FTB in London, if you were in my shoes would you go ahead with purchasing or wait till next year?

[Schg1911]

I'm absolutely crapping myself with the news that there will be a housing crash next year. I've been looking for over year and just last week found a place that I really like. My offer was accepted and now I am wondering if it will be better to drop out and wait to see how interest rates affect the housing market.

I'm not desperate to buy right now as I have a comfortable long term renting situation. However, my offer was accepted on a 2 bed 2 bath flat in Bow, London right next to Bromley-by-Bow tube station for 425k (it is not a new build). I would be fixing my mortgage rate for 5 years and I have applied for a mortgage with a 3.9% interest rate. It seems crazy that this flat could potentially drop 10% -40% next year that is a lot of money!! But the flat is so nice I would be upset if next year predictions fail to come to fruition and I am unable to buy a flat of the same quality for a lower or the same price. But at the same time I'm terrified of going through with this purchase and being in negative equity.

To give you some background to my finances:

• My job is pretty secure as I work in the Cyber Security industry.
• I am currently aged 29 and would like to keep a hold of the property I buy for at least 10 years.
• I currently take home £3900 after tax and pension deductions etc. (With an annual bonus after tax of around £5k which I haven't included in the above figure).
• If I get offered the mortgage with a 3.9% interest rate my mortgage payments will be £1800.
• After mortgage payments and all bills such as council tax/service charge/gas/leccy etc. are accounted for I will be left with £1500.

Taking into account the above it seems affordable to me. But I am terrified, could I be buying in the worst time ever?! If this flat was to drop in value next year to say £375k I would be screwed.

If you were in my situation would you wait to see what happens next year or just steam ahead with the purchase?

If you love the flat I would buy it and rent the spare room straight away.

The base rate is predicted to rise to in excess of 6% next year. What are the chances of you being able to borrow what you're planning on borrowing with an 8% interest rate? If you can progress the sale with a mortgage offer of 3.9% and can fix for a few years, buy it. If you can't, I'd probably stay put. I don't think we are going to see rates of 3% for a while.

Negative equity is only an issue if you're aiming to sell or need to remortgage. If you can fix for 5 years or so you'll probably be okay.

Why would you be okay in five years buying in this market, you will still have massively overpaid to bail an individual or developer out of their bad debt?

Why is she helping a developer? It isn't a new build unless I've missed something. In any event nobody is suggesting the kind of drop the OP is mentioning.

He/she was talking generally about the prospect of buying in this market.
People are definitely suggesting drops of 10-40%. I've seen 15% mentioned by three analysts. It could easily be much worse than that and, looking at the economic situation, it probably will be.

In my very sleepy search area on RM, today 4 new listings and 3 reductions. The train is pulling out of the station.

Prices are going down undeniably. In SE London I have 30-40 properties favourited and only one of them has sold in the past 3 months. That includes houses. Reductions are coming in on a daily basis now. I wouldn’t say not to buy, but just making sure that you at least getting pre-covid price. Covid boom and pricing is simply unsustainable. Not everyone is making 4k in London and there is a serious shortage of FTBs who actually have money. Because those that had some, already moved during pandemic, saving themselves stamp duty.

Not denying what you are observing but FYI I've sold (completed) two properties this summer and due to a backlog at land registry neither are being shown as sold.

The only way you'd know if they are still available is to speak directly to the agent.

This!!! It is like buying someone else's problem. There are so many help to buy people lurking around, trying to sell and move into houses. Yet developers don’t stop building and struggling to upsell their stock. The market for flats sooner or later will be crashing or people will stay put for life pretty much. Continuously paying interest on government equity loan.

Those that in process would be showing under offer. None of them are under offer either. And they wouldn’t be continuously reducing if they are sitting in backlog, but nearly every single one of them has had the reduction, even if it’s just a small one.

@Wanderergirl I agree about the reductions but as I say from experience sometimes the EA leaves the listing to encourage people to contact them.

One of the EA has finally shaded in a light grey one of the properties we've sold the other is just there - doesn't even say SSTC. The lack of action by EA on RM really freaked me out as I worried about the sale falling through and looking as though there were no offers. No worries now - the sale proceeds are in the bank.

I will agree the market feels off. Lots of speculation. Glad we've sold as it's one less thing to worry about.

The Covid froth was gone as soon as Mortgage rates hit 5%, that is rear view mirror stuff now, the Covid boom was a LOT of money printing to create and off the back of a stamp duty holiday (when the smart money offloaded their property) definitely gone and not coming back.

I'm sure the market is slowing but I know that there are several properties still on Rightmove that have sold (zone 2, SE London). I know because I offered on two of them and lost out. The agents should've taken them off the market but I assume haven't in the hope people contact them.