I'm Afraid I've Got To Buy A Home - Goodbye Str

[lozwills]

Can't believe I'm saying this, but with the Little'un starting school next year (we have to register her by Oct '06) and having to move to a new area (where the supply of quality rentals is about 0 houses), I've taken the decision to put in an offer in on a house tomorrow (I've got a good hunch that it will secure the property) and it's certainly not what I would call a bargain -the most anyone would have ever paid for a house in the road I'm ashamed to say.

I've spent nearly two years in STR now. During this time, I've spent £40k on rent.

A house that I could have bought for £440k 2 years ago in my chosen part of this area would now fetch about 480K. So do the maths - STR has been an expensive experiment and very unsettling.

Fact is, what really gets to me is that I know the market's going to slump at some point (WHEN?) but 'real' sellers of quality houses in my chosen area are so few and far between (basically because I reckon that no one in the area can actually afford to upgrade so can't actually market their houses in the first place -only people selling family homes now are the 'new year divorce' crowd).

I'm very aware that I'm buying at historically high prices for this area - I don't believe there will be a suffient correction in the next 6 months to make waiting worthwhile (another £10k on rent as well). Area is near Esher, Surrey and I will be borrowing less than 3x salary to purchase the property.

So, given my above situation, have any of you got an better ideas? If it was just me, trust me, I'd be sitting tight, but I've got a wife and kid that now need a family home.

[Converted Lurker]

Can't believe I'm saying this, but with the Little'un starting school next year (we have to register her by Oct '06) and having to move to a new area (where the supply of quality rentals is about 0 houses), I've taken the decision to put in an offer in on a house tomorrow (I've got a good hunch that it will secure the property) and it's certainly not what I would call a bargain -the most anyone would have ever paid for a house in the road I'm ashamed to say.

I've spent nearly two years in STR now. During this time, I've spent £40k on rent.

A house that I could have bought for £440k 2 years ago in my chosen part of this area would now fetch about 480K. So do the maths - STR has been an expensive experiment and very unsettling.

Fact is, what really gets to me is that I know the market's going to slump at some point (WHEN?) but 'real' sellers of quality houses in my chosen area are so few and far between (basically because I reckon that no one in the area can actually afford to upgrade so can't actually market their houses in the first place -only people selling family homes now are the 'new year divorce' crowd).

I'm very aware that I'm buying at historically high prices for this area - I don't believe there will be a suffient correction in the next 6 months to make waiting worthwhile (another £10k on rent as well). Area is near Esher, Surrey and I will be borrowing less than 3x salary to purchase the property.

So, given my above situation, have any of you got an better ideas? If it was just me, trust me, I'd be sitting tight, but I've got a wife and kid that now need a family home.

My 2 penneth before my..ahem...beauty sleep. I`ve lived in a rented for 2 years when I initially moved back up North. We had to rent `cos 10 years ago we still had neg. eq. in our place in Ilford, Essex. Looking back we knew we were missing out on nothing, the rent just about covered the mortgage in Essex. Myself my wife and the 2 kids, (one six months the other 2) were never happier looking back. Not gonna get all hippy on you, but is that all life means these days, owning a house? Shit it`s part of how I make my living but I`ve never taken it that seriously.

[laurejon]

I think that you are in the same boat as many.

But I would consider this. You have done the selling and STR'erd.

Now you would have payed agents fees, and now will be faced with big Stamp Duty Costs, and a conveyancing bill as well.

In my opinion for what its worth is that you have done all the hard work, I reckon for sure that prices will not rise, and its a dead cert that interest rates will rise either late 2007 or early 2008.

For sure you can borrow today at less than three times earnings, but what would a base rate of say 7% do to you. That would put the mortgage rate around 9% or 10%.

A base rate of 7% would only be the average rate, yes people think that rates of 4% are real.

So for me if I were you I would hold out, rent for another couple of years. It might be hard to stomach but you will save yourself a fortune in cash, and a decade of worry when it does all go tits up.

Regards LJ

[Guest muttley]

I've spent nearly two years in STR now. During this time, I've spent £40k on rent.

A house that I could have bought for £440k 2 years ago in my chosen part of this area would now fetch about 480K. So do the maths - STR has been an expensive experiment and very unsettling.

Ok, lets do the maths.

An IO mortgage on 440k would have cost you about £1,700 per month or £40,800 for the two years you have been renting. So you are nearly £1,000 up.

Of course,you can't put a value on the emotional side of it, but don't blame the maths. This hasn't been an expensive experiment at all.

[pyewackitt]

Can't believe I'm saying this, but with the Little'un starting school next year (we have to register her by Oct '06) and having to move to a new area (where the supply of quality rentals is about 0 houses), I've taken the decision to put in an offer in on a house tomorrow (I've got a good hunch that it will secure the property) and it's certainly not what I would call a bargain -the most anyone would have ever paid for a house in the road I'm ashamed to say.

I've spent nearly two years in STR now. During this time, I've spent £40k on rent.

A house that I could have bought for £440k 2 years ago in my chosen part of this area would now fetch about 480K. So do the maths - STR has been an expensive experiment and very unsettling.

Fact is, what really gets to me is that I know the market's going to slump at some point (WHEN?) but 'real' sellers of quality houses in my chosen area are so few and far between (basically because I reckon that no one in the area can actually afford to upgrade so can't actually market their houses in the first place -only people selling family homes now are the 'new year divorce' crowd).

I'm very aware that I'm buying at historically high prices for this area - I don't believe there will be a suffient correction in the next 6 months to make waiting worthwhile (another £10k on rent as well). Area is near Esher, Surrey and I will be borrowing less than 3x salary to purchase the property.

So, given my above situation, have any of you got an better ideas? If it was just me, trust me, I'd be sitting tight, but I've got a wife and kid that now need a family home.

Hi Lozwills,

I wish you all the best in your new home and hope it is a wonderful environment for you and your family.

But... you wouldn't be posting here if you didn't want us to remind you of the HPC view so...

1) Consider that in the last ten years 1995-2005 prices of the average house have risen about 137.4% using OECD datasets. A 20% reduction is perfectly reasonable against historic trends - this would leave the profit 1995 to reduced point at still about 89%. The only people who lose out wold be the late purchasers from 2003 onwards, remember in any commodity bubble its always the last people in who take the biggest losses. The losses could be greater than this but compared to many bears 20% is quite a conservative figure.

2) Relate this 20% fall to your own situation.

A £480K property at a 20% reduction would be £384K - this would more than cover the rental you have paid to date and take into account the 2003 selling price, oh probably account for the stamp duty and solicitors fees. Remember that had you bought in 2003 that £440K property would have been 56K more than a 20% fall from today prices... that 56K would also aproximate to about an extra 15-20K in interest over the lifetime of a typical mortgage. Renting may be expensive - but you don't pay intrest on it!

3) You mention that it is the most anyone has ever paid on the road so I assume you've checked the postcode land registry data. I'd only consider it worth raising the local benchmark if you are buying the nicest house also. Don't forget this will not only be your purchase - it will create a new level for property sales in your area and will certainly therefore raise the average prices for other properties nearby. Or at least will certainly encourage the amount your nieghbours will now expect to raise, consequently if falls do start elsewhere you may find your own area has 'for sale' signs up for longer than average.

4) Remind yourself you did well to sell in 2004! A huge number of areas had 2004 as their peak and have had either small reverses or no growth since - in a lot of places you would have made the right choice. But property markets can take years to run through a cycle and its not hard to judge the peaks slighty off... this site alone has been predicting the end of HPI for at least 3 years and others for even longer.

5) Family comes first - despite all the other HPC stuff you're not borrowing over 3 times income which means you have a substantial deposit. I'd suggest if you go ahead with the purchase you get a great rate and a 5 or 10 year fixed rate mortgage which allows overpayments. You're also obviously buying with the future of your family in mind so a nice place which will be a primary residence for over ten years will provide you with a home, stability and memories for your young family which is a greater return than any gold, oil or stocks could ever give you. The facts are than money in itself will never make you happy, only the things which it represents add enrichment, if you feel the time for your family is now then make your choice and enjoy the fruits of your decision... if prices do fall for a few years then remind yourself that you've bought an environment for your family and that its asset value as an investment is secondary and will always be prone to rise and fall same as with anything else.

6) If you really think that the HPC will come or that IR's will rise then prepare yourself. Pay back your own mortgage at the most affordable rate. Maybe put together a small secondary fund for a BTL or a stock investment in case things slide as your gut tells you... it's what the rest of us are doing. At least in this fashion you might be able to latch onto the start of another stock/housing cycle curve and profit enough to balance out any possible losses earlier. You might just be lucky and find out your area doesn't lose as much value as others or at all.

All the best,

- Pye (Property Speculation Ninja )

[Michael]

yes, never previously seen in modern times ..a 10 year FIXED rate of 5% or so is available!

You must take this into account

[Given Up]

Ok, lets do the maths.

An IO mortgage on 440k would have cost you about £1,700 per month or £40,800 for the two years you have been renting. So you are nearly £1,000 up.

Of course,you can't put a value on the emotional side of it, but don't blame the maths. This hasn't been an expensive experiment at all.

He says it is expensive because he has seen his desired house go up by 40k so he has lsot 40k through bad timing.

How much would a repayment mortgage have been?

[Guest muttley]

He says it is expensive because he has seen his desired house go up by 40k so he has lsot 40k through bad timing.

How much would a repayment mortgage have been?

Why compound the bad timing by buying now?

[Badlad1967]

He says it is expensive because he has seen his desired house go up by 40k so he has lsot 40k through bad timing.

Ermmmm that's an asking price right?

What your missing here is the fact that by becoming an STR when he did he managed to realise the money. Some people now are holding out for peak prices and the houses are just not shifting.

"My house is worth £480,000."

Really? Why hasn't anyone bought it then?

Lozwills - if you want to buy now, please go ahead and buy. But please don't blame the maths. I'm quite shocked that you're willing to take such a huge financial risk for your family. I hope you don't blame them if it all goes wrong....

If it was just me, trust me, I'd be sitting tight, but I've got a wife and kid that now need a family home.

I do think it is very very sad that life in the UK evolves around this obsession with property and if you don't "own" your own home you've put your "life on hold".

There is no such thing as a forced buyer. You are making a choice by buying. Maybe a little more patience is needed?

Good luck in whatever you decide to do for you and your family.

[Pete95]

You win some, you lose some. It was probably worth the gamble STR'ing as you stood to gain a lot more than you've lost.

With the amount you are paying out in rent I'd say it was debatable as to whether it would be worth holding out another few years for prices to dip further - probably not IMO, especially as you have a family.

[billy-g]

Good luck to you mate. FWIW, my wife and I are expecting our first child. Hence why I have bought the house I move into at the end of the month.

That's exactly the same reason why 2 of my friends and my sister have bought the houses they are in. I think its a good indicator; people need more space, hence they trade up. Fortunately, here is a lot cheaper to trade up than most places. Perhaps that's the real point of why here the market is still strong.

Borrowing less than 3X salary means your onto a winner, and stability for your daughter is priceless. Mine isn't even here yet, and already I'd give her the world if I could.

Good luck in all that you do.

[Mr Blek]

The nesting instinct is no reason to go lose your head and do something daft. Your kids will be better off if you can spend more on them rather than servicing a huge mortgage and then heading into negative equity.

[Ignorant Steve]

Can't believe I'm saying this, but with the Little'un starting school next year (we have to register her by Oct '06) and having to move to a new area (where the supply of quality rentals is about 0 houses), I've taken the decision to put in an offer in on a house tomorrow (I've got a good hunch that it will secure the property) and it's certainly not what I would call a bargain -the most anyone would have ever paid for a house in the road I'm ashamed to say.

I've spent nearly two years in STR now. During this time, I've spent £40k on rent.

A house that I could have bought for £440k 2 years ago in my chosen part of this area would now fetch about 480K. So do the maths - STR has been an expensive experiment and very unsettling.

Fact is, what really gets to me is that I know the market's going to slump at some point (WHEN?) but 'real' sellers of quality houses in my chosen area are so few and far between (basically because I reckon that no one in the area can actually afford to upgrade so can't actually market their houses in the first place -only people selling family homes now are the 'new year divorce' crowd).

I'm very aware that I'm buying at historically high prices for this area - I don't believe there will be a suffient correction in the next 6 months to make waiting worthwhile (another £10k on rent as well). Area is near Esher, Surrey and I will be borrowing less than 3x salary to purchase the property.

So, given my above situation, have any of you got an better ideas? If it was just me, trust me, I'd be sitting tight, but I've got a wife and kid that now need a family home.

Totally sympathise and empathise with your dilemma. STR in a decent bit of the UK with hindsight was an extraordinarily risky thing. Isn't Esher one of the most expensive parts of the SE?

My theory (which most on here ignore) is that there is still a significant amount of money available that the better off are prepared to spend on the better houses. I can't see prices falling too much in decent locations.

Where we will see price falls are in over developed investment blocks - no demand. And places like Stoke where, frankly, people only live there because they're stupid.

It's becoming a more and more defined two tier society every day that passes.

You're doing all you can to get your children a decent education and a decent start in life. What's £80k? Only money.

Edited March 7, 2006 by Ignorant Steve

[Mr Blek]

My theory (which most on here ignore) is that there is still a significant amount of money available that the better off are prepared to spend on the better houses. I can't see prices falling too much in decent locations.

I can see why most ignore that theory.

[Ignorant Steve]

I can see why most ignore that theory.

Bizarre in my opinion. If people openly laughed at it or tried to refute it I'd at least have their reasons. It's almost as if no-one can think of any reason why it's not correct!

Here we have yet more evidence that in a better off part of the UK house prices have risen 8% since 2004. 2004 for some reason seems to be the accepted peak on this site. (Complete nonsense as it fails to consider any ripple).

There's nowhere near enough decent property in decent locations to satisfy the current demand. There is thread after thread on here where "bears" openly state that good property is "surprisingly" selling within days / weeks but that poor property never sells.

Still it's only my opinion and what do I know?

[Guest Fiddlesticks]

Ok, lets do the maths.

An IO mortgage on 440k would have cost you about £1,700 per month or £40,800 for the two years you have been renting. So you are nearly £1,000 up.

Of course,you can't put a value on the emotional side of it, but don't blame the maths. This hasn't been an expensive experiment at all.

Let's do the maths again with all the numbers in this time.

Cost of staying out of the market

Rent: £40,000

Cost of housing market

moving against him: £40,000

======================

Total: £80,000

Cost of being in the market

Interest payments

(assuming 5% on the full £440,000 cost): £44,000

Maintenance of the house: £5,000

=================================

Total: £49,000

So he's lost around £31,000.

[Mr Blek]

Bizarre in my opinion. If people openly laughed at it or tried to refute it I'd at least have their reasons. It's almost as if no-one can think of any reason why it's not correct!

Here we have yet more evidence that in a better off part of the UK house prices have risen 8% since 2004. 2004 for some reason seems to be the accepted peak on this site. (Complete nonsense as it fails to consider any ripple).

There's nowhere near enough decent property in decent locations to satisfy the current demand. There is thread after thread on here where "bears" openly state that good property is "surprisingly" selling within days / weeks but that poor property never sells.

Still it's only my opinion and what do I know?

Whose figures are you quoting? Would you have the same conclusion if you used, say, CE figures? In what year do you think the house prices will hit their limits?

I'd also like you to explain the supply/demand of housing in relation to FTB, STR, and BTL.

Of course 'good property' sells quickly. If every other decent house on the street is £200k, I put mine on for £180k, what do you thinks going to happen?

Hold on, you're not a troll are you? Your name suggests ignorant by name, ignorant by nature.

Let's do the maths again with all the numbers in this time.

Cost of staying out of the market

Rent: £40,000

Cost of housing market

moving against him: £40,000

======================

Total: £80,000

Cost of being in the market

Interest payments

(assuming 5% on the full £440,000 cost): £44,000

Maintenance of the house: £5,000

=================================

Total: £49,000

So he's lost around £31,000.

Yeah, he'd better buy. Next year the market will have moved £60k against him.

[miro2021]

My theory (which most on here ignore) is that there is still a significant amount of money available that the better off are prepared to spend on the better houses. I can't see prices falling too much in decent locations.

Where we will see price falls are in over developed investment blocks - no demand. And places like Stoke where, frankly, people only live there because they're stupid.

I see that situation here in Edinburgh for example:

I have a friend just sold her 2-bed flat in Abbeyhill for 232k (offers over 182) and she had about 6 offers. This is the top price paid for a flat this size on the road. Another friend bid for a 2 bed flat in Marchmont offers over 235k - he bid 287k and lost 'by quite a bit' - again he bid over the top price that had been paid for a flat like this on the road.

These are both high quality stone-built victorian well-proportioned properties in very good areas.The fact is there is a limited supply of these and the supply and demand curve is still working for them, there are still enough people who can afford them. I think it's a different story for nasty little boxy new-build 2-beds.

[wifeling-smi]

I really don't understand how someone with the good sense and, quite frankly, massive balls to STR only a short time ago can have such a change of heart. You have done well so far, if you truly want to capitalise on selling virtually at the top of the market, at least wait until houses drop 10% - this shouldn't take too long - perhaps this time next year?

I understand you're spending (quite a lot! of) money paying someone elses mortgage at the moment, but given the price levels of houses you're looking at, you can recoup this, plus more by buying at the right time (ie not at the absolute peak).

Anyway - I understand the heart-strings side of this too - family is more important. Whatever you decide to do - good luck all the same. wifeling smi

[Killer Bunny]

I'm very aware that I'm buying at historically high prices for this area - I don't believe there will be a suffient correction in the next 6 months to make waiting worthwhile (another £10k on rent as well).

Very sorry to read you're only going to live for 6 months.

Get the point?

[Goat]

If you've really got to buy then you've really got to buy.

Shame though, if you could hold out for another couple of years it would make a huge difference. It is starting to look very definately like the crash has started.

[Ignorant Steve]

Whose figures are you quoting? Would you have the same conclusion if you used, say, CE figures? In what year do you think the house prices will hit their limits?

I'd also like you to explain the supply/demand of housing in relation to FTB, STR, and BTL.

Of course 'good property' sells quickly. If every other decent house on the street is £200k, I put mine on for £180k, what do you thinks going to happen?

Hold on, you're not a troll are you? Your name suggests ignorant by name, ignorant by nature.

Yeah, he'd better buy. Next year the market will have moved £60k against him.

Firstly I'm not and have never been a troll - been posting here for over a year.

Secondly my name is taken from an anarchist band - Crass. I'd like to think I'm not stupid but spending time on here answering you might point to the contrary.

Thirdly - if your avatar is symptomatic of your mindset then I'd shut up fairly quickly if I were you.

Fourthly - I have already stated earlier in the post what sort of housing would crash. Or did you just focus on a convenient soundbite?

Fifthly - why do you think a lower price equates to a "good property". Complete rubbish. With logic like that it's fairly clear you are muddled in your thinking. Good property is defined by many things, location being the obvious one. These in turn define price.

I see that situation here in Edinburgh for example:

I have a friend just sold her 2-bed flat in Abbeyhill for 232k (offers over 182) and she had about 6 offers. This is the top price paid for a flat this size on the road. Another friend bid for a 2 bed flat in Marchmont offers over 235k - he bid 287k and lost 'by quite a bit' - again he bid over the top price that had been paid for a flat like this on the road.

These are both high quality stone-built victorian well-proportioned properties in very good areas.The fact is there is a limited supply of these and the supply and demand curve is still working for them, there are still enough people who can afford them. I think it's a different story for nasty little boxy new-build 2-beds.

Thank you for that. I know nothing about Edinburgh but it's following the same pattern as the decent micro locations in London.

There was a big thread last year by Donnie Darker (still in classics I think) where he was agonising about buying in a decent bit of London. I was consistently telling him to buy subject to some common sense rules.

Given what's happening in London now (allegedly) I wonder how he's feeling?

[Given Up]

Let's do the maths again with all the numbers in this time.

Cost of staying out of the market

Rent: £40,000

Cost of housing market

moving against him: £40,000

======================

Total: £80,000

Cost of being in the market

Interest payments

(assuming 5% on the full £440,000 cost): £44,000

Maintenance of the house: £5,000

=================================

Total: £49,000

So he's lost around £31,000.

You need to add on the cost of selling to STR and the cost of buying which includes stamp duty and the cost of 2 moves. He has lost more than 31k.

[Mr Blek]

Firstly I'm not and have never been a troll - been posting here for over a year.

Secondly my name is taken from an anarchist band - Crass. I'd like to think I'm not stupid but spending time on here answering you might point to the contrary.

Thirdly - if your avatar is symptomatic of your mindset then I'd shut up fairly quickly if I were you.

Fourthly - I have already stated earlier in the post what sort of housing would crash. Or did you just focus on a convenient soundbite?

Fifthly - why do you think a lower price equates to a "good property". Complete rubbish. With logic like that it's fairly clear you are muddled in your thinking. Good property is defined by many things, location being the obvious one. These in turn define price.

Alow me to retort.

Trolls come in many guises. Doesn't matter how long you've been registered for. If you're an idiot today, chances are you're still an idiot a year down the line.

You chose your name; you live with it.

Thinking my avatar reflects my mindset truly goes to prove how ignorant you are. Does that go for all the other members that have tits in their avatar?

A housing crash isn't selective. When it happens, it happens accross the board. What do you think happened in the dot com crash? The good shares kept their price?

Ah, so you favour the 'value added' benefits to property (you did know it was called that right?). So why don't you take into other factors that define 'good property'? I'm pretty sure with an intellect so over powering as yours, you can work out i'm not talking about the positives, but the negatives.

Like to give me any more flame bait?

Edited March 7, 2006 by Mr Blek

[zag2me]

STR is a huge risk, you didnt win this time.

Homes should be treated as a home first and an investment 2nd so you are quiet right to want to buy again if your circumstances demand it.

Hope it all works out for you.