its worth now. Enjoy your house and treat the mortgage payments as the cost of that enjoyment. It may or may not be the absolutely most cost efficient way to run your life but you can't spend all your time worrying about your decisions. Sometimes you have to say 'that is MY decision and I'm going to live with it and concentrate on living my life'

Good luck

LA

HenryWeston

LandyAndy wrote: »

Exactly. At the end of that time it will be worth more than your mortgage and, 99.9% certainly, more than its worth now.

00.1% that it might not be though :rotfl:

epz_2

kingkano wrote: »

Depends how you look at it. You say 'rents are unlikely to follow' yet you assume a crash, which means many LLs will be desperate to sell, along with sections of the population who need to sell (bankrupt, moving jobs, need to upgrade etc) = more people who need to rent along with less properties available. LLs get a sniff of this and rents slowly start rising as supply of properties dries up but demand increases exponentially with people who dont want to buy/cant afford to.

Crashes don't happen in isolation to everything else.....

problem for landlords is when people get skint they also move back to mummy and daddys, take in lodgers and house share especially if there is a dissincentive to buy ie falling prices.

as you say things dont happen in isolation but it would be a brave landlord who tried to up the rent of a paying tennant in a recession.

Alan_M_2

kingkano wrote: »

Depends how you look at it. You say 'rents are unlikely to follow' yet you assume a crash, which means many LLs will be desperate to sell, along with sections of the population who need to sell (bankrupt, moving jobs, need to upgrade etc) = more people who need to rent along with less properties available. LLs get a sniff of this and rents slowly start rising as supply of properties dries up but demand increases exponentially with people who dont want to buy/cant afford to.

Crashes don't happen in isolation to everything else.....

Rents aren't irrevocably connected to house values, they are connected salaries, willingness and ability to pay and market forces.

Rents would be very unlikely to increase in a period of recession, quite the opposite.

However, even if they did rise, there is only a finite amount they can rise unlike HPI.

Romani_Ite_Domum

LandyAndy wrote: »

Exactly. If you plan to live in your house for the next, say, ten years forget all this doom mongering. At the end of that time it will be worth more than your mortgage and, 99.9% certainly, more than its worth now.

99.9% that a house wil be worth more in 10 years time? What utter tosh.
How can you possibly know that?

We could have the scenario that property will stagnate for a couple of years, then crash, bottoming out 7 years later and start the next boom/bust cycle making it 20% less in 10 years than its worth today.

Not saying the odds are high, but they are a lot higher than 0.1%