No one knows - I’d buy and hope my luck holds. If things are bad enough for a major price “correction” suspect we’ll all have bigger things to worry about.
environmental apocalypse most likely
If you lose out then you'll make your money back cos the Daily Telegraph will want to interview you about it for their feature about the "house price crash" they've been hyping since 2004
"As will get a fixed - long as keep job will be able to afford repayments."
This is not the right way of looking at it IMO.
This is a significant leveraged investment and so timing it correctly (which is of course much easier said than done) can have a very significant financial impact.
There is a common view that prices will fall at least 10% from here.
Suppose you are putting down 400k of capital against a £2m house with £1.6m borrowing.
If this 10% fall does indeed happen, £200k, that is half of your capital wiped in paper terms, and in real terms, an extra £200k on your mortgage compared to being a bit more patient/ timing it correctly.
It is not easy to time it correctly but just saying "I will be able to afford repayments" is the wrong approach IMO. Maybe you can afford to pay an extra £200k (on the above example). That doesn't make it a good idea.
Other houses will drop in value too though so the equity will go further which counterweights this .
Likewise when prices go up you get more equity but it won't go as far because other houses go up in value just like yours so it's effectively devalued and you will pay more stamp duty on the new property to boot
Demand isn't just wanting something, it's being able to pay for it. People can't afford the same property at 6% interest that they could afford at 1% interest.
Strong pay growth/ employment levels may hold it up for now, but we haven't seen the full effect of the interest rate hikes yet.
Fair point George but they’ll just lower the terms and extend the LTVs again. Also prob put in some scheme to shore things up in advance of the election. Bear in mind also that the regulators are now making it almost impossible to repossess given consumer duty, ‘everyone is vulnerable’, retail extend and pretend etc
Interesting points GG. I suppose my view is this is primarily a place to live- albeit a long term investment as well. Trying to game the market is difficult. So wouldn't want to miss out on a property we like in an attempt to do that.
Re cookie guess that makes sense from an investment perspective- but ideally want a gaffe can move into with minimal work needed. Not a fixer upper.
Heh risky- I don't think pre nuts are valid in England.
I doubt many first time buyers are buying £2m houses.
They can delay purchasing in the hope that the market drops 10% but may end up spending more in rent waiting for that to happen than they will have saved. You may also find you have fewer sellers when the market is down so you might not be able to find the right property then.
Similarly you can wait for interest rates to drop but then find that prices go up as people can then afford more.
Be decisive Clive. Of course buy now, a house is a home rather than an investment.
But as others have said, unless there is a massive new house building program over the next 10 years, it’s difficult see how its value would fail to at least keep up with the inflation rate over that period.
Think that's my thinking Marshall. Also would want to get something that could stay in forever so short or even medium term fluctuations in price less of an issue long as affordable.
You need somewhere to live, right. Can u afford the monthlys on a mortgage? Can you afford if interest goes up another 2%? Is it hugely more than your rent? Would saving the difference in your rof approved investment accounts (contact hyoo for tips) beat the housing market?
it's a punt
but a punt you can live in
factor in an extra 10k for easter eggs and £20k for the mrs clive has suddenly decided we need a new kitchen / bathroom / loft conversion fund
I still see more potential downside than upside over the next few years, subject to any scam they bring in to prop up the market to help the Tories' election prospects (oh sorry, meant to say "help people in these difficult times").
Just looking at the Rightmove mortgage calculator. Say £1m then, £100k deposit.
Couple of years ago the rate might have been 2%. Monthly repayments £3,815.
Now let's say 6% reflecting the rate rises since then. Monthly repayments now £5,799.
£2k extra a month of post tax income. Wage increases since then won't touch the sides of that. How can it not exert downward pressure on prices?
And that is without even considering the recession risk - remember the effect of rate rises takes a while to feed through.
I could well be wrong about the above, but the more general point is that this is a significant leveraged purchase and I disagree with the general "just go ahead and buy at any time because you'll live there" sentiment. Making a more considered decision can have a significant effect on your financial position.
I personally am looking to trade up and I'm waiting it out for now. Let's see what happens.
Secondly, no-one knows. Consensus is that there is more pain to come. It’s probably already priced in… there’s probably more value to be had in leveraging the fact you’ve got dry powder rather then focusing on timing.
Thirdly, I would avoid Kent. It’s all gone a bit downhill of late.
Are you a first time buyer? If so, ensure you get a decent discount on that as most sellers will happily knock something significant off for not being in a chain. You normally only get to do this once so make the most of it!
Assuming you are intending on staying in the house for a while and you are renting then I can’t see why you wouldn’t start the process.
It takes for ever, if prices go down between offer and exchange, drop the offer to reflect the market or drop out. If you can get the agreement in principle you can always revisit that as well if rates get better.
I doubt many first time buyers are buying £2m houses.
They can delay purchasing in the hope that the market drops 10% but may end up spending more in rent waiting for that to happen than they will have saved.
a market drop of 10% over eg 12 months? virtually impossible that u would spend more in rent unless ur renting something astronomically larger than the house u want 2 purchase
We are renting at the moment as the chain above us collapsed. Investing the proceeds in low coupon gilts more than covers the rent and we are now chain free so can make and pull offers if we get dicked around.
Probably not going to rent for too long because per above, they aren't building many more houses in inner London. However, while the average interest rate on the in-force mortgages remains lower than the interest rate on new/re-mortgages I can't see house prices racing away.
The market noise is general but you are a single individual so you can take advantage by finding a house that someone is prepared to sell at ‘below market’ because they are desperate or uncomfortable.
That may take some time to find and you need to get familiar with what things are actually selling for in the area you’re looking and also how long places have been on the market and the motivation of the sellers to sell
always ask - why are they selling / how long has it been on the market / have they found something / how long have they had it.
the renovation point is true for the 2000’s but less so now. I got 3 quotes for a full renovation of a 450sft flat in London - quotes consistent at £120k inc vat. Renovations have become very expensive - if you want / need to do everything - which you will in a proper fixer upper. If something has been done in the last 10 years that’s better - there’ll be hopefully decent electrics, roof and plumbing / heating
Yeah as Parsnip says unless you are a builder major renovations in London will be horribly difficult to make money on these days. Brexit has killed that game and of course if you have to rent while you renovate the cost of paying rent and huge mortgage interest will be brutal. Living in a house that is slowly being renovated over a period of years is a total mare (particularly with kids).
Real terms prices have already dropped a lot in London so not sure there is all that much further to go to. If you find something you like and can get a bit of a deal then go for it I would say.
Real terms prices have already dropped a lot in London so not sure there is all that much further to go to. If you find something you like and can get a bit of a deal then go for it I would say
What does this mean in practice, Catters?
The housing stock in London is notoriously expensive and sh1t
I have not once (literally) been inside a house in a vaguely desirable area of London that I thought was (a) nice and (b) priced at a level that I thought was reasonable/acceptable
What's the difference (price-wise) between a reasonable family home that you'd actually want to live in -- peak (whenever that was - assume 2020) and now? Do you have a sense?
PS - As boomers die and their assets are liquidated when kids inherit, won't this trigger a massive sell off of BTL properties which, in turn, could increase supply and thus affect prices negatively?
Maybe this is more applicable to flats and not so much to houses?
Canute the great BTL sell off has been under way for several years but the shortage of properties is such that it's barely been noticed. We honestly need to be building a million homes a year for several years for demand and supply to match and have prices fall meaningfully. With a growing population and what is in effect a static number of available properties it's really only going one way.
a market drop of 10% over eg 12 months? virtually impossible that u would spend more in rent unless ur renting something astronomically larger than the house u want 2 purchase
It was over a few years rather than 12 months and rather than renting something larger than they buy it’s usually more a case of renting something more central than the area they buy in.
Plus the anecdotal stories I’m hearing about the rental market at the moment are wild. In the group I was out with the other night, one was moving after having lived in that flat 10 years after the landlord tried to put the rent up 20% at the latest renewal; another’s landlord had told them if they didn’t agree to an immediate midterm rent increase they were going to terminate when the break clause came up in 3 months’ time.
What's the difference (price-wise) between a reasonable family home that you'd actually want to live in -- peak (whenever that was - assume 2020) and now? Do you have a sense?
The peak for houses worth around £1.5m in SE London was in 2022. They are down 3-4% since then. There was a big jump in 2020, say 10-15%, as I assume people were looking for space and small <5% increases in 2021 and 2022.
When looking at affordability its important not to exclusively focus on highly leveraged first time buyers. Plenty of buyers have cash, or high levels of equity. The examples of needing £900k in loan to buy a £1m place is nowhere near reality for nearly everyone. Even those buying a £1m place.
True I do work for people who need to borrow a few million to buy their even bigger posher house in London. I did something recently where I read the mortgage offer three times to check that the monthly payments really were over £20k.
Clive - I’d look to have a broker sorted before I put in an offer. I’d look for a whole of market one and also cross check with what’s available online.
"Plenty of buyers have cash, or high levels of equity."
But to realise that equity they need a buyer, and many from the pool of buyers have had their purchasing power restricted by mortgage costs.
Still, we aren't exactly seeing much desperation yet from sellers. Let's see how it goes as more and more people move off their fixed rates. The housing market is very slow to change direction, so it may just be a couple of years of slow falls. Fine by me if that happens.
Clive, depending on where you are looking you might not be able to put an offer in (or at lest have it taken seriously) unless you have the agreement in principle from your lender in place so you are best to speak to a broker sooner rather than later.
The vendor's agent will probably ask for details of your funds on the offer letter. I think they did when we had an offer on a place and I think they checked pretty quick as well.
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Buying a house and getting married Clive! Big year….
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Yep Risky!
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I genuinely wish you all the best
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Buy the most rundown house in the best street you can afford and you will never lose. Never a bad time to do that. Go well.
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Cheers Risky.
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I think, for the first time ever, wot Rosky sed.
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Captain Swing to the board….
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No one knows - I’d buy and hope my luck holds. If things are bad enough for a major price “correction” suspect we’ll all have bigger things to worry about.
environmental apocalypse most likely
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If you lose out then you'll make your money back cos the Daily Telegraph will want to interview you about it for their feature about the "house price crash" they've been hyping since 2004
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Thanks Jim!
Think that's the way I'm leaning bullace. Litigator so hoping even if there is a crash / law firms start to cull may be ok.
As will get a fixed - long as keep job will be able to afford repayments.
Heh at Gaga. Surely that's more Mail territory lol.
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"As will get a fixed - long as keep job will be able to afford repayments."
This is not the right way of looking at it IMO.
This is a significant leveraged investment and so timing it correctly (which is of course much easier said than done) can have a very significant financial impact.
There is a common view that prices will fall at least 10% from here.
Suppose you are putting down 400k of capital against a £2m house with £1.6m borrowing.
If this 10% fall does indeed happen, £200k, that is half of your capital wiped in paper terms, and in real terms, an extra £200k on your mortgage compared to being a bit more patient/ timing it correctly.
It is not easy to time it correctly but just saying "I will be able to afford repayments" is the wrong approach IMO. Maybe you can afford to pay an extra £200k (on the above example). That doesn't make it a good idea.
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Other houses will drop in value too though so the equity will go further which counterweights this .
Likewise when prices go up you get more equity but it won't go as far because other houses go up in value just like yours so it's effectively devalued and you will pay more stamp duty on the new property to boot
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Seems unlikely prices will fall much given continued demand and lack of mass job losses
just remember to get that pre nup signed Clive.
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Demand isn't just wanting something, it's being able to pay for it. People can't afford the same property at 6% interest that they could afford at 1% interest.
Strong pay growth/ employment levels may hold it up for now, but we haven't seen the full effect of the interest rate hikes yet.
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the above comment from cookie is, remarkably, reasonably good advice
*provided* you get an apt discount for it being run down ofc
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Fair point George but they’ll just lower the terms and extend the LTVs again. Also prob put in some scheme to shore things up in advance of the election. Bear in mind also that the regulators are now making it almost impossible to repossess given consumer duty, ‘everyone is vulnerable’, retail extend and pretend etc
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*lengthen the term
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Interesting points GG. I suppose my view is this is primarily a place to live- albeit a long term investment as well. Trying to game the market is difficult. So wouldn't want to miss out on a property we like in an attempt to do that.
Re cookie guess that makes sense from an investment perspective- but ideally want a gaffe can move into with minimal work needed. Not a fixer upper.
Heh risky- I don't think pre nuts are valid in England.
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Haven't read the comments
But buy a house if you can afford it and it enhances your life - crack on
If you are struggling to pay it then maybe have a further consideration
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That's basically my view Davos!
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Yeah I am I generally right
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Prices won’t meaningfully fall until we start building half a million homes a year.
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Buy now.
Having a house is handy you see as you need a place to live.
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I doubt many first time buyers are buying £2m houses.
They can delay purchasing in the hope that the market drops 10% but may end up spending more in rent waiting for that to happen than they will have saved. You may also find you have fewer sellers when the market is down so you might not be able to find the right property then.
Similarly you can wait for interest rates to drop but then find that prices go up as people can then afford more.
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Be decisive Clive. Of course buy now, a house is a home rather than an investment.
But as others have said, unless there is a massive new house building program over the next 10 years, it’s difficult see how its value would fail to at least keep up with the inflation rate over that period.
And probably considerably more.
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Think that's my thinking Marshall. Also would want to get something that could stay in forever so short or even medium term fluctuations in price less of an issue long as affordable.
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You need somewhere to live, right. Can u afford the monthlys on a mortgage? Can you afford if interest goes up another 2%? Is it hugely more than your rent? Would saving the difference in your rof approved investment accounts (contact hyoo for tips) beat the housing market?
it's a punt
but a punt you can live in
factor in an extra 10k for easter eggs and £20k for the mrs clive has suddenly decided we need a new kitchen / bathroom / loft conversion fund
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The uk courts pretty much follow them now clive as long as both parties have had independent legal advice and there aren’t kids etc
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I still see more potential downside than upside over the next few years, subject to any scam they bring in to prop up the market to help the Tories' election prospects (oh sorry, meant to say "help people in these difficult times").
Just looking at the Rightmove mortgage calculator. Say £1m then, £100k deposit.
Couple of years ago the rate might have been 2%. Monthly repayments £3,815.
Now let's say 6% reflecting the rate rises since then. Monthly repayments now £5,799.
£2k extra a month of post tax income. Wage increases since then won't touch the sides of that. How can it not exert downward pressure on prices?
And that is without even considering the recession risk - remember the effect of rate rises takes a while to feed through.
I could well be wrong about the above, but the more general point is that this is a significant leveraged purchase and I disagree with the general "just go ahead and buy at any time because you'll live there" sentiment. Making a more considered decision can have a significant effect on your financial position.
I personally am looking to trade up and I'm waiting it out for now. Let's see what happens.
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Firstly, congratulations.
Secondly, no-one knows. Consensus is that there is more pain to come. It’s probably already priced in… there’s probably more value to be had in leveraging the fact you’ve got dry powder rather then focusing on timing.
Thirdly, I would avoid Kent. It’s all gone a bit downhill of late.
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Are you a first time buyer? If so, ensure you get a decent discount on that as most sellers will happily knock something significant off for not being in a chain. You normally only get to do this once so make the most of it!
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Heh at Kaulbach's last point.
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Yes I am Jim. If an offer is made will go under. Will see where we end up!
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Assuming you are intending on staying in the house for a while and you are renting then I can’t see why you wouldn’t start the process.
It takes for ever, if prices go down between offer and exchange, drop the offer to reflect the market or drop out. If you can get the agreement in principle you can always revisit that as well if rates get better.
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Go large on budget as people tend to regret not going more larger. Then hamma that gidge in the ass.
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a market drop of 10% over eg 12 months? virtually impossible that u would spend more in rent unless ur renting something astronomically larger than the house u want 2 purchase
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We are renting at the moment as the chain above us collapsed. Investing the proceeds in low coupon gilts more than covers the rent and we are now chain free so can make and pull offers if we get dicked around.
Probably not going to rent for too long because per above, they aren't building many more houses in inner London. However, while the average interest rate on the in-force mortgages remains lower than the interest rate on new/re-mortgages I can't see house prices racing away.
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The market noise is general but you are a single individual so you can take advantage by finding a house that someone is prepared to sell at ‘below market’ because they are desperate or uncomfortable.
That may take some time to find and you need to get familiar with what things are actually selling for in the area you’re looking and also how long places have been on the market and the motivation of the sellers to sell
always ask - why are they selling / how long has it been on the market / have they found something / how long have they had it.
the renovation point is true for the 2000’s but less so now. I got 3 quotes for a full renovation of a 450sft flat in London - quotes consistent at £120k inc vat. Renovations have become very expensive - if you want / need to do everything - which you will in a proper fixer upper. If something has been done in the last 10 years that’s better - there’ll be hopefully decent electrics, roof and plumbing / heating
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Yeah as Parsnip says unless you are a builder major renovations in London will be horribly difficult to make money on these days. Brexit has killed that game and of course if you have to rent while you renovate the cost of paying rent and huge mortgage interest will be brutal. Living in a house that is slowly being renovated over a period of years is a total mare (particularly with kids).
Real terms prices have already dropped a lot in London so not sure there is all that much further to go to. If you find something you like and can get a bit of a deal then go for it I would say.
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Don't buy based on the market crashing/going up.
Buy on what you can afford - and if you're sure you'll be in the area for the foreseeable.
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What does this mean in practice, Catters?
The housing stock in London is notoriously expensive and sh1t
I have not once (literally) been inside a house in a vaguely desirable area of London that I thought was (a) nice and (b) priced at a level that I thought was reasonable/acceptable
What's the difference (price-wise) between a reasonable family home that you'd actually want to live in -- peak (whenever that was - assume 2020) and now? Do you have a sense?
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PS - As boomers die and their assets are liquidated when kids inherit, won't this trigger a massive sell off of BTL properties which, in turn, could increase supply and thus affect prices negatively?
Maybe this is more applicable to flats and not so much to houses?
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Why would they sell the flats?
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Canute the great BTL sell off has been under way for several years but the shortage of properties is such that it's barely been noticed. We honestly need to be building a million homes a year for several years for demand and supply to match and have prices fall meaningfully. With a growing population and what is in effect a static number of available properties it's really only going one way.
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It was over a few years rather than 12 months and rather than renting something larger than they buy it’s usually more a case of renting something more central than the area they buy in.
Plus the anecdotal stories I’m hearing about the rental market at the moment are wild. In the group I was out with the other night, one was moving after having lived in that flat 10 years after the landlord tried to put the rent up 20% at the latest renewal; another’s landlord had told them if they didn’t agree to an immediate midterm rent increase they were going to terminate when the break clause came up in 3 months’ time.
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What's the difference (price-wise) between a reasonable family home that you'd actually want to live in -- peak (whenever that was - assume 2020) and now? Do you have a sense?
The peak for houses worth around £1.5m in SE London was in 2022. They are down 3-4% since then. There was a big jump in 2020, say 10-15%, as I assume people were looking for space and small <5% increases in 2021 and 2022.
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(that's from me aggregating land registry data for SE4, SE5, SE15, SE22 and SE24)
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When looking at affordability its important not to exclusively focus on highly leveraged first time buyers. Plenty of buyers have cash, or high levels of equity. The examples of needing £900k in loan to buy a £1m place is nowhere near reality for nearly everyone. Even those buying a £1m place.
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True I do work for people who need to borrow a few million to buy their even bigger posher house in London. I did something recently where I read the mortgage offer three times to check that the monthly payments really were over £20k.
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When you've put an offer in would you instruct two brokers to go to lenders and see what you can get? Or just one?
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Clive - I’d look to have a broker sorted before I put in an offer. I’d look for a whole of market one and also cross check with what’s available online.
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"Plenty of buyers have cash, or high levels of equity."
But to realise that equity they need a buyer, and many from the pool of buyers have had their purchasing power restricted by mortgage costs.
Still, we aren't exactly seeing much desperation yet from sellers. Let's see how it goes as more and more people move off their fixed rates. The housing market is very slow to change direction, so it may just be a couple of years of slow falls. Fine by me if that happens.
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Clive, depending on where you are looking you might not be able to put an offer in (or at lest have it taken seriously) unless you have the agreement in principle from your lender in place so you are best to speak to a broker sooner rather than later.
The vendor's agent will probably ask for details of your funds on the offer letter. I think they did when we had an offer on a place and I think they checked pretty quick as well.
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