Terrible time to buy a house?

[DaveCWK]

Dear PH

I've decided I've had enough of renting & am currently looking at buying my first house. The problem being, looking at the previously sold values on rightmove, zoopla etc, I can't shake the feeling that where I'm looking to buy (berkshire/Hampshire area) is in a mahoosive unsustainable bubble.

Prices in Basingstoke for example, only surpassed their 2007 bubble prices 12-18 months ago, and are now 30% higher than then. They've risen even faster in areas along the M4.

These aren't paticularly desirable houses either. Standard cramped 10 year old estate stuff.

Who is honestly affording what I'd describe as small family homes priced at £350k+? Everyone must be going balls-deep with the lenders.

[gruffalo]

The housing market is this high because demand outstrips supply and that will not change is a hurry.

At the moment 100% of what you pay goes to someone else making them more wealthy, if you buy only a portion of what you pay will be going to someone else the majority will be going into something that may over time go down in value but at the end of the day you will only lose a percentage rather than all of you money.

Your choice but if you can my advice would be buy ASAP.

[scenario8]

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Best of luck!

[Crush]

We bought ours about three years ago for £200k (3 bed semi in Basingstoke including a pathetically small pretend bedroom you can barely squeeze a cot into). Had it valued at £280k last month!

Apparently the likes of Southampton and Basingstoke are now seen as commutable to London which is driving up the demand.

Fortunately we are aiming to emigrate. I doubt we could afford a larger home around here!

[davepoth]

gruffalo said:

The housing market is this high because demand outstrips supply and that will not change is a hurry.

At the moment 100% of what you pay goes to someone else making them more wealthy, if you buy only a portion of what you pay will be going to someone else the majority will be going into something that may over time go down in value but at the end of the day you will only lose a percentage rather than all of you money.

Your choice but if you can my advice would be buy ASAP.

That doesn't take into account the effect of interest rates though. Two concerns - the obvious one of affordability, but then there's the other (and not really quantifiable since it's a relatively recent phenomenon) of BTL landlords who liquidate their assets in search of better returns.

The two together might end up dumping a lot of housing stock onto the market rather suddenly, and it will be interesting to see what happens then.

[Welshbeef]

You have really overlooked the impact of

1. London house prices going very high pushing more people to look outside of London adding to the demand
2. The Berkshire/Reading proposed 1,000 houses to be built has been cancelled by the Govt there is nothing at all in the pipeline to deliver the housing required to need demand thus prices go up
3. cross Rail in now starting in Reading - massive improvement for infrastructure and means commuting to London and East London drastically quicker.
4. The £1billion Reading Station rebuild now nearly finished
5. Near zero unemployment in Reading
6. According to one of the local papers Readibg has the highest degree PHD and professional qualifications over any other town /city in the UK
7. Impact of T5 Heathrow
8. Impact of the next runway at Heathrow
9. rail link direct to Heathrow not via Paddington by 2020
10. Eurostar will commence from Reading.
11. massive Green belts in the areas
12. relative to its surrounding areas Reading is at the cheaper end. Of the scale
13. exceptionally low % of public sector jobs

So yep it's pricy and has a huge amount of reasons why things will not go adversely - heck it didn't during the 2007-2011 timescale (hardly any houses went into the market as I was looking constantly to add to the portfolio people sat tight didn't need to sell and en masse did that prevented a fall unlike some other areas.

[steveT350C]

Since 1945, UK house prices have, on average, doubled every 10 years.

Natwest Data

[truck71]

Putting values to one side, is the cost of renting = or greater than the cost of buying. If so, buy and don't worry. I've only bought two properties and in each case it was cheaper to buy than rent.

I'm absolutely no expert whatsoever in the housing market however a few big picture thoughts.

Population in the SE is only going to increase.
Houses aren't being built as quickly as the population grows.
Increasingly people are living in non family set ups- we're spreading out/ less people living in each property.
In the next 20 years the property owning baby boomers will start dying leaving their property wealth to their offspring. This gets sold, proceeds split and deposits become available.

Can people earn enough to sustain these levels? Not got a clue, but my very uneducated guess is the SE is a pretty safe bet. Choose carefully, location is everything.

[davepoth]

Welshbeef said:

You have really overlooked the impact of

So yep it's pricy and has a huge amount of reasons why things will not go adversely - heck it didn't during the 2007-2011 timescale (hardly any houses went into the market as I was looking constantly to add to the portfolio people sat tight didn't need to sell and en masse did that prevented a fall unlike some other areas.

And that's what will be different when interest rates rise. People are over-extended, I think that's clear. And a lot of BTL landlords who borrowed will want to get out of their investments if they can beat the return by putting their funds in a deposit account.

[nikaiyo2]

Is Portsmouth to far? I so,d my flat in Winchester for just under £775k in 2007, in 2010 got a fantastic flat in Gosport, on the Marina, 3 bed, exposed beams, Victorian iron works etc, for less than £350k
i can see the sea, go for a walk on the beach in 20 minutes it's great!
During the worst of the recession I bought a fair few BTLs in Portsmouth and Gosport.
I sold the most down market "housing benefit" flats early this year/ end of last as I was sure labour were going to win the election and make life hard, these were the ones that would take a bit of shifting. Primarily I was waiting the outcome of the election, to buy, but there is nothing for sale that represents value. To me that is a bubble...
I am getting rid of the rest when they become vacant, as I don't see current growth rates being sustainable, it's only a matter of time before any bubble deflates. My fear is that the next fall in values will be dramatic and make 2008/9 look like a walk in the park. It strikes me that once interest rates start to rise prices could go soft very quickly.

[Welshbeef]

davepoth said:

And that's what will be different when interest rates rise. People are over-extended, I think that's clear. And a lot of BTL landlords who borrowed will want to get out of their investments if they can beat the return by putting their funds in a deposit account.

You'd need a hell of a good rate to mitigate the leveraged long term capital growth.


Also another star in the area well over 65% of all houses are owned outright... So the remaining 35% are anywhere from brand new mortgages to one payment to go and of course includes Buy to let.


What locality are you in? Maybe the market is different there ??

[Welshbeef]

nikaiyo2 said:

Is Portsmouth to far? I so,d my flat in Winchester for just under £775k in 2007, in 2010 got a fantastic flat in Gosport, on the Marina, 3 bed, exposed beams, Victorian iron works etc, for less than £350k
i can see the sea, go for a walk on the beach in 20 minutes it's great!
During the worst of the recession I bought a fair few BTLs in Portsmouth and Gosport.
I sold the most down market "housing benefit" flats early this year/ end of last as I was sure labour were going to win the election and make life hard, these were the ones that would take a bit of shifting. Primarily I was waiting the outcome of the election, to buy, but there is nothing for sale that represents value. To me that is a bubble...
I am getting rid of the rest when they become vacant, as I don't see current growth rates being sustainable, it's only a matter of time before any bubble deflates. My fear is that the next fall in values will be dramatic and make 2008/9 look like a walk in the park. It strikes me that once interest rates start to rise prices could go soft very quickly.

And this is where the BOE have to be super careful as upping interest rates like that could utterly destroy growth in the economy.

What we should have is full term fixed rate mortgages just like USA then interest rate rises are irrelevant to household repayments. That would totally settle the market once and for all.

[nikaiyo2]

Welshbeef said:

And this is where the BOE have to be super careful as upping interest rates like that could utterly destroy growth in the economy.

What we should have is full term fixed rate mortgages just like USA then interest rate rises are irrelevant to household repayments. That would totally settle the market once and for all.

Yep I could not agree more, it seems nonsensical the current way retail mortgages are structured. Is there a reason why we have variable rates?
Tbh it is my worry, having close on a whole st load of levereged borrowing, I don't want to think about rates at 5% lol. Not sure how I ended up here, as this flat was meant to leave me debt free, then I started going shopping... For flats!!!

[MG CHRIS]

But for people outside the south east is the perfect time to buy house prices in my area south wales house prices are cheap my mate bought a 3 bed house in a good area in oakdale for 65k 3 years ago and you can still pick up similar houses to this day. Its the advantage of the media telling us there is nothing in south wales which is a lie.

But means cheaper housing for us and less people win win really.

[NicD]

I just sold an apartment in London and bought a house in Devon. For us, lifestyle is more important than investment, though no one likes to lose financially.

As posters have said, there are areas that are still high/toppy and others good value. Maybe you have to look further afield.

For sure there will be more on the market at better prices when the long signalled rate rise bites, but that could be two or three years, or longer. Do you want to wait?

[Welshbeef]

nikaiyo2 said:

Yep I could not agree more, it seems nonsensical the current way retail mortgages are structured. Is there a reason why we have variable rates?
Tbh it is my worry, having close on a whole st load of levereged borrowing, I don't want to think about rates at 5% lol. Not sure how I ended up here, as this flat was meant to leave me debt free, then I started going shopping... For flats!!!

The sad thing is we cannot elect a 25 year deal even if we wanted one (is it possible to obtain a U.S. Mortgage on a UK property in £ fixed for 25/35 years?).


Actually could this be the next big thing for the UK property market. In that everyone has to take out a full term fixed rate deal but can opt out - as you can imagine those who need the money the most probably never even move their mortgages or tryely understand it.

[dvs_dave]

Welshbeef said:

And this is where the BOE have to be super careful as upping interest rates like that could utterly destroy growth in the economy.

What we should have is full term fixed rate mortgages just like USA then interest rate rises are irrelevant to household repayments. That would totally settle the market once and for all.

Agreed, it would help the market stabilise and bring in people currently on the fence. I'm US based so different circumstances, but as an example I have a 25yr fixed 2.99% with zero early repayment penalty, and my mortgage interest is tax deductible. Also 95% LTV loans are commonplace and still relatively cheap, with the best rates kicking in at 80% LTV which in the UK seems to be the price of entry. Why the UK market doesn't have similar mortgage conditions I'm not sure. A lot of uncertainty and stagnation as a result unless you have a ton of capital to chuck in.

Edited by dvs_dave on Tuesday 28th July 03:39

[davepoth]

Welshbeef said:

davepoth said:

And that's what will be different when interest rates rise. People are over-extended, I think that's clear. And a lot of BTL landlords who borrowed will want to get out of their investments if they can beat the return by putting their funds in a deposit account.

You'd need a hell of a good rate to mitigate the leveraged long term capital growth.


Also another star in the area well over 65% of all houses are owned outright... So the remaining 35% are anywhere from brand new mortgages to one payment to go and of course includes Buy to let.


What locality are you in? Maybe the market is different there ??

An expensive part of the west country - just about commutable to London. A lot of people I know are extremely poorly prepared for an interest rate rise.

We have a substantial proportion of student lets here, and the high cost of a property in this particular town compared to the rental rates means that the returns are not that special - certainly when I did the sums it really didn't end up looking that good all in (it was well below 5% once expenses were taken into account, but before assuming less than 100% occupancy).

A rate rise would see a lot of people cashing here, in those circumstances - attempting to lock in the increase in the house price, as well as securing a decent income from lower maintenance investments.

The interesting part of the market for me is that the BTL sector is generational - baby boomers with more money than they know what to do with, at least locally. They want the money to work, but also to be safe, which suggests to me that they'll be more risk averse than the traditional speculative investor.

[Welshbeef]

davepoth said:

An expensive part of the west country - just about commutable to London. A lot of people I know are extremely poorly prepared for an interest rate rise.

We have a substantial proportion of student lets here, and the high cost of a property in this particular town compared to the rental rates means that the returns are not that special - certainly when I did the sums it really didn't end up looking that good all in (it was well below 5% once expenses were taken into account, but before assuming less than 100% occupancy).

A rate rise would see a lot of people cashing here, in those circumstances - attempting to lock in the increase in the house price, as well as securing a decent income from lower maintenance investments.

The interesting part of the market for me is that the BTL sector is generational - baby boomers with more money than they know what to do with, at least locally. They want the money to work, but also to be safe, which suggests to me that they'll be more risk averse than the traditional speculative investor.

What about baby boomers who intend to give those buy to let's to their children when their kids come of age knowing the difficulty of getting a property then using the 7 year rule to pass the asset IHT free on? Also even if not fully paid for the kids could then take up the smaller mortgage to have ownership of the property.


This is how we personally are doing it / intend to so it means that we will not have to worry about that side of their lives/knowing they are totally safe as houses so to speak.

[Neil H]

If you are buying it to live in, and can afford the mortgage, plus some headroom, then there isn't a bad time IMHO.

Case study: I bought my first flat in 2007 (1 bedroom, London suburbs), not a great time as the market hit a peak and the economy tanked for the next few years. For 5 years or so the value remained pretty much the same. In spite of this it is now worth 40% more than I paid for it, and it's being rented out for £900pcm - £300 more than the mortgage.