Why does the UK have property chains?

[mjf981]

For full transparency, I lived in the UK for most of childhood, but I moved after school and have never bought property there.

I have however bought in Australia. It's very straightforward (though horrendously expensive). You offer privately, or buy at auction. To seal the deal, you put down a 5-10% non refundable deposit, and 6 weeks later you exchange. If you pull out for any reason, you lose your deposit. There is no such thing as a chain here - if people have nowhere to move to they move in with family, rent short term etc.

I was talking to my cousin who is selling and buying in England at the minute. It's been a nightmare with 2 collapsed chains and has been ongoing for almost a year now. She is tearing her hair out and has vowed never to move again when this is all over.

Why is it so complicated in the UK? Why do chains exist? What is the advantage to them? How can other countries manage without them and yet the UK does not? It sounds ever so stressful to have it set up this way.

The advantage to them is that no one needs to find short term lets or stay with family.

Our rental market is set up on the basis that lets are (somewhat) secure and likely to be at least 6 months as the initial fixed term.

The system definitely is a nightmare.

But actually I can’t see that it would have been made better by having to move all our stuff twice - first into either a rental or into storage, and then into the new house however long later.

I think a lot of people here have deposits tied up in their properties, they don’t have the cash to put down the deposit. So people need to sell their current house to buy the next one.

But also you’re not locked in here until you exchange are you (you can walk off with minimal loss), which happens quite late in the time frame, so I think people want the protection if their purchase falls through that they can stay in their house until they find a new one rather than moving about - the conveyancing process here also seems to take way way longer than friends I have in other countries.

My DD in Australia was buying at the same time as her sister in the UK. The Australian one was saying how much simpler it was over there, but her sister pointed out that it might be more complicated (and a right royal pain) over here, but there are very few short term rentals available over here and she couldn't move in with family because there's only me and my house is too small!

So swings and roundabouts I think. Although our system is pretty rubbish with people able to pull out at very short notice and being 'locked in' to buying might help the situation.

Exactly this. Not sure why people are confused about this

This came up on another thread recently where someone was talking about a european country (dont know which one) and how essentially you just move in with your family

No thank you.

it seems like it probably works well if you are a first time buyer or very wealthy, otherwise not so much.

Many people who are second time or beyond buyers either don’t have the deposit until they’ve sold their house or don’t have the ability to get a second mortgage whilst their house is unsold so you end up with a situation of having to live in temp accommodation which is expensive and a huge faff.

E.g.
• living in a house worth £500k, with £200k equity.
• £50K savings.
• See house you like - worth £800k;
• need to puts down £40-80k;
• savings don’t cover this

only option is to sell house as part of a chain or sell your house and go into expensive rental, or stay with family/friends. Pack up your house twice or be living out of suitcases for months.

my worst fear would be that you sell your home and then for whatever reason cannot find a new home, or prices rise dramatically.

chains are an absolutely PITA but I actually think they’re pretty low risk compared to alternative

That system doesn’t work unless you’re a FTB or have the 10% deposit without selling first. In the UK its pretty hard to get a short term let and who wants to move twice? It’s not a perfect system, far from it, but neither is the Australian one.

Chains are frustrating for sure and some people do sell before offering on a new property. But not everyone has family to house them for a few months or can afford to rent even if they can find a rental. It's a choice.

There's different rental laws in other countries which make other things possible. E.g. when my brother bought in Australia he rented the property back to the original owners after he had bought whilst they bought another property which seemed to be a reasonably common thing to do.

Who has a 5-10% deposit lying around? I don't, all of my equity is tied up in my house. I could not move in with relatives or short term rent (the money, the faff, the pets, no rentals).

I am currently in a chain of 7 and yes I am always only a phone call away from it going tits up but the Aussie way wouldn't suit me either.

When you say the UK what do you mean?

In England the system is horrendous. In Scotland the system is very simple and pain free. I don't know what the systems in N Ireland and Wales are like.

Australia is no different. If anything the rental market is tighter and more difficult with fewer renters rights.

People more typically take out bridging finance between sale and onward purchase or delay settlement to allow them more time to find a house (by weeks not months).

Because the Australian system provides security of contract very early in the process (as little as 10 days) bridging finance is not economically infeasible unlike here.

I've never known it to be standard for people to go into rental here in Australia. It's really not a common part of the process. Rentals are in very short supply here as well.

I guess there are pros and cons to both systems. If it all works out I can see it being advantageous to be in a chain, but if things fall apart it could turn into a nightmare.

A woman I know (here in Australia) has recently sold her house and had 3 between settlement and possession of her next house. They had an Airbnb for those 3 weeks and put most of their furniture in short term storage. She did complain about the cost, but seems better than relying on 6 other people (or however long a chain is), and having it collapse months down the track, or even just before exchange as happened to my cousin.

Does any country other than England have similar real estate chains? I know the US and Canada do not.

Where did your friends/family live after selling if they didn't have an onward purchase lined up?

I would hate hate that. Im stressed just thinking about that

And yes - I see another poster above has already mentioned it - bridging financing is very common here and how people can raise a deposit if need be.

Yes, she is in England.

I bet the banks love that system, more money for them

Personally I’d trade 6 weeks of interest for months of uncertainty wondering if my buyer and seller were going to get their acts together. It’s a vastly superior way to move home.

I’m in Australia too and people also negotiate different lengths of settlement terms to allow for finding somewhere to buy after they’ve sold. If it doesn’t work, then they might rent, but I wouldn’t say it’s the norm. The average time a house is on the market in big cities here, is usually less than a month.

You are talking about England. Scotland has a different system that is much easier and quicker

This is true as well. I actually recently sold my place after 6 days on the market, and wanted a quick settlement. The buyer agreed to 4 weeks which went through just before Christmas. Now renting a while before I decide what to do next.

I will add - it's easier as I have no children so can be more flexible with moves, timings etc. It'd be harder with a family to consider.

What is the Scottish system, and why would England not adopt it if it is better?

We had the great good fortune to sell to an Australian family moving to London. They were cash buyers and refused to have a survey, didn't see the need for local authority searches, and exchanged/completed on the same day. I think the whole thing took four weeks. We were so lucky.