Property Watchers - are house prices ever going to stabilise/fall in London?

[twoisenoughmum]

And if so, when prices are falling, are you in a better position if you want to trade up or trade down?

I have spent the best part of 4 years trying to work out the answer to this question, and this is my current feel.

Prices in London (SW suburbs anyway) are on the brink of some kind of manic rise again. How do I know this? Because I have been watching the prices of three bed semis for about 3 years now. I have never seen so many sold so quickly in that time. Every single decent property is being snapped up as soon as it goes on the market.

When properties sell that quickly, there is only one outcome, and that is that prices will shoot up.

Generally speaking, higher prices are good for those trading down and bad for those trading up.

I know that where we are (30 min commute to london) it is as cloudhopper says. There are more buyers than sellers. Prices have risen a lot in the 6 months we have been looking and houses sell straight away. This is forcing us to stretch to the very top of our budget which is quite frightening if I stop to think that surely prices can't keep going up and maybe they'll drop after we've bought. But they doesn't seem to be any sign of it here.

Well, we'll be selling ours and moving abroad in about 2 years time so you can safely assume that property will crash just before that.

Seriously, I think it really depends on the Central Bank. A lot of mortgage holders are stretched almost to their limit so if the rates go up again (and the CB has been hinting that there might be another rise) I think a slowdown is possible. I know that in many areas the market seems to be hotter than ever, but I'm old enough to remember the last property crash and the market then was at it's most frenetic just before the crash.

A low market is a good time to upgrade, although your current house will have lost value, the difference between your current house and the upgrade house will be smaller. However, it may be very difficult to sell your current house in a falling market, so you might find yourself stuck anyway unless you can afford to keep your current house and rent it out until the market improves.

Generally I would say that there may be a slowdown of the market but not a crash so to speak, unless of course interest rates continue to rise unexpectedly. It's a supply and demand thing in London though, it is still one of the best places on the planet for capital appreciation in the property market. Our house has appreciated by 7 percent in the past 8 months which is a really good return.

We are in London, in a very popular area. Our house is worth a lot (well it seems to me an awful lot, £200k more than when we bought it less than 3 years ago). But we are absolutely stony broke - impending DH redundancy, huge unpaid tax bill - and I am seriously considering selling the house and moving to a very nice 3 bed purpose built flat with big communal gardens, in the same area, indeed in the same school catchment area, where we have some lovely friends already living. We would prob have no mortgage and thus a huge weight off our minds.

Should we do this, or is it a stupid idea? I don't know what the future holds in terms of DH getting another job - what if he doesn't? - we could lose the house anyway (repossessions happen to the middle classes, too) and feel it would be better to make the choice rather than have the choice made for us, iyswim.

But would you try and hold on to your house at all costs?

I would sell it now while the market is buoyant - silly prices are being reached. Pay off the debts, put the rest in the bank and rent for a while.

It is risky, in case prices continue to go up. So I wouldn't recommend it for someone for whom all other things are equal.

But if you are facing uncertainty, then it could be a good way of shoring things up.

Watch the service charges and ground rent on a flat in a block! You could end up paying money on those which could have gone to your mortgage!

We have just moved house and the total cost, including all fees, surveys, stamp duty, and removal was almost £25k...so moving, in itself is a costly thing to do and there's nothing to show for that outlay.

Would renting your place out earn you enough to cover the mortgage on it plus profit, while you rented somewhere smaller be an option? Or extending the terms of your mortgage?

If you think you would want to buy a house again at some stage in the future, I would think you will find it harder to get back up the ladder if prices have gone up even more - I'm not in London but within an easy commute and house prices here go up by far more than salaries can keep pace with. Local people say that this area was not really affected by the last crash because it is just so popular....

I think it depends what ages your children are - if they are early teens for example and so don't need a big garden to play in and will probably move out when they are 18, then providing flat will work for you in the meantime, you may not need to buy a house again...

i don't think so immediatley, no. there are actually no family houses on two estate agents books in highgate for example, they are shifting so fast.

Prices in Brighton like London have gone silly!We are going to sell as ours has rocketed and we are always skint.We can buy a nice house 1 road away from teh poshest area but 145k less!Life is too short

Actually I am reconsidering the advice I put. I wouldn't sell a house in London for a flat, because loads of flats are being built and no houses. So it may get harder to move back into a house.

Have you thought about going onto an interest only mortgage for the interim until you have more money coming in? With that amount of equity you could always do equity withdrawal, although this is a bad idea if used recurrently. As a one off it might bail you out?

Cloudhopper - what is equity withdrawal?

Equity withdrawal is remortgaging your house for a higher amount, and cashing in some of the equity.

If your mortgage is fairly low compared to the value of the property, then you can increase the mortgage on the house and bank the money. Effectively it is just a cheaper way of borrowing money than an average loan from a bank.

I wouldn't recommend it if there is any other way, because unlike a loan from the bank, it has a very long repayment period - 25 years or whatever the remaining mortgage term is.

But if you can still comfortably afford the repayments, and don't want to sell your house to pay off debts, then it is one way of getting through a temporary tough patch to avoid moving house.

Another way of doing this is a mortgage 'holiday'. This basically means that you don't pay anything into the mortgage for an agreed period with your bank, say a year. Meanwhile interest is still accruing on the mortgage, but will add to the overall amount owed, rather than having to be paid off immediately.

If you think that your job prospects are excellent in the long term and you feel that you just need to get over a small hiccup, then it is one option. But I wouldn't do it if you don't think a quick pick up is likely.

I would add that I wouldn't recommend either of these solutions without knowing a lot more about your financial situation.

I think it could well be a good idea to talk to a financial advisor. Bear in mind that they are always trying to sell you something - but they could sketch out some scenarios for you to see if they could help.

Prices forecast to rise another 10% this year - but that f/c was madse before the latest rate rise.
If prices crash you're better trading up.

Might post on this tomorrow, want to see what news the MPC got which made them put up interest rates which we don't know about also will see whether any of the silly priced places round here sold over the weekend!(Places have gone on at 30% more than similar less than 12 months ago)

interest rate set to go up by 3/4 of a % before summer. the market will be flooded with buy-to-let properties (many many btl-etters already make up shortfalls).

there'll be an oversupply and the market will fall considerably. national debt is so high. IMO!

certainly am happy our equity in bank for the moment.

Couldn't resist looking again!I'm with dinny on this but might get back tomorrow still.

Couldn't resist looking again!I'm with dinny on this but might get back tomorrow still.

Sorry don't know how I did that!

Dinny and Skiwear - please post again on this tomorrow, if you have time? I have a feeling that prices must crash soon, too. I bought my first flat at the peak before the last crash too (1987/8ish) and I just have a feeling that its going to happen again.

So, if you had £250,000+ equity in a property worth £500,000 and your sole income was vanishing in a month (redundancy and no job to go to) and you owed £15,000 to the Inland Revenue ... would you consider down-sizing to sort out all your problems. True, you would be moving from a big but scruffy 3 bed house to a small 3 bed flat, but - no mortgage? No job?

Wouldn't it be tempting?

Shamelessly bumping for the evening crowd...

Skiwear - ooh, look forward to your post!

Twoisenough - my dh remembers the last crash v well too, he was repossessed . He is convinced this huge bubble is about to burst (he is in the housing-market business too, fwiw).

Um, if the 3-bed flat fulfilled my family's needs then I would go for mortgage-free living, definitely!

There is such a culture of borrowing with abandon in the UK... DH knows people who are paying school fees with a remortgage! Lenders have encouraged people to borrow such ridiculously huge amounts they can barely even service each month.

What does your dp think re timescales dinny?We were thinking of selling up renting for a while and then buying next year.Even a crappy house is 250 k here and they were 185 last year.I am sure there will be a flood of houses after another rate rise which shouls lower prices at some point.

We will have about 300 equity and I don't want to buy another overpriced average house.We may bank it and rent to see how things go