Concerns about buying at the 'peak' of the market - should we pull out?

BSW89

Hi everyone,

We're selling our flat and buying a house. We're in the latter stages of conveyancing though facing some unexpected issues with our buyer, meaning the chain may collapse anyway, but let's assume we do overcome these. Is it still wise to go ahead?

I know there is no easy answer here, but it would be good to hear some different perspectives.

The key points are:

• If house prices dropped 15%, our flat would be worth £40k less, but the property we're buying would be worth £90k less. I've based this on estimates in the media of '10-20% falls' but are they being sensationalist - who knows!
• We plan to stay in the property long-term (10 years+) so any temporary falls are not a problem.
• The mortgage amount on the new house is £450k (85% LTV) and we have a 5 year fix secured at 2.8% which I know is an extremely good rate now. 
• We love our current flat (2 bed) and absolutely don't need a larger property right now - our plan was to move to a family home then start a family (as house prices were rising fast). It would be feasible to start a family here, keep saving, then move in 2-3 years but it's very hard to predict what the housing / mortgage market will look like then.
• I would feel bad pulling out and yes - we did always know the housing market could do anything, but our judgement was that house prices might stagnate or dip slightly but over time they would keep rising, and that interest rates would rise but steadily. What's happened in the last few weeks has come as a shock and now we are worried. 

Would be good to hear your perspectives. Am I overlooking anything? Or worrying disproportionately about anything?

Thank you!

donutandbeer

BSW89 said:

• If house prices dropped 15%, our flat would be worth £40k less, but the property we're buying would be worth £90k less. I've based this on estimates in the media of '10-20% falls' but are they being sensationalist - who knows!

If there’s a price crash it will never be an “even” crash (of same percentage) across properties of different value. Personally I think freehold houses will crash a bit less than flats of same value. There are lots more people on here who can articulate this better but I believe that’s the general belief. 

If you are planning to stay for 10+ years then any crash will not be that relevant, especially when you are also selling now at the same time. If you decide to wait now, there’s no guarantee that in 2-3 years times things will be much better, and you might not want to delay starting a family any longer. 

propertyhunter

I would continue with the purchase, but don't feel bad about pulling out as you need to do what's best for you.

I think that flat prices will fall proportionately more than house prices. They say property prices need to fall 28% for outgoings to be equivalent to 2021, and no one has predicted that happening. As long as you stay put for 5 years at a minimum, it should be long enough to ride out the current disruption to the market. Remember, your income will have increased in 5 years when it comes to remortgage, if not only to adjust for inflation, and you will have even more equity in the house so it won't be as bad as you think. 

In terms of the future and children, a friend of mine had 1 child in a 2-bed flat and she feels that it really did make a difference to their child's wellbeing when they moved to a house and had more space to play, especially in the garden. Sure you can cope in a flat with children (and many do), but I'm sure many on here will say that a house is preferred when possible when raising children.

RM_2013

We are in a similar position to you as we bought at peak and in a sellers market and the house we are buying did attract a bidding war and we offered over asking price.
However, we need to move as selling our house will release the equity we’ve built up and we can pay off debts and start afresh in a new house which will give us the facilities and space we need for our now much older kids.

i wouldn’t consider reducing our offer because I don’t want to risk losing the house - it’s a house that gives us the extra bedrooms and bathrooms we need without compromising on area.  The other houses I liked were a good £50k more so out of budget.

we are pushing on because we need to move for financial reasons and for space and we’ve got a fixed 5 year mortgage offer.

we accept that any short term price falls will even out in time - we intend to stay here until we need to downsize when kids leave home.

if you’re planning a family whilst many people manage in a 2 bed flat if you can afford to move i would opt for the house.

good luck whatever you decide to do 

Sarah1Mitty2

BSW89 said:

Hi everyone,

We're selling our flat and buying a house. We're in the latter stages of conveyancing though facing some unexpected issues with our buyer, meaning the chain may collapse anyway, but let's assume we do overcome these. Is it still wise to go ahead?

I know there is no easy answer here, but it would be good to hear some different perspectives.

The key points are:

• If house prices dropped 15%, our flat would be worth £40k less, but the property we're buying would be worth £90k less. I've based this on estimates in the media of '10-20% falls' but are they being sensationalist - who knows!
• We plan to stay in the property long-term (10 years+) so any temporary falls are not a problem.
• The mortgage amount on the new house is £450k (85% LTV) and we have a 5 year fix secured at 2.8% which I know is an extremely good rate now. 
• We love our current flat (2 bed) and absolutely don't need a larger property right now - our plan was to move to a family home then start a family (as house prices were rising fast). It would be feasible to start a family here, keep saving, then move in 2-3 years but it's very hard to predict what the housing / mortgage market will look like then.
• I would feel bad pulling out and yes - we did always know the housing market could do anything, but our judgement was that house prices might stagnate or dip slightly but over time they would keep rising, and that interest rates would rise but steadily. What's happened in the last few weeks has come as a shock and now we are worried. 

Would be good to hear your perspectives. Am I overlooking anything? Or worrying disproportionately about anything?

Thank you!

You are having issues with your buyer, so have not actually sold your property yet? I think you are jumping WAY too many steps ahead here, things are volatile and changing daily at the moment.

jj_43

Wait and see I suggest. Keep your options open and decide when you need to.

dannim12345

I’m in the similar position to you but we are really ‘ready’ to move although don’t have to. 

We have a good mortgage deal and it will be our home for hopefully a very long time.  We got well above asking for our house and I wonder if we would get that now…

lincroft1710

Back in 1988/89 the property market peaked then fell rapidly until 1995/6 when it started rising again. Had you bought ti 1988/89, by 2000 you would have seen your house being worth more than what you paid for it.


You buy a house (or flat) to live in. If it drops in value and you need to move then the next property you purchase will usually have correspondingly dropped in value. If your calculations show the mortgage on the new house may become unaffordable in the near future or would currently make living a struggle, then do remember a third family member will be a further drain on resources and an income stream could temporarily dry up.

Sarah1Mitty2

dannim12345 said:

I’m in the similar position to you but we are really ‘ready’ to move although don’t have to. 

We have a good mortgage deal and it will be our home for hopefully a very long time.  We got well above asking for our house and I wonder if we would get that now…

Probably not. Will you haggle on your next purchase or just pay what they are asking?

BSW89

lincroft1710 said:

Back in 1988/89 the property market peaked then fell rapidly until 1995/6 when it started rising again. Had you bought ti 1988/89, by 2000 you would have seen your house being worth more than what you paid for it.


You buy a house (or flat) to live in. If it drops in value and you need to move then the next property you purchase will usually have correspondingly dropped in value. If your calculations show the mortgage on the new house may become unaffordable in the near future or would currently make living a struggle, then do remember a third family member will be a further drain on resources and an income stream could temporarily dry up.

Thanks - we actually could have borrowed quite a bit more but I am quite money-anxious, know childcare costs a fortune and rates were expected to rise, so we have a fair bit of headroom - but everything just seems to volatile and it's scary!

BSW89

Really appreciate all of these comments, everyone. You have given me some different perspectives and made me feel much better.