Will there really be a crash?

jane101q

I'm in the process of buying a house and I'm seriously considering pulling out before the search due to the regular reports of prices going down and an impending crash.

I'm a FTB and I wouldn't want to pay for something then it a significant amount of value in April next year when I could potentially just wait buy something maybe even bigger and in a better area then but then again I don't want to loose this opportunity and the drop never happen and be priced out.

It is a one bedroom house so I won't have the advantage of renting out a room if money ever becomes a issue post crash. Do you think this drop will be more likely a stagnation of prices or a full blown crash like in 2008.

lisyloo

No-one knows, buying a house is a risk.
A 50% drop by April is very unlikely.

To me personally it looks unlikely. We have low unemployment,
increasing migration so more people and aren’t building enough houses,
There is brexit uncertainty but it’s clear the EU want a deal so the chances are that there will still be a deal.

Which publications did you real about a crash and what was there rationale?

You say you could buy something bigger/better in a crash, but if loads of people lost their jobs there would be a huge lack of confidence in property. If you’re having second thought now due to a few articles then would you have the guts to buy when no-one else wants to?
Logic would say not becuase if you/others did want to the. There would be demand and price wouldn’t be through the floor.
Also in practice mortagage lending rules would tighten and chains would be more difficult as people are losing their jobs.
I would put to you that logic says that if you are a little worried now then you probably wouldn’t buy at the height of a major crash. How would you know when you’d got to the bottom (eas6 in hindsight looking at a chart but anyone can predict the lottery results afterwards. It’s called catching a falling knife for a reason.

I’d say keep calm and carry on.
We aren’t building houses, we have more people and high employment, brexit will resolve.
There are 2 reasons price have stagnated and that’s both becuase of stamp duty changes stalling transacti9ns but also becuase affordability has hit the buffers.

I would advise you NOT to track your house price.
It somewhere to live. If you need accommodation for 70 years and you pay for 25 then it’s a very very good bet long term (plus you don’t pay any capital gains tax).

lisyloo

I am not financially sophisticated not rich and not on a high salary, however I started a pension with my first lay packet and started paying a mortgage at 22. I’m now 50 and have cleared my mortgage and have a pension pot to gove me a comfortable retirement from 55 if I want as opposed to 67.

I’ve been lucky to have good health, but the simple truth is that if you pay the mortgage each month you’ll end up with a house at the end of it and similar.y with pensions.
It sounds very simplistic but we know people here who waited for a crash and a now 50 without a house (he’ll turn up soon) whereas a simpleton like me has one.
Similarly with pensions I know people who put it off and years turns into decades whilst simpleton me gets used to a lower salary from day 1 and can comfortably retire early rather than look at a subsistence lifestyle on state pension late 60s. Not quite a single tangeable as having a house, but the difference is massive, imagine a snowball gaining size.
I didn’t realise until recent years (at the big end of the snowball), that it’s can earn more than you. Say you have £500k pension and for simplicity get 10% gains, that £50k in a year which is more than I earn by going to work.

lisyloo

Do tell us the rationale from the publications you saw (probably best not to name them as people have strong preconceptions).

phillw

lisyloo wrote: »

We aren’t building houses, we have more people and high employment, brexit will resolve.

There is a massive building program going on in the south east. Brexit is unlikely going to resolve issues, it just creates a whole new load of unresolved issues.

lisyloo wrote: »

If you need accommodation for 70 years and you pay for 25 then it’s a very very good bet long term (plus you don’t pay any capital gains tax).

It's rather simplistic as you still pay for upkeep for the entire time you live there & some people do lose out if they are unable to keep paying the mortgage. The new affordability checks go some way to reduce the risk.

Most buyers are better off, the Dunning–Kruger effect means that you can't reliably predict.

If the market falls by 50% then there will be bigger issues to deal with and enough people will be in the same boat that you shouldn't worry specifically about that.

Carl31

jane101q wrote: »

I'm in the process of buying a house and I'm seriously considering pulling out before the search due to the regular reports of prices going down and an impending crash.

I'm a FTB and I wouldn't want to pay for something then it loose half it's value in April next year when I could potentially just wait buy something maybe even bigger and in a better area then but then again I don't want to loose this opportunity and the drop never happen and be priced out.

It is a one bedroom house so I won't have the advantage of renting out a room if money ever becomes a issue post crash. Do you think this drop will be more likely a stagnation of prices or a full blown crash like in 2008.

if theres a crash, and houses drop in value, do you think you will get a mortgage next year? Lenders need to protect themselves also you know, they dont want people defaulting on assets that are losing value, its a risk to them

jane101q

Thank you all for the reassurance so far, just thought I'll highlight that the house is in Greater London hence the concern.

The rationale is that London prices have been steadily falling which we have been seeing since the end of last year, there have been some predictions that this will be greater once we that BREXIT mark. Initially I thought it was scaremongering but I have seen houses/flats I viewed in June still on the market despite numerous reductions in price. I did negotiate a bit off but it was only £5k.

lisyloo

Show us some figures for the massive building so we can debate whether it will meet demand. One thing we can agree on is that region of the country is key.

Brexit is known about, we’ve been going on about it for years. Please put forward you’re rationale if you think the risk isn’t sufficiently priced in.

Yes of course health, marriages, jobs can intervene but in all cases planning is better than not planning is it not? I know people in their late 50s who didn’t plan and are looking at a retirement on state pension in their late 60s.
One can get insurance for some things, have savings and of course pensions can partly replace life ins.

Upkeep can vary. Mines been absolutely minimal. Of course if you buy a thatched cottage or something delapidated or Victorian then you should expect high upkeep but that’s a choice. It is a factor but not a massive one on modern houses.
Yes there are costs and risks with buying but if you pay for 25 years and need housing for 70 then it’s verging on mathematical certainty.

jane101q

Carl31 wrote: »

if theres a crash, and houses drop in value, do you think you will get a mortgage next year? Lenders need to protect themselves also you know, they dont want people defaulting on assets that are losing value, its a risk to them

I think I would get a mortgage, I'm currently putting down more than 10% and have a good credit rating. I have no other debt than my student loan which gets deducted monthly automatically. If I go on with this house my payments monthly are £620.

lisyloo

jane101q wrote: »

Thank you all for the reassurance so far, just thought I'll highlight that the house is in Greater London hence the concern.

The rationale is that London prices have been steadily falling which we have been seeing since the end of last year, there have been some predictions that this will be greater once we that BREXIT mark. Initially I thought it was scaremongering but I have seen houses/flats I viewed in June still on the market despite numerous reductions in price. I did negotiate a bit off but it was only £5k.

Is it your dream home?
Are you currently renting or with mum and dad?

The risk of buying is you overpay, but you do get the house, so is it one that rarely comes up that you really want or are there dozens the same.

The downside of waiting is
A) things go right back up after Brexit as it’s not as bad as we thought and you pay more
you end up Paying more in rent whilst trying to time the market. That risk depends on whether your paying high rent in London or not paying to live with mum and dad
C) you never buy and end up like people we all know who frequent these boards with no property at 50.

lisyloo

jane101q wrote: »

I think I would get a mortgage, I'm currently putting down more than 10% and have a good credit rating. I have no other debt than my student loan which gets deducted monthly automatically. If I go on with this house my payments monthly are £620.

So you’ve had a few worries now, but you think that if there was a massive financial crash and property was a terrible investment that you’d jump right in?

I don’t think so (if people did this property wouldn’t tank in the first place).

I’m not making any judgements about you personally but it defies logic.