To sell my house right now and then wait to buy?

[peachgreen]

I'm in an unusual situation. I currently rent out my own house and live in a (low-cost) rental property. I'm now in the position where I want to sell my house and relocate from Northern Ireland to England, buying a new property over there. I'm not in any great rush to do this, but my tenant is moving out in October so now is a good time to put it on the market.

With house prices going the way they are, my instinct is to sell my current property asap, stay in my rental for six months or so (putting the money into Premium Bonds/an ISA?), and then buy in England once it looks like prices have reached a low point. Due to the difference in house prices between NI and England, I won't be a cash buyer, but I will have around a 50% deposit.

Normally I would baulk at the idea of sitting on that much cash rather than having it invested in property, but it feels reasonable at this point to assume that prices are likely to go down rather than increase providing I'm ready to move as soon as it looks like they could be going up again – which I will be.

Tell it to me straight, AIBU (but gently, please): is this absolute madness?

Normally I would baulk at the idea of sitting on that much cash rather than having it invested in property,

did you know there are other asset classes than property?

YABU

I think it’s not inherently unreasonable but:

• You are incurring rental costs while you wait.
• If the market does dip, it might take longer than 6 months, potentially a lot longer.
• Depending on where you’re going, prices may not fall significantly.
• You are putting up with inconvenience for a fairly uncertain outcome. It’s about your life after all, not just about making a good investment.

I don't really understand what you mean there @SavoirFlair or why I'm being unreasonable, and I am genuinely asking! I realise I could invest it in other assets but given I want to buy a new property asap it seems unwise to tie the money up?

@Deutschman The rental property I'm in is owned by friends and is nicer than anything I could afford on my own, haha, so no real inconvenience there – in fact it's probably easier, and it will certainly make the process of buying less painful as I'll be chain-free. But you are right about the possibility that prices might not dip. I guess I just need to keep an eye on them and see what happens.

So why “baulk” at the idea of having the cash around and available for this purchase? I don’t get the fuss here.

my AIBU was around the whole “aaargh there’s an estate nearby, my colonisation process of buying into rising London prices will be affected, waaah”

@SavoirFlair I've just always worked under the assumption that having your money safely in an asset which (under normal circumstances) will appreciate faster than any interest rate is better than being cash-rich so this would be step away from the norm for me.

I'm not sure what the rest of your post is about – have you got me confused with someone else? I'm not buying in London and I didn't mention anything about an estate?!

You’ve had some odd replies to this question! If you are intending to buy then of course it would be daft to put your money into illiquid assets. Do bear in mind though, that only £85,000 is guaranteed by The Financial Services Compensation scheme if the bank/savings company goes bust, so you might need to spread the money around (it will protect a higher amount for 6 months, but it could take you longer than that).
As for house prices, in the perfect financial storm we are having just now, I wouldn’t want to bet on what will happen. Good luck.

Thank you @Marigoldandivy, that’s a very good point! I think my best option is just to keep an eye on things and buy as soon as somewhere I like comes up…

I get what you’re saying OP but it’s a very risky strategy - the big drop predicted might not happen. Depends on where you buy too. I wouldn’t wait personally.

Wouldn't you have to pay capital gains tax if you sell the rental?

Out as much if the money in premium bonds, the rest in a high interest account

You're not 'investing in property', you're buying a home.

We still have a shortage of housing in the country. Sellers are very reluctant to allow prices to drop - most people take a 'I know what my house is worth' attitude.

Why do you think prices are going to drop? Because interest rates are going up to a level that's low by historic standards? No. Unless you have a lot of forced sellers then that won't happen. The labour market is still very tight.

Picking the bottom of any market is a fool's game.

Money can disappear too. I would buy straight away. Nobody knows what is going to happen. If you are buying to live in for a few years do not wait.

Risky. Depends where in England. Most places still rising, just the ridiculous over-asking offers have gone. And waiting means you are gambling on a truly hideous mortgage rate, which in turn will impact your affordability, so any “dip” won’t necessarily help you anyway.

I'm in a similar position OP. I've decided to continue looking for a purchase even though it may mean that if I sat it out, I'd buy cheaper. My main reason being is that any drop in prices would likely be lost in that interest rates are likely higher. I'd rather get a mortgage sorted now than have to worry about what I'll be faced with if I wait.

Quite possibly I'll be buying a house that will be worth 10% less next year but as long as you can afford the mortgage payments and aren't rushing to move again, then you should be fine.

Given your very specific circumstances, I think this is definitely worth considering and something I would personally pursue.

If nothing else, no chain when you come to buy is a lot less stressful than relying on the buyer you go with.

Cash in the bank is good - as PP said, make sure it is spread across different banking families if it is more than 85k. Keep it in cash for the flexibility it gives.

Property prices are more likely to fall than rise, so you should be able to get more for your money. I wouldn’t recommend others sell a property that live in with a view to buying something at a lower price, but that’s not your situation.

Go for it.

You’re losing money while renting, just buy the new house.

That sounds sensible to me.

We sold at the top of the market 2005, then rented for 2 years, the market crashed massively in 2006.
When we did buy we did incredibly well, it was one of the best financial moves we ever made.

Thanks everyone, very useful advice and lots to think about. I think I’m going to sell now and then start looking with a view to buying as soon as the right property comes up, rather than worrying about any kind of arbitrary measure – providing, of course, I can get a mortgage...!

It’s a very unusual situation to be in and I just want to make sure I’m doing the best that I can, mostly for my daughter – the reason I’m in this position is because I received a death in service payment when my husband died and so I very much see the money as being his final gift to her, so it’s important to me that I use it wisely.

It's a bit of a risk, but all you lose is the rental income and whilst there's no guarantee that prices will drop drastically they are unlikely to go up. The main risk is whether you get a good price selling now.

The houses are so much nicer in Northern Ireland...but anyway yes sit on your cash til the prices start dropping which will start next quarter I reckon

The £85k doesn't apply to money from a house sale, I think you're covered for £1.5m up to a certain amount of time