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Please Give Me Some Advice!


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No such thing as a perfect house.....unless you are Bill Gates. I don't know what is wrong with renting, especially in the current market. Most of my family have been born, raised, and died, in rented accomodation. It didn't seem to affect them.

A house is a non-liquid asset against which you have borrowed a very large sum of money. As employment becomes less reliable I am permanently bemused by peoples desire to take out large, long term loans.

If you can buy without requiring a large mortgage, then do so, if you require a large mortgage, how are you going to pay it off? Will your job or company exist in 5, 10, 15 years?

The question is, do you feel lucky?

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I am currently panicking about the a recent decision to buy a house and I’d really appreciate some advice/opinions of anyone reading this…

I’m married with a 2 ½ year old daughter. We bought our first house in 2003 and moved again in 2005. Both houses were nice (but only 2 bed) terraces. In July this year, we decided we needed to move to somewhere with a garden and extra bedroom. We had an excellent offer on our house from a first time buyer and to speed up the sale decided to put the furniture into storage and move in with my parents.

We’ve been looking ever since but have struggled to find anywhere nice. Recently we've found the perfect house. It’s a 3 bed detached with garden in a lovely location with great views (albeit it’s a little small!!!). A developer bought the house in Feb this year for £135,500 (web research!). It’s had loads of work, new kitchen, bathroom, all new windows & doors, garden landscaped, new carpets, new fences, all new appliances and internal decoration…very tasteful and in a state you can just move straight into. It was originally on the market for £195K but when we looked hadn’t had any offers!

We spend a couple of weeks negotiating and this week agreed a sale price of £181,500. Relative to the other houses we’ve seen, it ‘s by far the nicest house in this price range.

We have a large deposit (mostly built up from capital gain from the previous houses) and the mortgage required is only 3 times my annual salary.

My parents are great, but clearly living with them isn’t ideal….. we desperately need our own space again. In view of the current state of the market, should I go through with the sale and take the risk of falling value or should I pull out and rent while whilst the market sorts itself out? I’m nervous about both options, I’ve long thought that the market is due for a crash and have been proved wrong so many times before!!!

Any advice would be appreciated.

James

This house will be going less than 100K in a couple of years. From a financial point of view, right now, you will be buying at the very peak of the biggest financial bubble in recent history.

However, buying a house is not always a financial decision.

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It sounds like this is close to being the house of your dreams. The decision of whether to pull out, or to attempt to renegotiate, or to carry on must depend on 1. how much you want it and 2. whether you are confident you will be able to pay for it.

The overall market may crash over the next few years, but don't fall into the seductive trap of assuming that HOYD properties will fall by the same amount, or even be readily findable.

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If you can afford it and want it - buy it.

Renting sux. No matter what a LL promises they can still have you out in short notice and this is not good when you have a family. Maybe a young single guy can afford to be transient but dont underestimate the affect of instability on little ones.

One of the places I rented back in the day was promised as a long term let and the LL gave me plausible reasons as to why I could stay as long as i liked. A year later I got a phone call one night and was sheepishly given my notice. He decided to give the place to a relative! Nice

Sadly it isnt an ideal time to buy, but if you "benefited" from previous HPI then you arent really in such a bad position. You kinda really have to accept market conditions at the time you want to make that purchase, if you need a house now you have to pay todays prices. Or you could wait and hope and eventually buy that place when your kid is going off to Uni and its a bit too late.

Life happens whilst you make other plans.

Edited by Orbital
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James, apart from the obvious point that it is very worrying that you may be swayed in such an important life decision by advice given to you by a bunch of strangers on an internet forum I would offer the following:

Kids of any age, though especially young ones, don't care two hoots what their environment is, so understand that your decision is based upon what you think is good for them, not what actually might be good for them.

Time passes much more quickly than you think. The next 2 or 3 years will fly by. I would be more concerned about living near a suitable school than whether you have 2 or 3 beds and/or a garden. There is always green space/parks etc. Space for kids isn't an issue anyway until they're much older and at school.

You should be able to rent a much bigger house today if you want to move out from parents, for much less than your mortgage would be. You will be in an ideal position as a cash buyer to benefit from any market downturn or crash.

If your finances are in such good shape, the downside of renting for you seems almost nil. Even if houses miraculously rise over the next few years it is difficult to see how you would be in a worse position.

I wanted to move in 87/88. Prices had risen massively, we sold our house to the first viewer for the full asking price. However, there was very little on the market to buy, it was all ridiculously over-priced and sold very fast. We decided to wait. We rode out the crash, moved up in '96 when we viewed maybe 30+ 4 bed detached houses in our price range and bought at a discount.

I won't tell you what you should do, but the best decision I ever made was moving up AFTER a crash/downturn not just before it happened. But ignore anoyone that tells you what you should do, including your family. Trust your own instincts and follow them and then the decision will always be right for YOU.

Good luck.

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...It doesnt matter wether they crash to £20,000 or rise to a million because it's your home, the price is irrelevant and you can afford the repayments.

What complete pish. By that logic, if I pay £3000 for a Mars Bar it doesn't matter as long as it doesn't bankrupt me.

And WHY WHY WHY do people keep regurgitating complete posts just to add one or two lines of response?

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I am in a similar situation as you are, my son will be 3 next month and we are still renting so don't take notice of any nonsense that you must buy if you have a family. I have a cash deposit of about 40% to buy a property in South East but I am not contributing into the today's corrupted market.

How is renting not contributing into the corrupted market? A question not often posed to the STR crew.

Surely you are propping up landlords and justifying the BTL brigade?!!!!

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What complete pish. By that logic, if I pay £3000 for a Mars Bar it doesn't matter as long as it doesn't bankrupt me.

And WHY WHY WHY do people keep regurgitating complete posts just to add one or two lines of response?

caviar was recently selling at £3000 a Kilo

http://www.theanswerbank.co.uk/Article1370.html

If people pay that much for a kilo of Cavior.. I don't think it matters as long as it doesn't bankrupt them.

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Kids of any age, though especially young ones, don't care two hoots what their environment is, so understand that your decision is based upon what you think is good for them, not what actually might be good for them.

RK, I agree with your post entirely BUT it's been my experience that changing environments DOES upset the little uns. Sure, once they're used to it, they don't care if it's a flat or a mansion, but the moving process itself can be a little traumatic for them.

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Read all this advice, chew it over. But if I were in your position I'd then be looking to do one thing - VIEW THE PLACE AGAIN...

You already say the house might be a bit small. I don't have kids but looking at my brother's kids and their house they seem to eat up space as much as everything else. And what if you have another - will that necessitate a move due to further space demands?

Another viewing could give a more objective view, particularly if, as it sounds, the rose tinted specs are now off. The space issue can then be re-checked. If you still decide to continue then great but remember that if you feel too small in there you could be looking at a loss if you have to move on.

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I too would have schooling at the top of my list. It can be an expensive mistake otherwise.

My eldest lad hated his secondary school so much I had to fork out to send him private. Moving and getting into the catchment of a good school was not an option. Where I live the good schools are all seriously oversubscribed and the best route in is to live in catchment and to send your daughter to the right feeder primary.

If the mortgage (repayment mortgage?) is 3 times salary and your job is reasonably secure, it's a no-brainer. Buy it.

Who cares if house prices go down? You and your family are going to live there a long time and, in 25 years (or less with an offset mortgage and no stupid moving up the ladder for the sake of it moves) it will be all yours.

Check the schools out first though. If the house is not in the catchment area of a good secondary school you'd be happy for your daughter to go to - look elsewhere.

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How is renting not contributing into the corrupted market?

Because renting is 30% to 50% cheaper than buying. My rent is 40% less than what I would pay for IO mortgage + top of that my deposit is earning more money than landlord's yield. The more people with deposits stay away from the market the more the market will suffer & stagnate then collapse

Surely you are propping up landlords and justifying the BTL brigade?!!!!

well if landlords are happy to subsidize the tenant hundreds of pounds each month & take the risk of capital depreciation in today's market they are welcome to it!

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If you can afford it and want it - buy it.

You kinda really have to accept market conditions at the time you want to make that purchase, if you need a house now you have to pay todays prices. Or you could wait and hope and eventually buy that place when your kid is going off to Uni and its a bit too late.

Life happens whilst you make other plans.

Well said.

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We’ve been looking ever since but have struggled to find anywhere nice. Recently we've found the perfect house. It’s a 3 bed detached with garden in a lovely location with great views (albeit it’s a little small!!!). A developer bought the house in Feb this year for £135,500 (web research!). It’s had loads of work, new kitchen, bathroom, all new windows & doors, garden landscaped, new carpets, new fences, all new appliances and internal decoration…very tasteful and in a state you can just move straight into. It was originally on the market for £195K but when we looked hadn’t had any offers!

Jesus - you're happy to pay someone nearly £50k for about £10k worth of work.

It wouldn't cost much more than that to build the house from scratch!!

I'd go into rented, find a house for £135k and get the work done yourself

In fact you are paying much more than £50k for the work as you'll be paying off that extra amount over the next 25 years!! How long would it take you to save that kind of money??

Edited by munimula
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Many thanks to all for the comments and advice posted here. It’s interesting that the same arguments that have been going through my mind have been born out on these pages. I find myself agreeing with those on both sides! It’s nice to get balanced advice from people that understand the family issues as well as financial logic!

It’s a very difficult decision - my current persuasion is to go through with the purchase. As many of you have stated…. much depends on gut feelings regarding the housing market. The scenarios (as I see it) are as follows (best to worst!)

1) House prices stagnate or rise with inflation (unlikely!!!)

2) House price take a dip of 10-20% over the next few years (most likely!!)

3) House price fall more dramatically by 20-40% (possible!!)

I’ve thought deeply about these. I could live with scenario’s 1 & 2. I would consol myself by thinking that the loss in equity was only money I’d gained from previous houses and wasn’t ‘real’!! However, if scenario 3 occurred I’d be full of regret! In the extreme this could put me close to negative equity.

In mitigation, the discount I’ve negotiated will offset some of the fall. If we rent we’d have additional disruption and I don’t think I’d be happy with the un-certainty of only 6 months contract.

My job is reasonably secure, I work for an engineering company and I’ve just started another contract that’s close to home and due to finish in mid 2010. In my industry, that’s as certain as it’s ever going to be!

A few people have mentioned that the price increase from Feb on this property seems very high. On this subject all I can say is that neighbours have told me the house was almost derelict when the developer purchased it. The work has been done to a high standard (including all kitchen appliances). Whilst I’m sure the developer is netting a profit from this, I think it’s much less than he was hoping for. Importantly too, the house seems relatively good value compared with others in the area. (West Cumbria).

The option of going back and negotiating a lower offer would be difficult…I’ve already negotiated hard to get the price to the level accepted. In fact I had a lower offer in place for several weeks and this was refused. In the end we felt the reduction in price was worth it. Especially because the house is just want we want, the location is perfect and (as others have pionted out) school access and choice is excelent.

If I’m being honest about it, the pressure to buy is coming more from other members of my family (including the wife) than from me… I’m adverse to the idea of being a wage slave - I’ve enjoyed the last few months of being truly free from all financial commitments and the corresponding feeling of empowerment. However, I also want my family to be secure and to live in a nice environment. I don’t like the idea of renting from a private landlord as you’re always at the mercy of their whims.

My Dad tells me that in his day, good quality council houses were available for most people and that these were often pleasant places to live. If the same were true today, I’d be happy to rent one.

If the market does crash by the level some people are predicting (40%), whilst I’d no doubt harbour deep regrets for not waiting longer…my net gain from property would be only slight worse than neutral. The people that will really suffer will be those that bought their first property more recently. For these people, it will be a true disaster.

Once more, thanks for all your comments, no doubt I'll remain uncertain right up until the day I have to sign the final documents!

James

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You sound very sensible James. I too have a young daughter (20 months old) and we moved from a modern 2 bed terrace to a reasonably sized 1930's 3 Bed Semi with larger garden with our, then, impending new arrival in mind. The only difference I suppose is that when we bought it (2 years ago) it needed alot of work...wheras now it needs just a little less work! I know it can be done (I've wathced Grand Designs etc) but looking after a small person and trying to renovate a house do not go hand in hand so moving into a ready made place is much the preferrable route.

Bearing in mind just how much clutter (toys, clothes, wipes etc) a toddler can produce, you will be very thankful for the extra 'spare' bedroom and the general increase in floor space. The joys (and distractions) of having a larger garden are not too be underestimated either.

All in all, your families needs are paramount and as you are not stretching yourself I believe you should crack on with the purchase. The market will stagnate but an early 90's crash, I'm not convinced of.

Edited by Reverend Bluejeans
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I am currently panicking about the a recent decision to buy a house and I’d really appreciate some advice/opinions of anyone reading this…

Well, not advice, but I am finally putting my house on the market on Friday, mortgage paid and all that, but we want more space. Personally we have chosen the rental option. Prices are not really rocketing anymore, so there is everything to loose and nothing to gain.

Houses come up all the time and will do into the far and distant future. I am not particularly starry eyed about them. They are not that important in the great scheme of things.

It's got to the point where decorating has taken the place of religion to give meaning to peoples lives. How f@cked up is that?

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If the market does crash by the level some people are predicting (40%), whilst I’d no doubt harbour deep regrets for not waiting longer…my net gain from property would be only slight worse than neutral. The people that will really suffer will be those that bought their first property more recently. For these people, it will be a true disaster.

Just look at what is happening in some parts of America that had big housing bubbles. And the UK housing bubble is much larger than the American one.

However, I accept that I am looking at this from mostly a financial point of view.

Combine the credit crunch, with the UK subprime crisis and mortage resets. This will all lead to a house price crash. The likes of which has never been seen before in the UK.

If you could only hold on for a few more months. The credit crunch is only starting to take effect.

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Many thanks to all for the comments and advice posted here. It’s interesting that the same arguments that have been going through my mind have been born out on these pages. I find myself agreeing with those on both sides! It’s nice to get balanced advice from people that understand the family issues as well as financial logic!

It’s a very difficult decision - my current persuasion is to go through with the purchase. As many of you have stated…. much depends on gut feelings regarding the housing market. The scenarios (as I see it) are as follows (best to worst!)

1) House prices stagnate or rise with inflation (unlikely!!!)

2) House price take a dip of 10-20% over the next few years (most likely!!)

3) House price fall more dramatically by 20-40% (possible!!)

It's got nothing to do with what the property market might or might not do.

It's got everything to do with the fact that you are happy to give someone nearly £50K (+ interest over the term you pay that off) for doing £10K worth of work. Assuming that's around £75 in total - that's the equivalent of saving £500 per month, every month for over 12 years!!!

YOU ARE TAKING IT UP THE A*** AND YOU ARE HAPPY LETTING THEM DO IT

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Many thanks to all for the comments and advice posted here. It’s interesting that the same arguments that have been going through my mind have been born out on these pages. I find myself agreeing with those on both sides! It’s nice to get balanced advice from people that understand the family issues as well as financial logic!

It’s a very difficult decision - my current persuasion is to go through with the purchase. As many of you have stated…. much depends on gut feelings regarding the housing market. The scenarios (as I see it) are as follows (best to worst!)

1) House prices stagnate or rise with inflation (unlikely!!!)

2) House price take a dip of 10-20% over the next few years (most likely!!)

3) House price fall more dramatically by 20-40% (possible!!)

I’ve thought deeply about these. I could live with scenario’s 1 & 2. I would consol myself by thinking that the loss in equity was only money I’d gained from previous houses and wasn’t ‘real’!! However, if scenario 3 occurred I’d be full of regret! In the extreme this could put me close to negative equity.

In mitigation, the discount I’ve negotiated will offset some of the fall. If we rent we’d have additional disruption and I don’t think I’d be happy with the un-certainty of only 6 months contract.

My job is reasonably secure, I work for an engineering company and I’ve just started another contract that’s close to home and due to finish in mid 2010. In my industry, that’s as certain as it’s ever going to be!

A few people have mentioned that the price increase from Feb on this property seems very high. On this subject all I can say is that neighbours have told me the house was almost derelict when the developer purchased it. The work has been done to a high standard (including all kitchen appliances). Whilst I’m sure the developer is netting a profit from this, I think it’s much less than he was hoping for. Importantly too, the house seems relatively good value compared with others in the area. (West Cumbria).

The option of going back and negotiating a lower offer would be difficult…I’ve already negotiated hard to get the price to the level accepted. In fact I had a lower offer in place for several weeks and this was refused. In the end we felt the reduction in price was worth it. Especially because the house is just want we want, the location is perfect and (as others have pionted out) school access and choice is excelent.

If I’m being honest about it, the pressure to buy is coming more from other members of my family (including the wife) than from me… I’m adverse to the idea of being a wage slave - I’ve enjoyed the last few months of being truly free from all financial commitments and the corresponding feeling of empowerment. However, I also want my family to be secure and to live in a nice environment. I don’t like the idea of renting from a private landlord as you’re always at the mercy of their whims.

My Dad tells me that in his day, good quality council houses were available for most people and that these were often pleasant places to live. If the same were true today, I’d be happy to rent one.

If the market does crash by the level some people are predicting (40%), whilst I’d no doubt harbour deep regrets for not waiting longer…my net gain from property would be only slight worse than neutral. The people that will really suffer will be those that bought their first property more recently. For these people, it will be a true disaster.

Once more, thanks for all your comments, no doubt I'll remain uncertain right up until the day I have to sign the final documents!

James

Others on here may think you can nip into B&Q and buy a bathroom suite for a few hundred quid and likewise for some kitchen units.

I did up a bungalow some years ago. New double glazed windows and doors, £4600, new flat roof to large extension including new roof deck, insulation below, high spec felt, copings all around, 2k. New kitchen, bathroom, decorating and carpets took me up to 12k. I took 6 weeks off work to do it.

That was 20 years ago.

I reckon now, the same job, employing tradesmen etc would cost between £20k and 30k depending on quality of fitments.

So if the builder paid 135k and spent say 25k on it (allowing for buying, selling costs etc) and you're paying a bit over £180k for it - i'd say you're getting a good deal. I'm not surprised the builder does not want to go any lower. Hardly worth the effort if he goes much lower.

Edited by Lets' get it right
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Once more, thanks for all your comments, no doubt I'll remain uncertain right up until the day I have to sign the final documents!

James

You really don't want to do it, do you?

Be a man. Sit down with your wife and then together with your father and explain why it would make sense to wait, unless you can renegotiate the price (-20% from accepted offer at least) to mitigate the risk to you and your family's long term wealth. It's tough for the developer, but the market has changed and you are not the fool that will get him off the hook.

It's not as if you have no intention of buying ever, its just that the price ain't right.

I can't believe this is the only house you can find?

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  • 443 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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