Going ahead with house sale amid recession ?

leann91

Hello
We are first time buyers and had an offer accepted on a house in March (just before coronavirus hit the UK). The house is in a very desirable area so we ended up paying quite a significant amount above the asking price. Now lockdown is over things are picking up again with the sale and I’m a bit concerned that if house prices fall we will be in negative equity. We are aiming to be in the house 5 years or longer and have a 5 year fixed mortgage. Is this something you think we should be concerned about. 

At the moment our options are:
a) go ahead and hope the housing market restores itself by the time we come to sell.
b) walk away
c) try and re negotiate to a price we’re more comfortable with (although the seller doesn’t seem too keen on this idea, they will only consider due to issues with the survey, not because of the current disruption to the market).

any advice would be much appreciated.

blue_max_3

It seems there was strong demand for the property, so I'd say you are likely to have a desirable property whatever happens to values. With an outlook of five years plus, I don't think you would regret your purchase. Consider what you would be paying for rent during that time (if renting currently).
The housing market is all over the place at the moment. Nobody can give you any guarantees though.

Unicorn_cottage

What area is the property in out of interest? Are you jobs secure? Could you afford the mortgage and bills on 1 salary?

MobileSaver

leann91 said:

c) try and re negotiate to a price we’re more comfortable with (although the seller doesn’t seem too keen on this idea, they will only consider due to issues with the survey, not because of the current disruption to the market).

Hardly a surprise! You are trying to reduce the price because of something that might happen in the future!

How keen would you be if the seller said actually you need to pay a higher price now because Boris Johnson has said he is about to allow 2.8 million Hong Kong citizens move to the UK and that might cause house prices to rise?

leann91

Unicorn_cottage said:

What area is the property in out of interest? Are you jobs secure? Could you afford the mortgage and bills on 1 salary?

The area is in South Manchester & we are confident we could afford the bills & mortgage on 1 salary. It wouldn’t be ideal and would mean we wouldn’t have much left at the end of the month but it’s doable. 

We are all a little concerned as some people have said if house prices go down we would essentially lose our deposit, but then there’s always the hope they will go back up eventually. 

Surrey_EA

leann91 said:

Unicorn_cottage said:

What area is the property in out of interest? Are you jobs secure? Could you afford the mortgage and bills on 1 salary?

We are all a little concerned as some people have said if house prices go down we would essentially lose our deposit, but then there’s always the hope they will go back up eventually. 

There's always someone saying house prices are going to go down. They might, they might not. If it was that easy to predict I'd be very wealthy! It seems that you are in the process of buying a property that was in high demand, located in a popular area, and a lot can happen in 5 years.

Mickygg

There could always be something round the corner such as Brexit, pandemic, Recession. For me it’s what’s affordable now and work into your calculations what’s affordable with some curve balls, which you have done saying you could afford to be on one salary.

I remember a lot of people on here pulling out when Brexit was announced a few years ago for fear of house prices falling. We have some known trolls on here constantly pushing down everyone’s throats that house prices are going to crash.

i ignored this and carried on with my purchase after the Brexit vote due to affordability, contingency plan with financial back up if needed and I wanted the house. It turned out house prices went up not down!

gingercordial

We walked away - we'd had an offer accepted in January but the sellers hadn't found anywhere before Covid and so there was no chain.  We didn't feel comfortable buying at the old price, and if the market comes down we might be able to get bigger for our money - not worried about investment/negative equity as it's going to be a long-term home for us, but if we could have parking or an extra bedroom or a better area for the same price that would be preferable.  In the meantime we're OK renting where we are so willing to wait and see.  

numbercruncher8

Seems strange nobody has asked what the finances are.... anecdotal evidence is largely useless to the OP.

As far as I see it, 5 years is quite a long time frame in macro terms, but also passes quite quickly when you own somewhere. And there are a wide range of possibilities that could happen around this time. Negative equity is not a problem if you want to stay in the house. But a worse case scenario would be if you are highly leveraged, have put most of your wealth into the property and prices decline, that you would not be able to remortgage. And with a wide range of interest rates possible in 5 years it could be the case that a SVR will be quite painful. Currently some typical SVRs are around 3.5-4%. If interest rates in 5 years are 2%, the SVR may rise commensurately (although it does not have to). 

Some of the last minute checks you can make, are to look at what comparable properties are currently listed for now, what the availability is like and what is selling. Your agreed price no doubt was bumped up in a time where demand for that property was high - that may not be the case now. In which case a revision downward could be on the cards, although you risk losing out.

Paying significantly above the guide price is not the norm in my view unless the property was underpriced to start with, so the least you can do is reassess where you are relative to the current market. If you post a link to the property I am sure there will be more detailed advice.

Crashy_Time

Mickygg said:

There could always be something round the corner such as Brexit, pandemic, Recession. For me it’s what’s affordable now and work into your calculations what’s affordable with some curve balls, which you have done saying you could afford to be on one salary.

I remember a lot of people on here pulling out when Brexit was announced a few years ago for fear of house prices falling. We have some known trolls on here constantly pushing down everyone’s throats that house prices are going to crash.

i ignored this and carried on with my purchase after the Brexit vote due to affordability, contingency plan with financial back up if needed and I wanted the house. It turned out house prices went up not down!

Brexit hasn`t happened yet, someone with a mortgage when it happens will be affected, especially if they paid peak prices.The idea that there is "always something" doesn`t quite grasp the severity of the present situation IMO.

Torrel

I have just pulled out of a new build purchase. The builder wanted to exchange contracts now and the house is not to be completed for 4 months. We where paying full asking price with the builder not given us any upgrades. 

After asking for a delay or contribution they have refused. 

I feel house prices have to go down when unemployment and uncertainty is so high. We aren't looking to move quickly. But I the house was over  budget and we had to take a family loan that would mean sacrificing holidays and social life for 5 years. We are counting on prices falling and not having pressure of the family loan to have holidays.

I say ask for the discount, if you need to walk away, do it. I see it as a 10% chance to be worse off and 90% chance to be better off and get a cheaper house. But that doesn't mean the 10% won't happen.