First time buyer now or wait?

[AmyD54321]

Hello,

I’m currently renting a tiny flat in a very expensive city in the SE. I have a deposit saved and an agreement in principle, and had planned to try to buy my first home before my tenancy ends In January. Now I’m having cold feet due to the obvious uncertainty at the moment.

Obviously no one knows what will happen with property prices, but I suppose I’m in a good position where I am able to keep renting and wait it out, but it seems silly to do that when I’m now able to buy (15% deposit)

I’m new to this, so any advice would be welcome. I’d be buying somewhere for mid-term, I wouldn’t leave within 5 years, for example.
What would you do in my position? Wait to see if prices drop, or buy now?

Thank you!

We are also in this situation. We are older with kids so when we buy a house we won’t be moving again for a long time so don’t want to make a mistake!

I keep flipflopping!

I keep hearing that house prices are going to drop 15% next year. This might be right but then I’m thinking that mortgages will be even harder to get and possible need an even bigger deposit?
Everyone is trying to sell at the moment in order to upgrade while no stamp duty - but all it’s done is push prices up! I’m also worried that in 6 months when stamp duty ends there will be hardly any houses on the market as people will stay put rather than sell.
There will always be the 3 Ds - debt (but I don’t think we will see the effects of furlough ending and redundancies filtering through to people having to sell/repossessions until the very end of next year) divorce (but I’m thinking of in negative equity:low prices it will be better for one of the couple to stay in the house and death (but these houses mostly are doer uppers so not sure we want to take on a project)
So essentially I have no idea!

Have you factored in the stamp duty you will save buying now?

Have just saved nearly £10k and I'm not in London.

As someone who lived through the last recession in Ireland, where house prices dropped fifty per cent, I'd consider buying now. We were in the same position you are in, all ready to proceed, when prices started to fall. Very quickly, you couldn't get a mortgage unless you had a 40% deposit, and even then you had to jump through hoops! Banks really only wanted cash buyers. If you aren't intending to move for a while negative equity has no effect on you. But there is no right answer, you have to make your own mind up.

You’d also need to think about the logistics and how much longer you’d pay rent for and weigh that up against paying down the mortgage.

Also, while there are predictions of house prices falling by 14%, it’ll be very area dependent. Could be -30% or +10%.

I’d also say that 5 years in quite a short time in terms of property ownership. Would you be able to get sth more future-proof to suit for 10 years for example?

Agree with @JoJoSM2
you will 'lose' money by renting when you can start paying off your mortgage. They have been predicting huge falls for the past 4 years (since the brexit vote) and it is indeed very area dependent. Our area have been slowly rising by about 2% annually since then.

@JoJoSM2

You’d also need to think about the logistics and how much longer you’d pay rent for and weigh that up against paying down the mortgage.

Also, while there are predictions of house prices falling by 14%, it’ll be very area dependent. Could be -30% or +10%.

I’d also say that 5 years in quite a short time in terms of property ownership. Would you be able to get sth more future-proof to suit for 10 years for example?

This is very helpful! The rent is really what’s making me sway towards pressing ahead with buying, because my monthly mortgage payments would be significantly less than my rent, and also paying my own mortgage rather than my landlords too of course!

Agree that 5 years isn’t long, I’m used to rental properties for 2 or 3 years I suppose! I would probably stay in my purchased house for longer than 5 years, it would definitely be suitable for that.

Personally I would buy now. Don't worry about what may or may not happen or fear will stop you from achieving what you want. Don't you think you would feel more secure in your own place? Years ago I faced the same decision, I bought then went into negative equity but a year later prices rose way beyond my reach and continued to rise. Now I own my home and a holiday cottage with my dp and a rental. If I had dithered all those years ago I wouldn't be in this position now.

The market conditions that drive the housing prices over the last 30 years might not replicate in the next economic cycle so I wouldn’t assumed that price will eventually rise and increase above current level.

In term of mortgage availability, if the price goes down, you ll have a lower LTV with the same deposit. And also we should be careful drawing parallel with 2008 (like the example above in Ireland), which was a financial crisis, banks critically needed to deleverage their balance sheet so were very reluctant to lend. The current COVID induced recession is affecting directly the economy while banks remain well capitalised so there is no reason to see mortgages becoming unavailable for people with a sizeable deposit (but yes the 90-95% LTV won’t be there anymore to factor in fall). What we will see though is many losing their job and being forced to sell, especially if interest rates ramp up to a more “normal” level.

Now!

You can’t predict what’ll happen, I would buy now.

If you can afford it then go for it

I'd buy now (in fact we're moving to our forever house now, about two years ahead of when we'd earmarked to) because of the stamp duty holiday.

Prices might go down but you don't know how borrowing will change, and also if you're there for a few years it'll balance out anyway. Plus, I fear renting is going to get harder and harder in the next few years.

We're having the exact same worries... and as ftb the stamp duty break has actually removed the one advantage we had, so frustrating!

In the end we decided to keep looking because we are planning to buy a long term home, but we decided we would only go ahead if we found something special that we were really happy with... it's not worth rushing to buy something mediocre in the current market. We also stuck very firmly to our budget, because we know prices are a bit inflated and didnt want to pay over odds. I'm glad we did this as we refused to get drawn into a bidding war and still ended up having our (lower) offer accepted due to our position (ftb are a rarity atm because so many are struggling with higher deposits).

So if I were you I would keep looking, but dont hurry yourself or let the EA pressure or news get to you. Good luck

@GreenBeeSW that’s the attitude we are going with, looking and if something right comes up go for it but not in a rush to buy something just because. We can wait another 6 months.

I’d buy now if you could. 90% mortgages have just about vanished in the last few months, and 85% aren’t everywhere either. Get on the ladder, because unless your deposit is substantial you may struggle if the market drops.

What sort of property are you looking to buy OP?

If it's a relatively new / new build flat, i'd hold off.
Pretty much anything else, i'd go for it.

Absolutely go for it now!

Tough question. We've just paid way over the odds for our forever home. The stamp duty holiday has pushed prices up, and demand is high anyway. Agree prices might drop next year but it's a MIGHT. In my experience, when prices drop it puts sellers off and not much comes on the market (appreciate some people might be desperate to sell but generally speaking people will wait to sell).

If you see something you like, and you plan to be there forever / a long time, id go for it now.

If you were planning on buying somewhere to last you only 3-4 years I'd tell you to think again

Thank you everyone for the advice! Seems that the general consensus is to go for it, which is my thoughts too after reading your replies. If the right place comes up, I’ll pursue it, if it’s the right price, I’m just so keen to stop paying so much rent. I am finding fewer properties becoming available over the last few weeks, has anyone else noticed the same? I guess it depends entirely on where you are in the country!

Also, interest rates are so low right now so take advantage.

Prices MIGHT drop, which means less quality comes on, but I think what we can guarantee more is that interest rates will rise

Now, but watch your mortgage & what you agree to.