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.

@sparklewater 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

I'm not sure I quite understand your logic. What's the risk in waiting for 18 months? That house prices may rise in the midst of a recession? or that an 8 - 15% drop may not materialise?

If it's the latter, then you know the probability of house prices rising tends to 0 and therefore, you don't really have a downside vs. the upside of reducing 15% off the biggest loan you'll take.

Your situation doesn't sound a million miles off mine SparkleWater. Whilst I completely agree that banks etc are preparing for a shitstorm, I don't think that a blanket "don't buy" is correct, especially for current homeowners

Our mortgage payment increase will be about £200 - but moving to a much more economical to run, lower maintenance house means that this will offset and we'll actually only be spending £100 or so more.

Either way we're exposed to the property market, so the extra risk is only really in the difference between the two properties (both value change and difference in market performance). Hard to know which way that will swing - on paper our city centre place is likely safer but it's also more FTB couple friendly than the new house which might mean it takes a bigger hit. And zero outside space which is becoming more of an issue

My take for us was that we either go NOW before it's hit the values either way and whilst I can still easily access cheap mortgages, or we stay until this is all over. And we aren't up for another X years with 4 of us in under 100 sqm!

[quote thequantofmontecarlo]**@sparklewater* 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*

I'm not sure I quite understand your logic. What's the risk in waiting for 18 months? That house prices may rise in the midst of a recession? or that an 8 - 15% drop may not materialise?

If it's the latter, then you know the probability of house prices rising tends to 0 and therefore, you don't really have a downside vs. the upside of reducing 15% off the biggest loan you'll take.[/quote]
I know, I'm confused too!

But waiting for 18 months has various other ramifications which will affect the family, not financial.

I think my sticking point is that we already have most of that loan on the house we currently have, so it won't be a huge amount more - 100k at the absolute most.

I still think we're doing the right thing, I'm just nervous about it!

Wages are shrinking at the fastest pace in six years and hours worked have fallen at the steepest rate since records began, the latest official figures show. An 8 - 15% drop is wishful thinking at best.

Only a complete fool would buy now.

@StatisticallyChallenged

Your situation doesn't sound a million miles off mine SparkleWater. Whilst I completely agree that banks etc are preparing for a shitstorm, I don't think that a blanket "don't buy" is correct, especially for current homeowners

Our mortgage payment increase will be about £200 - but moving to a much more economical to run, lower maintenance house means that this will offset and we'll actually only be spending £100 or so more.

Either way we're exposed to the property market, so the extra risk is only really in the difference between the two properties (both value change and difference in market performance). Hard to know which way that will swing - on paper our city centre place is likely safer but it's also more FTB couple friendly than the new house which might mean it takes a bigger hit. And zero outside space which is becoming more of an issue

My take for us was that we either go NOW before it's hit the values either way and whilst I can still easily access cheap mortgages, or we stay until this is all over. And we aren't up for another X years with 4 of us in under 100 sqm!

This is very reassuring to hear!

Agree that as we're already 'playing the property game', a relatively small increase in cost (and I know it's all relative) is well worth the positive benefit of an improved living situation.

Only a complete fool would buy now.

Only a complete fool would try to condense the complex purchasing decisions of millions of households with different risks and rewards down to a single buy/don't buy judgement.

[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]
Ah look, Mystic Meg!

@StatisticallyChallenged

Your situation doesn't sound a million miles off mine SparkleWater. Whilst I completely agree that banks etc are preparing for a shitstorm, I don't think that a blanket "don't buy" is correct, especially for current homeowners

Our mortgage payment increase will be about £200 - but moving to a much more economical to run, lower maintenance house means that this will offset and we'll actually only be spending £100 or so more.

Either way we're exposed to the property market, so the extra risk is only really in the difference between the two properties (both value change and difference in market performance). Hard to know which way that will swing - on paper our city centre place is likely safer but it's also more FTB couple friendly than the new house which might mean it takes a bigger hit. And zero outside space which is becoming more of an issue

My take for us was that we either go NOW before it's hit the values either way and whilst I can still easily access cheap mortgages, or we stay until this is all over. And we aren't up for another X years with 4 of us in under 100 sqm!

Hmm. Not sure I agree. Differing swing across property prices aside, if prices fell uniformly across the property you're buying and selling, you'll still be in a better position.

Imagine you own a house valued today at £200k and you have 50% equity (100k). You want to buy a £400k house and you're going to use your £100k from the sale of your current house to get a 25% equity stake in the new house (mortgage amount = £300k).

If prices fell evenly across both properties by 10%, then your current house is now worth £180k (your equity = £80k) and the house you want to buy is worth £360k. You will now only be able to get a 22% stake (£80k equity) at this new valuation but your mortgage amount has now dropped to £280k reducing the amount you need to borrow by 7% reducing your monthly payment, the amount of interest you pay on your house etc.

@thequantofmontecarlo and @BlueLagoona

This is a very interesting thread. It's obvious why you feel it's unwise timing for those buying with a mortgage - and it makes sense. I agree that London house prices may go into negative equity. Not sure about outside London though because property prices are more reasonable outside London sometimes.

Just curious what you both felt about those buying outright? Lots of people are selling atm due to stamp duty holiday in order to release equity and downsize.

It's the absolute conviction that come from a couple of posters which is puzzling.

It's not "I think this may happen" or "the analysis I have done indicates this might be the possible outcome" or "this looks a resaonable possibility over the next 12 - 24 months."

But absolute certainty! This is guaranteed. Any other opinion is completely delusional.

Predicting future house prices is notoriously difficult, and everyone is just guessing. Sometimes guessing based on very plausible research, but a guess nonetheless.

@thequantofmontecarlo

Your numbers are wildly off for us as the differential in value is not very big at all. Actually most of the extra borrowing is due to the costs of moving which won't change and overall we're looking at going from 40% to 50% LTV roughly. Many people who are moving are not borrowing massive additional amounts but are looking for a different home - families moving out of cities, for example. Not every move is about a massive step up the ladder. Not every decision boils down to the investment value. The relatively small potential extra loss is more than offset by the improved quality of life.

But even if our numbers were as per your example, that still would not necessarily make staying put the right choice when a market fall might impact not only the price but the ability to sell. Would a (potential) 7% fall in mortgage payments be worth staying in the wrong home for years? For many people the answer to that is no. It is for us.

It's also far from guaranteed that prices will fall - especially at regional or area specific levels. An overall fall is likely (although not guaranteed - there is not a zero probability of a stagnation/rise, especially locally)

@ChocoTrio Just curious what you both felt about those buying outright?
Great question! If you're downsizing and buying outright, this may be the only scenario where I'd recommend a "buy".

For example, you're selling a £500k house and looking to buy a £100k house banking £400k in equity. If house prices fell uniformly by 10%, then your house is now valued at £450k and the house you plan on buying at £90k, reducing your bankable equity component to £360k (10% reduction)

@sunshinewhereareyou Ah look, Mystic Meg! Well it may look like magic/crystal ball etc. to some as our education system isn't very good at teaching most people economics and maths.

@Mildura It's the absolute conviction that come from a couple of posters which is puzzling.
You've had folks who've spent their careers modelling financial outcomes working at the largest banks in the world telling you that a deep recession will have an impact on house prices (which is just plain common sense really) and you think we're holding misguided convictions?

Houses selling within a day in my village. And these are mostly over £500k as leafy Berkshire.

We desperately want to move from 2 to 3 bed but cant afford it even with the stamp duty drop.

@thequantofmontecarlo - the key message here is that life is complex.

It's not just about making money on the property but on whether or not your kids need to register at a new school next year, whether or not you're separating from your partner and having to live together for another 18months might just be too much

I.e. the reason for the move often dictates why/when people move....hence people moving for reasons other than a nice pad are nervous.

It's baffling to me that prices would be 'shooting up' anywhere in this current climate. Just seems like greedy sellers. And just because a house moves quickly to STC doesn't mean the sellers got asking price...

That said, I do find the whole 'don't buy now' argument strange. Yes, if you were looking to purchase property in the £1m mark, it probably wouldn't be wise to progress, unless you were essentially buying your forever home for the next 10-15 yrs. Not everyone is in this boat. And realistically we all know that it's the pricier properties that are going to be hit hardest.

Somebody in this thread has mentioned purchasing a 1 bed flat in London for circa £150k... I mean, realistically, how much further do you think a 1 bed flat, costing that in London, will drop further? And furthermore, where are these mystical properties which appear to have alluded me??? Properties priced that low imo come with some sort of a catch. They either required extensive work which will cost £££, have an issue with the lease, or are located on the outskirts of London.

I certainly would not be waiting around for another 18 months to see if I can get a further 10% knocked off (unlikely) a £150k London flat. If there were habitable flats available to purchase in London for that price, I'd be snapping them up!

@StatisticallyChallenged

Not every decision boils down to the investment value.

Every decision shouldn't but it might make sense to run the numbers before making the biggest financial commitment most people make in their lives at a time of one of the greatest economic crises in the last 300 years.

I understand the emotional arguments but I guess I'm one of those people who's willing to defer my emotions for another 12 - 18 months for the sake of financial stability.

e.g. in our case - we moved from abroad so dont have a property in the UK so 100k up or down does make a difference. But at the same time - who knows who has a job in 18 months time, but my kid will need to enrol in a school next year so there's is a balance between staying in our two bed rental without a garden in an area without schools or buying with 50% LTV now - in a nice area with good schools where we plan to stay for a while and just deal with the house prices.

Now in this scenario I personally tend to feel nervous and not knowing what to do - i.e. any price increases will price us out of areas with good schools i.e. that severely impacts my kid's future, but year waiting and seeing the price drops could potentially free up some money.

But as always econ/finance comes up against behavioural econ and people's lives

and you think we're holding misguided convictions?

I don't think I've ever said that, have I?

I've dealt with loads of City analysts, fund managers, finance directors etc etc.

What I'm trying to get across is that it is impossible to be quite so certain as you are.

As I mentioned yesterday, there isn't one homogeneous housing market. More like there are thousands of slightly separate markets that each behave a little differently, depending on what type of property is being discussed, exact location, transport links, local schools etc etc.

There are some very clever City people who have spent an entire career modelling/analysing the UK residential property market, yet still managed to get it wrong. The Housing market(s) does not always respond to logic and reason in the way you might expect.

We are trying to upsize now from a starter type home to hopefully a forever one.

Reasons for doing it now are that we are expecting a baby in March and dont have much room. We only bought 3 years ago with a 10% deposit and crap mortgage rate so house prices falling wouldn't benefit us at all as we would lose all our equity. I'd rather upsize now and ride out any recession somewhere comfortable for our family. We are both public sector so hopefully secure (touches massive plank of wood) jobs.

We think it's a good time for us and dont really care if prices crash in the short term as it would be worse for them to crash while we are still in our current house.

Oh and because we have a bigger deposit and access to better rates this time around, our monthly costs will be roughly the same as they are now but in a bigger house.

[quote Greenhats10]@thequantofmontecarlo - the key message here is that life is complex.

It's not just about making money on the property but on whether or not your kids need to register at a new school next year, whether or not you're separating from your partner and having to live together for another 18months might just be too much

I.e. the reason for the move often dictates why/when people move....hence people moving for reasons other than a nice pad are nervous.[/quote]
I agree. And this is exactly why thinking "falling house prices will make the market completely freeze up" is a fallacy.

@thequantofmontecarlo - these are not emotions but life.....i.e. can you defer life in order to potentially gain more cash

And this is exactly why thinking "falling house prices will make the market completely freeze up" is a fallacy

It won't completely freeze up, but it is likely that a fewer number of homes will be sold.

That's just common sense, and anyone who thinks otherwise is deluded

@Mildura

There are some very clever City people who have spent an entire career modelling/analysing the UK residential property market, yet still managed to get it wrong
Really? Who got it wrong? Show me some evidence please. Housing is the one of the slowest markets and as such, it's easier to model. The last house price crash in 2009 was accurately modelled along with the "boom" of 2013/2014, impact of interest rates etc.

Not every move is about a massive step up the ladder. Not every decision boils down to the investment value. The relatively small potential extra loss is more than offset by the improved quality of life.

Agree with this 100%. A concept which appears to be alien to a fair few MN'ers.