Negative equity :-(

[jasminethecat]

I live in a 2-bed almost new-build (second owner) I bought in 2021 when the market was at its peak. I paid £190k for it.

Anyway, my neighbours on either side have recently sold, both were private sales to friends or family. I just went on the Land Registry and am upset to see one sold for £145k and the other for £130k.

Surely this will massively impact the valuation of my house? Most houses on this estate are 3 or 4 bed, hardly any 2 beds so not many other houses to compare with.

I really want to relocate next year when my mortgage is due for renewal, but I still have a mortgage of £156k and looks like I will be in negative equity.

What can I do? I feel so upset. I am single so just the one income, I was a first time buyer and feel so stupid like I overpaid massively for a house that I am now stuck with. I have a reasonable income, just over the threshold into the higher tax bracket, but not much by way of savings (they all went into my house deposit!) I feel so sad and stupid. I want to move to live near my sister and elderly mother, I am miles away from them and feel so lonely.

Ah yes your correct I didn’t think ot that

We paid 165k 3 years ago,2 years ago a house same as ours sold for 130k (Reno project),the bank has valued ours at 195k so I wouldn’t worry.

You can still see it on “market stats” on Zoopla.

Having said that, the neighbouring houses aren’t for sale. Buyers still have to use their common sense and consider the wider market. Could they buy a similar house in the next street for those prices? Probably not. Not all is lost OP!

I get that a house might sell cheaper to a family member, but surely not to friends? Just a slight discount perhaps for less hassle/no agent fees.

Are any other houses locally up for sale? Perhaps keep an eye on those and see what they go for.

You have a decent income and a low mortgage. You must have a reasonable amount of disposable income each month. I’d put all of that into overpaying your mortgage to get it down as much as possible. You just have some savings from over the last 4 years?

Could those other houses be shared ownership? I live in a mixed development, some private and some shared ownership and obviously the shared ownership properties sell at a much lower price.

Just because your neighbours sold cheaply to friends and family it doesn’t mean the value of your place is the same. If you are worried get an estate agent to value it for you.

Yes I do have some savings, but not enough to cover the difference between my mortgage and what my neighbour’s houses sold for.

I know it’s a low mortgage compared to many people’s, but it feels like a lot to me and I still have 25 years left of paying it. I will start overpaying it though once I remortgage though as the interest rate will be going up a lot then, so hopefully I will knock a few years off it.

Just have a look on rightmove.co.uk to see what other similar 2 bed homes are up for locally. That will tell you if you have an actual problem.
Other solution if it is a major builder is to see if they will do a part ex to one where you want to move

The thing about property is that is viewed as a long term investment and looking at prices a few years in is rarely a good idea. We bought our current home in 1997 - everyone in the street was in negative equity as the market had crashed. At the moment the house is valued at 5x what we bought it for and nobody is in negative equity. I'd forget about it for now and wait until you are seriously thinking about selling - this time of year is also not great for house prices and they tend to rise naturally during the spring and summer.....

All the houses on my street look the same from the outside

They can be vastly different on the inside which massively affects their price from one house to the other

If you're not planning on moving just ignore it and stop checking the value

We bought a house in 2006 for £125k. I then sold it in 2020 (after 5 years of trying to get rid of it) for £110k. It covered the outstanding mortgage so technically wasn't negative equity but lost £15k. It's now up for sale again for £150k so the buyers have made 40k if they get the asking price.

I am sorry op, please try to keep in mind that generally speaking and over the long term property prices do rise. Also you are in a better position than if you were renting and investing in someone else's property portfolio.

OP's house is pretty new though, so it's doubtful others on her street are massively in need of modernisation.

It does mean it's easier to compare prices of similar houses locally though... unless any have been extended.

I think it is worth getting a valuation as it currently stands because even if it comes back low at least you'll have a better idea of the gap then something you're hypothetically worrying about. The estate agent may also be able to point out quick wins for your place.
Barring any other debt or priorities, I'd be overpaying the mortgage sooner rather than later because it'll work more in your favour whilst you (presumably) have a lower rate than the one you'll next get.

Does your family live really far away?

Just fyi that we had two estate agents undervalue our place significantly - I'm talking tens of thousands difference. It ended up setting a new ceiling price on the street.

Private sales to family are nearly always done below market value so I wouldn't judge on that.

Get a local agent to value it

Sold prices for any house are available on Rightmove and Zoopla, regardless of whether or not it was originally listed for sale on these sites. There are various other websites that show these prices too.

Any savvy buyer would look up recent sold prices in the area when deciding how much to offer.

And you don’t need to pay to see sold prices on the land registry website, it’s free.

Firstly, sorry that you are in this position, it sounds very worrying.

Secondly, I would start by getting a valuation from a couple of local EAs. They won't charge you anything and it will give you an idea of what your house would likely be put on the market for if you were selling it.

Sites like Zoopla are not accurate. Better to get actual EA valuations and hopefully they will put your mind at rest slightly. As @LindaDawn says, just because your neighbours sold cheaply to friends and family it doesn’t mean the value of your place is the same, it's possible your house is worth more.

You can be honest with the EAs that you are looking to move next year not in the near future. Part of their job is building relationships with people who may use their service in future and it shouldn't put them off giving you a free valuation.

I’d get a valuation now. We did with the question about of increasing saleability, that give you a rough idea of what you’re working with. If the figures are higher than the neighbouring properties are selling for, use the next year to keep an eye on the market in your area. Set up an alert for 2 bed properties in the area, look at what they are going on at, how long they are taking to sell, if they are being reduced and the condition of those.

If the price isn’t high enough, then you need to work on feeling happier while you wait out the negative equity. Can you join a craft group or exercise group? Remortgage on that property, overpay what you can and make sure you can port the mortgage if the market improves during that next mortgage fixed rate.

"I know it’s a low mortgage compared to many people’s, but it feels like a lot to me and I still have 25 years left of paying it. I will start overpaying it though once I remortgage though as the interest rate will be going up a lot then, so hopefully I will knock a few years off it."

jasminethecat, unless I've misunderstood your comment above, I'd strongly recommend starting those overpayments now. In fact, if you have savings to take a big chunk off, do it now before you remortgage. Otherwise you'll end up paying more once there's new, higher interest on it.

Sorry @jasminethecat, meant to tag you in my post above

You don’t have the facts around these sales - if they’re to family / friends they could well be at lower than market price. Did these owners sell for less than they paid? Don’t think too much about it until you’re genuinely ready to sell. You’ll only end up torturing yourself with worry.

We sold at a loss in 1990 but were moving to a much more expensive house so the price of that very big one was similarly less than it would have been. If you are moving up the market price drops benefit you rather than damage you.

House prices in general have risen signifincantly since 2021 so it's highly unlikely that you will be in negative equity. We bought at a similar time and our house value has increased by around 35%. Mortgage providers won't go solely off those two sale prices.