Non-motoring > Future property values Buying / Selling
Thread Author: legacylad Replies: 37

 Future property values - legacylad
With some form of economic depression being forecast, although how severe and it’s length are open to debate, does anyone have any thoughts on future residential property values ? I know that the SE has its own bubble, and there are obvious regional variations, but I’m trying to get a general feel for the housing market.
I’m wanting to downsize in the short to medium term, so wondered if this year may be a good time to sell and possibly move into rented short term.

An acquaintance of mine has also made me a business proposition. I lend him money to buy some land which already has planning permission for 3 houses, then when the first house is sold he pays me back the loan at 8% APR. I will have a first charge on it. In the event of the houses not selling, then he and his partners (2 builders) will take out ‘buy to let’ mortgages. A solicitor pal, head of property services at a large firm, will do my legal paperwork and I’ve known him for over 30 years so no worries in that department.
 Future property values - Falkirk Bairn
You have to think - "what could go wrong?" - lots
The bottom falls out of the market, the houses are badly built and do not sell, the 3 partners fall out amongst themselves .............

8%?

Surely they could borrow money for a lot less than that by putting up their own homes as security or is it a case that the have very little in assets only the ambition to make money with someone else doing the financial heavy lifting?

 Future property values - sooty123
I don't think friends and money are very good mix. Especially if it's too do with the housing, no one can guess too much about which way prices will go but its a fair bet they aren't going to be selling too many as the housing market is unlikely to be red hot for quite some time.

How much longer can you stay in your current home? It's very difficult for anyone to get a feel for house prices as there's so little on the market right now to make a judgement on.
 Future property values - Duncan
>> I don't think friends and money are very good mix.

That and what Zero said:-

Question I would ask myself. Would a commercial lender accept this risk, if the answer is yes, why havent they used one?

And the question he didn't ask himself is "Would a commercial lender REFUSE this risk, if the answer is yes, why should I accept it?

I think that works out to no, no and no.

OK. Perhaps it's me, perhaps I am too cautious?
 Future property values - Manatee
It's entirely possible that LL could be in possession of more information than a potential commercial lender, or to be prepared to take account of information that they choose not to use.

Given there are three partners in the project, and 2 of them are builders, maybe one or both of them has a poor history. Many builders have been bankrupt at some point.

I'd be cautious. I assume the amount involved is a material chunk of LL's cash. He probably wouldn't normally put such an amount into one investment, so that is Rule 1 broken.

That said if LL has first charge security then he can reduce the risk a lot by confirming the realistic value of the land to be developed (taking care with the planning permission aspect) and lending only a proportion of that. That may well be the rubbing point with a commercial lender.
 Future property values - Zero
Question I would ask myself. Would a commercial lender accept this risk, if the answer is yes, why havent they used one?

The single most important question is. Can you afford to lose the money.
 Future property values - bathtub tom
I'd put an offer on a bungalow just before this all started.

I suspect property prices will drop, particularly bungalows. The majority I looked at were probate sales and with the old being worse affected there could be even more available.

If I survive it, I reckon it could be to my advantage.
 Future property values - Runfer D'Hills
I have left strict instructions with my son to do, or at least arrange the humane thing for me if I ever start to take an interest in a Honda Jazz or a bungalow.
;-)
 Future property values - God
Howls about: www.rightmove.co.uk/property-for-sale/property-86207585.html
 Future property values - R.P.
We moved into a bungalow last time (3 years ago). First bijou house for me to live in. In truth I've found it a bit small of late. I love my books: Bike books, car books, history books...so I think we've grown out of this place. There is another reason to move again, to be closer to the in-laws. So we're on the move again. Not sure what we're looking for - certainly a bit more space...time will tell.
 Future property values - sooty123
>> We moved into a bungalow last time (3 years ago). First bijou house for me
>> to live in. In truth I've found it a bit small of late. I love
>> my books: Bike books, car books, history books...so I think we've grown out of this
>> place. There is another reason to move again, to be closer to the in-laws. So
>> we're on the move again. Not sure what we're looking for - certainly a bit
>> more space...time will tell.
>>

How did you find living in a bungalow, I've always been put off them. Regret moving into one?
 Future property values - R.P.
It's OK Sooty - size matters for me I think. Just a little small maybe. We were about to spend money on increasing the usable space (knocking walls down to extend the kitchen) already had surveys done etc before the plague hit.
 Future property values - Terry
Both propositions are about an appetite for risk.

Going into a venture to buy land, build three houses etc has lots of inherent risks:

- need to trust your potential partners absolutely,
- construction costs are as budgeted,
- death or incapacity of any of the partners,
- properties can either be sold at sensible price, or are capable of rental,
- that if the latter, a buy to let mortgage is available

Trying to find the right time to downsize is similarly subject to risk, albeit far less than the other proposition. Making assumptions that one type of property will move in price differently to another type over the coming few years is probably more about personal bias than hard evidence.

It would probably make more sense to decide whether you want to downsize for practical reasons - capital to bolster pension, maintenance becoming too much, want town rather than country etc.

Picking the right time based on perceived financial benefit ratchets up the risk, and may make no difference to standard of living, or the future. So why worry?
 Future property values - smokie
Meant in a nice way, and with some jealousy, you keep banging on LL about how you can walk for miles etc without seeing a soul and you and your mates in the village have your own "pub" and you make it sound like you where you live ticks all of your boxes.

So I'd be suggesting you look carefully at your motivation and think about whether you will be happy elsewhere.

OTOH (and I am a year or so younger than you) I do believe if there's something you want to do then you should just get on and do it (within reason!) as you never know what tomorrow might bring (especially with this virus of course).

 Future property values - sooty123
First estimate I've seen is from the BoE, they estimate a 16% drop in house prices this year.
 Future property values - R.P.
Does it matter about price drops - there may be some right bargains out there.
 Future property values - sooty123
>> Does it matter about price drops - there may be some right bargains out there.
>>

Expected price drops? Yes I think they matter, people will be put off buying if they think they can wait 6 months and get 10/20/30 grand off.
 Future property values - Bobby
My daughter got keys to her first house a week past Monday. I hummed and hawed on the best advice - I was originally just wanting her to walk away and reconsider in a few months - maybe house prices would fall etc.

At end of day this is the start of a long ownership, its her home, not an investment plan. There will be ups and downs over the ownership period.

The clincher was she had a 95% mortgage, but as the interest rates got slashed again, the banks all pulled their low deposit mortgages.
 Future property values - Zero
>> Does it matter about price drops - there may be some right bargains out there.

It maters if you are investing your nest egg in a "property" deal
 Future property values - martin aston
There is a real problem for young second time buyers too. My son bought his first house early last year. He was moved on promotion this January to another office 100 miles away, his house has been on the market ever since.
His company gave him a relocation grant but I doubt they are in a position to help him out to bridge the gap as their business will be tight for a while.
The fact that any new house will be cheaper if prices crash is no help as he will have negative equity of maybe £30k. It's one thing sitting on negative equity but another if you have to sell and buy elsewhere.
Just another example of most of us being poorer in the medium term.
Luckily I take a long term view of housing.
 Future property values - Boxsterboy
I know of two house sales in London where prices were agreed before the virus hit. In both cases the purchasers were due to exchange contracts after the lock-down and they gazundered the sellers by 5%. Both sellers agreed to get the deal done (and possibly gazundered their sellers in turn?). I think Savills said they reckon on a 10% drop in prices this year. I suspect this is probably right. The market will come back but uncertainty as to where the necessary taxes to pay for the virus will fall will restrain things.
 Future property values - legacylad
To update, I backed out of the transaction yesterday.
My solicitor pal, head of Property Services in a large legal firm, was happy to draw up a watertight contract with personal guarantees from the 3 directors, plus a single charge on the building land in my name. Which would only increase in value once building work got under way. They were happy to provide me with personal financial guarantees to boot.

A second independent land valuation, spreadsheets with building costs, labour, materials, proposed sales values and margins all in order.
The only fly in the ointment was residential property values in 12/15 months. Which we can only second guess.

Incidentally my solicitor pal, who deals with million pound land purchases, said that as a small building company, even long established with a strong track record, would not be able to borrow at the moment from main stream banks and would have to borrow from ‘secondary lenders’ at far higher rates. Far higher than the 8%pa I was offered.
I just got cold feet, but might be kicking myself in 12 months.
Moving on..
 Future property values - Zero
My estate agent cousin, covers South East London, North Kent, is working his socks off.

Properties are getting offers for full asking price on day of first viewing, tomorrow he has 20 viewings booked across 4 properties, and expects full asking price offers by close of business.

He's not sure if its a post lockdown feeding frenzy, or how long it will last.
 Future property values - sooty123
That's a pretty crazy rush. I wonder if it's people who had to move, be interesting to see what happens in the next few weeks or months.
 Future property values - Zero
>> That's a pretty crazy rush. I wonder if it's people who had to move, be
>> interesting to see what happens in the next few weeks or months.

Who knows. He does lettings and small commercial. Lettings is OK, but he is keeping a weather eye on the small commercial portfolio, Lockup shops, lockups, small commercial and offices he reckons will take a complete caning.
 Future property values - PeterS
Anecdotally, given the current situation, people are realising space is more important, and outside space particularly so, than previously was the case. And a shift to more home working means less need to be in or near city centres. I took that with a pinch of salt, as I think it’s too early to say. But certainly an estate agent I know in Sussex echos Z’s source.
 Future property values - sooty123
>> Anecdotally, given the current situation, people are realising space is more important, and outside space
>> particularly so, than previously was the case. And a shift to more home working means
>> less need to be in or near city centres. I took that with a pinch
>> of salt, as I think it’s too early to say. But certainly an estate agent
>> I know in Sussex echos Z’s source.
>>

We are thinking of moving, saw a house been on online one day. Already taken off sale, they've got 12 viewings booked. I guess they is a fair bit of built up demand.
 Future property values - Bromptonaut
>> We are thinking of moving, saw a house been on online one day. Already taken
>> off sale, they've got 12 viewings booked. I guess they is a fair bit of
>> built up demand.

I think the 'boom' is heavily regionalised. Was speaking to somebody in a non touristy bit of Cornwall last week. Property owned for several years likely to slip back into negative equity. Priced for a quick sale but not much interest.
 Future property values - sooty123
>> >> We are thinking of moving, saw a house been on online one day. Already
>> taken
>> >> off sale, they've got 12 viewings booked. I guess they is a fair bit
>> of
>> >> built up demand.
>>
>> I think the 'boom' is heavily regionalised. Was speaking to somebody in a non touristy
>> bit of Cornwall last week. Property owned for several years likely to slip back into
>> negative equity. Priced for a quick sale but not much interest.
>>

No doubt there's that about it. Also hugely depend on the house itself. I wonder if it'll burn out as the build up is satisifed.
 Future property values - Zero

>> I think the 'boom' is heavily regionalised. Was speaking to somebody in a non touristy
>> bit of Cornwall last week. Property owned for several years likely to slip back into
>> negative equity. Priced for a quick sale but not much interest.

It was ever thus, the property market has always been heavily regionalised. But if "telecommuting" does stick, regions will change. Cornwall will always suffer from its poor travel connections and facilities
 Future property values - God
>>We are thinking of moving, saw a house been on online one day. Already taken off sale, they've got 12 viewings booked. I guess they is a fair bit of built up demand.

That's been my experience too - I registered interest in a couple of properties, but they were sold without the estate agent even contacting me.

I phoned an agent on Friday to arrange a viewing of a property on Bodmin Moor .. they haven't got back to me yet.

Not all estate agents are like this of course, some I know of are 'on the ball' but, they haven't got the properties I'm interested in buying :)
 Future property values - Falkirk Bairn
>>but might be kicking myself in 12 months.

I do not know the investment needed to buy land & finance the build.
However, if they cannot borrow from a bank then they need private finance.
Too risky for you but someone that is minted then it might be worth a punt - the chance of them finding somebody is quite small.

In 12 months things might be clearer as to what is happening & you might then be in a position to take it on assuming the land is still for sale & the "builder pals" are all still talking.

I live in a house that was built by someone I knew - he bought land & built houses. He staggered from making money to almost bankrupt every few years - his own home + plots in hawk to the bank as security.

The only time he had "real money" was when he sold out for £150,000 - does not sound a lot today but back then he was selling 3 beds for £7K & 4 beds under £9K - average pay was under £900/year.
 Future property values - legacylad
The land purchase is going ahead. They always had a plan B to borrow from a ‘secondary lender’ at a higher interest rate, with the consequence of a smaller gross profit. They are self financing the actual build and have extensive previous experience of such things. Very successfully.
I’m sure the properties will be built and for sale within 12/15 months.
The only unknown, and the only reason I withdrew from the transaction, was future residential values in the short to medium term in an area I wasn’t familiar with. Where I live property prices are holding up very well...whether that will continue who knows.
 Future property values - God
>>Where I live property prices are holding up very well...whether that will continue who knows.

I have a property dilemma taking place at the moment in as much as I put my cottage on the market back in mid Feb, had 6 viewings in no time at all, and accepted an offer just £5k below asking.

Then along comes the lockdown. Buyers still on board as are their buyers but, nothing can be done.

Boris announces easing of said lockdown, had survey done here last Tuesday, buyer accepts the damp west-facing walls!! but, the 5 properties we've been looking at have all gorn under offer, also in no time at all.

So, I've been looking at renting a place for 6 months and see how the property market goes but, d'you think I can find a rental that would accept 2 large (ish) dogs ... no chance.

What to do?? .. I don't want to let the 'yam yams' down, who are such a nice couple with a teenage daughter who will be attending college in Cornwall come September and, we're due to exchange con-tracts any time soon :o)

OMG.
 Future property values - sooty123
What to do?? .. I don't want to let the 'yam yams' down, who are
>> such a nice couple with a teenage daughter who will be attending college in Cornwall
>> come September and, we're due to exchange con-tracts any time soon :o)
>>
>> OMG.
>>
>>

Have you thought about renting a holiday let place? Last holiday cottage we went on holiday to the other half of the building was rented out to a retired couple who were moving overseas and had sold their house already. I think they were there for around 5 months.

They tend to be much more understanding with dogs as well.

Where are you moving to?
 Future property values - God
>>Have you thought about renting a holiday let place?

Yup, but wouldn't easy with the lockdown. I shall choose that option as a last, um, resort.

>>Where are you moving to?

Not too bothered about area really, as long as it's in England. Been looking (on-line) at places in Cornwall, Herefordshire, and Exmoor. The couple who are selling the Exmoor property aren't actively looking at other property - until they get a buyer for theirs!

PITA this property buying/selling lark - my 9th :(
 Future property values - sooty123
>> >>Have you thought about renting a holiday let place?
>>
>> Yup, but wouldn't easy with the lockdown. I shall choose that option as a last,
>> um, resort.

Might be easier than you think, not likely to be fully booked!


>> >>Where are you moving to?
>>
>> Not too bothered about area really, as long as it's in England. Been looking (on-line)
>> at places in Cornwall, Herefordshire, and Exmoor. The couple who are selling the Exmoor property
>> aren't actively looking at other property - until they get a buyer for theirs!
>>
>> PITA this property buying/selling lark - my 9th :(
>>

How come you moving?
Herefordshire is quite nice, went on holiday there once. Lovely countryside. Don't know much about the SW, not been there.
 Future property values - God
>>Might be easier than you think, not likely to be fully booked!

Yup especially on farms that I know - hidden away ;-)

>>How come you moving?

Been here 9 years now, that's a long time for me. Fancy a move though, a change is as good as a rest.

>>Herefordshire is quite nice

Indeed it is, and not too touristy, unlike Cornwall, Devon etc. etc.

Orf out now ... with the dogs.
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