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Original poster

Will house prices continue to drop? Do we sell up and rent?

37 replies

ducdo · 12/03/2009 21:45

Currently have about 30k equity in our house (house worth approx 330k) and husband is really keen to sell as believes house prices will continue to drop and thinks we should come off property ladder now and rent. Monthly mortgage payments are £1,300 and to rent will be the same but I am nervous of coming off the property ladder?! Plus have 3 young children and don't want to disrupt them. Really need others advice..

OP posts:

twoluvlykids · 12/03/2009 21:49

I think it's better to see your home as just that, your home, and not a money-making item.

Friends did this, and got badly burned, as prices climbed really sharply, and they almost lost out completely. They also had 2 rented houses put up for sale while they were living in them!

I personally wouldn't do it. 30k isn't much in the long term.

artichokes · 12/03/2009 21:50

Where do you live?

It is so hard to know. Prices may drop further but some believe we have reached the bottom and things will stabilise now. We have noticed alot more interest in buying around here. After 18 months on and off the market we went back on teh market a few weeks ago. For the first time in 18 months we were innundated with viewings and got four offers in as many days (although all were below the asking price). We accepted an offer and have had one accepted on another house and things feel like they are really moving now. However, even if this is the bottom I doubt things will shoot up any time soon and so you should not lose by coming off the ladder.

Original poster

ducdo · 12/03/2009 22:07

artichokes that is promising that things seem to have picked up where you are, where do you live? We are in Ruislip, Middlesex and I just keep hearing such mixed views on house prices .. some say they are creeping back up, some say they are still on the way down .. it's sooo confusing knowing what is the right thing to do

OP posts:

DaisyMooSteiner · 12/03/2009 22:43

I think the time to do this was a year ago or more. Prices have fallen quite sharply, and there are signs that we may be nearing the bottom. It's possible too, that prices may fall much further, but it would be a massive gamble IMHO.

LynetteScavo · 12/03/2009 22:52

If you live in the UK I would advise against enting with young children. The landlord could want there house back at any time, causing you to find another home.

This happened to us when we rented after we sold our house. We hadn't yet found a house to buy when the owners decided to return from abroad. (We thought they were happily settled there - we did check)We didnt' have enough time to buy a house, so had to rent another house meanwhile. Lots of house moves with small DC's isn't funny. And 30K equity on a house with a £1,300 mortgage isn't really that much is it?

Prices would have to drop a lot very quickly to make it worth while financially.

Bonneville · 12/03/2009 23:07

Plus you may find it very difficult , if not impossible, to sell anyway.

wombleprincess · 13/03/2009 08:04

if you dont need to move, i wouldnt at this time. its not a good time to be playing the market unless you are very confident things will go one way or another or if you dont have a lot to lose.

Beachcomber · 13/03/2009 08:12

My DH suggested that we do this about 6 months ago. I said no way was I going to uproot everybody, move house, possibly change schools, etc for the sake of cashing in on a bit of equity. Our house isn't worth anything like yours but we probably would have made about 30K too as we bought when houses were cheap round here (we are in France).

I don't regret the decision.

hippipotamiHasLostSixPounds · 13/03/2009 08:17

The thing is, if you love your home, and you want to stay there for the forseeable future, then why worry about houseprices? A house surely is a home, not a money making venture?
We bought our (little) house 11 years ago. We have seen it treble in value. Now we see it dropping in value. But we don't care. It is our home.

Plus, by the time you have sold (and you may not get £330K for it anyway) adn you have paid estate agents and sollicitors etc you won't have much left from your £30K equity.
So stay put and enjoy your house

ABetaDad · 13/03/2009 08:24

Even though houses have dropped in value 25% and may drop a further 25% that is not a certainty. What is a certainty though is that (as HHLSP says) the transaction costs would pretty much eat up all your equity anyway.

Stay put - but I guess thats easy for me to say as I don't own a house.

Simplysally · 13/03/2009 08:40

If the rent/mortgage would cost the same then I don't see the point in moving -each month you've paid off some albeit, not much, of the mortgage. With renting you have to pay the same (or more) forever and still not own anything - unless you have a shared ownership scheme.

I'd stay put personally -think of the longterm. You might need to release some equity further down the road (say university fees) which will be easier and probably cheaper to get with a re-mortgage than taking out a bank loan.

DaisyMooSteiner · 13/03/2009 10:47

Plus, what if you couldn't get a new mortgage when you wanted to buy. Unless you have a 40% deposit it's very hard to get a good deal. If you've got 30K equity now, even if house prices fall another 25% and you buy back a house that similar to your current one, you'll only have about a 12% deposit - you will really struggle to get a good deal with that.

brettgirl2 · 13/03/2009 11:00

The only issue I think is how long your mortgage deal is for. If you have less than 10% equity in your property when it comes up for renewal then you may be given no choice but to go onto the bank's standard variable rate. This is likely to put up your payments. However there is still no way I would sell unless I would be unable to make these repayments.

traceybath · 13/03/2009 11:05

I would have thought you're a bit late to do that now. We sold and moved into rented a year ago - more throught luck than judgement.

However we personally won't look at buying until next year mainly because i think prices will still come down around us and also i'm expecting another baby this summer and just can't deal with moving again.

Agree with other posters your house should be your home and not something you take massive risks with. If you like your home then i'd stay put.

Fimbo · 13/03/2009 11:08

We moved into rented for a while when we sold our house and our purchase fell through. I didn't enjoy it one bit, it never felt like my home and I was always worried about ds or dd spilling things or marking walls etc. You need to have a whole months rent for the deposit and the first months rent. We had a load of hassle on moving in day too as we didn't find out until then that the electricity was on a card meter. The letting agents didn't have the card, the landlady was sending it that day first class and when we did eventually get it, the meter was in debit! It costs a fortune for removals too, we ending up doing it twice in 6 months.

I really wouldn't do it for that sum of equity.

ChesterTown · 13/03/2009 11:09

I think you are sadly between a rock and a hard place tbh. If you sell ow, you MAY get your 30K equity - but that's a big maybe, and lots will be eaten up in fees. If you then spend about the same every month in rent, you won't be able to save, and will not have enough equity to get another mortgage, even with house price falling. Anecdotally, you need about 30% equity to get a decent mortgage rate now (as banks are factoring in about that amount in further house price falls).
If you stay put, it is very likely you will be in negative equity as IMO, prices still have a way to fall, and I suspect your 30K will be gone by the end of the year. If you do need to remortgage, chances are you will not get a good rate and will have to drop to SVR. This is fine at the moment as it is low. However, if it rises, will you be able to find the extra money each month? Interest rates are at a historic low, so what is affordable now may not be in a couple of years time.
No advice I'm afriad - it is a tough one. Just hope your DH is secure in his work - a 300K mortgage is a lot to sustain, even before you factor in the frustration of being in negative equity and a potential rise in interest rates.
I know you are not alone in facing this though - a lot of people who bought in the last few years are/will be in the same position. I wish you all the best in what you decide.

ChesterTown · 13/03/2009 11:12

apols for appalling typing

FWIW, I think the majority view is that house prices have a way to fall still - one of the broadsheets yesterday (Times or Telegraph I think), had a headline warning of falls to 55% from peak 2007 prices...

ChesterTown · 13/03/2009 11:17

Telegraph house prices to fall by further 55% link

Obviously one opinion of many. However, it is from a City Bank.

Hopefully family homes (rather than city 'apartments') will hold their value better, but trend is very much downwards still.

brettgirl2 · 13/03/2009 11:47

I'm not sure that I have too much confidence in the predictions of city banks given their recent track record. I also think that it is unlikely that interest rates will go up in the near future - yes they are at a historic low but that is for a reason.

Round here it is true though that flats have faired worse - it went from the position of there being very few, to them just swamping the market and simple demand and supply means that now people only want to buy them if they are cheaper than houses, 'executive' or not.

ChesterTown · 13/03/2009 12:02

Brettgirl - I do agree with you. Most of the Banks are still pretending it can all be fixed though. The Bank quoted in the article are suggesting it is worse than expected, which is why their voice is of interest.

As for low interest rates, I suspect they will remain low for a couple of years as an attempt to keep the money supply up. However, to do so in the long term is inf,ationary, and the govt really don't want that, so rates will need to go up. They will also need to go up to help the £ - it is going to be worth less than the Euro at this rate.

Fact it, this economic situation is pretty much uncharted territory. No-one knows for sure what will happen. Best stance is therefore to be as cautious as possible. The boom of the last 9 years or so where house prices went up by 200% in some cases was mainly financed by people increasing their debt. If prices went up by 200%, why couldn't they fall by 50%??

MrsRecycle · 13/03/2009 12:08

Ducdo I'm in ruislip and my 330k house has been on the Market since October last year. We had an offer 2 weeks after it going on the Market but they then went awol and we had to remarket it in January. Loads and loads of viewings but no offer yet. If you fancy a coffee to chat about it, I'm around most days!

brettgirl2 · 13/03/2009 15:45

That is absolutely right Chestertown. Inflation is an interesting concept though - we have had in fact had years of really high inflation (including house prices) masked by the use of the CPI. Now, using the measure of the RPI we in fact have deflation. Of course the situation in two years is impossible to predict.... However, because of the bank of england keeping the CPI low when we hit recession there was nowhere for inflation to fall, unlike previous recessions.

Round here, house prices doubled since 2000(100% increase), so 55% decrease would take them back to the same level. In 2000 interest rates were higher, so logically house prices should be lower. Of course there are modern affordability issues in terms of deposits, but you needed 10% to get a reasonable deal in 2000 anyway. In addition, wages have gone up since then (at the moment) so this will also increase prices and it is still possible to borrow more money as a multiple of salary than it was then.

I don't know about the pound, there are advantages and disadvantages to it having a low value. Expats and it being expensive to go on holiday are not particularly important ones though. We have got used to it being 'cheap' abroad - there is no logical reason why it should be. It is certainly uncharted territory however - nobody really knows what will happen.

Original poster

ducdo · 13/03/2009 16:05

Thanks to all for your replies which are very interesting and helpful. I suppose my biggest concern is if we do stay put and end up in negative equity, then we're stuck here paying a big mortgage and probably unable to move which I don't like the thought of. It feels such a big risk to take and just not sure whether it will pay off and whether the stress of renting in the meantime will be worthwhile .. where is the fairy godmother when you need one!?

OP posts:

Original poster

ducdo · 13/03/2009 16:12

another idea would be to up sticks and move to a cheaper area and reduce our big mortgage .. heard Lincolnshire is nice and can get a 4 bed detached out there for about £160k

OP posts:

LackaDAISYcal · 13/03/2009 16:16

Although house prices are falling at the minute, property is one of the safest places rto put your money as prices still rise on balance more than stocks and shares over a long period. We are in a similar position, except we are looking at breaking even at the minute so no equity at all. But, we bought this house as a family home three years ago and have young children so imagine bewing here for a very long time.

When and if we do sell in about 20 years once the kids have flown the nest property prices will have gone back up again.

I alsso think that if you can sell now in the depressed market and rent, you'll probably regret it in future.

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