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Rebeccajohnston

Sell In London, Buy Outer

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Hi All,

Read quite a few posts about imminent collapse in London house prices...

We have recently put in an offer on a house in Harrow (nearer to Wembley), but is having second thought.

We have recently sold our 2 bedroom flat in the same area (we bought in 2007).

It went for more than what we paid for it (just) and thought we couldn't bear looking back. We liked it but the recession really scared us and got me thinking.

We are hoping not to make the same mistake as we did before, do you think we should look elsewhere, perhaps further afield (into Reading / Hertfordshire). Part of me is thinking it would protect our money better than Harrow...

Any thoughts welcomed!

Thanks!

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We are open, but would require good access for work in London. I know Wiltshire has some good cheap housing, but seems like South East (Berkshire, Kent and Surrey) has better transport?

I don't know whether or not to believe the housing indicators - they all said outer Metropolitan (?) might mean I get better value. We have a daughter and one coming up, renting may not be practical (and rent is so expensive!)

I can't see how house prices could fall given we cannot build more!

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We are open, but would require good access for work in London. I know Wiltshire has some good cheap housing, but seems like South East (Berkshire, Kent and Surrey) has better transport?

I don't know whether or not to believe the housing indicators - they all said outer Metropolitan (?) might mean I get better value. We have a daughter and one coming up, renting may not be practical (and rent is so expensive!)

I can't see how house prices could fall given we cannot build more!

There is no reason that houses prices (in fact, all prices) can't fall, if there are no buyers (maybe everyone will leave London!) and owners can't service their debt's (therefore needing to sell or getting repossessed). Admittedly, it would take some pretty big changes to cause a major correction in London and I have to admit that I also see the government doing everything they can to try and stop any correction in the short run. Maybe something like mortgage holidays (didn't they do this in Ireland! Didn't help there much!), Banks just not selling repossessed properties (Ireland, Spain and the US). I even see the government trashing the pound, after all with public and private debt so high, everyone would love a bit of high inflation! Wouldn't they? This time it is different, of course...

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There is no reason that houses prices (in fact, all prices) can't fall, if there are no buyers (maybe everyone will leave London!) and owners can't service their debt's (therefore needing to sell or getting repossessed). Admittedly, it would take some pretty big changes to cause a major correction in London and I have to admit that I also see the government doing everything they can to try and stop any correction in the short run. Maybe something like mortgage holidays (didn't they do this in Ireland! Didn't help there much!), Banks just not selling repossessed properties (Ireland, Spain and the US). I even see the government trashing the pound, after all with public and private debt so high, everyone would love a bit of high inflation! Wouldn't they? This time it is different, of course...

Good post. The long and short of it is that these prices have been at least partially borne out of households with £50k incomes being allowed to borrow £350k from the bank. Now the banks are starting to refuse that type of request, it takes a lot of demand out of the market. The sellers won't reduce their prices immediately, of course, but a lot of people are finding themselves way short of where they need to be.

This is the only thing that can cause the correction now. Interest rates are now forecast to stay low in the long term, although even small rises will catch out a proportion of highly indebted borrowers.

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My thoughts would be that you should move to get benefits, not protect any money you have in the property. If you are not going to move from the property you are buying for a while, then short term movements in the market are irrelevant. What is more relevant is transport links (not only for work but being close to friends/in-laws/family, etc), schools and how much space you want for the family, and knowing that you can service the mortgage at 7% interest rates, save cash for any maintenance and slush fund for job losses and other life-changes.

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Thanks for the replies. Employment seems strong (or am I being misled) and perhaps London would always attract people? I see the point re. long term living and that is the plan, that's why we wanted to move out of London to get more space, but do not want to lose all our money in places where house prices fall even now.

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The South East bubble is driven by London prices. So, if London does fall substantially then all the areas around London will fall.

My guess would be that the areas of London and the SE which will fall most will be the ones that people didn't want to buy in anyway and the same will be in the commuter belt around London.

That and costs of commuting/council tax and schools will also pay a part.

I lived in London during the big 90's crash so I know how bad / good things can get with housing prices there. If you really do think London prices are going to crash you could consider selling your flat, putting your money in the bank and then buying in a better part of London if things crash.

Edited by Flopsy

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Thanks for the reply, that's what we are thinking about, however no one is 100% right and I would not want to be holding cash whilst house prices shoots up and not being able to go back on the ladder. The problem is space is really not enough where we are and we need extra space as baby no. 2 is coming very soon.

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Looking at the market right now, holding cash might not be a bad thing, although you might want to consider alternative investment opportunities rather than just holding cash. Or you just take the long term view, get a place that you will be happy for 10+ years and know that you can service the debt given the possibilities of what life might throw at you - i.e. ensure you have buffers in place for job losses or medical / life changing emergencies and then pay off the debt as much as possible.

This will iron out any short term paper gains or losses, less bragging rights at the dinner tables, but then who really wants to be that guy/gal?

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Looking at the market right now, holding cash might not be a bad thing, although you might want to consider alternative investment opportunities rather than just holding cash. Or you just take the long term view, get a place that you will be happy for 10+ years and know that you can service the debt given the possibilities of what life might throw at you - i.e. ensure you have buffers in place for job losses or medical / life changing emergencies and then pay off the debt as much as possible.

This will iron out any short term paper gains or losses, less bragging rights at the dinner tables, but then who really wants to be that guy/gal?

I agree this is the sensible view, especially for somebody who is 'trading-up', so has presumably made some paper gains from HPI to put in to the new place.

I struggle with the idea of doing that myself. After seeing this massive bull run probably put prices up 300% while I stood on the sidelines, I'd be mortified now to buy at these prices, giving someone else a massive profit, and then see my own 'investment' fall back over the next few years.

I agree it doesn't matter as long as you stay in for the longer term, but I'd much rather buy as close to the bottom of the cycle as I can. If I had something to sell, I wouldn't mind so much.

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That's sort of my position, I've a place to sell and only slightly upsizing if I need to, so market neutral-ish, and it is only regional fluctuations (london/surrey) that could make a differrent. Although it is better if prices fall consistently - less fees/stamp duty, etc.

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Thanks, my thought is that if house prices is to go up 2.5% - 3% next year and if we sell now and hold cash, we are not getting any benefits. Perhaps, put it in a good safe investment...however, have to consider renting in the mean time, renting locally would mean close to £15k a year and we lose the flexibility if we see something in October.

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Thanks, my thought is that if house prices is to go up 2.5% - 3% next year and if we sell now and hold cash, we are not getting any benefits. Perhaps, put it in a good safe investment...however, have to consider renting in the mean time, renting locally would mean close to £15k a year and we lose the flexibility if we see something in October.

Unfortunately, because of the boom/bust way that the government likes to run the housing market, you are unlikely not to lose some money in the short term at some point.

A lot of people on here have stayed out of the market for many years because prices have been far too high. This has turned out to be a bad strategy because if I had invested £250k in my area in 2008, it would have doubled by now if I was able to sell it before prices fall. Similarly, a lot of people have bought at a peak and then seen a lot of their money wiped out.

Everybody wants to sell high and buy low, but no one will be able to give you a true answer as to when the correct time to do that will be. A lot of people seem to think we have hit the peak now, but if you sell now and the government conjures up a bit more magic to keep things going until next year's election, you might even find there is another few % HPI to go yet.

Unfortunately, it is the same boring advice that always works. Buy something that you will be happy living in for a reasonably long time and buy it on a mortgage that you will still be able to afford if interest rates go up. That still doesn't do much to ease the psychological pain if you buy a house for £500k and two years down the line it is only worth £350k, but that is the game that the government wants us all to play and at least it means you shouldn't lose the house altogether.

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