Anyone have experience buying property 07/08? Throwing a wobbly!

[jellywobble22]

Hi all

Made an offer on a property back in July, won against 3 other really strong offers so was estatic when I found out, property ticks a lot of boxes, and must have viewed over a dozen before finding 'the one', could see myself living there happily for 5+ years.

Process is still ongoing thanks to the lawyers being slower than athsmatic ants... as time goes on it seems the news each day gets worse and worse and I am having a few sleepless nights about buying at the peak and being in negative equity for 12+ months from completion :( .. not to mention that the mortage offer was agreed on the basis of 30% LTV so I'd be seeing best part of £150k life savings go is frankly frightening.

Has anyone had experiences buying in a downturn? Just wondering what to do - am I better staying put (my first home bought 6 years ago with negligble debt remaining thanks to overpaying) and waiting for a better priced house next year (admittedly not at the 3.4% interest I have agreed in the mortgage offer) or biting the bullet and moving....

People need to chase the money.

It depends some much on what industry you are in, some people will be able to increase their wages & some will lose jobs. A 10k increase for me wouldn't even be an extra £500 a year for example. My mortgage is fixed but my bills are going up by more than that.

Ignore the gibberish I wrote at the end, meant to be a %, but i'm not getting a 10% or 10k rise in the public sector 😆

Well you know where the ballot box is

Looking at the rates at the moment, LTV doesn’t seem to have a massive impact. Hardly any difference between 80% LTV and 60% LTV. Our LTV is 40% and the rates are still high. Our mortgage is looking like it will go up by £800-£900 per month if we fix it.

I bought in August 2007 with my ex. Kicked him out in 2010 and kept the house on in my name only, it was in negative equity then.

I sold it last week for just over £100,000 more than we paid for it.

Well you know where the ballot box is

But I can't vote for everyone...

Yes me! I bought my favorite house at the top of the market and within months it went into negative equity which freaked me out. But as my good friend said at the time it only really affects you if you want to sell, which I did not. And I knew that I could afford the fixed rate mortgage.

We spent 15 happy years in that house and I made money when I finally sold it.

But if you are nervous about the money or affording the mortgage you will need to consider. My mortgage was fixed and affordable.

Yeah. Completed August 2008 - 123k. Next door had sold for £140k in 2007 and value dropped to £108k in late 2008 so we bought on the downward slope. We were immediately in negative equity. Sat tight, sold for £125k and bought a 4 bed in 2013 which has since gained £110k in value.

Other side is - that £140k 2007 house also sold for £125k in 2013.

I bought a flat in London in 2007 and within a few months it had gone from buying frenzy (I paid the asking price which was 260K and this meant a higher stamp duty rate than just 10k leas but I went for it as the vendor wouldn’t budge) to a fall in value. I didn’t get it valued but most things around us fell by around 10%. The worst thing was later fixing on a high rate of around 5% (I forget how long I fixed for) and then before long interest rates started plummeting and I was left struggling to pay a high rate for however long the fix was whilst other people were paying virtually nothing. Ultimately however the flat value went up to £410k at last calculation earlier this year. I still own it but now rent it out on a BTL and will hold onto it as long as I can. I know it’s all guess work at the moment but i personally am not afraid of buying before a downturn as a result of this as I feel that over the course of the years property will still be a good investment. I AM afraid of getting stuck on a high interest rate and rates going down again. Luckily I fixed my two mortgages at lowish rates a few months ago. I might have to buy something separate to this in a few months and am nervously watching interest rates and possibly might choose a tracker. But I don’t have to think about this just yet.

Bought 2007, when we sell will probably make about 250k even in the current climate.

LOL, just remember that this time they won`t be cutting interest rates, doing QE, HTB and all the other props, plus co-ordinating with other central banks around the world to save the debt balloon, AND people are SO much more in debt than they were in 2007, this time it is way way worse. The time to lock in gains was the stamp duty holiday, that is when the smart money got out.

It's pointless to talk about now vs 2007/2008. Property is artificially high now and will not "double in value" in 10 years. It simply can't.

The last 25 years of property pricing is not typical or sustainable

Why cant it double ?

Its literally quadrupled since 2000 - thats only 22 years not 25

Mortgage market regulation brought in in 2014 means affordability tests are much higher than they were in the early 2000s. All income is checked much more stringently, you can't self certify. Banks are also trying to limit the amount of their loan book that is above a 4.5 loan to income ratio. So credit is less freely available. On the other side, wage growth is much lower than it was pre-Brexit (actually falling in real terms). In the post 2010 market, you also had consistently low base rates, meaning the cost of debt was cheaper. Rates are likely to fall by 2024, but most economists think it will settle at 2-2.5%, rather than the 0.1-0.5% that turbo charged the market since 2020.

So, given that the average England house price to earnings ratio is 9.1, but banks won't lend at more than 4.5 loan to income so you need a massive deposit, the cost of debt has massively increased, and there's little prospect for dramatic wage growth in the short to medium term, where does the capacity come from for prices to double?

My wages grew 200% since 2018 as have most in my recession proof sector.

However 9.1 divided by 2 is comfortably within the affordability criteria, just means couples buy average homes as was always ever the case, not since people.

*single

Most ‘recession proof’ incomes haven’t increased 200%, especially since 2018. People only would generally get that through career progression and promotion. Police officers for example have seen their salary decrease in real terms over 10 years by 13%.

The UK GDP per capita has stagnated for 20 years, relaying on growth through outsourcing and immigration. The whole economic cycle has now changed into an inflationary one from a disinflationary cycle (which lasted 40 years).

The UK (and the EU) is going to find it very difficult to maintain growth in an inflationary environment (which could last a decade). That will reflect on people’s salaries and affordability. We are entering a global recession. Lots of businesses will close and people will lose jobs. House prices are linked to credit affordability not inflation, it’s a ‘growth’ asset class.

In the stock market, you may of seen what’s happened to Facebook, Amazon, Apple, Netflix, Google (FAANGs) and the likes of Tesla this year. These are ‘growth’ stock assets also (relies on cheap money, to grow), and it’s already now seeping into the global real estate market.

If you’re interested, look over my previous posts (I haven’t made that many) over the last couple of years warning of this and explaining it in more detail.

What is you recession proof sector where wages have apparently risen 200% since 2018?

Most of the private sector is not recession proof and most public sector wages have fallen in real terms since the financial crisis in 2008, never mind 2016.

House prices have increased so much since 2000 because of loose lending, zero/ negative interest rates and QE. Those trends have now reversed.

I see that @Lightscribe has said the same thing but in more detail.

Last year I sold a BTL I bought in 2007. I sold it for £1k more than I paid for it. I can only think it was over valued when I bought it, as it was a nice flat in a good area. I didn’t make any money renting it out either!!

We wont be taking any financial advice from you then. Literally managed to lose in a one horse race apparently

"House prices have increased so much since 2000 because of loose lending, zero/ negative interest rates and QE. Those trends have now reversed."

Thats right, seems a lot of people cant, or won`t, grasp this fact though? House prices will revert to the base rate relationship, when were rates last at 3.5% again?

Imagine you bought it now, think of the losses you could make.............ouch!

I wouldn't buy now if I were thinking of moving again in a couple of years' time, but I would buy now if I were planning to stay put for a while. I have spent the best part of 30 years buying and selling houses, in all kinds of markets, and they basically all go up in the end. The question is whether you are likely to find yourself needing to move (are your jobs secure, for instance, or might one of you have to relocate for work? That kind of thing). If you are as good as certain that you will be staying in the same place, and that you can afford the repayments now and if they go up, then I wouldn't worry.