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Before I start please realise that this is just a thought on the direction I could take, and it is not what I am actually doing - yet.

I had a thought today that the biggest problem with house prices falling is the wait, or length of time that this usually takes. I think we could all say that it will take longer coming down than going up.

With this in mind, would it be worth me buying my first house, which is likely to be the smallest I will buy during my life, now. Then after the wait for house prices to fall (I still believe this will happen), the next larger house will be closer in value than the same 2 houses today. Perhaps this will be how I can get ahead. In other words although I will pay over the odds today, at least it is on a very small (cheaper) house and the fall in value will not be as much.

I know this is not an option for most, but in my area I can afford to buy and I am almost 100% certain of the security of my job in the case of a recession.

Essentially what I am saying is buying now may position me well when / if the market bottoms out.

Please feel free to shoot me down in flames after all it is advice I am after and I will not be too worried if you think I am an idiot - cheers

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Before I start please realise that this is just a thought on the direction I could take, and it is not what I am actually doing - yet.

I had a thought today that the biggest problem with house prices falling is the wait, or length of time that this usually takes. I think we could all say that it will take longer coming down than going up.

With this in mind, would it be worth me buying my first house, which is likely to be the smallest I will buy during my life, now. Then after the wait for house prices to fall (I still believe this will happen), the next larger house will be closer in value than the same 2 houses today. Perhaps this will be how I can get ahead. In other words although I will pay over the odds today, at least it is on a very small (cheaper) house and the fall in value will not be as much.

I know this is not an option for most, but in my area I can afford to buy and I am almost 100% certain of the security of my job in the case of a recession.

Essentially what I am saying is buying now may position me well when / if the market bottoms out.

Please feel free to shoot me down in flames after all it is advice I am after and I will not be too worried if you think I am an idiot - cheers

I was thinking along the same lines myself. Effectively it's a kind of hedging strategy. I think the trouble with this strategy is that if you buy at the very bottom rung it will just be something nobody wants in a downturn and you might have a lot of trouble selling.

If the smaller property is somehow a desirable property which would always be easy to sell but nevertheless is well within your means, then it seems like a reasonable strategy (but in this case I guess you would have to have a pretty big budget in the first place). So, only for the rich perhaps.

frugalista

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I was thinking along the same lines myself. Effectively it's a kind of hedging strategy. I think the trouble with this strategy is that if you buy at the very bottom rung it will just be something nobody wants in a downturn and you might have a lot of trouble selling.

If the smaller property is somehow a desirable property which would always be easy to sell but nevertheless is well within your means, then it seems like a reasonable strategy (but in this case I guess you would have to have a pretty big budget in the first place). So, only for the rich perhaps.

frugalista

I was thinking of something slightly bigger than the average FTB. Perhaps a 2-3 bed. This is still affordable for me if I use my savings. It would be in one of the villages surrounding Swindon, so it would be more desirable than those within the town (I know it is Swindon!). Of course it would still be hard work and I may be stretched a bit, but if I can fix for 5+ years I think it may be possible.

Obviously if house prices suddenly dropped by a long way I could lose out, but it looks like the fall in prices will be slower than the last few times (I can see this just by the graphs).

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I was thinking of something slightly bigger than the average FTB. Perhaps a 2-3 bed. This is still affordable for me if I use my savings. It would be in one of the villages surrounding Swindon, so it would be more desirable than those within the town (I know it is Swindon!). Of course it would still be hard work and I may be stretched a bit, but if I can fix for 5+ years I think it may be possible.

Obviously if house prices suddenly dropped by a long way I could lose out, but it looks like the fall in prices will be slower than the last few times (I can see this just by the graphs).

So, I'm guessing you'd be looking around the 250k - 300k mark?

That would mean your ideal purchase (that you would trade up to in the downturn) would be around the 400-500k mark (in today's prices), right?

frugalista

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So, I'm guessing you'd be looking around the 250k - 300k mark?

That would mean your ideal purchase (that you would trade up to in the downturn) would be around the 400-500k mark (in today's prices), right?

frugalista

Just don't buy a new 2 bed flat in a large development without parking.... Mr T had it right when he pitied the fool who is piling in to those at full whack at the moment.

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I was thinking of something slightly bigger than the average FTB. Perhaps a 2-3 bed. This is still affordable for me if I use my savings. It would be in one of the villages surrounding Swindon, so it would be more desirable than those within the town (I know it is Swindon!). Of course it would still be hard work and I may be stretched a bit, but if I can fix for 5+ years I think it may be possible.

Obviously if house prices suddenly dropped by a long way I could lose out, but it looks like the fall in prices will be slower than the last few times (I can see this just by the graphs).

Are you referring to the Nationwide house prices graph that shows house prices way above the average trend line and having peaked?

House prices, according to Halifax fell 10% in Somerset in 2005 and there's no reason that won't be coming to your county sometime soon

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So, I'm guessing you'd be looking around the 250k - 300k mark?

That would mean your ideal purchase (that you would trade up to in the downturn) would be around the 400-500k mark (in today's prices), right?

frugalista

:D thankfully the prices are about £150000 although I would agree that is still high. Next step up about £250000.

The problem is I feel the wait will be just too long.

If property takes a 20% hit then £150000 will become £120000. I can absorb the £30000 if the next step is then less as well (£250000 to 200000).

Are 20% drops still expected by anyone? If so what sort of timescale do they feel is resonable?

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Before I start please realise that this is just a thought on the direction I could take, and it is not what I am actually doing - yet.

I had a thought today that the biggest problem with house prices falling is the wait, or length of time that this usually takes. I think we could all say that it will take longer coming down than going up.

Hi Irkuiem,

That's pretty much the strategy I'm going for. It's a gamble, but so is waiting. And I have been thinking that this time round it may well be a gradual stagnation, slow slide rather than the massive falls of last time. I looked at all the possibilities, from small rises, stagnation, small falls, and big falls. And on balance I decided that I'd take the risk and buy now.

The two things I think are most important if you think property in your area is significantly overpriced are 1) not to buy something that will simply not sell in harder times (many new-builds, bad-quality FTB stuff, bad areas) and 2) to buy somewhere that, if worst came to worst, you could bear to live in for ten years or so - because that's the other risk you take by buying now. Maybe an attic that could be converted or similar so that you could create more space? Or enough space that you would not feel too trapped.

But if you think you can get something then it's only a different risk. Everyone who can afford property is gambling at this stage - BTLs are taking stupid risks gambling on property going up, STRs are gambling on falls - and FTBs who can just afford to buy are gambling on whether waiting or buying now is a better gamble. Unfortunately only time will tell...

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Hi Irkuiem,

That's pretty much the strategy I'm going for. It's a gamble, but so is waiting. And I have been thinking that this time round it may well be a gradual stagnation, slow slide rather than the massive falls of last time. I looked at all the possibilities, from small rises, stagnation, small falls, and big falls. And on balance I decided that I'd take the risk and buy now.

The two things I think are most important if you think property in your area is significantly overpriced are 1) not to buy something that will simply not sell in harder times (many new-builds, bad-quality FTB stuff, bad areas) and 2) to buy somewhere that, if worst came to worst, you could bear to live in for ten years or so - because that's the other risk you take by buying now. Maybe an attic that could be converted or similar so that you could create more space? Or enough space that you would not feel too trapped.

But if you think you can get something then it's only a different risk. Everyone who can afford property is gambling at this stage - BTLs are taking stupid risks gambling on property going up, STRs are gambling on falls - and FTBs who can just afford to buy are gambling on whether waiting or buying now is a better gamble. Unfortunately only time will tell...

Sums up my thoughts well.

I feel a long wait for small loses is not good enough, and with IR's possibly going up slowly as well it may be worth the risk with a long fixed mortgage. Even with a rise these amounts of IR are not causing enough strife to break the housing markets back.

At least this way I might feel more happy at home rather than renting (came home Tuesday to find landlord / EA had got the painters in to do the wooden window frames and doors - all this without telling us about it. They had let themselves in and the toilet seat was up. The Mrs was not happy :lol: )

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Guest Fiddlesticks

Before I start please realise that this is just a thought on the direction I could take, and it is not what I am actually doing - yet.

I had a thought today that the biggest problem with house prices falling is the wait, or length of time that this usually takes. I think we could all say that it will take longer coming down than going up.

With this in mind, would it be worth me buying my first house, which is likely to be the smallest I will buy during my life, now. Then after the wait for house prices to fall (I still believe this will happen), the next larger house will be closer in value than the same 2 houses today. Perhaps this will be how I can get ahead. In other words although I will pay over the odds today, at least it is on a very small (cheaper) house and the fall in value will not be as much.

I know this is not an option for most, but in my area I can afford to buy and I am almost 100% certain of the security of my job in the case of a recession.

Essentially what I am saying is buying now may position me well when / if the market bottoms out.

Please feel free to shoot me down in flames after all it is advice I am after and I will not be too worried if you think I am an idiot - cheers

I've been considering this strategy too. As others have said it is a good hedging strategy - if prices drop you benefit from the next rung getting closer, if prices rise at least you have a foothold and your equity goes up.

The problem I can see is that if we all start doing this prices are less likely to come down.

Fiddlesticks

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What happens if the first house you buy goes into negative equity?

You've lost your savings and you will need a loan to pay of the difference should you choose to move.

If this happens will you be able to afford to move up?

Any decrease in the value of this first house will result in a proportional loss of the savings you've put into it.

I'm assuming your savings were hard won and accumulated over some time and are importatant to you.

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Sums up my thoughts well.

I feel a long wait for small loses is not good enough, and with IR's possibly going up slowly as well it may be worth the risk with a long fixed mortgage. Even with a rise these amounts of IR are not causing enough strife to break the housing markets back.

At least this way I might feel more happy at home rather than renting (came home Tuesday to find landlord / EA had got the painters in to do the wooden window frames and doors - all this without telling us about it. They had let themselves in and the toilet seat was up. The Mrs was not happy :lol: )

Well that's completely illegal, a landlord shouldn't be entering the property without your permission. If that were me I would be having words with the landlord. If it happened persistently I would be either leaving or consulting a decent solicitor.

As to whether it's worth buying or not it depends entirely on your personal circumstances.

Figure out what it'll cost to buy relative to renting - interest, insurance, furnishing, maintenance, transaction and moving costs. Factor in possible rises in interest rates. 2%, maybe more.

Then factor in possible falls, 10%, 20%, 40%. How much would you lose?

Would you be in negative equity at any of these levels? Would it be likely to be a problem (if IRs went up a lot would you struggle and need to sell). Would you be in trouble if no income for a while? Are you relying on two incomes or can you cope on one?

Is having your own home worth the level of risk (which most of us on here judge to be considerable)?

At least make your decision having thought HONESTLY about the risks as opposed to saying 'ah it'll be grand'.

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With this in mind, would it be worth me buying my first house, which is likely to be the smallest I will buy during my life, now. Then after the wait for house prices to fall (I still believe this will happen)

What is it about housing that causes people to behave in such irrational ways? What other major 'investment' would you make despite believing that its value will fall? You are not the only one afflicted with this apparent madness (witness a recent poster who will 'do whatever it takes' to buy a house) which seems to afflict 99% of the non HPC population of the UK and probably 25% even of HPCers. We can thus understand why house prices bubble.

Rent.

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What is it about housing that causes people to behave in such irrational ways? What other major 'investment' would you make despite believing that its value will fall? You are not the only one afflicted with this apparent madness (witness a recent poster who will 'do whatever it takes' to buy a house) which seems to afflict 99% of the non HPC population of the UK and probably 25% even of HPCers. We can thus understand why house prices bubble.

Rent.

The original poster does not know whether the market will fall or rise. All they know is that they want to buy the larger house in a couple of years. Buying the smaller house now is a hedge, assuming that any change in the value of the two houses is correlated. Buying the larger house now would be putting all the weight on the bullish outcome. Renting now would be putting all the weight on the bearish outcome, which is rational only if your belief in the bearish outcome is strong.

This hedge has a cost of course, which is the transaction cost (stamp duty, estate agents fees etc). Renting for a couple of years or buying the larger house now would avoid these costs.

I think this strategy is too risky for people looking at the 150k range for the smaller property in the south of England. It could easily become unsaleable in a downturn.

frugalista

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What is it about housing that causes people to behave in such irrational ways? What other major 'investment' would you make despite believing that its value will fall? You are not the only one afflicted with this apparent madness (witness a recent poster who will 'do whatever it takes' to buy a house) which seems to afflict 99% of the non HPC population of the UK and probably 25% even of HPCers. We can thus understand why house prices bubble.

Rent.

I think it's a bit more complex than that. There isn't anything else you would invest in in this way for one very good reason. Most of us like to think that in 25 years or so we will own a reasonable house. There may be some who are happy to rent forever, but I think many here don't see that as the desired end.

Any other investment you can buy or not, because you don't care if you will be holding it in 25 years' time.

So with housing it becomes a different decision - a strategic one of when to buy, rather than whether to buy at all. Given that, this way of buying might or might not be a sensible strategy. One can accept that now is not as good a time to buy property as five or ten years ago. But the past is gone. The question now is what decision will lead to greater happiness as well as being a better investment decision. A slightly worse "investment" decision might still be worthwhile if it overall makes the buyer happier. If there are very major falls then maybe it will be a loser on both fronts. That's a decision we all face at this stage of the cycle, and I don't think renting is the right answer for everyone.

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That's a decision we all face at this stage of the cycle, and I don't think renting is the right answer for everyone.

Well there's always my personal hedge against this, which a lot of other people here cite as well. If a time comes that I really can't do without my own house and I still can't afford one, I will use my savings to buy a place abroad, or in move to a cheaper rural location at home.

That might cause my income to take a battering but no worse than a mortgage would now!

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Well there's always my personal hedge against this, which a lot of other people here cite as well. If a time comes that I really can't do without my own house and I still can't afford one, I will use my savings to buy a place abroad, or in move to a cheaper rural location at home.

That might cause my income to take a battering but no worse than a mortgage would now!

Yes, that's another reasonable fallback plan. I don't really plan on leaving London - however one option that might or might not be possible for me if things get hairy would be to sell up and buy elsewhere at a lower price. This is based on my theory that London is currently less overpriced than some other UK areas, so I may in future be able to exchange a London property for something better than I could now.

Again it's a gamble as my assumptions may be wrong, but in these times you probably need a variety of fallback plans for various possible futures...

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The original poster does not know whether the market will fall or rise.

Quite right, nor does anyone. However, he or she says that they believe the price will fall.

Why invest in something if you believe its price will fall? It's irrational.

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If you are able to comfortably afford a 2/3 bedroom 'house' and are not prepared to wait for the correction in house prices then I would not put obstacles in a persons way. I have just had this conversation with one of my sons who is determined to buy and although I would prefer he waited he can easily afford it.

What should be avoided at all costs is piling into an 'apartment' (i.e a flat). Following a house price correction buyers will circumvent this 'rung' and go for small houses instead. You will not be able to give apartments away as nobody will want them; in the last crash apartment prices fell like a lift without cables.

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  • 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%



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