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dw4518

First time buyer - Should I buy now?

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Hi everyone, I've come here looking for some opinions on whether it's a sensible time to buy a house.

The house in question is a 3 bed terrace just out of London for £400k. A similar one was sold within a day after an open day and 6 offers, went for over asking price. So I immediately offered asking price on this one and got it accepted! But now I'm worried about a house price crash and found this forum.

I'd be living in it for at least 10 years. With £80k deposit my mortgage would be £320k at 1.75%

I know lots of people here are predicting a crash but I'm hoping to get some opinions on whether to go for it or hold off, and if the latter, for how long, and how much do you think it will crash by?

Most of my family and friends think that as long as you're living in it, and you take a long term view on prices, small dips won't matter along the way.

thanks! :)

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5 hours ago, dw4518 said:

I know lots of people here are predicting a crash but I'm hoping to get some opinions on whether to go for it or hold off, and if the latter, for how long, and how much do you think it will crash by?

...at least 10 years and 50% although ideally I'd prefer 80% to get back to pre-bank deregulation, normal inflation matching levels. Since the 90's the average Semi in my area has increased 700% in price and contributed absolutely nothing to society, the NHS, poverty, Crime rates, the sick or elderly needing care, education, employment or people's health or betterment whatsoever.

My £25 per hour job isn't location dependent, if the future holds more jobs being like that then that works against you getting 400k +inflation if you eventually try to sell....and don't forget the Rise of the Robots

5 hours ago, dw4518 said:

I'd be living in it for at least 10 years.

By then many Baby Boomers will be on their way out (THANK GOD) which will contribute to making prices cheaper. UK has low birth rates (as does the West in general). As the next generation I certainly couldn't give a Fig about HPI.

When I was a beginner dipping my toes in the stock market I lost £1000 on an investment of £2000 (I made it back eventually). I take it you are beginner at the housing market putting £400,000 on the table for a non-liquid investment.

There's far more to learn by reading these forums and absorbing over time than I can give you. Such as the recent thread about recent Chinese rules on money leaving the country that will affect Chinese buyers in London that were formerly causing prices to go up.

Edited by Arpeggio

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It is just too difficult a question to answer. If you had come here in 2003, asking whether you should have bought the same house for £150k, you'd have been given a resounding 'no' and for very good reason. If you had taken the advice, you'd have 'lost' £250k.

Since then, prices have totally lost the linkage with what people earn, and have now lost the linkage with what a lot of people are able to borrow. Eventually, that HAS to mean that prices will come down, but how long that will take is what is more difficult to predict...

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7 minutes ago, worried1 said:

It is just too difficult a question to answer. If you had come here in 2003, asking whether you should have bought the same house for £150k, you'd have been given a resounding 'no' and for very good reason. If you had taken the advice, you'd have 'lost' £250k.

Since then, prices have totally lost the linkage with what people earn, and have now lost the linkage with what a lot of people are able to borrow. Eventually, that HAS to mean that prices will come down, but how long that will take is what is more difficult to predict...

In 2003, I had just that conversation with a younger guy I was working with. The Office was generally split, many of us, thought things had got out of hand then. Thankfully for him, he went ahead anyway. In fact my house is now probably almost 50% up on its 2008/09 price. So we'd need a serious crash just to go back to that crazy level. House prices aren't just propped by low rates, but also by the benefits system. In the old days, if people couldn't afford the rent, then that was that; which of course helped keep prices in line with earnings.

On the one hand, we know that every time there has been a blip, rates have been cut. So yes, I can for see prices been held up by negative rates and/or more QE, or perhaps the reintroduction of MIRAS for First time buyers (that was an old tax relief on mortgage interest).

However, there has to come a time when the country wont be able to borrow at will and will have to start living within its means. At which point we will see real austerity, not the light version we have now. Whoever's in charge keeps trying to put that day off, and the longer its put off the uglier its going to be. Personally if I were younger, I'd have a go at living and working elsewhere in the world, rather than tie myself to the UK.

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On 27/01/2017 at 2:50 PM, dw4518 said:

Hi everyone, I've come here looking for some opinions on whether it's a sensible time to buy a house.

Good luck with whatever you choose to do.

I have always agreed with the observation that "advice is a dangerous gift ...", but after many years of making bad financial decisions (through refusing to participate in bubbles and get-rick-quick schemes), I feel more tempted to tell my life story as a warning from history.

More seriously, if you choose to buy, make sure you can withstand - emotionally as well as financially - historically normal interest rates, and a decent correction to prices. If you choose to avoid buying, but purely as a gamble on falling prices, then make sure you can emotionally handle the opposite.

If you hate speculation, so that you either buy to live in a home, or avoid the market entirely, then I think you have the goodwill of most of the forum members here, whatever that is worth.

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Ask yourself:

1.  Is your source of income (job, business, whatever) safe for the next 10 years?

2. Can you withstand a 7% interest rate (random figure) once the fixed interest period is over?

3. Can you find another job with similar pay in the area if you lose your job (assuming you have one)? Would you have enough money saved and/or support to keep paying the mortgage if you lost your job/source of income and couldn't find another one for 12 months?

If the answer to these 3 questions is "yes", then I see no serious reason to worry about buying.

If, on the other hand, the answer is a "no", then you might want to avoid taking on debt equal to 4 times your savings so far.

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I'm in a similar situation.  I little nervous about committing huge sums and watching it tank.

 

i thought that in 2003 and had I bought then, I'd be laughing now.  I suspect today is the same.

I'd struggle at 7% but if that happens,  the world will be in such a pickle my housing woes would seem irrelevant.  Having expected IRs to go up long ago, I've given up being naive and thinking there'll ever be a return to 'the norm'.  This is the new norm. 

 

Good luck.

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On 04/02/2017 at 7:58 AM, LittleBro said:

I'm in a similar situation.  I little nervous about committing huge sums and watching it tank.

i thought that in 2003 and had I bought then, I'd be laughing now.  I suspect today is the same.

I'd struggle at 7% but if that happens,  the world will be in such a pickle my housing woes would seem irrelevant.  Having expected IRs to go up long ago, I've given up being naive and thinking there'll ever be a return to 'the norm'.  This is the new norm.

Yes, this is the new normal of 0% IR, 0% inflation and 0% chance of house price growth ever going negative again! :P

I'm joking of course, there has been nothing normal about the last 8 years!

Edited by renting til I die
None of your bussiness!

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