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 just sit tight OP. We bought a 2bed garden flat at peak, figured we would be there 4 or 5 years. Ended up staying ten, along with the 2 dc we had during that time. The second flats on our street started selling for what we needed to sell for, we got the ball rolling. Sold within a couple of days.

Our new home was very reasonably priced but we have no plans to move. And if there is a drop, we will just stay put longer again.

But you bought a leasehold!? What were you thinking?

Not that simple though is it. I grew up in Sheffield where every house is leasehold - all are or used to be part of the Devonshire estate (Chatsworth). Some places it's just normal. My parents have lived in that house 30 years and still pay about£20pa ground rent

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

Don't know about this precise figure but interests rates were above 10% for a four-year period in the late 80s/early 90s.

This wasn't even against the background of a massive downturn. I'm just about old enough to remember it and it caused widespread shitness and misery.

Famous last words but (i) I expect a UK government would let this happen again because it would be politically unspeakable and (ii) in any event the 80s/90s situation, looking back, was a bona fide bubble, whereas high house prices now are simply a question of demand and supply. Successive governments have controlled the number of new houses being built deliberately to engender this situation.

Even if you look at the credit crunch period, which was in broad economic terms much worse than anything that happened in the 90s, in most places house prices did not crash. Some recent buyers with small deposits ended up in neg eq, but they weren't very many.

Where did you buy?? I've got an end of terrace 3 bed, freehold for 250k in the south east. 400k seems absolutely ridiculous!

So much misinformation here...

Leaseholds are very common in certain areas, and as long as the remaining term is more than 80 years there really is no issue in mortgaging or selling. Leasehold properties will generally not restrict granting a lease (but obviously check your lease).

I referred to our 15% mortgage in 1987. Blame the late hour. That particular property was actually bought in 1989.

I have attached a chart showing the Bankmof England base rates from then until now so you can see how high they were you need to add between 1 and 2% to these numbers to get the mortgage rates. I was very aware of rates as in addition to having a new mortgage myself I was a building society manager.

One day during these volatile and expensive times (September 1992) I went house hunting with my best mate who was selling his flat and looking to buy a house. Over the course of 24 hours the mortgage interest rates went from 10% to 12%, then up to 15% and then back to 10%. At which point BM said said ‘screw this’, put his money in a high interest account and went travelling for 6 months!

And there is now Fleasehold which buyers need to be aware of, just another way to get as much money out of house buyers as possible

I had a leasehold house for 10 years. The ground rent was still £16 a year when I sold it.

Also, if your house reduces from 450,000 to 300,000 it isn't anything to panic about as long as you can continue to pay the mortgage. When you want to sell and get a more expensive house it will also have got cheaper. For example, it may have been 700,00 when you bought yours and is now 450,000. So now you only need to find an extra 150,000 whereas if prices had stayed the same you would have needed to borrow an extra 250,000. This happened to me and it worked out well for me.

I also think a full on crash is unlikely as people will have to use their homes to pay for care - the govt has that incentive to shore up the market

Honestly, I have read some bonkers stuff on here but ^^ though- the government will not bail out homeowners so that they can pay for their care!

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

Why on earth would you pay 400k for something you don't even own 🙈

Leasehold is very normal, in lots of areas it's pretty much the only option!

Don't worry about house prices, worrying won't help you or house prices

It's firstly a home, so put some tlc into that home. Small rooms can be made cosy, and for storage ideas and clever use of small spaces look in an ikea

why in earth would you pay 400k for something you don’t even own.

www.rightmove.co.uk/property-for-sale/property-80460026.html

Let me draw your attention to this 32 million pound flat in Knightsbridge. It’s leasehold as just is about every flat in the country as well as many houses. Perhaps you could give the billionaires considering buying this property the benefit of your financial expertise?

That's a nice pad.

Money can't buy taste, apparently...

We bought our first home at the height of the last crash (Northern Rock collapsed at the same time). We only paid 87k for it, it was then valued at 60k. We continued living in it until a couple of years ago and it's now worth 160k +. These things do happen but it's not the end of the world if they do.

I worry sometimes too.

We bought our first house (2 bed terrace) for £220K two years ago (south) and now similar houses are selling for around £210K and our neighbors house that is slightly bigger than ours has been on the market since November with no interest.

Our plan was to stay for a few years, build up some equity and savings and then ‘trade up’ but if prices crash too far that scuppers our plans .

200years seems a very short lease. Won't that be hard to sell on?

Eh? 200 years ago George 1st was on the throne and the average house price for a grand estate was a few thousand pounds.

A 200 year lease is not hard to sell, its 5/6 familial generations.

It's only when it gets below 80 do mortgage lenders start dropping out.

As someone that worries about just about anything constantly, I’ve had to learn how to keep it under control.

My best advice to you would be to look at the elements within your control and act on them. Then accept what you can’t control and try not to worry.

You can’t go back in time and not buy the house and you can’t control the housing market.

But you can try and overpay your mortgage whenever possible to improve your loan to value and make negative equity less likely. You can try and start a savings plan to help with the cost of moving in future.

You can also make sure you keep the property in great condition and therefore minimise the chance of greater outlay in the future (drains and guttering as an example).

If you definitely want to move in future you can make sure that decorative choices aren’t too out there or personal, to try to appeal to a broader market.

Possibly also look at extending etc. that would make it larger for the long term.

Beyond that enjoy living there. It should be your home first and foremost. As easy to say as it is, worrying won’t solve anything and just make you miserable.

When we first bought in the 90s, prices were just beginning to rise after the last great crash, and we had friends in negative equity, which was grim for them. You're right to be worried - but what else can you do? You've made the right choice for you at the time. No one knows what will happen, and in the meantime you have to live.

I'm personally hoping they drop significantly I've got to buy h out of the house and the lower the value the more likely his public sector pension is worth more than the share of the equity, oh and because I don't completely hate him, he'll be able to buy something decent, prices have doubled in 5 years here, admittedly from a lower starting point