Sell and buy?Sell and rent? Do nothing? Aaargh!

[KoalaSar]

This might be a long one.

We have a house worth about £315k. It's in a desireable semi-rural location with excellent schools and excellent commuter links. We have a mortgage of about £195k against the house, so a significant amount of equity, circa £120k.

We've been here for 12 years. It's an older house (1931) and we extended some years ago to avoid the cost of trading up for a bigger house at a time when we didn't have firm future plans about where we wanted to live. We virtually doubled the area of the house by adding the extension and we also renovated the original part of the house by stripping floorboards, laying a lovely tiled floor in the hallway and installing a new fireplace.

Everyone who comes into the house falls in love with it. The kitchen alone is 35 metres squared and it's the kitchen that really does it for people. The house is in excellent order and I suspect it might sell quickly because our neighbour sold within a fortnight last December.

So - we've been watching the housing market for some time and we'd planned to put the house on the market next year. In the meantime we were planning to up our mortgage payments by about £700 per month to chip away at the loan and increase our deposit on the next house. We have a small car loan of about £5000 which will be paid off next May, and we've worked hard to pay off all other debts in the last 12 months to get ourselves into a good position next year. We both have very secure jobs.

And then the pundits and economists began forecasting a huge drop in prices and we began to wonder whether we ought to bail out of the property market, as I guess others have done. After an initial panic, we have decided to put the house on the market in the middle of August and we are currently working through some small jobs that need doing before it goes on the market.

Our main concern is to protect the equity existing in the house. There is nothing on the market at the moment that I want to buy - the next step up the housing ladder is a detached family home, and such houses cost about £480k - £600k in our area - a huge leap from where we are right now, despite the fact that we're in a four bed semi. We were prepared to make the leap, but thought we'd be doing it next year. There's very little on the market in that price bracket at the moment and the decent ones get snapped up quickly.

I am prepared to rent short term if nothing comes up that we want to buy, however, I'm trying to work out what might/might not happen and how this will afect us. For example, do prices in desireable areas drop by the same percentage as houses in other areas during a crash?

My worst case scenario is that we do nothing and see the value of our house drop by 20%, which equates to about 60k and leaves us with only £60k as a deposit when previously we had £120k. This would be fine if all of the larger houses in the area also suffered a 20% drop - so a £500k house became £400k, but with such a bouyant market for those types of houses in this area, I can't see it happening.

Sorry, I realise this is a rambling post - I feel quite confused about what we are about to do. I hadn't mentally prepared for the house to be going on the market and the potential of moving into rental is a huge upheaval for our children. I'm trying not to be rushed into a decision but I'm aware we need to strike quickly if we want to protect the equity.

Help!

You will need to act quickly as prices are already stalling.We decided to do this in feb as I suspected our house could lose a significant amount in teh next year or so when the new budget etc relly bites.We moved into rented which has been fine but I have done this several times so find it quite easy tbh.We planned to maybe buy again next year until by chance we had the opportunity to buy another old wreck and because it is in a great area and very cheap we have gone for it. the seller had 2 higher offers but both couldn't proceed as sales have stalled atm and we were in a good position.I think you should do it asap though as this winter will see things change I am sure.

I suppose I know it's the thing to do - but what if the larger houses hold their value? There seem to be some on the market that have been overvalued in the first place and they have been forced to drop the asking price by 5-10% within about a fortnight of going on the market, however, they have sold very quickly thereafter - even though I think they were still overvalued.

If you and others love the house there is no reason why it shouldn't sell quickly at any point in time. Yes, I do think some further falls are coming but it won't necessarily affect desirable houses in desirable areas. Don't forget - house building has all but stalled too so good family houses will be in demand for the forseeable future.

I would sell when it suits you and not feel panicked into getting it on the market!

In our area, SE, the prices are creeping upwards so I believe if you live in a desireable 'commuter' belt the crash (if there will be one) won't affect you much.
The areas of high concentration of public sector employment are the ones that most likely will see steep a turn for the worse.
London will always be a major center of employment and the areas that allow the daily commute will only go up.

Now I'm confused! I hear what you're both saying. But mine is a mid-range house for this area - four bed semi at £300k - we're obviously trading up but many of the people who are selling the larger houses are retired and in no hurry to sell.

I know several people looking in vain for a family house and this whole area is full of people aged 70+ sitting in huge family houses because they enjoy the garden.

Wich someone would build new houses here - they'd go like hot cakes.

I wonder whether we ought to hold our nerve?

I can't see prices going up, as such - just stagnating. At least in rented, we'd be in a good position as buyers without a chain.