Six figure deposit, first time buyers, market about to crash - WWYD

[Dol4321]

We are a married couple with a 7month old baby. We rented in London for over 10 years, moving up north during the pandemic as our employers switched to working from home. We now rent a house up north near Manchester and love the area we are in.

Our only hope of ever getting on the property ladder was through saving up for the deposit whilst also paying the eye watering London rent. Neither of us have wealthy families so parents lending / inheritance was not an option and obviously the cost of living in London is crazy, hence why it has taken us a decade to get the deposit together.

Due to progression in our jobs and bonuses, we have managed to save just over £100k and between us our joint annual income is £140k.

I really appreciate just how fortunate we are to have that amount saved, and to earn what we do particularly coming from low income families and childhoods. I am also really proud of having saved what we have.

It means that we are now looking at buying a big family home with a garden, with a budget of 650k-700k. We want this to be a house we are in for 10/15 years.

We are looking at a 10% deposit of £65k-75k, with £25k for stamp duty.

The dilemma comes with the following situation.

There is a new build estate near us (Redrow built) that is really nice and extremely family friendly. Primary school being built, lots of shops and commodities. Annoyingly it is very close to to the footballer postcode (Cheshire) it is also extremely expensive especially at the minute.

Isn’t buying a new build a bit like buying a new car? At soon as you put your own key in the door the value has depreciated. And they tend not to age well. If you can afford it, and it sounds like you can, buy a period property. Also, if you can afford the funding(mortgage) even accounting for date increase, then over a 10-15 year period you can probably weather the storm. It won’t matter to you if property prices crash, unless you mean to sell. Finally, check your employment contract/terms to ensure you won’t be summoned back to the office in London. Many companies are now recognising that they need people back in the office, and you may see your career opportunities diminish if you are not present.

I doubt there will be a crash, maybe a dip or a plateau.
i know FAR more people who’ve been left behind by the market waiting for prices to come down than have ended up in negative equity.

Is this in Woodford? If so I would consider looking at a different property in a more established neighbourhood where you are more likely to be cushioned from and fluctuations in the market.

Another one that says avoid new builds. Older houses are more desirable and generally hold their value better. Also don't trust the council re. new schools. There is an estate near us with a new school but it's over subscribed as council didn't plan properly. People are driving their kids 45 mins to get to school.

There won't be a crash, or nothing significant anyway.

I would want more than a 10% deposit though and I wouldn't buy a house were the primary was being built.

The trouble with a new primary school is that it has no track record. Chances are that it will be OK, but you can't be sure.

I doubt there will be a crash, more a stagnation.

Have you got DC or are you planning for the future? My main concern would be the very high mortgage when you’re possibly going to have young DC soon, and potentially rising interest rates. Childcare will be high and depend on your income split you might not get child benefit or tax free childcare.

On your income I’d look at getting cheaper house with a 20% deposit.

Also beware developers that promise to build a new school after selling x number of houses, then simply don’t build that many!

I would usually say go ahead and buy as I don’t think the housing market will crash (although I don’t have a crystal ball, same as everyone else). I think prices may stagnate or slightly reduce but I don’t think it will be a crash.

However the specific properties you’re talking about don’t necessarily sound like a good idea? I’m always wary about new builds anyway and from what you’ve outlined it does sound a bit worrying.

How old are you and what would the mortgage term be?

'Market about to crash'!!
I don't think so, more of a slow down in the rate of house value increasing and perhaps a plateauing. There is (sadly) such a shortage of housing stock that it's looking like a seller's market for the foreseeable.
If I was spending 650k +, I'd want something far more interesting than a new build

Just adding to everyone else. Don't move near a non existent school if you're planning on children.

We were in a similar ish position to you. FTB looking at properties at a similar level/a bit above but with a larger deposit. We completed in February and I'm so grateful we did. I definitely think buying sooner rather than later is still the safest bet, unless you are looking for an investment property to turn over quite quickly.

Personally though, new builds, especially in an overpriced postcode, are not a good investment, and I'd look for something more likely to hold it's value over time.

Our new build has increased in value from £170k to £290k in 8 years so they are not all overpriced. However, we bought on the site of a demolished brewery in a market town centre, near a good primary! Do be very careful of buying in what is essentially a big field surrounded by A-roads, for example.

Why do you think the market is going to crash? I think most in the industry thing reduced growth followed by stagnation.

Wait if you like, but make sure to also take into account the cost of additional rent (instead of paying into equity) and the increase in interest rates that will happen over the next year or so, which will make borrowing more expensive. How much to house prices need to drop to offset those costs? Does that seem likely?

No idea about crashes but if you are concerned about losing money, don't buy a new build.

this from me too.

I would buy now but not the new build - surely there must be better options in your budget?

I am not a housing market expert but people have been saying for years that the market is going to crash, but it hasn't. Even if the market crashes you will be fine so long as you are planning to stay in the house for a while. The other option is to rent for potentially years. Also if the market does crash it could become harder to get a mortgage and less property on the market.

Buy now but not a new build.

I wouldn’t buy a new build right now.

But I would buy right now because interest rates rise more, that will have a big impact on your mortgage.

OP your combined salary is quite low for that size of mortgage. I'd be very wary with increasing interest rates. You should be looking at having more than 10% deposit as you're vulnerable if prices crash.

You always pay a premium on new builds. If possible I would avoid a new build at all costs.

otherwise I’d crack on and buy.

Are you planning a second child? Things could be pretty tight on that mortgage if you're paying 2 sets of childcare. Don't forget your house doesn't just cost the mortgage - there's council tax, maintenance, odd jobs, decoration, and more. It adds up pretty quickly.

Things could be pretty tight on that mortgage if you're paying 2 sets of childcare.

really? surely the mortgage won't be more than 2.8k & their take home will be around 8k which still leaves 5k for childcare & bills.

Buy a house - not a new one. Horrible small rooms and usually too many bathrooms. Build a life rather than perpetually waiting for house prices to crash

If it’s the one in Knutsford I actually think it’s pretty good value. They are solid, detached family houses with great layouts in a prime location. I dont think they will lose value anytime soon (and definitely not over 15 years) so go for it!

yes you can buy an older house that is bigger for the same price, but but the time you’ve faffed about modernising it and dealing with builders I’m not convinced you’d be any better off.

Meanwhile your cash deposit is devaluing at circa 10% ....