2 Buy Or Not 2 Buy

[MartynGT4]

Tough man, tough. "Devastated" is not a destination you want to send a loved one!

The very least I think you should consider doing - if you haven't already - is negotiating more of a discount.

Also the £5K deposit. I said it already, I don't like that.

If that is because that is all you have sapre at the moment my advice would be 'don't buy' because it would suggest you don't have much of a safety net in things go pear shaped.

House prices crashing is something we hope for here but is not guaranteed but there seems to be a broad concensus that the country will go into recession in the next couple of years. That could mean pain.

You have to weigh up the pros and cons - an obvious statement if ever there was one! If partner is likely to be devastated then I think you should prepare your evidence for not buying. 

<{POST_SNAPBACK}>

Its tough alright, kids will be disapointed too.. very hard decision to make this.

We have a £10k deposit, not £5k, although I agree its not a lot if the prices do start going south. I'm already borrowing with a 95% LTV so the rates i'm getting offered arent the best. If the house prices do head sourth then my LTV will go through the roof and so will any chance of getting a better mortgage rate later through remortgaging etc.. If I do go ahead, at least I have a damn good job with minimal redundancy risk and have skills that are in great demand.

[DonnieDarker]

Fair point.

I am a little fixated with 15% deposit for some reason. Too much Alvin Hall I guess!

From what I have been led to believe you can get more competitive mortages if you put down 15% and its a nice safety net to avoid neg equity if you are forced to sell.

But you're right. The main thing is to factor in a worst case scenario for interest rates. I pray interest rates get that high. I've saved hard for years and although the mortgage repayments would be massive at least the money I have stored away in savings would also be growing.

[zag2me]

I am going to say what I always say. A house is for living in, not as an investment. If you need somewhere to live, think you are getting a good deal compared to other similar properties, and can afford the repayments with a significant interest rate rise. Then go for it. The only thing you will loose if the market does crash is "Equity" If your not going to move or be forced to sell the house, then this means nothing to you.

[Catch22]

Don't worry folks, I don't work for Wimpey..

its a lot of money and the market is scary.

<{POST_SNAPBACK}>

YOU SAID IT... AND THEY KNOW IT.

thats why you got 35K off and new carpets thrown in.

The economy is contracting, the populace is up to its eye balls in debt, unemployment is growing. Household expenditure is raising, gas, electric petrol,etc etc. And on top of that "Grasping Gordon" will need to raise taxes to pay for his cocking up of the economy.

If you cannot see the wood for the trees, it is because you are letting your heart rule your head. So stump up your 5% deposit, and hang on because you have just bought your ticket for the "Biggest Financial Bubble in History" rollacoaster ride.

[munimula]

I am going to say what I always say. A house is for living in, not as an investment. If you need somewhere to live, think you are getting a good deal compared to other similar properties, and can afford the repayments with a significant interest rate rise. Then go for it. The only thing you will loose if the market does crash is "Equity" If your not going to move or be forced to sell the house, then this means nothing to you.

<{POST_SNAPBACK}>

In 5 years time when the shine has come off his not-so-new Wimpey home he'll be wishing he can move but buy today and you might find you can't! Those new builds fall apart after a couple of years. The least you can do if you are going to go new build is buy a detached, wouldn't touch new build semis or flats with a barge pole.

[DonnieDarker]

I am going to say what I always say. A house is for living in, not as an investment. If you need somewhere to live, think you are getting a good deal compared to other similar properties, and can afford the repayments with a significant interest rate rise. Then go for it. The only thing you will loose if the market does crash is "Equity" If your not going to move or be forced to sell the house, then this means nothing to you.

<{POST_SNAPBACK}>

Hm. Not quite that simple though is it? Timing it well (or badly) can mean a substantial amount of paper cash being saved or spent.

Take my example for instance. I shan't bore you with details, but the difference between me buying last summer and waiting until 2007 could save us in excess of £50,000. (additional savings + house-price reductions).

That £50,000 won't be equity. It will be money remaining in the bank collecting interest. It's a life changing amount, the difference between sending a kid to private school or having a lifetime of family holidays.

To someone like me, this is one of the only opportunities in life I can see saving that amount of cash. I can't be alone?

[fatfreddie]

Is your job secure for the next 5 to 7 years. If you were made redundant would you have to move to gain employment elsewhere. Would rent cover your mortgage. Also if there are a number of places being built prices could vary if there are unsold buildings eg last one end could get a bargain. What is the price compared to other houses in the area and also land size etc. What would the price be if property went down by 30 per cent in the coming years. Also work out what would be my mortgage if interest rates rose. normally these days they give you a starter rate but if you suddenly found yourself paying 2 %. If it was the late ninties I would say sure, then they would have been people fighting over it and the rise would have rocketted. With no buyers what would happen.

Do the 3 R's Research Research Research. Also who is liable if the builders go bankrumpt . Wimpey ?

As its a buyers market those places are going to be around for a while. Also another tip what sort of buyers are buying in there. FTB or BTL. A flood of BTL resales after the houses are built will not do your valuation any good. Another tip look for a house which is similar 5 or 10 years old one that you can renovate over time for $150 K. For example you can add value. There should be some bargains coming up in the near future.

[CrashIsUnderWay]

accoring to this the answer is:-

NO

The house is TERRIBLE value for money, and you will probably regret buying it as soon as you move in.

[Catch22]

I am going to say what I always say. A house is for living in, not as an investment. If you need somewhere to live, think you are getting a good deal compared to other similar properties, and can afford the repayments with a significant interest rate rise. Then go for it. The only thing you will loose if the market does crash is "Equity" If your not going to move or be forced to sell the house, then this means nothing to you.

<{POST_SNAPBACK}>

It ain't that simple.

Lets take Japan as an example:

These figures were extrapolated from data taken from Japanese Property Crash

1980's average house in Tokyo cost £126K

peaked 1991 same Square Footage £354K

14 years after the peak same Sq Ft £202K

Now who in Japan would have believed in 1991 that their housing market would crash. And that 14 years later prices would STILL be 43% lower than at their peak. Obviously not the Japanese or they would not have driven prices up to that level.

Just for sake of argument lets compare Martyn's figures to the above. 200K with 10K down =190K mortgage as against a revised mortgage of 103K after the 43% correction. Now having 82K extra mortgage to finance sure ain't peanuts.

There are all sorts of arguments why you should not always believe property prices will always bounce back. The creation of wealth is shifting to China and India, and taking with it the jobs that sustained high house prices, Be warned.

Edited August 17, 2005 by Catch22