Ready to exchange on house purchase - should we reduce our offer due to COVID-19?

Crashy_Time

sjc93 said:

This thread is a trip.... The same users do sure love scaremongering the first time/nervous buyers!

Only you know with your personal circumstances whether you want to go ahead with the move or not. If it's your first home and you're in rented, living with parents & you need to get out (or any other situation, etc) and you're in a position where you can see yourself in the property for at least five years, then I'd go for it. 

You already got the property 8% under the asking price - at the end of the day, we have to put a roof over our heads. I'm going through the process of buying my first property with my OH and we're renting.. With everything going on due to COVID, we probably could have gazundered and tried to negotiate with the price (we bought for asking, the property is in a popular area & we knew it would go) but we love the property and we can see ourselves in it for at least 5 years (we have a 5yr fixed term mortgage).

I live in the cotswolds so house prices aren't going to 'dramatically' drop around here. At the end of the day, it's up to you and if you really love the house and see it more of an investment than a roof over your head that will eventually be yours regardless of how much you're paying for it (and your money is actually going towards something instead of renting and dead money!)

How do you know? 

Crashy_Time

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Crashy_Time said:

MobileSaver said:

prices dropped by 20% but transactions dropped by 50% putting paid to the fake news that lower prices makes it easier to buy a house...

How do you explain that prices are higher now, but transactions are about half what they were back then?

it is indisputable that when prices dropped significantly during the last financial crisis, transaction levels dropped even more significantly.

No, I am just stating the fact that transactions stayed lower while prices moved higher.

Right, so we are in agreement then! Even though it seems counter-intuitive, it is a simple fact that (for a whole myriad of reasons) if house prices fall it actually gets harder to buy a house.

So as house prices rose why didn`t transactions follow?

MobileSaver

Crashy_Time said:

sjc93 said:

I live in the cotswolds so house prices aren't going to 'dramatically' drop around here.

How do you know? 

Have you ever been to the Cotswolds? It's one of the most desirable areas in the country, we have holidayed there both on our own and with other friends; my girlfriend is Welsh born and bred but the Cotswolds is one of the few places she would seriously consider moving to in the future.

MobileSaver

Crashy_Time said:

MobileSaver said:

Even though it seems counter-intuitive, it is a simple fact that (for a whole myriad of reasons) if house prices fall it actually gets harder to buy a house.

So as house prices rose why didn`t transactions follow?

I don't know as I never said they did. Why do you keep asking the same question as though I said something I didn't?

Are you disputing that during the last financial crisis, when house prices dropped by 20%, it became much harder for people to buy a home?

sjc93

Crashy_Time said:

I live in the cotswolds so house prices aren't going to 'dramatically' drop around here.

How do you know? 

The fact that I've been born and bred here and have watched house prices rocket over the last decade due to supply and demand & the popularity of the area... During the banking crisis, people were still buying around here and even now, I'm getting weekly alerts about multiple properties going up on Rightmove/Zoopla/Onthemarket.

There's several new build sites going up at the moment that get snapped up within weeks and my house that I'm in the process of purchasing has gone up by at least 20K since it was last sold in 2017. Although it's not exactly 'London' prices, but the cost of living around here is pretty similar and I really cannot see a dramatic drop due to tourism, and that we have a LOT of big, big corporate organisations (aircraft, government, big insurance companies) who are always employing & expanding.

sjc93

MobileSaver said:

Crashy_Time said:

How do you know? 

Have you ever been to the Cotswolds? It's one of the most desirable areas in the country, we have holidayed there both on our own and with other friends; my girlfriend is Welsh born and bred but the Cotswolds is one of the few places she would seriously consider moving to in the future.

Curious to know which parts you've been to - I'm lucky that I'm only a 20ish minute drive from Bourton-on-the-water and about a 40 minute one from Stow on the Wold - it really is gorgeous, and the weather we get here compared to the north (my partner is from there).... He still can't believe it nearly two years down the line! 

Windofchange

We are in the exact same position - about 3 and a bit months post offer, and ready to exchange contracts. We are proceeding, and won't be trying to knock 10% or whatever off the price. Who knows what will happen with prices in the coming years. There is a fair bit to suggest they will come down in the short to medium term, but we are in this for the long run - it'a a big house that we both love, we both work in the NHS so our jobs are about as secure as they can be, and the mortgage will not stretch us in the slightest - about 25% of post tax take home pay.

I think the answer as to what to do in the current crisis is going to be individual to everybody. If you are stretching yourself to the max and have just lost your job(s), then you are most likely going to get very different advice to a couple like us who are comfortably able to afford the mortgage, even on the standard variable rate, and whose jobs are going nowhere regardless of what the economy does in the coming months / years. Even if anything were to happen to our jobs, we could both walk into any London hospital tomorrow and get locum work at twice the hourly rate. 

We in all honesty just don't care anymore about prices. We are paying something like £18,000 a year in rent for where we are, so if we save £20,000 in a years time secondary to a price drop, well we are what £2,000 better off? Who knows if we would even find another house that we love in the time period, and who knows if the mortgage rates are going to go up due to increased volatility in the market despite interest rates being at record lows. There are so many arguments and reasons on both sides to either buy or not, and my thinking is to hell with what prices are going to do in the coming few years, I want somewhere to call home, and we are not looking for a quick profit by selling next year for 50k more. Am I going to regret buying this house in 10 years time? 20 years time? I strongly suspect not. Might we be in negative equity in the short term? Maybe, but we are not looking sell so who cares!?

Crashy_Time

MobileSaver said:

Crashy_Time said:

sjc93 said:

I live in the cotswolds so house prices aren't going to 'dramatically' drop around here.

How do you know? 

Have you ever been to the Cotswolds? It's one of the most desirable areas in the country, we have holidayed there both on our own and with other friends; my girlfriend is Welsh born and bred but the Cotswolds is one of the few places she would seriously consider moving to in the future.

I don`t think you are seeing this emergency in a detached or objective way, you are too emotionally involved with the asset class most likely to be hit by this I`m afraid.

Crashy_Time

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Even though it seems counter-intuitive, it is a simple fact that (for a whole myriad of reasons) if house prices fall it actually gets harder to buy a house.

So as house prices rose why didn`t transactions follow?

I don't know as I never said they did. Why do you keep asking the same question as though I said something I didn't?

Are you disputing that during the last financial crisis, when house prices dropped by 20%, it became much harder for people to buy a home?

What you said - "it is a simple fact that (for a whole myriad of reasons) if house prices fall it actually gets harder to buy a house."
So are you now saying that as house prices rise it is still harder to buy a home? 

SouthLondonUser

Windofchange said:

[...]
I think the answer as to what to do in the current crisis is going to be individual to everybody. If you are stretching yourself to the max and have just lost your job(s), then you are most likely going to get very different advice to a couple like us who are comfortably able to afford the mortgage, even on the standard variable rate, and whose jobs are going nowhere regardless of what the economy does in the coming months / years. Even if anything were to happen to our jobs, we could both walk into any London hospital tomorrow and get locum work at twice the hourly rate. 

We in all honesty just don't care anymore about prices. We are paying something like £18,000 a year in rent for where we are, so if we save £20,000 in a years time secondary to a price drop, well we are what £2,000 better off? Who knows if we would even find another house that we love in the time period, and who knows if the mortgage rates are going to go up due to increased volatility in the market despite interest rates being at record lows. There are so many arguments and reasons on both sides to either buy or not,[...]

Well, at least you gave it some serious thought, are aware of the pros and cons, and realise there isn't a one-size-fits-all answer. All of this should be banal, but there are so many people who don't appreciate any of this and seem to be waging their own ideological war, be it pro crash or the other way round.

I agree with you that, if you have very stable jobs, are not stretching yourself to the limit, and, I would add, are happy with a 5ish year fixed mortgage (otherwise who knows what it will be like to remortgage in 2 years), then it may make sense to buy now, especially if there are a number of non-financial considerations, e.g. you hate it where you're renting now, you had been looking for a while and this is one of the few properties that ticks your boxes, you want the stability of knowing that, as long as you pay the mortgage, no landlord will kick you out (which is important once you have kids attending schools). However, I am not sure how many people are so lucky to be in a similar position (stable job, mortgage is a small % of their income etc)!

My very personal view, with which not everyone agrees of course, is that, unless I ticked all these boxes, which I don't, I wouldn't buy right now - not a chance. For me, the risks of ending up in negative equity, struggling to remortgage, or maybe losing my job and wishing the money used for deposit, stamp duty etc were available as a rainy day fund outweigh that of missing out by not buying now and maybe seeing house prices go up.

Just one thought, though: if house prices drop by 20k in a couple of years time, the cost of buying won't have been £20k only, it will have been £20k + interest paid in the period on the mortgage + all the fixed costs associated to a house purchase + missed interest on the deposit (that you would have got by investing it elsewhere - arguably not a lot).

Also, buyers should think very carefully of whether/when they will be able to move: booking a removal firm is almost impossible now, and, even if you move your stuff yourself, don't you need any furniture? Ikea doesn't deliver heavy items which require two people. Do you need broadband for work? Most companies are not sending out engineers. Will you have to pay rent + mortgage for a few more months? Can you afford it? Etc.