FTB - anxious about market crash

[ChimpsEatChomps]

This may be my anxiety talking but I’d really appreciate your thoughts on things please.

I’m a FTB and have a decent deposit to put into a house I’ve found in a village in Cheshire. My dad found the house, he’s a retired builder and found one that needs some work doing to it but not too much. Just putting in a garden instead of a yard, damp proofing the cellar and turning it into an office and redecorating throughout.

Once the work has been done, it should make around £30000 (based on houses that have sold recently with those changes already made). This would obviously then greatly improve my budget for the next buy.

Ok so here is where my questions come in. I was very excited about this but then my ex DH who works in finance in the City has told me that now is the worst time to buy and I’m likely going to lose my deposit and not be able to sell when I need to. For context, I’ll probably need to move again in 2-3 years which is why my dad and I focused on buying a project.

He said we’re due a crash and this teamed with Brexit means it’s the ideal time for it to happen. He recommends renting instead. The trouble with that is, rent in that village is double the cost of mortgage repayments and with much smaller properties available. It’s also the fact that the money i’d Spend on rent could be coming off my mortgage and I’ll never get it back.

Dad says ex DH is an idiot. Ex DH says dad doesn’t understand the market. I’m as anxious as they come and don’t know what to do for the best.

What do you think? Is dad right or is ex DH?

Lymm should hold its value well and is pretty rentable.

I would see it as enjoying time with your Dad, you may never get the chance to do so again as circumstances change.

I assume your Dad is local to Lymm so could also manage a rental for you.

Prices may well crash but equally they may not and this seems to me more of an opportunity than just a normal house purchase.

Just putting it out there but is your exdh jealous of your opportunity or pitting himself against your dad?

Do not think you have to worry about property prices falling in Lymm as that and surrounding areas are very popular and prices are on the rise. If property prices go down so will the next property you buy. Renting it out would be a good investment, but I believe not all mortgage companies will allow you to do that.

I would buy!

I've owned property for over 20 years and there has only been one significant downturn of around 20% but many of the rest of the years saw strong rises. I actually expected the downturn to come sold put money in bank at 5% and rented. Overall the initial investment is worth about 10 times what I put in so long term there are high rewards. The government does everything in its power generally to prop up the housing market as if it goes the whole economy goes.

Having said that now is much higher risk for another 20% correction again due to Brexit and the short term economic instability that will follow plus there's lots of tension in the global economy, trade battles, political tension. Our population could go down if people start to leave. Not convinced there will be a big rise in interest rates but you always need to cover that possibility, BoE is now expected to consider growth as well as inflation.

If you could buy for the longer term its a pretty safe bet though may fall before rising again even with the improvements. If there is a big fall it will affect everywhere - started in London last time and there are signs of decreases starting there now. Once the market starts to go bad house sales fall, that doesn't mean you can't sell but means you have to have house in perfect condition for best chance of selling and you will need to undercut the average price to stand the best chance of selling which could mean a loss. Another option is to rent out but you get clobbered on stamp duty if you then buy a second property and can't sell first within 3 years. Rental income is also taxed and could say mean you lose child benefit if it takes you into that tax bracket. But it can be a way of riding out a storm.

No-one knows for certain what will happen. We have just bought but I wouldn't be amazed if in 3 years we couldn't sell it for what we paid but we can keep it long term, we've made a lot of profit before and we love it and it works for us. What it would be worth doing is a financial analysis of what would happen to you if prices fell 0% compared to rental, 20% or increased say 10%. Look at your options in each scenario, you really need a back up plan. Also can you fix and could you afford it if mortgage payments rose or bills rose. We have gone for long-term fixed energy prices as I think there's higher risk to that too. If you are doing it purely to make money its risky over such a short and unstable economic timescale. I am not one who thinks Brexit will be the end of the world but do think its likely to cause a few years of economic difficulty which could be severe before a new normal emerges. The way Trump is acting also concerns me for global economic prospects and the last housing market crash came from the US initially.

I bought a small 1 bed in 2005 at the height of the market and then met dh who had a bigger place.
I just rented my flat out for a few years till the sale would break even (about £5k over what I bought it for). It was fine. Why are you listening to your ex? Surely he’s ex for a reason? Does he really have your best interests at heart? Most people would trust their df over an ex-dh.

There's been talk of a crash for years, we bought 2 years ago and was warned it was a bad time. You can't put your life on hold forever. I'd do it as long as it wasn't somewhere that the price had become hugely inflated in very recent years.

We've just bought our first home and plan on staying put for at least 10 years. I wouldn't buy if I knew I had to move as soon as you. Prices are heading down even though most homeowners will protest this!

As for the "rent it out" option. You may find this is not open to you. Policy is changing. The government does not want small time "accidental" landlords and are making the environment for them difficult.

If you're anxious about buying a house, imagine how anxious you'll be if you're trying to sell it (and can't if the economy tanks). I actually think now is a great time for FTBs to snap up a bargain but if you're only planning to stay there 2-3 years, I wouldn't risk it. I'd save more so you have a bigger deposit and buy somewhere you plan to live in for 10 years to ride out any dips if they happen.

I live up here too, go for it listen to your dad, enjoy the time you have together working on it. Houses aren’t stagnant here especially around that price. You’re only young and free once run with it

Lymm at that price. I agree with your Dad. You literally can't go wrong. People want that area for the schools and Cheshire East catchment for secondary grammars. Great transportation and just a lovely village too.

Buy it. Renting for 2-3 years will lose you the same amount of money over that period as this house deposit.
In the mean time you're paying money off your mortgage, also save the extra money you would have been spending on rent to top up the deposit you'll need for your next house.
No one knows what's going to happen next week let alone in 3 years time

Buy it, enjoy the time with your Dad (he won't be around forever so make the most of it). There is no real way of knowing what will happen in 3 years time. You may not even be working in the same job. You might have met the person of your dreams and decide to stay put. Stop planning too much for the future and live in the now.

If you need to move in 2/3 years then don’t buy now if you would definitely need to sell the property! Everything is too uncertain at the moment. Rent and save what you can until you are settled in a location that you can see yourself living in. OR buy as a residential now BUT check carefully that you could easily convert the mortgage to a buy to let investment. I suspect that you’ll need a lower loan to value though.

Am in a v. similar situation - just asked about this on brexit thread - but in my case I don't think I'd be able to get a mortgage in a year or two due to work situation, so decided to go ahead.

But I saw the BoE comments about 33% drop house prices and now am very worried.

If prices go down, so will the place you plan to move to, and if you are trading up, you would be better off than if prices had gone up.

Interest rates for fixes are pretty cheap at the moment. If interest rates go up in the future, or the lending climate changes due to the economy, you may find banks may decline your Mortgage application on ‘affordability’ despite house prices being lower and a mortgage being cheaper than renting. Then in a few years they may even say you are too old for 25 yr mortgage ( been there, they would only give us a 23 yr mortgage)- and as 23 yr mortgage require a bigger monthly payment, they say you can’t afford it....

"If prices go down, so will the place you plan to move to, and if you are trading up, you would be better off than if prices had gone up."

But a twenty percent drop would mean losing deposit for most people.

Buy it, renovate it, rent it out. The additional income can be used to supplement your rental elsewhere or saved for your next deposit. After 2-3years re-mortgage, you may be able to release all of your equity. By then you’d have the benefit of an uplift in property prices, especially given the anount of renovation works you’re planning to do.