Are prices shooting up where you are?

[Focusanddetermination]

Just that really. I'm in a small Midlands town, have a high amount of activity and prices shooting up in the past few weeks even.

I thought people would be more hesitant with a looming recession, but it's almost the opposite.

SkinnyChikky are you looking new, used? Buy outright, lease, finance? Probably makes a fair difference

Used cash buyer ideally no more than £10k. Wondering if in a few months a load of PCP defaults are going to be flooding the market.

But for those of us looking at one beds in London circa £130-160,000 , what do you think, @thequantofmontecarlo?

[quote thequantofmontecarlo]@Focusanddetermination

You will save upto £5k (2%) of a £250k house if you bought now during the stamp duty holiday. Or, you could wait for 12 months and save anywhere between £20k - £35k (8 - 15%). Ignore those who have bought recently as they're desperate to justify their decision and praying that they don't fall into negative equity.

The probability of house prices falling next 12 months is guaranteed. Anyone who tells you otherwise is clearly delusional. We're entering the greatest recession this country has seen in 300 years. It is easily an order of magnitude more severe than the last one that caused the average house price to fall by 15%.

No country on the planet has survived a 8+% drop in GDP without a significant drop in house prices. Ever. Banks are putting aside billions to cover impaired loans. Over 100,000 jobs have been cut thus far and the expectation is 30% of all furloughed jobs will disappear (3 million jobs).[/quote]
thequantofmontecarlo speaks sense.

@StatisticallyChallenged - absolutely agree with you!

@thequantofmontecarlo - your advice is sound and clearly a recession is coming. But your advice also needs to be front-loaded with a description of your situation i.e. in either scenario you'll be ok, the main question is how much or whether you will make a profit etc. You are young, fit and healthy and in a secure and very well paid job (and perhaps no dependents or other commitments) - i.e. you are in the minority!

But that's not the case for most other people buying or making decisions about moving. Hence a lot of people have clearly made the decision to buy even at inflated prices..... Is that wise? It probably depends on your personal circumstances. Will you be stuck with a couple of kids without any outside space for another year, has your job moved, will you still have a job - it's much cheaper to pay off a mortgage than rent for most people so if your sector is shaky then buying today is wiser than buying next year...

But it is definitely good to hear a more sober take on the housing market than is currently being experienced at least in London

@serenada I would wait till mid - late next year if possible.

@Greenhats10

But that's not the case for most other people buying or making decisions about moving. Hence a lot of people have clearly made the decision to buy even at inflated prices.....

Maybe I'm not understanding something but if someone's situation is less secure financially or due to job security, surely that's when they should be even more careful when making a significant financial commitment? Someone who's financially secure could afford to ride out negative equity by paying ridiculous interest rates etc., but most people cannot. Hence my advice to exercise caution.

[quote Greenhats10]@StatisticallyChallenged - absolutely agree with you!

@thequantofmontecarlo - your advice is sound and clearly a recession is coming. But your advice also needs to be front-loaded with a description of your situation i.e. in either scenario you'll be ok, the main question is how much or whether you will make a profit etc. You are young, fit and healthy and in a secure and very well paid job (and perhaps no dependents or other commitments) - i.e. you are in the minority!

But that's not the case for most other people buying or making decisions about moving. Hence a lot of people have clearly made the decision to buy even at inflated prices..... Is that wise? It probably depends on your personal circumstances. Will you be stuck with a couple of kids without any outside space for another year, has your job moved, will you still have a job - it's much cheaper to pay off a mortgage than rent for most people so if your sector is shaky then buying today is wiser than buying next year...

But it is definitely good to hear a more sober take on the housing market than is currently being experienced at least in London[/quote]
I also work for a bank, in credit risk, and have chosen to buy now rather than wait because:

1. I am buying a house I will be living in for years at just under 60% LTV. The mortgage is larger than I currently pay but works out the same monthly over an extra 3 year term. I will overpay and so will be paying it off early at the same time I was due to repay my current mortgage. So there won’t be much of a change for me.

1. I have investments too - so if the shit really hits the fan I have ways of meeting monthly repayments / repay early as needed.

1. I will have more family support in my new area. As I fully expect to work to the bone next year to avoid redundancy this is really going to help.

@thequantofmontecarlo - for most people mortgage repayments are lower than rent and therefore cheaper on a day to day basis. E.g. in our case - we're a family so we can't just go and rent a room or just move areas once kids are at school. But in our case - we are looking at 50LTV because at our age we'd like to owe less money rather than more.

Also, people can ride out negative equity simply by not moving. Hence as @StatisticallyChallenged pointed out - its probably wise to buy something that works in the long term.

But I absolutely agree that in your circumstances waiting it good. In fact for anyone young/single/no commitments waiting is good. But for everyone else - doesn't it really depend on who you are and what your aim is?

@GrumpyHoonMain Couldn't you have deferred the move to next year? I'm sure given your background, you would have crunched the hell out of those numbers and made a call. You have the equity and the assets to ride out the storm.

@Greenhats10 people can ride out negative equity simply by not moving

You mean by reverting to the standard variable rate? If you can afford it sure. But why would you want to risk putting yourself in that position in the first place? Quick calculation shows that reverting to a 4.3% SVR from a 1.7% fixed rate for a £450k mortgage drives up your monthly mortgage payment by 33%!

[quote thequantofmontecarlo]@GrumpyHoonMain Couldn't you have deferred the move to next year? I'm sure given your background, you would have crunched the hell out of those numbers and made a call. You have the equity and the assets to ride out the storm.

@Greenhats10 people can ride out negative equity simply by not moving

You mean by reverting to the standard variable rate? If you can afford it sure. But why would you want to risk putting yourself in that position in the first place? Quick calculation shows that reverting to a 4.3% SVR from a 1.7% fixed rate for a £450k mortgage drives up your monthly mortgage payment by 33%![/quote]
I did the number crunching - in the event of a crash my property was very likely to experience a greater fall in value as it’s small, aimed at FTB, and near a new estate full of HTB properties. For us it just made sense to move now.

If there is a property crash we may decide to upsize (or buy a couple of serviced or buy to lets) if any properties come up in our new area.

@thequantofmontecarlo - no by fixing your rate for 5 to 10 years and hope to pay as much of it off in the meantime.

But if your sector has been affected, one is planning to have kids in the next couple of years and go P/T, you need to move closer to family, need outside space etc

And again am not suggesting that you're wrong in general or for specific individual circumstances - but they are not universal as most people are not aged 28-31 with enough money to buy, but with no kids, no other committment, in secure jobs, two people working etc etc...Lots of people move as a result of circumstances - i.e.births, divorces, jobs, deaths - only sometimes is it just to get a nicer house. Can you postpone any of those for a year or two, some but not all, will those couple of years be worth getting a bit more money - maybe or maybe not

Not that I've noticed but good houses are selling same day and some decidedly crap houses are going on at about 15% over the odds, in hope of the same. I can't see the sellers market being anything but short lived, mind.

@skinnychicky I used to work in collections for a vehicle finance company.

At the moment vehicle finance companies have been offering payment breaks so there won't be as many people in arrears as there should be right now. Once this stops and more people start actually defaulting then it will take a long time for this to turn in to repossessions as it's a slow process which often requires court orders, and the courts will be backed up majorly. The cars will then end up at auction and reappear through the dealer network mostly. Whilst the increased supply at this point might drive price drops I'd say it depends more on what is happening to used car demand at that point. This is an unknown - recession means less car buying but what it may mean in reality is that fewer people buy brand new or lease, and that they shift down to used meaning it's less impacted overall.

Certainly going by the deals I am seeing coming through the lease companies they have taken an absolute pasting.

After them being closed just now you might actually get a better deal just by driving a good bargain just now. Also make sure to find out the best price if buying on finance - I was looking for mil recently and several cars were cheaper if you bought on finance, which you could pay off almost immediately.

@StatisticallyChallenged

But the money (or credit) is with new cars, isn’t that the point? That it is , in part, the credit mechanism that is keeping things high. If people buy secondhand cars for cash that does collapse everything.

Thanks @thequantofmontecarlo

Will do

@serenada I'm not sure what you are meaning? Credit is available on used cars or new. The particular examples I was looking at for MIL were a few years old and not far off the budget the pp was discussing which was why I mentioned it.

@StatisticallyChallenged

I am wrong then, apologies - I thought credit was only available on new cars. Wouldn’t the premium on new cars be where the companies make their money though?

My apologies

You'd be surprised, they whack a fair mark up on used cars too. They either take them in as part ex, acquire them directly as lease returns, or buy at auction (ex-leasers mostly)

I once really upset a car dealer - he offered a shitty part ex value on our car which was way below it was worth, but it was part of a good package overall. Last minute I pointed at the line showing the contribution the part ex car was making to the purchase ( a couple of hundred once finance cleared) and went actually, I'll just pay that in cash and keep the car to sell privately. Guy was fuming as he'd obviously banked on making a decent amount on reselling. OOPS.

Sold it a week later for £2k more

Also - finance apr is normally higher on used cars which is why (if you don't have cash to buy outright) there sometimes isn't that big a difference between the monthly payments on new vs used.

@StatisticallyChallenged

"Once this stops and more people start actually defaulting then it will take a long time for this to turn in to repossessions as it's a slow process which often requires court orders, and the courts will be backed up majorly."

Just wondering if people on the whole would want to just get rid of their cars and save the hassle of getting a CCJ against them. If they are not working they might not need the vehicle any longer. Wondering if there is a route whereby finance companies start to offer negotiated early termination fees to save the long drawn out court process.

@BlueLagoona

I work for one of the big 4.

The only contribution I can make is that where I work there is some serious shifting and prepping going on no matter how hard the powers that be try to hide it from the majority of the workforce.

People, budgets and resources are being moved ‘unusually’ even when compared to 2008. Areas that have even the vaguest connection to bad credit, collections, problems, complaints, repos, recovery...especially in relation to secured lending...are being saturated with new staff, temps, whole departments transferred. Shiny new processes, mandatory requirements and policies being eased, lots of other stuff.

ie the big banks are currently prepping for a shit storm of EPIC proportions. They know it’s coming. And that’s never going to mean good things for the economy, the housing market or anything else.

The very last thing I’d be doing right now, unless completely unavoidable, would be making a large or life changing purchase and definitely not a house.

THIS THIS THIS 10000000 TIMES THIS!!

Thanks for stating some really clear advice that you can't argue with.

This is all making me very nervous, as I can completely see where @thequantofmontecarlo and @BlueLagoona are coming from.

But I am looking to move at the moment - from a 'first step' house to a hopefully forever home. Normal reasons - kids, school, blah blah

I have a decent amount of equity and have saved a big deposit as well so will be able to put down at least 45-50% LTV. We will not be looking at moving on anytime soon. Our new mortgage payments will probably be approx £100 pcm more than they are now, which is very affordable.

So I'm thinking along the lines of @GrumpyHoonMain in that house prices can do what they want really, we will be in the home we can make our own for the next 15 years or so and that's the important thing. Waiting a year or 18 months to take advantage of a 8 - 15% drop that may not even happen is too much of a risk for us.

Wealthy property owners like to sell when prices are highest at the top of the property bubble. Owners of multiple properties are now using this opportunity to divesting themselves of assets in property before the property crash.

Unfortunately, there are plenty willing to buy. Buying at the top of the property bubble combined with reduced earnings and being stuck indefinitely in negative equity, is one of the surest ways into a lifetime of poverty.