Mark Carney Brexit house price warning

[BlueKittens]

Is now a really bad time to sell/buy a house?

We’ve recently put our house on the market to move to a larger house in the same area. Basically because I’m unexpectedly pregnant with our second child. We could hang on in our current home but we’d be a bit squashed because DH works from home. We have seen a great property nearby which we’d need to take out a slightly bigger mortgage to buy (but we have good LTV). We live in one of the fastest moving housing markets in the country (comparatively- it feels quite slow recently!). House prices are high. House has been on over a week and have had 9 viewings. No offers yet but have second viewings booked in.

Thoughts please! I don’t mind if the comments are directly related to our situation or just general chit chat around Brexit and house prices.

Here is another recent review ....
www.ft.com/content/5f4bd650-b737-11e8-bbc3-ccd7de085ffe

Lifechanger - how old are your children. When is the latest that you need to be in catchment for secondaries?
How would you feel if your children went to current local secondary?

Separate out the issues school vs house vs location - see where that thinking takes you.

Age old issue of bigger size in cheap area vs smaller better quality area - financial trade off only you can make that call on the property.

@AnalyticalChick - you think a huge price crash in housing would be isolated to housing? You don't think that such a drop would come with huge job losses and a deep recession? Anyone hoping for these kind of drops are either naive or selfish.

The 35% drop is a stress test anyway.

A 35% price drop would see my home drop by about £100k. Firstly, we wouldn't sell - recent FTB in London. Secondly, any new FTB would almost certainly need a significant deposit as banks will be reluctant to lend and affordability tests will be much more rigorous. So FTB still need hefty deposits, there'll be fewer places to buy, issues with job security and banks restricting lending. Only those with cash to buy will be rubbing their hands in glee.

@lifechangesforever we are in a similar situation- in a period detached house with lovely features, double garage, decent garden etc. Area is ok and schools fine but there are better areas nearby.

However, it doesn’t suit us as well with a baby as it did a couple- could really do with a kitchen/diner, utility and downstairs wc. Really, “new house” features. We could do some modifications but that would change the character of the house, wouldn’t tick all the boxes and from talking to estate agents the outlay wouldn’t correspond to a rise in value.

Been looking around at “next step” houses but it’s a super slow market and there’s very little to choose from that isn’t hideously overpriced! So we have a choice to stay and do nothing, do the modifications or keep looking. I think we’ll wait it out and see what happens.

@kirinm Everyone has different views on it because we are all looking at it from different perspectives. What might be good for some people might be bad for others, and vice versa. People here are putting their own spin and interpretation on the story, depending where their interests lie.

She's only 9 weeks old so we've got a good while before thinking about high schools fortunately!!

If I could pick up our house and take it with me I would.. it does need fully re-plastering, rendering, new doors & windows and cosmetic updates. I want the old house outside but completely modern inside (not too much to ask!). We have already had a new roof put on that cost us 10k.

I think we will stay for now and spend some money on what will make us happy with staying. We can always review when it's time for high school, who knows what will happen in 11 years time.

@Cottipus ours also isn't great with a baby! It's all on one level except the bathroom and spare bedroom, which are right at the opposite end of the house from the living room & kitchen. With a baby & 2 dogs, I can't leave her unattended whilst I go up to the bathroom etc. We do at least have a downstairs WC.

@lifechangesforever if you can add value with improvements I think it’s a no brainer!

We’ve also done a new roof, renovated central heating, landscaped garden etc. Valuations from estate agents suggest we’d get back what we spent so far but there’s very much a ceiling. And there’s so much to do- we’ve replastered some of the house but it’s a massive job to do the rest. I saw a very shiny luxury show home the other week and loved the idea of moving in and having no work to do- but it was also significantly more expensive than ours!

Thank you for the replies everyone! Need to have a serious think tonight

@AnalyticalChick When was the last major house price crash that didn't come with a recession?

@Cottipus we really are in the same situation.. all I keep looking at are shiny new builds with their straight walls and simple gardens but they're so much more expensive and I know that 10 years down the line that we'll lose so much money on one. I also know friends that have have countless problems with the quality of builds.

Ours has a ceiling too and to be honest, I think we've pretty much hit it with what the agent said yesterday and looking at comparable properties in the area. I don't mind spending the money and potentially not getting it back if I know that we're going to commit to staying.

I am known for my itchy feet though and we've been here 3 years now which is the longest I've stayed anywhere. Got to think with my head this time though.

@kirinm When was the last recession that did not lead to an economic boom? Recessions are absolutely necessary to keep the economy healthy.

Analytical

You are missing the point. House price collapse will not happen on its own without other impacts on the economy which will negatively affect almost everyone.

Any subsequent boom will just see house prices (and other asset classes) rise again

@10degreestostarboard I am not missing the point. The housing market, like everything else in the economy, goes in cycles, which always ends in bust. This time will be no different to every other time in history. If you think this time will be different, you are going to be sorely disappointed.

@AnalyticalChick

Your lack of care or interest in the human damage a recession would cause all so you could buy a property is pretty crass. Many families struggle to survive recessions. You might get your cheap (won't be cheap) house but at what expense?

Analytical

You are right - boom and bust goes on

But if you think massive overnight house price drops will benefit anyone (apart from those who have the foresight and fortune to have loads of liquid cash in hand to pick up the scraps) you are mistaken

Those who own outright will not move. Those with mortgages will not move or will default. Those not on the housing ladder will get frozen out by strict lending criteria and much higher LTV deposit requirements. That ‘cheap’ house will look in reach but in reality anyone needing a mortgage will be just as challenged, just in a different way.

Just to reiterate that the 35% drop was not a prediction. The BofE have been running stress tests on banks for the impact of various scenarios post Brexit. The 35% drop was the worst hypothetical case they chose to test, that is all and that is all Carney said.

Anyone who runs stress tests as part of their job knows that you always pick an extreme example at the highest level. And anyway he confirmed that the banks can all stand that drop - which is all the hypothetical test was for. Trying to draw any other conclusions from it is irrelevant.

I do think the press are guilty of some wilful doom-mongering.

@10degreestostarboard I do think it is wise to try to time purchase or sale optimally according to the market. I realise it is not always possible, but if someone manages to do it right, kudos on them - they should reap the rewards of their good sense.

@kirinm I care about all the first time buyers who have been priced out of the market by the huge gains owners have experienced in recent years. It is about time they got more affordable prices after suffering all these years.

@kirinm Owners loved it when prices rose by 35% and didn't complain about their gains at the expense of non-owners over the last few years. They didn't care that more and more first time buyers were being priced out of the market. Owners cannot claim now a monopoly on sympathy, having not cared about the suffering of non-owners.

These posts remind me of the stuff people posted (may still be for all I know) on Housepricecrash.com.

@AnalyticalChick I bought at the age of 38 so am fully aware of how hard it is to buy but I'm not stupid enough to think we can have a huge crash with zero other consequences. What happened after 2008? Banks restricted lending other than to buy-to-let's and those with big deposits. You think that won't happen again?

I live in a typical first time buyers flat. I don't think anyone other than a FTB would look to buy it other than a BTL landlord. If I am in negative equity - I'm not and probably can withstand a crash and not because I've benefited from price increases as I bought at the peak - I'm not going to be selling. Which flats / houses are FTB going to be buying? And how will they find the deposits and pass the affordability tests that they've not been able to pass to date? Whilst still paying huge rents?

We've just remortgaged and have had to provide a lot more evidence than we did when we bought the flat 2 years ago. And we already are on the ladder. It isn't suddenly going to become easy to buy property.

@kirinm If prices come down, first time buyers will not need to shackle themselves to such enormous mortgages. Prices have got completely out of hand, and they need a correction to bring some sanity back to the market.

It’s total bullshit.

Interest rates will be normalised. Mortgage rates will return to previous levels. House prices will correct.

Mark Carney will blame it on something outside his area of responsibility.

The reality is that he caused it.

Of course brexit will never happen. Big business needs the never ending supply of cheap uncomplaining labour.

So the ensuing fudge will be just enough to blame anything and everything on but not enough to make any difference.

We will rejoin after a few years.

If it’s not imploded under a mountain of debt, hubris and butter.

@Bluelady said what I was coming on to say. That, around 10 years or more ago, the "HousePriceCrash" forum was predicting huge falls in property prices. Those people who chose not to buy then are now moaning that prices have gone up hugely and so now they may never be able to get on the ladder.
A house is a place to live first and above all, that should be your main reason for purchasing. Trying to time your entry/exit to the market is unlikely to work unless you get very lucky. Be prepared for prices to go up and down.
Don't buy a new build if you only have a small deposit as these often go down in value leaving you in negative equity. This is what has screwed many first time buyers. If you are worried about interest rate rises, fix your mortgage rate for as long as you can.