Basic buying question

parabol64

I'm thinking about buying a house soon.
Not as an investment, but as a place to live.
I'm trying to get my head around it:
Does timing matter?
Let say I buy a house now for £200k, when it seems like the market has peaked.
Consider a worse case scenario that in five years I need to move to a bigger house, the market has crashed, and now my property is valued at £100k.
Surely, the next house I buy which today is valued at £300k would have dropped as well, to £200k (considering London prices will all rise and fall together roughly).
Am I leaving out some important factor or am I rougly right?
Should I wait until prices decrease (if ever)?
Would it make any difference?

Thanks in advance.

Pal

In your scenario you might be OK, but what if the house you want to buy has only dropped to £250k? Obviously if it has fallen to £150k you are laughing.

Also, what happens if you buy with a partner/spouse and split up, forcing a sale? Where would you find the £100k to cover the negative equity from?

parabol64

Pal wrote:

In your scenario you might be OK, but what if the house you want to buy has only dropped to £250k? Obviously if it has fallen to £150k you are laughing.

I am assuming house prices in roughly the same area in London would drop at the same rate.

Pal wrote:

Also, what happens if you buy with a partner/spouse and split up, forcing a sale? Where would you find the £100k to cover the negative equity from?

That won't happen

Another scenario I'd like to consider - what happens if in five years, regardless to market conditions, I would want to let the £200k flat AND buy another one. Say letting the flat covers my monthly mortage repayments.
In that scenario, would I be better off waiting until prices go down? My mortage would be lower in that case, less repayments etc.
What do you think?

mylittlefriendbaxter

hi,

i'm in the same situation, here's what i reckon:

-buy place now for 200k, it loses 100k and in 5 years you move to a place that costs 200k. in this scenario you have borrowed 300k; orig mortgage for 200k, sold for 100k, had to borrow another 100k. The total amount payable on a 300k 5% mortgage would be £526131.

-rent for 5 years and buy house for 200k, you will have saved 100k but probably spent 50k on rent. total amount payable on a 200k 5% mortgage would be £350754.

these figures are pretty rough and ready but over the lifetime of the mortgage that extra 100k actually costs you 175k, which is why its a good idea to get a big deposit before you buy ;-)

lush_walrus

parabol64 wrote:

I'm thinking about buying a house soon.
Not as an investment, but as a place to live.
I'm trying to get my head around it:
Does timing matter?
Let say I buy a house now for £200k, when it seems like the market has peaked.
Consider a worse case scenario that in five years I need to move to a bigger house, the market has crashed, and now my property is valued at £100k.
Surely, the next house I buy which today is valued at £300k would have dropped as well, to £200k (considering London prices will all rise and fall together roughly).
Am I leaving out some important factor or am I rougly right?
Should I wait until prices decrease (if ever)?
Would it make any difference?

Thanks in advance.

Yep, eactly as you say the whole market falls at roughly the same rate. BUT the problem is if the market falls you may find yourself in negative equity, which means that you will be unable to sell as you will owe more than the property is worth. That is the problem with large falls in property prices, along with the fact that when the market falls so does the amount of people buying.