First time buyer – should I continue with my purchase?

paisted

Hi Everyone,

My wife and I currently face the biggest decision of our lives – whether to go ahead with the purchase of our first flat.

We started searching for a flat at the beginning of 2016 after a generous gift from my parents gave us the deposit we needed for our first home. After a lot of searching and many ups and downs, we found ourselves within sight of exchange and completion... only for the referendum result to throw the world into uncharted waters!

The question we now face is whether we continue with the purchase, seek to continue the purchase on amended terms, or cut our losses and pull out.

I have consulted many people I trust but there is simply no clear answer, so I thought I would turn to the people of this forum for their views. I have set out below our situation and my view on how I think we should proceed, along with the underpinning logic. I would welcome any thoughts on whether we would be acting reasonably, whether my logic is skewed in any way, how else we should act, and what really is the worst case scenario for us.

With kind regards and many thanks in advance,

Paisted

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Key Facts

1. Husband and wife buying first property
2. Property is 1 bed flat in the Lee (London) area
3. Agreed price is £265,000
4. More or less ready to exchange and complete
5. Before Brexit, I felt confident that we were buying an excellent property on good terms
   
   Positives
6. Well maintained flat with reasonable proportions
7. We like the area and it is important to us to be in Lewisham/Lee/Hither Green
8. The area is subject to a regeneration project of Leegate Shopping Centre, which I understand has received approval by the local council, is due to commence soon and will be finished towards the end of 2018
9. Good transport links (good bus links to Blackheath and Lewisham, and only a 10-15min walk (or 2 min bus) to our primary station into central London (Lee station)
10. Now is a good time to get a mortgage, plus our monthly payments will be cheaper than our current rent
    
    Negatives
11. The flat has no outside space, which is scary. Even a Juliet balcony would add something
12. There is no bike storage, which is rubbish as we both have bikes
    
    Biggest issue
13. We see ourselves as needing to buy something a bit bigger (two bedrooms or somewhere having outside space) in the next couple of years, particularly as children may be on the horizon in this timeframe. Had Britain voted to remain, we feel that the property would have at least held its value and made moving on easier. Or if the property was a bit bigger, it would be easier to commit to being there for a longer period until prices recovered. But we are now concerned that house prices are likely to fall and leave us stuck in a property that is too small for us
    
    Thoughts
14. That a drop in house prices generally is to be expected, but that properties such as the one we are about to buy (flats in London in good areas with good transport links and in the first time buyers’ price bracket) will be fairly unaffected
15. That if we do not go ahead now, we will lose a decent property with good prospects (it was difficult to find and secure), we might be priced out of our preferred area if prices rise any further
16. That it will become harder to secure a mortgage in the future (and our circumstances mean we are not in the sweet spot of lenders’ preferred business)
17. That staying in the property longer than two years is undesirable, meaning we will be seeking to sell at the worst possible time, namely, when Britain actually leaving the EU is likely to be on the immediate horizon, meaning we can expect to sell at one of the worst times as far as Brexit impact on our flat is concerned
18. That if prices do drop, we might be able to secure something better for a lower price
    
    Conclusion
19. That on balance, continuing with the purchase is better than not doing so. We will buy a place that is nicer than where we currently live and we will enjoy living there for the short term. It has good prospects for holding its value. I do not think prices for properties that we are looking for are likely to drop so significantly that we will get something considerably better than what we are buying in the short term and, even if this did occur, we might not be able to borrow enough to buy it if banks continue to restrict their lending. If the worst case did occur and the price dropped so low that we did not feel able to sell in the short term, we can tough it out until prices recovered (which I feel sure they will)
    
    Alternatives
20. Seek a reduction of the purchase price to reflect the materially increased risk to us as a result of Brexit. A 5% reduction (to £251,750) would obviously make us feel more comfortable, but I question whether it is reasonable for us to request this? It is important to me that we act reasonably and in good faith with the vendor. I feel we are too far into the process to be seeking a reduced price, but equally Brexit is an extenuating circumstance and the vendor can simply say no
    
    Main Questions
21. Whether my logic and conclusion seems reasonable (appreciating that no-one has a crystal ball and there is a huge amount of uncertainty)
22. Whether asking for a price reduction is reasonable and sensible in the circumstances
23. Are we being stupid even considering moving forward with this?! My friend summed up our fears perfectly – why buy with a knife to your throat?

If you've got this far - thanks so much for taking the time to read this lengthy post. Your views will be hugely appreciated by a young couple who are suffering a great deal of fear and trepidation from a world seemingly turned upside down and cutting us few breaks!

Marshall_Man

This looks like a business case!

It seriousness I was bricking myself a couple of years ago when I completed on my place but haven't looked back since!

Britex is a curve ball but realistically not enough homes are being build so I can't see prices crashing massively... If you have a 10% deposit I think you're unlikely to hit negative equity unless the ar!e falls out of the economy. Realistically if there is a small drop it may just mean you may have to think about pitting off a further move for a year or two - not the end of the world.

I think this forum promotes a lot of fear as there's a lot of people who want to stir on here....

Harper123

My personal opinion is that Brexit isn't your issue. I think your issue is that you intend to have kids within the next year or two and therefore will need to sell a one bed within 2 years.

Buying and selling is expensive. I wouldn't buy something I knew I was going to outgrow in less than two years. If I couldn't afford a two bed where I wanted to live I'd find another area that I liked where I could.

usefulmale

Brexit is a red herring. The property is not suitable for you, regardless of leave or remain. Just buy the flat that you want in the next two years now.

penguingirl

Do you think you will be able to afford to move in 2 years? You are unlikely to have gained much equity in your flat from mortgage payments and it sounds like you think house prices won't have risen much (but if you're remaining in London house prices rising would be a bad thing for you as you move up the ladder). If you have a baby it is likely you will have reduced salaries for a bit (maternity leave, possibly part-time working, nursery fees) all of which would reduce how much you can borrow. Are you expecting a big payrise in the next 2 years? Of course some people do have babies in 1 bed flats, but if I were you I would hold out until I could afford a 2 bed if that is realistically possible in the next couple of years. Moving is expensive busines and can easily eat up 10k. I wouldn't want to do that twice in such a short period.

If you don't think you can afford a 2 bed in 2 years I'd probably take the gamble and buy that flat.

theGrinch

Brexit is a non issue in the grand scale of things. I wish people didnt flop on new headlines

paisted

The difficulty is balancing the property we like with the area we want to live in. We explored a range of options in order to reflect our possible future, but always came back to prioritising proximity to our existing life and desire to be centrally located. At the time that we started the purchase process, it seemed that the property would experience a good lift by local regeneration to help make a two bed more accessible in the short term - it feels that Brexit may mitigate this. My wife will have her right to reside in the UK in two years' time, meaning more of her income will be considered by a lender. The actual cost of moving is an important consideration and a very good challenge!

paisted

theGrinch wrote: »

Brexit is a non issue in the grand scale of things. I wish people didnt flop on new headlines

But I'm not talking about the grand scale of things. I'm talking about the impact on my short term plans

cashbackproblems

I agree it sounds like you will outgrow it immediately and if moving so soon lose 10k+ in stamp duty and fees etc. I know the lee/hither green area quite well and your price if near station is fair pre-brexit, but with price falling and continuing to, i would hold on and try for a house.

norm_

I think it pays to wait, the market (especially in London) has literally peaked within the last 6 months and now we're on the falling edge.

Fewer properties are coming to market as sellers wait to gauge the market, and more are being made available for rent, which is only going to reduce or maintain current rent prices.

With the financial uncertainty if interest rates did go up, even a few percent, it would turn the tables on a lot of people getting a mortgage and make the existing debts harder to service, which would limit buyers forcing a reduction in prices. With your large deposit you'd be in a very strong position to get a mortgage anyway.

And yes I think you should probably be looking for a 2 bed property minimum.

KRB2725

It is not a fact that Brexit will have an effect on house prices, it is speculation. Whilst it may in time prove to be the case, it equally may not.

Buying property is always a risk, prices dropped in the latter half of the 2000's when Brexit wasn't even being discussed.

If you are going to need to sell again within 2 years though, I'm not sure you're buying the right place. By the time you add mortgage fees, stamp duty, solicitor's fees then do the same again in 2 years, along with your selling fees, you are going to spend thousands. Much better to buy somewhere that suits you for longer now.