I try not to pay too much attention to the everyday gloomy reports on the housing market in the US and UK but its quite difficult. Especially, when there seems to be a growing number of economists and other so called experts who are predicting a further drop in housing prices.
And having purchased a home just last September, I am concerned about getting into negative equity. However, I do take comfort in the fact that my deposit was 10% and prices for my area seem to be holding steady. Case in point, a similar house on my street went up for sale this week and the seller egged on by the estate agent is asking for approximately £60K more than I paid. Granted no two properties are the same, but I find it hard to believe that they’ll achieve that price point in this market. Of course only time will tell.
I also take comfort as had I waited to get on the property ladder, I probably would not have the same buying power, as while prices may have dipped, interest rates have gone up — so monthly repayments would be higher. Also, banks have tightened their lending criteria and some are even asking for a 25% deposit to be eligible for the best mortgage deals. That’s just outrageous when you consider that the entry point for a two bedroom place at the lower end on the London property market is about £250K. At that price point, a buyer would have to come up with £62K for the deposit plus a further £5K-£7K to cover stamp duty, attorney fees and other cost associated with the purchase. At these levels, the barriers to entry are higher, especially for first time buyers who experts all agree are the lifeblood of the property market. Particularly as, if people can’t sell on their starter homes, they can’t move up the ladder which in turn means that everything grinds to a halt.
So I am going to try my best to ignore all this doom and gloom talk. Especially as even if I move on from the UK, the plan is to hold on to this property for many years to come. Plus once prices start to fall, unless you absolutely have to sell, the best strategy in these cases is to do nothing. Otherwise, selling will just crystallise any potential loss — which would not be a good thing at ALL!