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thirdwave

When Is The Right Time To Buy?

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Now that HPC fever has gripped the nation, I wonder whether its the right time to put in an offer on a property at, say,a 20-30% discount to factor in any declines expected in coming years? I would imagine vendors are quite jittery & properties would be really hard to shift as banks have more or less stopped lending to the sub prime crowd. What is the likelihood of such an offer being accepted, given that properties where I live seem to be sticking for months..

I`ve got a good credit history & there are still some decent long term fixed deals available to prime borrowers. I am looking at 3- 4 bed detached in the South Coast (Brighton & Hove, to be more specific) & there are a few which would be attractive at a 20-30% discount & well within my budget (around 280000 with a 10% deposit, possibly more if my partner finally manages to find a job ) at 3.5X income. I`m concerned that interest rates may go up further in coming years & if I wait for the market to bottom out, I might find myself competing with cash buyers...

Edited by thirdwave

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Now that HPC fever has gripped the nation, I wonder whether its the right time to put in an offer on a property at, say,a 20-30% discount to factor in any declines expected in coming years? I would imagine vendors are quite jittery & properties would be really hard to shift as banks have more or less stopped lending to the sub prime crowd. What is the likelyhood of such an offer being accepted, given that properties where I live seem to be sticking for months..

I`ve got a good credit history & there are still some decent long term fixed deals available to prime borrowers. I am looking at 3- 4 bed detached in the South Coast (Brighton & Hove, to be more specific) & there are a few which would be attractive at a 20-30% discount & well within my budget (around 280000 with a 10% deposit, possibly more if my partner finally manages to find a job ) at 3.5X income. I`m concerned that interest rates may go up further in coming years & if I wait for the market to bottom out, I might find myself competing with cash buyers...

The real value of property (what someone will pay) in most areas now is about 20% below asking prices, this is why properties in many areas aren't selling because sellers haven't come around to the idea of what they can really get for their property.

And this is before the cycle gets underway.

Therefore I'd definitely wait a couple of years before buying anything

The chances of 20% reductions being accepted is zero - my parents are actively trying this right now in SW and sellers simply aren't prepared to accept. Therefore there is a lot of property around going unsold and the number of property on the market is increasing all the time.

Edited by munimula

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Now that HPC fever has gripped the nation, I wonder whether its the right time to put in an offer on a property at, say,a 20-30% discount to factor in any declines expected in coming years? I would imagine vendors are quite jittery & properties would be really hard to shift as banks have more or less stopped lending to the sub prime crowd. What is the likelihood of such an offer being accepted, given that properties where I live seem to be sticking for months..

SNIP

This really should be in a FAQ or a sticky by now. The topic is appearing on a weekly basis. Would be good to add a "how to" guide too.

Edited by aussieboy

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No way. The slide has only just started.

My best guess on timing is here:

http://www.greenenergyinvestors.com/index.php?showtopic=1803

But I am buying aggressively already in Hong Kong and Germany.

Just bought flat number 4, here in HK

Dr Bubb, I had a look at housprices in HK whilst I was there in June..they seemed quite inflated to me compared to the average wages..(or maybe I was looking in the wrong places). I loved HK & wouldn`t mind moving there but the language is a big barrier, especially in my trade (which involves a lot of waffle)

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The real value of property (what someone will pay) in most areas now is about 20% below asking prices, this is why properties in many areas aren't selling because sellers haven't come around to the idea of what they can really get for their property.

And this is before the cycle gets underway.

Therefore I'd definitely wait a couple of years before buying anything

The chances of 20% reductions being accepted is zero - my parents are actively trying this right now in SW and sellers simply aren't prepared to accept. Therefore there is a lot of property around going unsold and the number of property on the market is increasing all the time.

Here's some sweeping generalizations for you - most of which I can rebuff from my own experience over the last few weeks and months.

1. Interesting that you know "the real value of property". A detailed definition of how you come to that would be appreciated.

2. Interesting, too, that you know that the "real value" is 20% below the asking price - and not, as may equally be the case, that the asking prices are just 20% too high, a hangover from the hi-growth days, perhaps?

3. I've just accepted an offer on a property today that is 4% below my asking price and, to be honest, I priced it there so I could accept a lower offer and still be happy. It worked! Oh, and it's been on the market for...er....10 days. So no great lack of buying interest there! (There was another offer lurking, and I've had about five other calls. And I didn't even use an EA!!)

4. "The chances of 20% reductions being accepted are zero". I love this one! I've been buying about one property a month this year, and EVERY SINGLE ONE of them has been at 20% below, because that's my business model! And that's not a notional 20% below, and it's not on off-plan new-build nonsense. It's 20% below an open market valuation given by a RICS surveyor. The reason your parents aren't having much success is because they're not talking to the right people. Also, I've been doing 20% below for a few years, so this model works in 'good' times and 'bad'!

Back to the original question, I'll just quote an old investor adage that I think is very true...

"Don't wait to buy property. Buy property, then wait." Put another way, at the right price, Now is always the right time!

Cheers!

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The real value of property (what someone will pay) in most areas now is about 20% below asking prices, this is why properties in many areas aren't selling because sellers haven't come around to the idea of what they can really get for their property.

And this is before the cycle gets underway.

Therefore I'd definitely wait a couple of years before buying anything

The chances of 20% reductions being accepted is zero - my parents are actively trying this right now in SW and sellers simply aren't prepared to accept. Therefore there is a lot of property around going unsold and the number of property on the market is increasing all the time.

But surely there must be a few ppl who need a quick sale for whatever reason & have enough equity to cushion a 20% 'loss'. I suppose we`ll have to wait a few more months for the resets to kick in....I don`t know about the SW but the prices in B&H are especially vulnerable as 80% of the population are on the minimum wage/benefits & there are only a handful who earn anything like the kind of money needed to justify current prices..

Also, when ppl say there would be a drop in prices of 30% in real terms in the next few years, are they assuming that inflation would stay around 5% or more? Given the current gloomy economic outlook, isn`t it more likely that inflation would be more modest due to reduced consumer spending & rising interest rates due to high commodity prices? So are the real term falls more likely to be in line with the nominal price reductions, which many agree would be around 5%pa?

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Hi Thirdwave I'm not jumping in just yet. It hasn't got into the thick heads in Brighton and Hove that they can't get asking price even when they have been on market for more than six months :lol: Just picked up Latest Homes at station and that Brice woman is draped over a sofa in a flat that has featured on Property Ladder (penthouse), year ago I think, then he wanted £900k for it and no elevator, now at £750k. I wouldn't touch it with a barge pole at £500k.

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But surely there must be a few ppl who need a quick sale for whatever reason & have enough equity to cushion a 20% 'loss'.

Probably but they will have already emotionally bought into having that money and would be too embarrassed to go to their vendor and get the same amount off so will stick for all they are worth.

I think we are far too early for panic selling in suburbia or anywhere except BTL and sub prime right now, and who would want to buy those properties given a choice?

I myself would consider a BTL flat near the bottom in a few years, but you have to pick somewhere that people will actually rent, otherwise you end up with a flat in Thamesmead.

If last time is anything to go by, the bottom will not be for another few years. If a recession is included, then cash is a better option right now.

However, if you are a "neither", then you have to decide what value you think the bottom actually will be for the the house you want and try and get it for that price. If you can't get it, review and wait if necessary or jump in at that price.

If you are a bear, then obviously stick around a while longer.

If you are a bull, go and buy it now and if you can't buy it now, spend as much money as you can and go long on the Haliwide HP Index.

Edit to add:

Do even the Bulls think now is the time to panic and jump into the housing market before it is too late?

Edited by bobthe~

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Now that HPC fever has gripped the nation, I wonder whether its the right time to put in an offer on a property at, say,a 20-30% discount to factor in any declines expected in coming years? I would imagine vendors are quite jittery & properties would be really hard to shift as banks have more or less stopped lending to the sub prime crowd. What is the likelihood of such an offer being accepted, given that properties where I live seem to be sticking for months..

I`ve got a good credit history & there are still some decent long term fixed deals available to prime borrowers. I am looking at 3- 4 bed detached in the South Coast (Brighton & Hove, to be more specific) & there are a few which would be attractive at a 20-30% discount & well within my budget (around 280000 with a 10% deposit, possibly more if my partner finally manages to find a job ) at 3.5X income. I`m concerned that interest rates may go up further in coming years & if I wait for the market to bottom out, I might find myself competing with cash buyers...

Put an offer in. Give 'em a wee fright. It'll give the estate agents something to talk about and remember and it'll help to make your offer a self-fulfilling prophecy. Tell them that "you'll be back". (In a German accent would be even better.)

But they will not just not accept, everyone concerned will take it as a personal insult and they will think you a thorough cad for the very idea.

I wouldn't worry about cash buyers. Nobody in their right minds will be forking cash in a market down 30%. Indeed, some will sell for that at auction before the general market touches down but if the general market gets to 30% down you will be able to buy from a wide range of supply (but maybe you'll need 20% down and a letter from your boss saying they will never fire you; even if they go out of business).

I suspect when (if) the price does come back that much you might not want to buy (no matter how strange that might seem now.)

Edited by dstars

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Guest DissipatedYouthIsValuable
Hi Thirdwave I'm not jumping in just yet. It hasn't got into the thick heads in Brighton and Hove that they can't get asking price even when they have been on market for more than six months :lol: Just picked up Latest Homes at station and that Brice woman is draped over a sofa in a flat that has featured on Property Ladder (penthouse), year ago I think, then he wanted £900k for it and no elevator, now at £750k. I wouldn't touch it with a barge pole at £500k.

A flat is worth 70k while average wages are 20k

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Put an offer in. Give 'em a wee fright. It'll give the estate agents something to talk about and remember and it'll help to make your offer a self-fulfilling prophecy. Tell them that "you'll be back". (In a German accent would be even better.)

Arnie is Austrian :rolleyes:

Cheers!

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A flat is worth 70k while average wages are 20k

You say that, but this one is at the very top and has 2 plasma tvs and an lcd in the bathtub.

That must count for something, surely?

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Hi Thirdwave I'm not jumping in just yet. It hasn't got into the thick heads in Brighton and Hove that they can't get asking price even when they have been on market for more than six months :lol: Just picked up Latest Homes at station and that Brice woman is draped over a sofa in a flat that has featured on Property Ladder (penthouse), year ago I think, then he wanted £900k for it and no elevator, now at £750k. I wouldn't touch it with a barge pole at £500k.

I agree that many properties in B&H are overvalued by atleast 30-50% but I think that speculator fuelled HPI has been mostly confined to BTL properties..

A property I recently spotted on Rightomove illustrates the case..

http://www.rightmove.co.uk/viewdetails-893...=1&tr_t=buy

A quick search shows that prices on the street have only gone up in line with inflation..

http://www.mouseprice.co.uk/Search_Propert...reet=&Town=

It could be that the vendor has decided to price the property more 'realistically' in view of the current market..In any case, properties like the one above have to drop by atleast 30% before I would be consider them good value for money.

So to the people in the know round here..how was it last time???Did properties drop across the board regardless of how much they had appreciated in value during the preceding boom? Were there properties, for example fairly large detached properties owned by households with stable incomes, that did not go up by much but did not drop a lot either?Were the real term drops last time exaggerated by high inflation & would the nominal drops be less remarkable in a low inflation environment?

PS: I am a actually an uberbear & have only left my status as neither 'cause I can`t figure out how to change it :)

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Here's some sweeping generalizations for you - most of which I can rebuff from my own experience over the last few weeks and months.

1. Interesting that you know "the real value of property". A detailed definition of how you come to that would be appreciated.

2. Interesting, too, that you know that the "real value" is 20% below the asking price - and not, as may equally be the case, that the asking prices are just 20% too high, a hangover from the hi-growth days, perhaps?

3. I've just accepted an offer on a property today that is 4% below my asking price and, to be honest, I priced it there so I could accept a lower offer and still be happy. It worked! Oh, and it's been on the market for...er....10 days. So no great lack of buying interest there! (There was another offer lurking, and I've had about five other calls. And I didn't even use an EA!!)

4. "The chances of 20% reductions being accepted are zero". I love this one! I've been buying about one property a month this year, and EVERY SINGLE ONE of them has been at 20% below, because that's my business model! And that's not a notional 20% below, and it's not on off-plan new-build nonsense. It's 20% below an open market valuation given by a RICS surveyor. The reason your parents aren't having much success is because they're not talking to the right people. Also, I've been doing 20% below for a few years, so this model works in 'good' times and 'bad'!

Back to the original question, I'll just quote an old investor adage that I think is very true...

"Don't wait to buy property. Buy property, then wait." Put another way, at the right price, Now is always the right time!

Cheers!

I think youll find there are still plenty of people desparate to get on the property ladder at whatever cost- I just heard some of them on Radio 4 Moneybox.

There will also be people who can cash buy, so at the moment, I think you are right, nobody can value a property except the next buyer.

But there is sense in the argument that now is not a good time to buy. Its an excellent time to sell, as we appear to be at the top of the price range, but I am sure in a few months time, even the most desparate buyers will have got the message into their thick, ignorant skulls, that there isnt somebody going round with a price gun putting prices on the houses, it was just the lenders pumping life into the boom with their careless loans, and their own fear of being priced out thats keeping prices so high.

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I suspect when (if) the price does come back that much you might not want to buy (no matter how strange that might seem now.)

I have often thought about that myself..Why would ppl want to buy something that is viewed as a depreciating asset, rather like a new car, than an instant cash machine? However, it would be extremely difficult to call the bottom of a crash so I`d consider house prices reasonable once the repayment mortgage with a 10% deposit on a given property would cost less than renting it. It would take a drop of prices by atleast 30% from current levels for it to be true in my case..

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I have often thought about that myself..Why would ppl want to buy something that is viewed as a depreciating asset, rather like a new car, than an instant cash machine? However, it would be extremely difficult to call the bottom of a crash so I`d consider house prices reasonable once the repayment mortgage with a 10% deposit on a given property would cost less than renting it. It would take a drop of prices by atleast 30% from current levels for it to be true in my case..

Yeah that's how I view it to, once the balance swings in favour of mortgage over rent, then is the time to buy. You can't wait around forever!

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Arnie is Austrian :rolleyes:

Cheers!

Is Austrian (accent) different from German? (I didn't want to say 'Austrian accent' as I can't tell the difference even there is one.) ;)

Edited by dstars

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Yeah that's how I view it to, once the balance swings in favour of mortgage over rent, then is the time to buy. You can't wait around forever!

especially if,as in my case,your wife views home ownership as the sole purpose of human existence (I`m just about managing to hold her off with all the bear news ATM ;) )

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Best time to buy something is when the vast majority

undervalue it.

Property has been over-valued since at least 2003.

In my view, the time to buy would be when prices drop

to below 2003 levels.... ish.

Edited by PotNoodle

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