To buy or not to be in current climate

GBY

I wonder if anyone would be kind enough to offer opinions on the following?

We are currently renting and in the process of purchasing a property, due to exchange in the next week or two. We are borrowing 60% of the value, the rest being made up from sale of a flat a year ago and savings. We are very keen to move, but in light of recent events are somewhat apprehensive in case of a downturn in housing prices, ie. danger of negative equity etc and of any other factors should there be major problems with the economy.

However, the location is Winchester and the house is a type which has been in strong demand owing to its style, condition and proximity to the train station(fast line to London). Houses of this type seem to be snapped up immediately, often going above the asking price.

So, we are borrowing well within our means, at present, to buy a very sought after property but in a climate of strong uncertainty and house prices in other areas coming down.

Any fortune tellers out there?

Thanks in advance.

tomatopuree

I am certainly not an expert or a fortune teller, but I do know Winchester a little bit and you're only borrowing up to 60% of the value of the house. Winchester is lovely and being close to the train station an added bonus. I'd imagine there would always be a market for a decent property in a good part of Winchester.

Not wanting to point out the obvious but house prices would have to drop nearly 40% for you to drop in to negative equity. If house prices fall this much then I am sure there will be worse things to worry about than just house prices!

Lotus-eater

GBY wrote: »

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Any fortune tellers out there?

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Yes, eventually we will all die and you can't take money either up or down (which way you go depends on how you have lived your life payments may vary, how you lived your life may not actually affect which way you go)

Sits back and waits for the normal answers to come in.

Jorgan_2

How long do you intend to stay in the property? That would have a big bearing on any decision I would be making.

You have a good size deposit so in theory, you should be ok, sorry, the crystal ball is a little foggy at present.

GBY

Thanks for comments so far. I'd see ourselves living there several years, say at least 5 years.

Lotus-eater

How would you feel if all the equity you have put into your house disappears? That would happen if prices dropped by 40% over 5 years........ possible.
£60k down the plughole.

Of course it may not happen...... it might. No one knows. And if they do they aren't telling, they are just being quiet and making loads of money.

BUT most people now think that prices won't rise much in the next couple of years at BEST. Stagnation seems to be the buzz word. So ask yourself this, do you feel lucky?

johnycoldears

If you really love the house and are treating it as a home rather than an investment then it shouldn't matter what happens to the value in the short to medium term.
Your LTV is low (60%) and I presume the repayments are affordable and in fact, at that LTV cheaper than renting. If it really is your dream house I'd go for it.
Having said that I do believe there is a pretty major property correction afoot. This is already obvious in the traditional BTL market of overpriced new build "luxury" apartments, some of which are being auctioned at 50% of their original purchase price, and it is starting to creep into more mainstream property as FTBs find it more difficult to get the finance to complete a purchase.
Figures from the last property correction in the early 90's suggested an average drop of 26% over 4 or 5 years ( about 40% in real terms). However it was noticeable that traditionally desireable locations and properties dropped less than other properties. From my own observations I would say that desireable property only dropped about 15%, whereas property in undesireable locations was dropping almost 40%
If you are likely to be living in the property for more than 5 years then, unless you become a forced seller, chances are you will ride out any price reductions, and as tomatopuree points out prices will need to drop 40% before you hit negative equity.

mr.broderick

All posts after post #1 are total guess work please anyone reading these posts do not let them influence any important decisions you may be making anytime soon. A lot of posts on here recently should carry this warning.

johnycoldears

mr.broderick wrote: »

All posts after post #1 are total guess work please anyone reading these posts do not let them influence any important decisions you may be making anytime soon. A lot of posts on here recently should carry this warning.

Too true they're guesswork but the comment "any fortune tellers out there" from GBY seemed to imply that he was looking for some (educated) guesswork, and to be fair lotus eater's comment about us all dying seems pretty accurate :rolleyes:

mlz1413

can you afford the mortgage? regardless of LTV.
is it fixed for a short term 2 to 5 yrs? if so can you afford current SVR or any higher rate than you are getting?

If you can afford the mortgage and can afford a mortgage of upto 8% (for example) then I would say go for it - If your going to treat is as your home and your happy to stay there long term.


If your going to constantly check the market, neighbouring houses for sale, worry that you could have got a better deal, don't go for it. Houses are always for sale.

PS i can NOT see in to the future!

Lotus-eater

Tbh, of all the people that have come on here (alot) and asked, should I buy now or not? You are about in the best situation. Just worries me that you are only thinking of staying there for five years, might be just in the middle/end of a [STRIKE]cra[/STRIKE] price correction.