To feel scared about a house price crash?

[Nervousnelly2019]

I’ve recently purchased my first house. I’m in the SE and prices are eye watering. We definitely paid far more than I ever thought a house would be worth. (400k for small 3 bed terrace)

All the talk of house prices crashing are making me feel sick. This is not our forever home, we don’t have dining table space and the kids rooms only fit a single bed with no wardrobe space even in the master. I think we bought out of pressure to buy.

We definitely need a crash to make house buying more affordable, and this will be great to young people especially. But if prices fall 30_40% what happens to people like me? We only put down a 5% deposit... would you have to go bankrupt to move?

You get stuck in negative equity. And if forced to move for work or family reasons you end up renting somewhere to live and renting your own house out, for less than the mortgage payments until the market recovers enough for you to be able to sell it. At a loss compared to when you bought it.

At least in my experience

Don’t worry about something that might never happen. That’s what my counsellor said to me once when being treated for anxiety.

Practically if you can save some money then do so and it can then be used to repay debt from time to time.

When I bought my first house the market crashed about a week later but it really didn't mean anything to us, yes we were in negative equity but we had a house to live in and we are only just moving 11-years later. We are no longer in negative equity and have actually paid quite a bit off on our mortgage. If you need a bigger house you can always rent out your property and rent yourself

That's exactly what happened to us in Scotland. Purchased a one bed flat when the market was at its peak, house prices have crashed dramatically and its now worth £40k less than we paid. Only about £17k paid off the mortgage as we also put a 5% deposit down.

We've massively outgrown the flat and it's cluttered. We can't get another dog, or have children (if we wanted to). Basically we are stuck here until proves rise again or until we have paid enough of the mortgage off so we aren't in negative equity.

It's sucks. But there isn't anything else we can do.

@ToyStoryPants whereabouts are you?
I worry about this happening to me too i’m currently In a location with predicted rises due to shortages, but you never know do you?

It goes in cycles, we brought our first home in 1989 for 42k south coast, just two years later valued at 28k, eek, lots of repossessions and negative equity.

Property always comes up in the end, enjoy your new home and try not to worry.

I don’t understand the economy enough to know if house prices crashing is likely-are they talking about it in the news?

I think that's unlikely. I've had 4 very high offers for my house at the asking price and it's sold within 2 weeks. The house market seems to be rocking.

Thanks for the info guys, I’m very nervous.

A friend is a site manager and said no houses have sold on his new (beautiful) development in the 3 months they’ve been for sale, they’re in an area of huge demand that would’ve gone quickly before.
Another friend is an EState agent that said the market is dire.
Just looked it up and I think prices fell 2.5% in a month, the largest drop since 92.

The house is leasehold I don’t think we could sublet it if we needed too

Unless you desperately need to move it doesn't really matter. Yes the house is a bit small but you can make it work! You all have a place to sleep it will be fine. Also some areas are so convenient and popular they don't suffer as much. I know it's concerning but try not to worry too much

We had negative equity in our 1st flat and just had to rent it out until prices improved (Though tax wise that is becoming much harder)

Happened to me. Flat lost nearly 30% of its value. Really struggled. Took in a lodger then rented flat out later when I had to work abroad. Finally sold it and recovered my money. All ok now. Don't worry OP. Just enjoy living in it.

I think OP is referring to when Brexit finally happens the housing market might crash, all the uncertainty has certainly caused the market here to slow right down.

We bought two years ago and I definitely don’t feel this is our forever home either, but I doubt we’ve made any money on it at all. However we could manage here another 5 or 6 years if we have to. Tbh I regret buying it.

I am shocked that you’ve bought a small house for 400k that’s leasehold.
Baffling.

We're in the same boat (though we only have a 2 bed). Surrey prices :(.

I'm trying to overpay as much as I can to get our debt down, but equally we thank our lucky stars we have a stable place to live.

Remember, if your house drops so does everyone's, and 10% of a bigger house is more than 10% of your smaller house.

It may not be ideal Missy but at least you're not subject to the whims of a landlord, wanting to increase the rent or worse still, giving you notice to quit. You're safe and secure even if it is for another 5/6 years.

The best thing to do unless you want to sell now is to pay off as much as possible to avoid negative equity. It is always worth remembering your house may go down in price but it will recover. And if history repeats itself with property in the SE, usually within a decade.

A friend is a site manager and said no houses have sold on his new (beautiful) development in the 3 months they’ve been for sale, they’re in an area of huge demand that would’ve gone quickly before.

For none at all to have sold in 3 months they must be grossly overpriced. With all the incentives attached to new builds I don't believe that none have sold at all.

We bought in 2006 at the height of crazy prices and then the property market crashed in 2008. We were in negative equity for a bit and then the prices picked up again. So now we're back at the age of the cliff where prices might drop again. We need to move soon so we're keeping an eye on the prices. If the prices do drop then it's the only way for us to upgrade in the SE where prices are nuts.

A friend is a site manager and said no houses have sold on his new (beautiful) development in the 3 months they’ve been for sale, they’re in an area of huge demand that would’ve gone quickly before.
Another friend is an EState agent that said the market is dire.

For a bit of context, we just bought a new build and every single one of the homes on our row were reserved within seven days of going on the market. They had people showing up at 9am on the day the showhome was open to view it and then slapping the £500 reservation fee down on their way out :)

But you bought a leasehold!? What were you thinking? You don’t own anything. The land and all that’s on it returns to the land owner at the end of the contract period. Did you not do any research before buying into pitfalls to avoid, leasehold versus freehold? Ours is freehold or we wouldn’t have touched it, the house and that patch of land are ours for as long as we want it until/unless we die or sell. Buying a leasehold makes no sense, you’re essentially still renting but for an extortionate cost. If you have friends who work in property sales why didn’t someone say something?

Sorry to be the bearer of bad news but you should get a leasehold solicitor to check over your lease if your not familiar with the covenants within it.

If it has a 10 year doubling ground rent clause you may find the property is un mortgageable for future buyers.

Banks are generally not lending now on leaseholds with this clause. Sadly the house builders don't tell you this!

Edge not age

Plus everything @Emerald said regarding leasehold.

If have the option to buy the freehold before the builders sell it on, do it.

All of the new homes in our budget were leasehold. It’s not got a doubling ground rent clause, we had that checked. It increases with RPI and is very low. Was a 200 year lease so not something that will affect us in our lifetime.

Sadly the house builders don't tell you this!

Yep, and it’s not really their responsibility to, if you’re buying a house you really ought to do even some basic research into the main things to be aware of when buying. We’re both first time totally naive buyers but within ten seconds of googling every U.K. reputable website giving ‘things to bear in mine when buying your first home’ had the leasehold issue on. We made a note of the things we had to look into and then did further research.

Solicitors/conveyancers should really draw it to the buyer’s attention but i assume many expect a basic level of knowledge too. It’s on the paperwork as well, which you wouldn’t sign without reading thoroughly.

Yanbu to be worried. I also think the help to buy will screw people over. It’s enabled young people and ftb to buy massively overpriced new build houses that they can’t really afford. I have friends who have done this and I would feel really bad for them if there were a massive crash.