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Would you be OK if interest rates went up, say 4%? Savings rate in the UK is very low and personal debt high, that could be a bigger issue than just a drop in value.
hesa-
Yeah, an interest-rate hike is possibly more concerning than a property market crash. Given that mortgage offers are stress tested, and I'm not maxing out my mortgage allowance, I'm kind of trusting/hoping/praying that I'll be ok.
Certainly if interest rates leap up, millions of mortgagees are going to be screwed, which probably would cause a property market crash — possibly even a multi-national recession a la 2008 — which is why the Bank of England will probably go to almost any length to avoid a sharp rise.
Who knows, maybe the combined efforts of the government/BoE won't be enough to hold off such a situation. Maybe we'll all be screwed. But I like to try and stay optimistic.
Diamond_Supercool
Given that I'm days away from pouring all my savings into a house in London, I'm trying hard to stay optimistic about house prices. I recognise that there are plenty of reasons to be fearful, but here are my reasons for optimism...
What really screws the property market is uncertainty. There is loads of uncertainty at the moment, hence the very slow market, hence the price drops. Once Brexit happens, the economy will probably not totally implode, and after a year or two, things will have settled down one way or another, uncertainty will start to dissipate and the market will pick up again.
Fundamentally, the housing market is about supply and demand, because everyone needs somewhere to live. Given that the government is likely to miss housebuilding targets for 2022 by anywhere upwards of 50,000 homes (possibly much more), demand will almost certainly continue to outstrip supply. A LOT of people need to move out of London before there is a surplus of houses and therefore a massive drop in demand.
If anywhere in the UK is going to be insulated from the impact of Brexit, it is likely to be London. It seems unlikely that vast numbers of people are going to flood out of London, buying houses in the provinces instead.
As the saying goes: property gets sick but it never dies. And the London property market has been a solid investment for about 2,000 years. It may slip a little in the short term, but it's probably still a safer asset in the medium term than, say, Apple. Or Bitcoin. Or Foffa bicycles.
Interest rates are unlikely to rise dramatically over the next few years. At least according to recent noises from the Bank of England. While interest rates stay low(ish), mortgages are affordable, which keeps the housing market relatively buoyant.
Fuck it: this house is meant to be a nice place for me to live, not some kind of speculative investment.