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Jake1734

Buying In South East - Stupid Idea?

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Hello folks!

Currently living at home just outside toddington with the 'rents still. I'm 24 and ready to be buying/renting now.

Been looking at buying for last six months but the prices are literally crazy and seem to be going up and up way out of kilter with average earnings. I'm referring to the luton/flitwick/dunstable/leighton buzzard areas.

Everywhere is going for asking price or above, and the rises even month on month are huge with no issue selling anything for the sellers.

This has made me reconsider and possibly rent, hence saving more to put down when I do buy.

What are peoples thoughts, should I just jump on the roller coaster and commit to the ups and downs?

Or rent and save, potentially saving thousands on interest but risk being priced out of market (is this possible, do enough people earn the income required to pay for a 240k 2 bed house? I think not)

All input much appreciated.

I keep offering on places but am just considering giving up on buying for now and renting somewhere cheap! Approved for a 198k mortgage, and enough to put 40k deposit plus fees. Hence looking at things like thee around 235 but both sellers have rejected my offers :/

I offered full asking price with proof of deposit and mortgage agreement on this and it's gone up with offers over £240, just mad;

http://www.rightmove.co.uk/property-for-sale/property-57299996.html

Places like this, 240 for a 2bed. Also offered 235 and sellers want asking price.

http://www.rightmove.co.uk/property-for-sale/property-52238425.html

Maybe a rush of LLs buying pre stamp duty change? Or a January rush?

I'm stuck where to go with it!!

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"Everywhere is going for asking price or above, and the rises even month on month are huge with no issue selling anything for the sellers."

So why is my neighbour's bungalow in SW Beds still on the market after 9 months? £350,000 might tell you why.

Biggest laugh of the day, thank you for cheering me up for free.

PS> Went past Brown and Merry's in the town earlier. Only one "agent" in there, busily occupied sweeping up the tumbleweed. Was that you?

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Good luck! I gave up the idea of buying 3 years ago and these example just remind me why! LOL

You are 24 but you don't say what you earn? what multiple are you looking at for these 'great' properties?

Stop it man, you're killing me.

:lol::lol::lol::lol:

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"Everywhere is going for asking price or above, and the rises even month on month are huge with no issue selling anything for the sellers."

So why is my neighbour's bungalow in SW Beds still on the market after 9 months? £350,000 might tell you why.

Biggest laugh of the day, thank you for cheering me up for free.

PS> Went past Brown and Merry's in the town earlier. Only one "agent" in there, busily occupied sweeping up the tumbleweed. Was that you?

Because the property is wildly over priced, more than BTL investors generally are attracted to and maybe a less than desirable location? At a guess!

Interesting replies. Not sure what I said to obtain some of the responses was genuinely provoking discussion....

But glad I gave you all a laugh!

Look at the market in flitwick/leighton buzzard area and nothing around 230 is hanging around long. Houses in dunstable have been selling for 10%+ over guide prices. Places within commuting distance of London are in demand currently. In the last six months prices for 2 beds are up circa 20k on a lot of them. No way has it crashed here, not sure about other areas as I only look km said region.

Not sure if you are questioning if I'm an estate agent, I'm an engineer and work in heathrow so commit down/round m1/25 every day.

Regarding questioning of earnings, borrowing 198 is four times my income. Renting these properties would be the same cost as mortgage.

Eg circa £800 a month.

Any more thoughts?

Or just laughs all round? :S

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Oh no. At this rate you may have to wait until after the crash to buy

Pay attention 'til I die:

Approved for 198,000 mortgage, so I'd bet he earns 39,600.

49600 would be more accurate.

I'm very taken back with all the hostility here, have I said something to upset you all?!

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49600 would be more accurate.

I'm very taken back with all the hostility here, have I said something to upset you all?!

Don't worry about it, a lot of head in sand types on here. 25 year old colleague went to view a 2 bed flat that had 1 external photo on rightmove, no floorplan or description. There were 30 others waiting to view. £350k in south bermondsey. It's nuts. I've been waiting 7 years and regret not buying in 2009 thinking everything was overpriced. I'm certain it will crash but even a 50% fall (unlikely) will only take us back to 2008 in london and it could be years before that happens. Emigrating is my only option.

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I suggest you read some more threads on this site and educate yourself on the intricacies of the UK housing "market" before joining the stampede. Do not on any account listen to brainwashing of the likes of Kirsty and Phil (known on here as Krusty). :)

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I'm working on educating myself and reading up hence I am here! :)

It's just hard to see it all come tumbling down with so much money being lent and so many people wanting prices to stay high

Cheers!

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I'm working on educating myself and reading up hence I am here! :)

It's just hard to see it all come tumbling down with so much money being lent and so many people wanting prices to stay high

Cheers!

Jake - don't let the doom mongers put you off. You may well be making a mistake buying. Personally I thought that it would all come crashing down when the average family man on a single average income couldn't afford a small terraced house that I grew up in. I was wrong and you now need to be paying circa £150k for those houses (in the NW) which is probably 7 times average earnings in the area.

Make no mistake; prices are being propped up by low interest rates and they will come down if (and that is looking like a big if these days) interest rates go back up. There will be a lot of distressed sales particularly if rising interest rates also send employers to the wall as well. With my track record I shouldn't offer anyone advice but I do believe that when the BTL tax kicks in, landlords will have to sell as their assets will become liabilities. The portfolio landlords will have no choice but to go bankrupt (with distress sales) or emigrate because they can't afford to sell because of the capital gains tax due and they don't have the cash as it's been spent on the deposit for the next property.

Personally, unless you see a proper bargain, I would sit on your hands and let the BTL tax changes bed in and that market unwind. Supply will exceed those able to buy (which is the limiting factor to potential demand) driving down prices. You do not want to be stuck in a house that you can't sell due to negative equity. It does exist and is long overdue a return.

What ever you decide to do, good luck.

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49600 would be more accurate.

I'm very taken back with all the hostility here, have I said something to upset you all?!

Well, seeing that you are in the top 5% of earners in the UK (well done on that), I say go for it. If it did come crashing down (come on, how likely is that? And remember you are asking for housing advice on HPC) you would just cry 'I only wanted a home and the nice mortgage broker said that I could easily afford this'. After that the taxpayers (i.e. us) would help pay the interest on your mortgage until you were back on your feet. So, no worries. As sPinwheel says, don't forgot to offer 10% over the asking price!

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49600 would be more accurate.

I'm very taken back with all the hostility here, have I said something to upset you all?!

I wouldn't worry about the hostility from some quarters, a lot of people on here are pretty hacked of (with good reason in many ways) about the way that things have gone in recent years, and sometimes that's reflected in the way they react to people looking to buy.

In terms of your situation, I certainly don't envy you. The level of pricing makes it a nightmare for FTBs in the South East, and knowing what to do for the best is tricky. Prices look insane. but as you mention, the powers that be don't seem too keen to see them drop. Personally (and there are many valid and often different views on this issue), I think that short of mass unemployment, it's all about interest rates. While they stay ultra low (I'm thinking 2.5% ish or less) we're unlikely to see significant price falls. If we see 5%+ interest rates, there will be carnage in the market as people just wont be able to service the debts at those rates. There is of course the argument that the very fact that 5%+ interest rates will cause carnage means we're unlikely to see that happen, but personally I'm far from convinced by that approach.

What that means for you depends on a number of factors that are unique to you. How secure is your job ?. How easy would it be to find something else paying similar money if you lost your job?. How long do you want to stay in the house you buy now?. What are your longer term plans in terms of what area you want to live in?. Do you want to start a family, and if so, when ?.

Your income is strong enough to support the kind of borrowing you're talking about. At 49k, you're looking at take home of close to 3k per month (perhaps less if you're paying into a pension). If your job is secure, the initial Monthly payments are not going to be a huge issue, and you can mitigate interest rate risk by taking a long term fix (there are 10 year fixes at about 3.8% for 80% ltv). You're also in a strong position in the sense that you''re looking at 2 bed houses, rather than pokey 1 bed flats. The second one you linked to may not be a dream house, but is has loads of space for you, would be relatively spacious even for a couple, and even having one child in there would (while perhaps not ideal) be far from a disaster. That means that while it would be a bit of a pain financially if you were to get "stuck" there due a drop in value, it would be far from the end of the world in terms of still being able to enjoy life.

Personally (and this is a very subjective decision that only you can take rather than being influenced by strangers on the internet!), if my circumstances were similar to yours, I'd probably bite the bullet and buy (paying within reason whatever I needed to to secure the right house) if (and only if) my job was secure (and ideally if I was confident of being able to get another one paying similar money if I needed to) and I was happy to commit to the area long term. I'd go for a long term fix (probably 10 years) and then just forget about house prices etc. and enjoy life. But If I was worried about my job prospects, I'd be much more cautious about taking on that kind of debt.

Yes, a house that you buy might fall in value, but you'll be paying off a mortgage , and moving towards a point where you eventually get housing that's close to free for the rest of your life. Given what you can afford (if you were talking about a studio flat my view might be very different), I'd probably rather take the (very real) risk of being "stuck" in a house worth less than I paid for it than I would take the equally real risk that prices keep going up and being priced out (or being able to afford much less) as a result.

Whatever you decide, good luck. Like I say, I don't envy you, and wish you all the best.

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I stumbled across the blog linked below today and thought of this thread:

https://surplusenergyeconomics.wordpress.com/

I've not read much of it yet but within The Ponzi Economy Part1 I read the following; which I could relate to. As has been pointed out, Jake is in the top 5% of wage slaves but the links that he shared didn't really match his his high earning status (although I appreciate that this would be his first home). To me they looked more like a starter home that someone on a more modest salary should be able to aspire to.

Britain is a good – by which, of course, I mean a bad – example of this delusion. Property prices have escalated, which can make a theoretical national balance sheet (and the balance sheets of individual households) look comfortingly impressive. Take away the purely notional and unrealisable value of the housing stock, however, and you arrive at a situation in which most of the asset side of the equation does has no saleable value, whilst the debts and other liabilities are all too real.

I use Britain as an example of this situation because the illusion of prosperity founded on inflated, unrealisable asset values masks a very hazardous reality, in which debts are enormous, reported output numbers flatter to deceive, the structure of the economy is seriously unbalanced, and a dependency on sustaining consumption by selling assets and borrowing from abroad is not sustainable within any realistic definition of that term.

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Jake, are you sure rents are going up in your area? We have been looking in some of the areas you mention (to buy) and have been renting. Our rent didn't go up after the first year and I can see properties that we could rent for cheaper than buying (at least with a long fixed mortgage).

Really sympathise as ex-Londoners we are one of the reasons house prices are going up. Anything commutable to London is skyrocketing in price. Leighton Buzzard was where friends looked 2 years ago so too late to buy there. Even further out in Milton Keynes house prices have gone up.

Around Heathrow (where you work) has long ceased to be affordable. We looked in Surrey over 10 years ago and even after 2008 when some house prices stagnated in the SE that area stayed out of our reach price-wise.

You do have a small advantage in that you don't need to commute to London. I gather you drive to HR for work?

My only suggestion is that you draw a circle around where you work and then investigate any commutable areas that don't have good links to London by rail or road.

Edited by Flopsy

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PMF,

I haven't read the link yet, will have a scan later.

They are certainly nothing special.

With two incomes I guess I would aspire to more but it's me going at it alone and it's a difficult market. That property in Leighton Buzzard has now sold for a 'considerable amount over asking price' according to the EA. They are pushing towards the max I would want to commit to and are certainly nothing exciting just fairly nice two beds in okay areas.

Flopsy,

Nice to hear from someone who can relate to the madness!

I'm not sure on rents going up, I haven't followed the rent market closely at all. My aim has been save, save, save and commit to the scary figures of debt that is the 'norm' to obtain home ownership. Only over the last month has my mindset changed on this and I'm not convinced it is the route to progress currently.

Heathrow and surrounding area are crazy prices, way out of my affordability for anything I would want to own. However renting (and maybe a shared rent with a friend would work).

I currently commute from Toddington to Heathrow by motorbike, it's about a 90mile round trip and the bike is doing 90mpg. So less than a fiver a day at current prices!

With regards to rent vs mortgage do you mind going into any of your calculations a bit more?

A 200k mortgage at 3ish% would be circa £780 monthly payment, rent on those would probably be around £750.

Difference being you've thrown circa £45k at them to actually'own' them plus stamp duty/maintenance/repairs/re fits.

IF the rises continue obviously buying is sensible, if they don't it's a big punch in the face from Mr. Negative equity and a rather depressing picture!

With regards to work security, it seems okay for now. Maybe not the most secure job in the world but is anything in this day! I feel I could move around and maintain the wage or quite close to it. May involve a relocation but who knows!

Cheers

Jake!

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Jake1734 it sounds to me like you're currently able to keep your living costs low compared to your salary, which is ideal for saving.

Your sums are interesting but actually there's no way interest rates are going to stay low for the next 25 years. The odds of that are just eye watering. Think about what the overall purchase cost of the house will be if you factor in 25 years of interest rates at a more realistic 5%+, as well as stamp duty/ maintenance / repairs / solicitor's fees etc etc.

Then compare that to the cost of renting for the next 12 years while saving the money to buy your first house with cash. By which point it's likely that house prices will be a little more sensible and you'll (hopefully) be earning much more.

Of course with this strategy the key is to keeping your renting and living costs as low as you can in the next decade, to enable you to save a large sum. Yes there will be some sacrifices but imagine buying your first house with cash. Or maybe with a huge cash deposit and small 50K mortgage worse case scenario.

No asset class goes up forever. Not even UK real estate.

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Well, seeing that you are in the top 5% of earners in the UK (well done on that), I say go for it. If it did come crashing down (come on, how likely is that? And remember you are asking for housing advice on HPC) you would just cry 'I only wanted a home and the nice mortgage broker said that I could easily afford this'. After that the taxpayers (i.e. us) would help pay the interest on your mortgage until you were back on your feet. So, no worries. As sPinwheel says, don't forgot to offer 10% over the asking price!

Exactly.

And the leaders of breakdown will be fully vocal on HPC claiming the 'pure innocence' of the buyers.

Including the ones who claim they try and convince their HPI-forever addicted mates that HPC isn't full of loons.

Yeah, don't listen to the HPC doom-mongers. Go go HPI+ and no HPC.

You realise that BTL stamp duty is being hiked in a few weeks, and BTLers are already beginning to sell because of tax squeeze ahead?

Get in there.

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Jake1734 it sounds to me like you're currently able to keep your living costs low compared to your salary, which is ideal for saving.

Your sums are interesting but actually there's no way interest rates are going to stay low for the next 25 years. The odds of that are just eye watering. Think about what the overall purchase cost of the house will be if you factor in 25 years of interest rates at a more realistic 5%+, as well as stamp duty/ maintenance / repairs / solicitor's fees etc etc.

Then compare that to the cost of renting for the next 12 years while saving the money to buy your first house with cash. By which point it's likely that house prices will be a little more sensible and you'll (hopefully) be earning much more.

Of course with this strategy the key is to keeping your renting and living costs as low as you can in the next decade, to enable you to save a large sum. Yes there will be some sacrifices but imagine buying your first house with cash. Or maybe with a huge cash deposit and small 50K mortgage worse case scenario.

No asset class goes up forever. Not even UK real estate.

This is the dilemma I am facing. Should I continue to live cheap and invest my savings in the hope that at some point over the next few years prices come down significantly and I can buy outright or have a very small mortgage. Or should I buy now and mitigate the risk of interest rate rises as best I can by getting a ten year fixed rate mortgage? It's a tough call. I really want to put down some roots and have place that I can call my own but the fundamentals haven't changed and by every measure you care to look at the UK housing market looks like a huge bubble just waiting to burst.

I have a lot of sympathy for the OP as I am in much the same position myself - and I live in the same area (Milton Keynes) - although at 41 I'm considerably older - so I don't have time on my side.

Edited by Priced_Out_GenXer

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