[Closed] Advice/Opinions for a first time buyer.

depends if your buying an investment or a home.

I think your location makes some difference to how the market will move but buy now if you don't intend to move for a few years. Negative equity only matters if you want to sell.

Hoses are more affordable now than they have been for a while but still expensive in historical terms.

You are also in a buyers market so bargaining is on your side.

If, after 'years of saving' on salaries like yours you only have a 10% deposit and a bit more for other out of pocket expenses, are you sure you can afford £1k a month and potentially much more when interest rates go back up?

It took me 2 years to save 10% on a £42k house when I was earning £12k a year back in 1994-ish

depends if your buying an investment or a home.

If, after 'years of saving' on salaries like yours you only have a 10% deposit

We haven't been saving madly, we've been having quite a nice life, and we've both been back to further education, which we're just now recovereing from (another story). I'd say most of that is from two years of hard-ish saving.

are you sure you can afford £1k a month

I think so, but not sure. It would still leave us with £2k a month as long as we both stay in full time work at our current salaries, and as I say, no other debts.

But no kids at the mo, and they could well be along soon [shudders]

Are you currently renting? Remember there will be many more additional expenses over and above the mortgage - life insurance (strongly recommended to protect any surviving mortgagee in the event of death), council tax, insurance etc.

My wife and I had a joint income of around £3,600 and no debts other than the mortgage (£100k) and a small car loan but most of that was gone at the end of the month (although we were saving quite a bit as well).

Now she is on maternity.... OUCH!

Are you currently renting?

Yep. At a very reasonable £450 a month - our land lady is very nice and not at all mercanary.

So we should in theory be able to save at a quicker rate than most, but that doesn't get round the fact our salaries are modest in edinburgh terms, and that probably won't change.

Fair enough - I am just trying to make the point that there are lots of other less obvious costs on top of the mortgage - I am sure you have done your homework, but I still find it scary now trying to find out where all the money goes after 15+ years of home ownership. 🙁

that's exactly the kind of perspective I'm looking for, just to check we're not deluding ourselves - cheers mastiles.

So, on top of £1k, what other new expenses would we have that we don't have renting, and what would be a ball park figure for those? £200? £500? n?

The only regular expense I can think of if owning rather than renting is life insurance. You'll want to make sure your partner (if you're joint mortgagees) can afford to pay the mortgage if something happens to you (or vice versa).

Otherwise the main difference between owning and renting, is maintenance and if something breaks. Then you've got to pay for it rather than phoning the landlord. Oh and you'll need buildings insurance too.

That said, I've never rented only owned so I don't know if stuff like water tends to get included or not.

My mortgage is similar to your planned one at a shade over a £1100 a month (for 160k), but our outgoings not including food are another 400 quid for all the insurances, bills, etc. This is for a 2 bedroom detached house in the glorious Midlands.

The housing market certainly looks like it's moving now

From the Halifax report this month

Key facts

• House prices rose by 1.6% in September. This was the third consecutive monthly increase and the fifth so far in 2009.

• House prices increased by 2.8% in Quarter 3. This was the first quarterly rise for two years (2007 Quarter 3) and the biggest since 2007 Quarter 1 (2.9%).

• The UK average house price in September was 1.7% (£2,672) higher than at the end of 2008. Prices have risen by 5.9% since reaching a trough in April 2009; an increase in the average price of just over £9,000. The national average price is currently at a similar level to that in mid 2005.

• House prices in September were 7.4% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) has fallen markedly from a low of -17.7% in April. It is at its lowest since June 2008 (-6.1%).

me and my partner can now get a mortgage at x2.75 of £180000

Actully that's wrong - £180000 is our mortgage plus deposit, so mortgage would be £162k @ x2.75.

I realised when I read:

a shade over a £1100 a month (for 160k)

And I got that wrong as well 🙂 It's 1080 for 165k.

Damn being fixed for 2 years.

Feenster, why don't you try saving then balance between your rent and proposed mortgage (plus other regular savings) and this will let you see if you cab survive with that commitment, and quickly get you a bigger deposit, reducing the actual mortgage (assuming no major house price rises)?

7

The housing market certainly looks like it's moving now

My hunch is that's fuelled by the cash/equity rich minority who have been wiating to smell the bottom of the market.

I reckon there is a majority, like me, with modest to low deposits, or are in -ve or low equity who are in a catch-22 of affordable prices, but poor lending conditions and need to wait.

I reckon it'll stall again. And so it should imo. We need to learn the lessons of the last few years and not rush to create another bubble.

The last thing we need is another sellers market, for everyone's sake

why don't you try saving then balance between your rent and proposed mortgage

I like that idea - thanks!

Our expenses per month....
Home insurance (building and contents with bling bike cover)- £60
BT (phone and interweb) - £30
Life assurane - £32
Dental cover - £27
Council tax - £130
Gas/leccy - £80
Sky - £22
Mortgage - £770
TV licence - £12
Water rates - £18
Car loan - £200
Pensions - £350
Food/nappies (wife + two babies) - £300 allowance

That's just short of £2,050 a month and doesn't allow for my wife's phone or car running costs (mine are through my business so it pays for them).

The only real 'luxuries' are the car loan and the Sky/interweb on our outgoings, yet all our money is accounted for.

Damn scary

gulp @mastiles_fanylion

But thanks for the insight - very usefull to see

Looking at house prices historically, they tend to 'bottom' for quite a while, but it might be the interest rate rises that makes ownership more expensive. However, you can offset this by saving for a bigger deposit. Many have commented that it's not worth starting out now without at least 20% deposit.

Definatly worth working out what you can afford, as MF suggests.

I tend to agree with 7's approach too 🙂

Just to mess with your head:

[url= http://www.lovemoney.com/news/the-property-ladder/get-ready-for-the-housing-crash-part-ii-3994.aspx ]Get Ready For The Housing Crash part II (lovemoney.com, 6th Oct 2009)[/url]

Our expenses per month....
Home insurance (building and contents with bling bike cover)- £60
BT (phone and interweb) - £30
Life assurane - £32
Dental cover - £27
Council tax - £130
Gas/leccy - £80
Sky - £22
Mortgage - £770
TV licence - £12
Water rates - £18
Car loan - £200
Pensions - £350
Food/nappies (wife + two babies) - £300 allowance

Jesus our sky is £80 :O

(although does cover phone and broadband)

Jesus our sky is £80 :O

We are thinking about combining our Sky/phone/broadband to save a little.

For what it is worth, we bought, probably fairly close to the top of the market although within our means. Owning a house has given me a long list of dull things that I never used to have to do, and the claustrophobic sense that if I stop earning for a few months the world will fall in.

Savings, on the other hand, give me a warm glow of knowing that it's all going to be OK. 🙂

If you can get a 15% deposit then you'll have alot more mortgages to choose from. I'd get on the ladder now as the prices will only go up. Make sure you haggle like **** and double check ALL the solicitor fees, e.g. Archive fee £25....isn't required by law so don't bother.

Would you not think about staying outside of Edinburgh to get a cheaper deal? the house prices there have not been effected as much as other parts of the country. E.g. there are new train lines planned from the likes of Airdrie and coatbridge (OK not the nicest places in teh World) and you can get a new 4 bed detached there for £200k. Your lucky to get a 2 bed flat in some place in the Burgh for that. Need to take into account commuting costs (I'm from Airdrie and costs me about £8 a day, £160 a month or less if you can car share. I drive to the Gyle)Just a thought. I await the abuse for living in the Buckfast Triangle lol.

I'm currently in the same predicament as a first time buyer. This is my calculations built in actual quotes, not assumptions. This is for a £76k Mort over 30 years.
358 Mort
75 Council Tax
60 Gas/elec
55 sky/phone
20 House Insurance
12 TV license
20 Critical Illness

Plus other personal comitments. This is all based on a 2 bed flat and living on my own. just gives you a look at it from the other end of the spectrum. If its your first house, it's only a starting point and can build on it from there

Edinburgh? Buy now. The market is as low as it will get - thats my guess. Still well expensive compared tot he rest of the country

Xan - don't forget to add your commuting costs and time into the equation

TJ, as I said £160/month it to drive in and out to the Gyle from Airdrie. I'm less than that cause I car share. Summer time I'll be cycling the 28 miles each way saving yet more of my hard earned bucks. I can afford more thatn the above, just dont really see the point for a first home on my own. Give me bike money and lets me keep running a nice car and a night out or 2 every weekend.

sorry Xan - didn't see that.

feenster - is it an old property?

Your not going to move in and then decide it needs new windows, carpet, kitchen, bathroom, central heating, etc. are you?

In my book, always keep something back, just in case.

(we ended up with coughing up £10k for a new kitchen within the first year)

😉

Personally I'm just going to keep saving with a view to the interest on the mortgage amount being greater than the total you'd save by having a larger depsoit for the timebeing, that and I don't have quite 10% yet, and think 20% would be a better option. Provided I don't have a heavily expensive trip to Kenya next year as I did this year I should be well on the way to 20% by this time next year.

Edinburgh still expensive, try Aberdeen, no credit crunch here!

is it an old property

We haven't found on yet.

In my book, always keep something back, just in case.

I wish....we're going to be lookin gdown the back of the [rented] sofa for every last penny just to get through the door, and probably sleeping on matresses and sitting on bean bags for the first year, never mind putting in a new kitchen. 😉

I take your point though....

When we bought our first house [86, I think] all we had was a bed without any legs, a coffee table, & 2 deck chairs
The previous occupants had left a cooker & we went to the local auction & bought a 2nd hand fridge & a sofa for £12

happy days 😀 - no, really they were

Yeah, I am with uplink... When I bought my first house (15 or so years ago) I begged, borrowed and stole (well bought second-hand) almost everything.

My mum and dad would go around supermarkets looking on the second-hand adverts for me and I just asked for everything from everybody. I got a great second-hand Habitat leather sofa (my brother inherited it and recently sold it on Ebay). Fridge freezer and washing machine from local free newspaper (sold for same price as I bought them for to the person who bought the house from me 7 years later). Habitat table and chairs bought second-hand and sold for more than I paid for them.

I even dragged my mates' father along to the local DIY store when I bought the (cheapest they had) kitchen as he was retired and could get 15% off on Thursdays.

Spent the first few years drinking supermarket lager in an unheated and dark home whilst keeping warm in a sleeping bag.

Mad now I look back at it, but I had some great times. And a VERY fit neighbour opposite who didn't seem to realise that her bedroom had curtains 🙂

Your hunch is my hunch (and also the hunch of many of the economists/investors like Steve Keen, Mish, and Jim Mellon who predicted the 07/08 crash), keep out of it. Housing is over-valued, and will fall upto 40% after the withdrawal of the stimulus. Taking on a £1000 a month mortgage will look like a bad decision in two years time. My advice, keep saving, and diversify where you keep those savings - 60% sterling, 20% euro, 20% gold (you can buy relatively small amounts and gold is on a bull market). This is not aggressive investment advice, merely protective.

No chance of a 40% fall in house prices - certainly not in Edinburgh.

There has been little fall anyway so far here and I simply don't see any signs of any fall in values

Re 40% fall, this would effectively mean wiping off around the last 5 years of housing price growth. The stock market effectively lost 40% in two months last year. The housing market has proven resilient so far because of the huge unprecedented fiscal stimulus, but the stimulus cannot continue indefinitely, and once it is drawn back, with no major driver for jobs (Edinburgh is a financial centre, lots of job losses there), unprecedented personal debt levels (rampant iron bru consumption), and a cutback in public spending (who's going to clear up all that sick on a sunday morning), a long period of deflation (cheaper bottles of ginger), I think it could be on the cards.
In other words I don't think the last year is a typical and therefore instructive period on which to base economic projections. It's like bench-pressing your max weight pumped up on steriods, then expecting yourself to be able to do that indefinitely after the steriods are taken away.

@badnewz

ignoring your Irn Bru and ginger jibes 😉

I find myself agreeing. Scotland and edinburgh have a very high dependancy on the financial and public sector for jobs. Me and my partner are the latter.

My partner should be fine (NHS), but I work for a governement dept, and it's pretty clear that after next year's election, no matter who wins, all manner of pain is on the way for the public sector. I feel relatively secure, as my profession is quite transferable to public or private sector, but I just think there are many more redundancies to come for scotland.

The stock market effectively lost 40% in two months last year.

It varies locally so much though. Around here (glasgow) nothing seems to be coming onto the market and prices are still steadily being adjusted lower. I'm looking for my first place, but looking for a cheaper one and with significantly more deposit, and I'm still torn about buying!

mastiles_fanylion, the stock market has rallied but is still well below its early 2007 high. The recent rally is also a response to the stimulus, so once the stimulus is withdrawn, I wouldn't be surprised to see the ftse stagnate (it will rally and fall from time to time because traders need something to do).
The most instructive example for the UK and US is Japan, which after it stock market crashed, went through ten years of falling prices, especially in real estate (before the crash there the land around the Imperial Palace in Tokyo was worth more than the whole real estate of California).
You could flip the question and ask not why would houses prices fall, but why would they grow? I don't see many reasons, especially with a conservative government which has nailed its flag to the mast of public spending austerity. For the sufferings of the private sector just read the threads on here by recently redundant workers.
House prices are likely to fall, they could simply stay the same, but I don't see them increasing. Which would mean there is little motivation to panic buy in the expectation that you will get priced out of the market.

but why would they grow?

Ok, let's do that.

In the run up to 2007, I could see people borrowing more with bigger salary multiples, putting down smaller deposits, and self certifying. Also, even though slaries weren't going up as fast as fast as house prices, they were still going up, because things were booming, and employment was high.

Now though, things aren't booming, salaries are static, employment is falling, and lending conidtions are really tight. The banks have reduced their multiples, are asking for bigger deposist, and self certificaton has gone. I mean how many people really do have 20%-40% for a deposit. I don't, and on an average salary, what does x2.75 atually get you at the moment. Not much, take it from me.

Plus, the stamp duty holiday finishes at the end of the year, and no sign a syet it will be extended.

So, those that think house prices have bottomed and are on the way up, what are the factors that will allow that to happen? It's not a loaded question, I genuinely want to know what you think?

In Edinburgh? Prices have not risen much over tha last three or 4 years ( althought they did before that) so property is not so overvalued as in some areas.

Land always remains in short supply and so does quality housing in the city

Edinburgh will continue to be relatively prosperous due to all the tourist money.

There has been no significant drop in house prices in the last year - just a lot less activity and overpriced stuff is not selling - but realistically priced stuff is selling well.

I think we will see a lot of local variations in the market but I think Edinburgh will hold firm - no great rises but no great falls either.

I'm of the opinion that the market has a long, long way to go still. Bear in mind all the stats coming along are about a very small number of transactions compared to a couple of years ago, and they should always be taken with a pinch of salt anyway given they're done by companies with a vested interest in talking up housebuying. The few sales going on seem to be fuelled by the wealthier middle-aged who don't get much interest on their savings so are buying up property instead.

If you're renting for £450/month and it would cost you £1000/month to mortgage something similar, you'd be nuts to buy unless you're committed to living there long-term (10+ years), in which case all the factors going into house price trends are largely irrelevant.

Edinburgh will continue to be relatively prosperous due to all the tourist money.

@TJ, but how many people actually work in tourism compared to public sector and financial services in ediburgh? And of those that do, aren't most of them low paid, casual and trasnient workers, and not involved in the housing market? I can't quite see how Edinburgh's tourism status has a bearing on house prices in Edinburgh for average punters - what am I not getting?

Feenster - simply that it brings a lot of money into the city. A lot.

This supports businesses from hospitality / tourism to retail. So while the directly employed people are lowish earners in the main it has the effect of pushing up the floor on both wages and housing. If you want a job in Edinburgh there is always one available. Due to the high rate of employment and relatively high wages the rental sector is flourishing. £500 pcm for a studio flat worth £120 000 is the norm. A large number of students also are in the city.

So while tourist money has no direct bearing on the housing market - by increasing the affluence of the area it has an indirect effect thru a general increasing of profits and a upwards pressure on the bottom of the market.

mastiles_fanylion, the stock market has rallied but is still well below its early 2007 high.

To advocate the devil (or estate agent), reasons I've heard cited for house price growth include: the global economy is recovering, population growth in the UK (to be 70 million in 2030), social economic changes (more divorcing couples = need for 2 rather than 1 property), devalued sterling will bring a UK manufacturing boom, Gordon Brown will get re-elected (unlikely) and will then start another credit binge.
Aliens could also prove to be bullish UK property speculators.

Feenster
mmmm, Edinburgh must be loads different to London then, as I would have said you have already missed the lowest point of the trough and things are now going up. According to the papers, other areas do follow the London house pricing trends, though so maybe its only a matter of time.

Contrary to you view on lending, things are getting better and better in that department on a weekly basis.

TJ is right on every count as far as I can see... (wow that really hurt)

Ok, I can see what you are saying, but what I still don't get is this:

upwards pressure on the bottom of the market

The bottom of the market, and the financial resources needed to get there don't match at the moment. They haven't for a long time, but previously people just borrowed more, because they could, so prices went up. Now they can't do that, so I reckon the source of that upwards pressure has gone.

From my point of view there is a huge correction needed in edinburgh more than most to get prices more realistic again.

Feenster - if you have a buoyant rental sector due to high employment and large numbers of students then this increases the desirability and saleability of cheap property and thus prices. This then has "knock on" effects throughout the market. The rental sector takes properties out of the owner occupier market thus decreasing availability thus you get a scarcity premium.

As there has been no significant increase in most of Edinburgh in property prices for the last few years there is little correction needed.

I really don't see any significant move in house prices in Edinburgh in any direction over the next few years. Slowly upward if anything

Eninburgh looks to be close to the Scottish average for unemployment

http://www.edinburgh.gov.uk/internet/business/economic_development/cec_labour_market_information

Truth is I don't think anyone can predict exactly what the housing market is going to do other than, in the long term, it will probably rise. Yes we have seen prices rising recently but that could also be accounted for by the fact trhat we are almost in equilibrium between buyers and sellers. The quantity of housing being sold and bought is still, from what I understand, considerably down on "normal" levels. With the economic uncertainty (I don't believe we are coming out of the downturn yet) and the potential for more job cuts particularly in the public sector over the next year or two it is more than likely that the house prices will dip, drop or crash. You can never really predict what extra costs you will need when you buy a house either as sometimes things just happen. You have to know your budget, what you need to pay for, decide whether you want those luxuries you may have had up until now (Sky for example) and what else may change in the future (eg babies). Interest rates will rise at some point but quite possibly not for a couple of years but it is something that needs to be factored in to your budgeting. We have been on a fixed mortgage of one sort or another for our entire mortgage history. Yes, it has not been the cheapest option for us at a number of points but I did have security in knowing exactly what the biggest mnonthly outgoing was. That's how I manage. Others do differently and find it works for them. When looking at your costs I would also remember to factor in montly saving for other bills that crop up such as car servicing, boiler servicing, water rates etc.

@TJ

So what you seem to be saying is that the high number of students and low paid workers in tourism and hospitality businesses are fuelling the demand for rental property at the bottom of the market, thus taking them out of the market and making them scarcer and therefore pricier for people like me who want to buy one.

And (I'm running with it here), the higher the bottom of the market gets, the more people are excluded from it, so the more people have to rent which increases demand for rental property, which makes property to buy even more scarce, which keeps it priced high......

Depressing.

So what we [edit: I] need are students and tourists out of Edinburgh

More or less. It has an effect right thru the market. Demand for rental properties is not just at the bottom end of the market tho - 4 / 5 bed flats are also in the rental market for students. The high rental activity keeps a floor under the price [i] per room[/i] so even proerties worth £300 000 can make worthwhile rentals if you rent to 5 students.

Certainly prperty is basically unnaffordable and you are right that a correction is needed. I see it happening thru price rises below wage rises for the next ten years rather than by a crash in values in a short time scale

A Leith 1 bed flat at £160 000 is unaffordable for the average worker.

some good advice in this thread.

imho what the market will do depends hugely on where you are.

in cornwall lower end properties, up to 200k, are selling like mad to cash buyers because even at minimal rental they offer a far greater return than the cash in the bank.

250'ish middle market is sticking, the family houses that tend to be mortgage dependent (i sold a house 18months ago for 250 and i reckon that today i would severely struggle to get 200 for it).

300 and up, which tend to be more affluent buyers, is not bad PROVIDED it is priced correctly. there are still a lot of 'have a go' prices around.

but, from what i can gather there are a huge number of deals falling through and a lot of large legal cos laying off conveyancing staff. read into that about teh state of the market what you will!

my gut feeling, and i am happy to be corrected, that the market will slump again in the new year. i don't forsee a catyclismic crash but the re-introduction of stamp duty, vat likely going up and an inevitable rise in interest rates should do it.

my advice would be that if you can find a good deal, most preferably a house that you can add significant value to, and you want a home/long term investment, then buy because cash in the bank is worth nothing.

and for sure do not be afraid to make silly silly offers.

mastilles_fanylion - 18quid/month water, i wish! you can tell that you don't live in cornwall!! : )

http://www.moneyweek.com/investments/property/uk-property-housing-market-hasnt-hit-bottom-yet-939.aspx
Thood for Fought.