What would you do? Would you buy a house now, or wait... in these circumstances?

patrick194

It's quite complex but will try to keep it simple. Partner and I are effectively retired, both late 50s, neither have private pensions or any incomes other than from savings interest and we don't own any property at the moment. Will be entitled to state pensions as and when.

We currently rent, having sold two houses about 2 years ago. The interest on our savings - (about £750k all easy access) is just under £30k and enough to cover rent on a basic victorian conversion flat in the south east and leave us enough to cover all bills if we're very frugal.

So, we have no capital growth and are probably chipping away at it gradually.

We had intended to buy a house nearer to London after selling our other homes but the housing market pushed the houses we wanted up out of our budget and the lack of stock has meant we haven't found many alternatives.

We'd like to buy a place and embark on new self-employed careers (creative and low incomes) but don't know whether to buy now or wait and see if prices fall.

We can't get on with our new occupations where we live at the moment because of space restrictions so life is pretty much on hold while we wait/decide - which is difficult at our ages.

We've seen a nice house at £525 (the going rate in the area we'd like to live in) which would save our rent but also more than halve our remaining income from savings.

We've always thought we would give these new alternative careers about 5 years and if they don't work we'll sell up and downsize - get some sort of paid employment if we can.

But with the housing market as it is, we're worried if we spend £525k now, we might lose 10% in value immediately and in 5 years possibly only be back at £525k when we need to sell.

What would you do?

Would you carry on renting and hope prices come down next year? Of course, our landlord could choose to sell at any point.

Or buy at £525k and hope for the best?

Or something else?

maisie_cat

Would it be possible to compromise by buying a cheaper property? That way you'll still have decent savings but the security of an outright owned property.
We opted for buying and having smaller savings and a low income. We live quite frugally and if push came to shove we could probably earn more

patrick194

Thanks maisie_cat - that's definitely something we've thought a lot about. The house we're interested in at £525k is at the low end of the price range for the area - which is somewhere we've always wanted to live.

It's that dilemma between giving up on that area and getting a cheaper house in a less appealling location and trying to get a balance between what you might lose in 'lifestyle' because of not living in the nicer area and what you gain in psychological comfor from feeling more financially secure.

Also, trying to work out whether the cheaper house will be any more or less vulnerable to price changes in an uncertain market.

RogerPensionGuy

If you feel 99% you will buy in said area and stay they a fair long reasonable time etc etc.

Maybe don't be too bothered about market downturn and as you say 525K will probably maybe be 500/525/550ish in maybe 4 or 7 years, who knows. 

Sounds like your in a great position to action a simple fast sale and over this next period, say now till late 2024 or very possibly middle or late 2025 houses will just have to be sold and there will be people who can't afford 6% mortgage rates after enjoying 2% for many many years, it looks like you will be able to offer lower prices and you may feel happier buying in this period of prices dropping. 

I'm in a bit similar position to you reference buying a house, I feel like I'll wait a bit and probably buy spring2024 or winter 2024 or may beyond and enjoy positive interest flows during these times.

I find a nice rental is working fine currently with the background of prices going down and interest looks set to stay at today's levels for longer than some people were hoping or thinking. 

Time will tell and good luck on your decision.

Cus

I would buy the property.  You are both in your late 50's so now is not the time to over deliberate, it's the time to enjoy your semi retirement. Imo

Albermarle

We currently rent, having sold two houses about 2 years ago. The interest on our savings - (about £750k all easy access) is just under £30k and enough to cover rent on a basic victorian conversion flat in the south east and leave us enough to cover all bills if we're very frugal.

So, we have no capital growth and are probably chipping away at it gradually.

On a more general note, having no pensions or investments to last the next maybe 30 or 40 years, and relying on cash is not a great strategy. Your enemy is inflation ( particularly at the moment but in future as well) £750K on 01/01/2023 will only buy £675K worth of goods and services at the end of this year. Even if you add the £30K interest your net worth has been significantly dented. OK the current situation is unusual but for sure inflation will always be around .
When you sort out your house move and new occupations, it would be a good idea to have a good think/research into how your future retirement income is generated. ( above state pensions). 

MultiFuelBurner

It really depends where your priorities lay.

Personally I would look to invest 2/3rds into EPC C and higher high yield rentable properties and the other 1/2rd into a property to live in.

Depending on the area 8-10% rental yield is possible. 

However there are many ways to skin this particular racoon............

What proportion of your £30k yearly interest income (which is depletion the true worth of your savings btw when spent) is you current rent? 

patrick194

Thanks everybody for the thought-provoking comments.

RogerPensionGuy - although we really like the area where we've seen the £525k house - it's more that it's an area we know and like but which also offers good transport, shops, health etc - it's as much a head as heart sort of area.

As a by the by, the agent who showed us round said she was seeing vendors turn down offers within 5% of asking but felt that offers within 10% were probably realistic and should be seriously considered.

Cus - totally agree with the sentiment - exactly what we want to do but the risks of getting it wrong are nerve-wracking. If house prices drop 10% over the next 12 months we're looking at accepting a £52,500 on that house when we could rent for roughly £12/13k for the 12 months and (theoretically!!) buy the same house then for maybe £480kish - but our lives would be on hold with a lot of uncertainty - hence just trying to get a sense of what other people would do in the same situation.

Albemarle - agreed. We do need a plan! We're hoping our retirement occupations will give us enough to subsist - but it's a big unknown. If we're not subsisting after 5 years then it'll be worrying - that's why the value of the house at least holding its own with the market is such a big worry. 

We probably need to spend less on a house as a propertion of everything.

MultiFuelBurner - our current rent is just under half our annual interest - we didn't really consider investing in rentals - didn't think we had enough money to get a good income - perhaps that's something to consider.

smipsy

If you've got cash, I would be looking at properties and making cheeky offers on suitable houses. The market is changing and you might grab a good deal where you least expect it. I ended up with a nice house at a decent discount that way, more or less on the assumption that the house prices will go down about 10-15%. The strategy does rely primarily on luck, but if you don't try you have no chance of getting a deal.

One of my many cheeky offers was refused this year, 2 months later the seller became a "motivated" (distressed) seller and suddenly selling 15% under asking (and under recent market values!) was acceptable and now I am a homeowner!

Wyndham

In terms of the savings, obviously keep an eye on rates, and make sure you are maximising your interest. Also, with that amount of money, I assume you've split it between banks - as if it's all in one place and the bank goes bust the FSCS only protects up to £85,000 per financial institution. This site has lots of information, and as rates are rising, it's good to keep informed as much as you can.

In terms of the house, I think make the right decision for you based on both head and heart. And no one knows what prices will do - a crash has been predicted far more times than it has actually happened!

patrick194

Cheers all - lots to chew over - no simple answers.