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.

Thanks, I agree with what you’re saying. I’m saving at the moment because the interest on my savings is higher than the interest on my mortgage, but I will make an overpayment before I come to remortgage, and then overpay a bit monthly from then on (cause the interest rate next time will be much higher).

Thank you for this advice, I am going to do this.

Thanks. I’m going to try.
Tbh I don’t really understand what market rate is, I guess I’m worried the low sales have brought the market rate down? Locally, I mean.
But you are right, there is nothing I can do about it so best not to dwell.

This happened to me and I was upset. But I had no plans to move. When I did move I still made money (I remodelled and the market had lifted up again). I still miss that house.

Get an EA around for a valuation and then go from there. In my experience house buying is a long game.

I'm not sure this is true in most areas and certainly not by 35%. House prices were at their peak mainly in 2021.

What your neighbours sell for shouldn't really impact you it's almost irrelevant. A house next to me sold for £45k under market value because it was a wreak, avocado bathroom etc, unfortunately Zoopla algorithms don't take this into account and hit the value on those portals. But anyone buying would've seen that or I can explain it when I sell., likewise when selling you inform buyers that both sold under value to friends and family. Now, unless you knowingly overpaid for the property? I don't know. I wouldn't worry yourself sick over it, if you staying for a few years the negative equality won't exist and it should rise like all other properties. Chill 😎

Get a free valuation..beware though a scammer EA charged my in-laws for photos even when their property didn't sell. That's unethical.

To be fair they will because the LR data becomes public on other sites. You can access LR sale price data for free. My DS did it before deciding what to.offer.

EAs do use these as comparable too but they should also know if they are that low compared to what they know about the area. I assume.they never went with an agent if sold to FF.

But does sound like they were sold potentially at an underprice and you need to chat to a local.agent to get a valuation.

Then, don't panic, because you are where you are.

We had negative equity in the 1990s. But we got through it. We had to save to.cover the NE, our.move costs and a new 5 percent deposit. We immediately cut back everything. We ate tomato pasta a lot and vegetable curry. Walked to work. Sold one of our two cars. Allsorts of bits and bobs - no holiday etc. It took us a year to recover what we needed to move.

Then we moved and made a 75k offer, which was accepted, on an empty house that had been marketed at 120k 2 years earlier and not shifted. Still here now - 30 years later.

So what can you do to hedge this risk? Get a lodger perhaps? Anything else you can cut back on?

Not to be rude but why on earth did you think it was worth anywhere near what you paid?

Like a car driving off the lot you paid a premium for 'new' and it devalued instantly when you took the keys. The easily loose 10% in the first few years so take that £190k now only worth £171k, it wasn't going to go up in value.

On top of that is the market you bought at absolute peak when house prices rose nearly 11% and want to sell in the slump.

Your neighbors haven't done anything wrong their pricing is realistic, It's known that prices on new builds drop and it was obvious the peak would come down. You where just wildly financially unsavvy to not foresee this and now your stuck but theres no one else to blame for it.

Well, you are being quite rude actually.

I never said anyone else was to blame, I’m just asking what, if anything, I can do.

If you read my post you would see that I didn't buy new, I am the second owner.

As for “why on earth” I thought it was worth what I paid, the answer is because it was on the market at that price, there were multiple interested buyers, my bank agreed to lend me the money, and there were no other houses at the time going for any cheaper.
I am not a property mogul, I am a first time buyer looking for somewhere to live. My choice was to continue paying extortionate rent, or to buy while I could. With prices rocketing upward, I felt I should go for it or risk being priced out.

I know I said I felt stupid yesterday, and perhaps I was somewhat “unsavvy” but I think your tone is totally uncalled for.

She didn't buy it new

@jasminethecat
If there aren't many 2 bed houses on your estate then you might be surprised at how much yours is worth to a FTB who can't afford a 3 bed.
If the other 2 were private sales then they were probably sold at below market value.
How much are 3 beds worth?

Or 1990, when we found ourselves in serious negative equity. Property values goes in cycles, and if you are at the wrong end of it, it can be very painful. But no one ever listens, and just assumes property always goes up, and yes it does in the longterm but it can also dip massively. Not a popular view on MN but you don’t own your home until you have paid off the mortgage. Look up mortgage rates in late 80’s early 90’s.

Well you are rude.

Prices have risen in all areas of the UK since 2021: https://www.nationwide.co.uk/house-price-index/

No region has experienced an overall drop in prices. My point was that estate agents will consider much more than just the sale price of two other properties when valuing the property.

By that calculator, my house has risen by 3% so not significantly at all. That aside, I very much doubt I'd get now what it would have sold for at the peak, when people were queuing to view, sealed bids became commonplace and people were paying way over asking.

If I'm wrong I'll be pleasantly surprised though!

Sounds very rude to me.

OP you aren’t stupid for buying at peak. Yes, housing is cyclical there are peaks and there are lows. Obviously it’s better if you can buy when it’s at a low and to buy a house that you can see yourself in for 10 years to wait out any possible dips in the market but it isn’t always that simple. For most people (those not in the business of flipping houses), then whether you buy at peak or not is just down to luck.

Obviously someone will dispute this and say there was evidence of a peak everywhere and there was. But that evidence was there from 2015 when we started looking for a house and they continued to go up until Brexit and then everyone said house prices would drop. Then it was the pandemic (which we know had the opposite effect), then it was the war in Ukraine. We bought in 2017 after hearing house prices were going to crash for two years and the market just kept going up and up. If we’d bought in 2015, we’d have got a house that needed less work doing to it for the same amount. Likewise, you’d have been hearing about a crash in house prices but seeing prices rise and rise and wondering if you’d ever get on the market. It’s just bad luck you got caught at the peak.

On the other side, very few people are buying at a low because by the time people have realised prices are low, everyone realises it too and houses start going for over asking again and prices go up.

I agree @WhereIsMyLight most people don't buy houses as investments but rather as a home to live in and no one can see into the future so it's largely down to luck whether you make money from them or not. It's very hard to predict what the property market will do so @jasminethecat was unlucky not stupid.

And I totally agree with your point that very few people buy at the low end because by the time people have realised prices are low, everyone realises it too and houses start going for over asking again and prices go up. If it was easy to judge exactly the right time to buy then everyone would be doing it! (and then it would very quickly become the wrong time to buy).

Just because those 2 houses at that price sold it doesn’t mean you have to. You don’t know their circumstances. Maybe they saw the house of their dreams and were willing to sell it cheaper.You can price your house higher. You say there are not many 2 bedroom houses nearby then that is a great plus as you will not have much competition and thereby keeping your house a higher value. 2 bedroom houses are highly sought after. Don’t be upset. At the time that is what you had to pay.

I bought a new build flat in 2007 for £150k. Today’s it’s worth £120k. Prices do not always go up!!

Not always no ... I mean the flat will eventually be worth more than 150k assuming no cladding issues, subsidence etc but no guarantees about how long that will take.

But new build flats tend to be the worst investments, if anyone is buying a property hoping to make money on it.

Property values goes in cycles, and if you are at the wrong end of it, it can be very painful. But no one ever listens,

what’s the alternative? You can’t really time the market and many want to pay a mortgage rather than rent and want security.

If they were private sales to family, is there a possibility they were sold at a lower price? Don’t panic, at least you have this information to present to agents when they make their comparables. Keep an eye on the prices of the next house up to see if they have retained their value. I’d ask an agent around for a valuation if you are concerned but I doubt it has lost that much value. Good luck x

Agree with the previous poster about it being skewed as it’s a private sale to friends and family. We bought a house from family (probate sale) and paid a lot less than what it was valued for when you look at our sold price on Zoopla compared to other similar houses ours stands out like a sore thumb!