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?

a crash would be great for those hoping to get on the ladder
It won’t help them get on the ladder. Because if there’s a crash then there’ll also be widespread economic downturn, job losses, increased interest rates and tighter mortgage lending criteria. There may well be cheap houses for sale but most people won’t be in a position to be able to buy them any more.

YANBU to worry. Where we live house prices haven't recovered from the 2008 crash. Depending on where you are house prices could take a long time to recover.

While UK is in the EU the mortgage interest rate will be regulated by the ECB. If there is a property crash the interest rates will go down to float the debt. If you're worried about payments you can enquire about a fixed rate. You will always have options so try not to worry too much. With Brexit a lot of people are sitting tight because of the uncertainty.

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 would only go bankrupt if you cant afford the loan repayments and the value if the house is less than the outstanding loan.

Wouldn't touch a leasehold house I'm afraid. It doesn't matter how long the lease is; it can still be a huge obstacle in terms of mortgages, selling.

Prices around me have actually risen
I was quite surprised since I keep reading about prices dropping. I wonder if it's just the overpriced south? I am North so it might be different.

I think they are talking about scrapping leashold for houses. Martin Lewis if I am not mistaken mentioned it on Twitter too

Oh yeah. They indeed are talking about it.

www.which.co.uk/news/2019/03/leasehold-and-ground-rents-could-be-scrapped-under-new-recommendations/

Leasehold houses arent ideal but they are not necessarily difficult to sell. If it is a newbuild its possible that you will have the opportunity to buy the freehold within a reasonable timeframe). If you can afford to buy the freehold then do it, not least because it will make your house easier to sell than similar houses which still have leasehold title.

www.lease-advice.org/ - this website is really useful and includes info re whether/how you have the right to buy the freehold

It's perfectly normal to be concerned after such a large investment. But the house isn't just an investment. It provides housing services that you would otherwise have to rent.

To the extent that it's an investment, it's a long term investment, like shares of stock. The long term return is very good but you have to accept some volatility in short run worth.

Enjoy your lovely new home, There's no reward without risk.

It'll go back up if you can wait it out. We bought 2017 so I understand your fear - we were right at the peak so have a 2 bed London flat at an eye watering £615k argued down from £640k.

We planned to upgrade in the 2024/5 time so is worrying but hopefully can wait it out.

Ours is leasehold too - I think most in London are.

This happened to me in the early 90's.

You only lose money if you sell, so you don't sell, you rent it out. Then you rent somewhere more suitable.

The thing is OP you have somewhere to live.You have only just bought so this is your home for a while.If you hadn't bought you would be renting,high prices no security.
So for now just enjoy your house,there may be a did but since demand still outstrips supply it will even out when the Brexit drama is over.

We were in negative equity for many years following the price crashes in 1987. We gritted our teeth, paid the mortgage (at 15% interest for the first couple of years) and waited for prices to rise again. In fact by the time they did rise we had paid off a lot of the loan by not reducing our monthly payments as interest rates dropped.

Your small home is probably not costing much more as a mortgage than renting somewhere similar and you aren’t chucking money away on rent. Buying a house isn’t just about making a profit, it’s also about security and that’s worth a lot.

If you've only bought the house recently, presumably you won't be moving for quite a while so don't worry about it now. By the time you're ready to sell it will all have changed. Enjoy your new house, well done to you.

Blue you’ve made your point. The OP didn’t even ask for opinions regarding buying leasehold. Not everyone has a choice, clearly the OP didn’t.

Nelly. There is NO point in worrying. Worrying won’t change a thing. You’ve just bought it, enjoying having your own home. IF you (and lots of other people) end up in negative equity you’ll just ride it out like people have in the past. Don’t spoil today worrying about what the future might never bring 💐

Inflation will win eventually. You may just have to wait a bit longer before you can sell but at least your have your own home to live in in the meanwhile.

Nelly, I'm guessing you like to fret over stuff!
Lots of people think we're due a slump, and lots of people are saying "buy quick, the prices will shoot up once Brexit is sorted one way or t'other".
If your monthly payments are £800, they'll be £800 regardless of the value of your house. The only things that could cause trouble, are

1. if you want to move (so don't, just wait till it all picks up)
2. if interest rates shoot up (they're not likely too)
3. if you lose jobs and can't afford the £800

There are a lot of leasehold properties where I live (not London) and it's not stopped it from being a property hotspot. Apart from my current house, all the houses I've owned have been leasehold and that hasn't stopped my house value going up or prevented me from selling easily. Leasehold or freehold - a good property in a good area will never be a liability.

Enjoy your new home - it is the best feeling knowing it is all yours. You have made the right decision to buy - don't doubt yourself

If house prices crash unavoidably then your house value will be the least of your worries.
And the rest of what PeachSummer said.

No, OP, a crash doesn't mean good news for people trying to get on the ladder.

It means the whole economy will have gone down the toilet. Only people who sell large quantities of cocaine for a living will be able to afford to buy, in cash. Banks won't be lending. People won't have jobs. A house price crash won't happen in a vacuum.

Banks won't be lending. People won't have jobs. A house price crash won't happen in a vacuum.

I agree with this. We've been in our house for 17 years. In the couple of years after we bought it, the prices went crazy and shot up. Then there was a massive crash. It's worth almost £100k less than it was in 2007. Which in theory shouldn't have affected us, because we weren't in negative equity at any stage. But in reality we couldn't have sold anyway as the banks just weren't lending. Neighbours tried to sell a few times over the years but eventually gave up as there were no buyers.

In the past year, suddenly things have heated up again and houses are selling quickly but for a full ten years the only houses that sold in my immediate area were ones where the seller was desperate to get rid of it and could accept a rock bottom offer Eg where the owner had died

With regards to leaseholds, in some areas they are pretty much standard. I worked in the mortgages for many many years so saw the legal paperwork day in and day out. In this area it is really only rural houses that were freehold, the vast majority of houses available to buy here are leasehold.

If you are looking to upsize in the future then a price crash will be in your favour. A 20% drop is bigger in monetary terms on your next purchase.

The PP who said that house prices will fluctuate is right. Property prices will never just disappear. The one thing we cant manufacture is land. There is only so much land we can build on so there will always be some sort of demand for housing.

You have bought a house which meets your family's needs if not wants. Look after it, love it, invest in it, making it a desirable home to spend time in.

We have lived through high interest and negative equity. At times it can give you a sense of being trapped even if you dont actually want to go anywhere!

Prices may go down but they do eventually go back up.

We were in negative equity for many years following the price crashes in 1987. We gritted our teeth, paid the mortgage (at 15% interest for the first couple of years)

Did interest rates stay at 15% for a couple of years?!

This happened to my friend in 1990.
She and her DH worked extra shifts and saved hard for 2 years to pay off the negative equity so that they could move. It was tough.

Obviously they paid a lot less for their next and forever home though, so it wasn't all bad.

We are about to buy a house so we have been watching the market all year.

Nothing is shifting. We saw a new build maybe 2 months ago where we were pressured because ‘it’ll soon be snapped up’. It’s still there.

That said, worrying won’t change anything. It might bounce back by the time you are looking to move anyway