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1. Ewan - Member

   Got married last year and the wife moved into my (now our) one bedroom flat*. It's nowhere big enough for the two of us (or three/four of us in the future)... so we're thinking of buying a house. We've got a fair sized deposit saved up and we could afford a 3/4 bedroom family home in a nice area (and next to good mtbing). My current thoughts are:

   Pros
   *Prices are probably bumping along at the bottom of the cycle so now is a good time to buy if we're happy to stay put for a few years
   *Cheeky offers will probably be at least considered
   *Decided on affordability based on me taking a 40% pay cut (at some point I intend on leaving the overpaid industry i'm currently in so don't want to be stuck with a massive mortgage we can't afford)
   *We can get 3.6% mortgage rate with our LTV which seems quite good

   Negatives
   *Could be a second housing crash precipitated by euro zone crash
   *Hard to work out what properties are actually worth as so few are selling

   What does the collective mind of STW think – good or bad time to buy?

   *Not planning on selling the flat at the moment. I brought it in 2008 (epic fail) so it makes more sense to rent it out (which would more than cover a repayment mortgage) rather than crystallise our losses. My affordability calcs assume the worst case (i.e. I can't rent it out at all for some reason)

   Posted 6 months ago #
2. mudshark - Member

   Sounds like you should buy. I wouldn't bother trying to 2nd guess future house prices as you want to stay put for a while - at least 5 years? But supply might be limited so take your time and buy only what you really want for a price that suits.

   Posted 6 months ago #
3. nickjb - Member

   If you are living somewhere that isn't suitable and you could move somewhere better then do it as soon as possible and start reaping the benefits. Prices might go up or down but you'll be living in a house you like (I suspect prices will stay fairly flat for a while). It sounds like you are in a decent financial position and can minimise any risks.

   Posted 6 months ago #
4. magowen100 - Member

   Depends on if you're buying a house or a home. A house is an investment a home is somewhere you live.
   Would I buy a house now no.
   Would I buy a home now - yes - And a couple of months ago I did.

   Posted 6 months ago #
5. prezet - Member

   Before buying I'd make sure you're both secure in your jobs - if there's even a hint of something in the future that may indicate something affecting that then hang tight. 2 properties and 1 income would make for sleepless nights.

   Posted 6 months ago #
6. mtb2020 - Member

   If the warnings about Peak Oil, global warming, food shortages and so on are anything to go by, and I had any money at all, I would be investing in a nice remote place with plenty of land to grow food and keep cattle and horses - and I'd build a cheap, but well built straw bale house and fill it with as many eco-friendly systems, fixtures and fittings that I could. Britain could be going back to the Iron Age sooner than it thinks. Best to be prepared!

   Posted 6 months ago #
7. mudshark - Member

   if there's even a hint of something in the future that may indicate something affecting that then hang tight.

   Well they might be able to move back into the flat and rent out the house if that happened.

   Posted 6 months ago #
8. mcboo - Member

   Sounds like you are being sensible about affordability and pricing in a pay cut, thats all good thinking. You sure you dont want to sell your flat? Nothing wrong with selling at a loss unless you are expecting it to rocket back up over the price you paid for it which it doesnt sound like you are.

   (All the time in my line of work we see clients happy to pay the current market rate for an asset on the way into a trade but very often reluctant to sell below where they bought it, regardless of what the general market has done in the meantime. Don't let sentiment affect your decision making)

   Posted 6 months ago #
9. Stoner - Member

   ^ this.

   Taking a hit can be a good thing if it unlocks your capital to take advantage of the same depressed asset prices somewhere else thats more relevant to either your domestic or financial needs.

   Posted 6 months ago #
10. choron - Member

    In my opinion, no. The Euro induced sovereign debt crisis is fast turning to a banking crisis which may well play out in a particularly ugly manner over the next couple of years.

    This may well translate into a squeeze on mortgage availability here in the UK. If you are desperate to move, then now could be the right time as you may have trouble getting a loan in the future. However, the mortgage squeeze may well induce a significant drop in house prices. You don't want to sell one property in order to avoid realising losses, but buying another property is in effect doubling up in the hope that the market won't drop further.

    My feeling is that you might find yourself in negative equity on two loans, while in a highly illiquid housing market (all those people that don't want to sell to avoid realising losses). In a poor economy with job insecurity and a possible deep recession/depression on it's way, this is a huge risk.

    Maybe not an accurate opinion, and maybe not what you wanted to hear, but worth thinking about.

    Posted 6 months ago #
11. mudshark - Member

    You sure you dont want to sell your flat?

    Yeah but 1 bed flats make good rental investments - in the right location anyway. If what you can still afford if keeping the flat is what you want then great. However, I wanted to live in the best house I could (given that I'm not overly loaded) so have never had a rental property.

    They sound a well off so risks not so great.

    Posted 6 months ago #
12. Ewan - Member

    Don’t think it would unlock any capital. I paid 158 in 08, mortgage outstanding is 130 (overpaying by 1k a month at the moment, tho that would stop if we brought), and properties that are similar ish have been going from between 120 and 130. So I don’t think i’d be quite in negative equity, but assuming prices rebound a bit over the next 5 years, I’d then have a lump sum to stick in the main house when I did sell (would continue with repayment mortgage).

    Edit: Forgot to say that all the other flats in the block are rented out (next to Woking train station so reasonable demand), and I spoke to an agent who thinks it’d be rented in a flash (but he would say that I guess!)

    Posted 6 months ago #
13. choron - Member

    but assuming prices rebound a bit over the next 5 years,

    this is the problem

    Posted 6 months ago #
14. prezet - Member

    When we bought, we worked out what we could afford to do on a single wage - and bought accordingly. We settled on a modest 3 bedroom bungalow in a quiet village a few miles out of town.

    We know know that if something happens to one of our jobs we'll still be able to pay the mortgage (although it'd be tight).

    Posted 6 months ago #
15. mcboo - Member

    If you're flat is worth less than you paid for it, you have already taken a hit, it doesnt matter if you sell now or later. Be honest and ask yourself if you and your other half want to own two properties (and be someone's landlord) or own a home with a very low mortgage. I'm in the very lucky latter position, believe me I dont wish I was at the mercy of the Bank of England and the housing market.

    Sounds like you are in a position to take a lot of stress out of your future, that is the very definition of luxury as far as I am concerned. I'd take it, buy a nice house somewhere you like, have a couple of kids, be happy and leave property speculation to someone who cares about that kind of thing....I know I don't.

    Posted 6 months ago #
16. TurnerGuy - Member

    1. If you buy a house now and then had to sell it in the future from a position of negative equity then you would obviously lose money

    2. If you don't buy now but rent then, at the same point in the future, you would also have lost money in the form of rent.

    Posted 6 months ago #
17. mcboo - Member

    Listen to choron

    My feeling is that you might find yourself in negative equity on two loans, while in a highly illiquid housing market (all those people that don't want to sell to avoid realising losses). In a poor economy with job insecurity and a possible deep recession/depression on it's way, this is a huge risk.

    So many people have got into trouble this way. Be smart, stay nimble, dont double down.

    Posted 6 months ago #
18. Ewan - Member

    choron - good points.... well made....

    Not so much that I don't want to sell the property to avoid the loss (i've noted the depressed asset price point above already) more
    a) take a while to sell and the current situation is not sitting well with the wife
    b) it would be difficult to sell while we're in it (it's rammed with stuff making it hard to redecorate)
    c) it would seem it'd be easy to rent out and I can't see rental rates dropping (if anything they're going up) much in the near term so it's relatively low risk

    I have a very good rate on it at the moment (2.5%) which just seems to strengthen the wait and see with the flat side of things.

    Posted 6 months ago #
19. mudshark - Member

    Ah you haven't got any equity in the flat, you've got a problem with renting it out I reckon. You'd have to switch to a buy to let mortgage and would need to put a significant deposit into that so have you factored that into your new house purchase?

    Posted 6 months ago #
20. mudshark - Member

    If you don't buy now but rent then, at the same point in the future, you would also have lost money in the form of rent.

    Well not really the same thing as interest paid is lost in the same sense that rent is paid.

    Posted 6 months ago #
21. pk-ripper - Member

    Ewan, I'm planning on buying a house next year as well. There's no perfect time to buy, and uncertainty can lead to a potential bargain or indeed a loss. As long as you get what you want for a price you're happy with then its all good.

    Equally, you might need to factor in the potential income hit if you drop out of your well paid job and Mrs p sprogs and dual income is affected substantially more with kiddie expenses.

    You also need to factor in the cost of lots of brake pads the way you use them so much....!

    Posted 6 months ago #
22. willard - Member

    I bloody hope so... Just started the process to move and, fingers crossed, we might be in by Christmas.

    If the market crashes, we'll be upset, but as long as we both still have our jobs, we should be ok.

    Posted 6 months ago #
23. Ewan - Member

    I guess option b would be buy new house with the benefits of not being in a chain, then redecorate the now empty house and stick it on the market to reduce my exposure. Having the second flat is not a factor as far as getting the mortgage is concerned - we only want to borrow 1/2 of what they suggested they'd lend us (!).

    Posted 6 months ago #
24. Ewan - Member

    Ah you haven't got any equity in the flat, you've got a problem with renting it out I reckon. You'd have to switch to a buy to let mortgage and would need to put a significant deposit into that so have you factored that into your new house purchase?

    Checked with bank. This is fine - they'll add on a 1.5% uplift in the rate after 6 months of renting out which i've accounted for in my calcs.

    Posted 6 months ago #
25. Ewan - Member

    Equally, you might need to factor in the potential income hit if you drop out of your well paid job and Mrs p sprogs and dual income is affected substantially more with kiddie expenses.

    You also need to factor in the cost of lots of brake pads the way you use them so much....!

    Indeed - the wife has good maternity benefits thankfully (and job is secure - EU/US cosmetic regulations - can't see those going away...)

    Hadn't factored in brake pads yet. On the upside it's getting to the point where i just buy a new set of brakes every year...

    Posted 6 months ago #
26. andrewh - Member

    Is now a good time to buy a house?

    
    No. The estate agents round here all shut at 5. Try again tomorrow.

    Posted 6 months ago #
27. ART - Member

    Sounds like you've thought this one through sensibly including what happens if income drops substantially or worse. Being chain free helps a lot in the buying process. You can always see how you go with the flat. Sort it out for rental and if it rents easy and is covering costs/ what you need it to, then fine. You can always change your mind and sell it on later if circumstances change.

    Posted 6 months ago #
28. andrewh - Member

    You can always change your mind and sell it on later if circumstances change.

    
    Again, this would have to wait until at least tomorrow.
    .
    Don't worry, I'm going now.

    Posted 6 months ago #

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