Jump to content
House Price Crash Forum
Sign in to follow this  
Space Cadet

Should I Buy?

Recommended Posts

Right,

I'm preparing for a flaming here, but just want peoples opinions on the following:

2 bed terrace house in a nice location, good sized living/dinning room, small garden, adequate sized kitchen, in Devon

Asking price £130,000

This place is suitable for my needs for the foreseeable future in terms of size. It needs some work, principally new windows/doors, redecoration throughout, maybe new kitchen, and eventually I would want to knock through the wc/bathroom. The house is a repossession and has been on the market for three months, had one offer which fell through when a chain collapsed (according to EA so taken with a pinch of salt). I’m a FTB and want this place to live in, not for BTL.

IMO the asking price is too high when compared to other properties in the road (one on at £137K few doors down, with garage, new interior, DG, etc) so there is definitely room to beat them down on price. According too www.houseprices.co.uk, the ceiling price for the road was £140K in march 2005, all the houses are the same style and size.

I think vendor would accept an offer of 115K, which is my top price anyway. I start my offers at 100K. At 115K it’s a little over 4.5 times my salary, repayments would be £150 more than my current rent and manageable. I need to factor in some higher IR (6-8%) to see what happens with the numbers, but think its probably still not unreasonable.

I’m about as secure in my job as I’ll ever be. I am in a good position to increase my earnings above inflation, and would think the debt burden of such a house would not significantly increase if IR where to go up (unless I am made redundant – a risk that I’m prepared to live with).

The latest round of house stats would indicate some price drops in this area. They’re certainly not rising at present. If I purchased at 115K, this is 85% of asking price. Working on a worst-case assumption of 30% decrease in all prices, this house might be worth 91K at the bottom of the cycle. I would quite happily start a family in this house, so probably not looking to move for at least 5 years plus.

Should I buy? Anything fundemental Ive missed?

Share this post


Link to post
Share on other sites

If there is a down turn you will be in negative equity and unable to borrow any money until houses are this high again.

That means you will miss the chance to invest in the next housing boom.

If you buy at the top of the market you must be willing to accept that at no point in your life are you likely to make any capital gains from home ownership.

Just a thought.

Share this post


Link to post
Share on other sites

What size deposit will you be able to put down?

Also remember that should house prices drop they will not drop at the same rate across the country. If this is especially over valued for the area you could see a more severe correction.

Have a look on houseprices.co.uk....what was these housing selling for in 2000/1? Have they increased at the same rate as other local areas or do they look more over valued than other areas?

Nobody has a crystal ball...but my rule of thumb is that I wouldn't buy anything unless I could easily manage the house value dropping to what it was worth in 2000/1. That may be over or under optimistic but like I said ..nobody has a crystal ball and this is just my particular rule of thumb.

Good quality housing will hold it's price better in a correction.

BUT in HPI even very poor areas can become over inflated and will be hit very hard in a down turn.

There are still some FTB out there who have been pushed to the very bottom of the housing rung because of affordability. This is putting some upward pressure on very small 2 bed terrace starter homes and IMO they are now more over valued than 3 bed semi etc.

It sounds like you could afford this but be careful...if this is the last affordable place in the area it could well be over valued at the moment and would drop sharply in a correction.

Share this post


Link to post
Share on other sites

2 bed terrace house in a nice location, good sized living/dinning room, small garden, adequate sized kitchen, in Devon Asking price £130,000

The latest round of house stats would indicate some price drops in this area. They’re certainly not rising at present. If I purchased at 115K, this is 85% of asking price. Working on a worst-case assumption of 30% decrease in all prices, this house might be worth 91K at the bottom of the cycle. I would quite happily start a family in this house, so probably not looking to move for at least 5 years plus.

Should I buy? Anything fundemental Ive missed?

Sounds very nice. Your first home will always seem very expensive at first. At the end of the day it will be your home. Buy it and be very happy. Although I would try and knock them down they can always say no.

Share this post


Link to post
Share on other sites

Read this:

http://www.olis.oecd.org/olis/2006doc.nsf/.../ECO-WKP(2006)3

We are at the top of the biggest consecutive growth in real House Prices than at any point in the last 35 years. And its affecting more countries at the same time than ever before.

Accross all OECD countries involved in this study prices have risen over long periods 37 times before and on 24 occasions there has been a subsequent fall.

If you still like your house and want a home you can see yourself living in for 10-15 years then by all means go for it.

But if you find that in two/three years you're new house is worth 30% or 40% less than you paid then don't be suprised. It should pick up value again eventually... but you might have been able to buy an even bigger and nicer property if you waited.

- pye (property speculation ninja :ph34r: )

Share this post


Link to post
Share on other sites

I think you should look at www.houseprices.co.uk and see what price this property was in 2002. Use this as a guide to what they MAY drop to over a period of time.

If you cannot wait then dont mess about. Go in a with a 'take it or leave it offer'. Tell them your a FTB and can move quickly and your offer is £107,000. Its a straight yes or no. If they refuse and come back later then you will drop the initial offer in value.

Its a business deal. The house is NOT walk-in-able. It needs lots of work. Where does he propose you get the cash?

If the ceiling was £140K then how much would all the work cost? £25K?

Try your luck... they need to sell it more than you need to buy it.

BTW The way the cycle goes you would not get the price you paid for the house for another 10-12 years should history repeat itself. If you can stay there for that long then fine. The only equity you will have is the amount you have paid off the mortgage in the mean-time.

If you are looking at IO mortgage.

DONT DO IT!!!!!

Good luck whatever you may do!

TB

Share this post


Link to post
Share on other sites

Sounds very nice. Your first home will always seem very expensive at first. At the end of the day it will be your home. Buy it and be very happy. Although I would try and knock them down they can always say no.

Now that has GOT to be an estate agent speaking! Urrg.

Wonder how he sleeps at night, knowing the rest of teh population consider him to be lower than whaleshit...

Share this post


Link to post
Share on other sites

If you are looking at IO mortgage.

DONT DO IT!!!!!

Don't worry, would never consider anything but some form of capital repayment.

Not many of this style listed on houseprices.co.uk. Price in mid 2003 for an idential house was £93,500. Hard to make a comparison before that as none listed. Other houses (in different style/area) which sold mid '05 at 140-150K were 85K in mid 2001 and 95K mid 2002.

Anyways, thanks all for the advice, downside risks may be greater than I anticipated. Going this weekend to have another look and roughly price up the work needed. Also need to look at nationwide figures again. Any other stats just been released for comparison?

Thanks

SC

Share this post


Link to post
Share on other sites

Check the Nationwide stats--I believe the West Country had quite large falls in 2005. Just the beginning of the trend.

This press release is probably why he's buying :lol:

Share this post


Link to post
Share on other sites

Definitely do not get IO mortgage.

It also depends how good you are with money. If your a natural saver and have no debts, then you could try to overpay as much as possible, and even if prices do drop you will hopefully beat the market down (if indeed it does go down?) You could rent a room out and make some money to keep your cocts down.

Also, are you sure you've done all your maths right? If you are renting somewhere with bills included, make sure you include exact amounts for council tax etc.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.