Sell

SELLING BEFORE A CRASH

A lot of people lose sleep about selling too late when a property crash looks like it’s on its way. However, the reality is that there is little to worry about – unless you really need to sell in the year or two. 

According to several reports house prices are currently falling slightly in London and a few other parts of the country.

Many commentators fear this could be the start of significant house price deflation once the ripple effect takes hold.

How you should approach selling your property if you fear big house price falls depends on your personal circumstances. 

There is no one size fits all solution.

This blog considers three common situations and how you may want to deal with them:

  • You’re not planning to sell for decades
  • You will need to sell in the next year or two
  • You don’t need to sell for another 10 years

1. You’re not planning to sell for decades

This is the easy one. You can just sit tight and ride out the storm.

If you are on a variable rate mortgage, consider moving to a fixed rate which will give you more certainty as to your future mortgage costs. 

If it is best to stay on a variable rate, make sure that you build up your mortgage payment reserve.

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2. You will need to sell in the next year or two

You may need to sell because of divorce or relationship breakdown or because the term of your interest only mortgage will come to an end and you will need to sell in order to repay the amount outstanding on your mortgage. 

This is the hard one. There is no certain pattern with house price falls. They can fall slowly and then rise slowly over many years. They can fall fast as they did in 2008 and then recover fairly quickly, as they did in the South East from 2010.

Sometimes prices can take a very long time to recover. In some parts of the country prices have only just recovered from what they were at their peak in 2007. In some locations values are still below their 2007 peak.

With no certainty of pattern, no hard and fast position is possible.

However, it seems safe to assume that most big price falls will last at least 5 years before a full recovery. 

If you make this assumption and you need to sell within a shorter period, it makes sense to look to sell as soon as possible.   

If prices are falling, you may lose less if you sell now rather than later. If prices start to fall fast, you will need to expedite your sale to minimise your losses.


SELLING FAST
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Of course, none of this is science; in the real world, we simply do not know how prices will proceed. Ultimately the best any of us can manage is educated guesswork.

Small price falls do not necessarily lead to large price falls or accelerating price falls.

London prices are thought to be falling by just under 1% at the present time. This is the position for London as a whole. However in some London boroughs prices are falling faster; in other boroughs they are actually rising.

Some experts expect the general fall to continue; but the reverse could happen; prices could start to rise after the uncertainty of Brexit has been resolved, possibly next Spring.

For some observers the current fall is simply a “mid-cycle wobble” in the 18 year property cycle which began around 2010; they do not expect the fall to be permanent.  After the wobble there will be aggressive growth or boom followed by a full-blown crash as in 2008-9.

The trouble with this analysis, assuming it is correct, is that the period of wobble cannot be predicted with any certainty. It could be a year or two or four or five. Further, there is no knowing the extent of the fall during the wobble phase.

What you can do is to use Rightmove and Zoopla stats to work out what may be happening to prices in your specific location, to form your own educated guess and to act accordingly.

On Rightmove, go to “House Prices” and from there look at “Sold house prices” and “Market trends”, keying in your postcode.

On Zoopla, go to “House prices” and look at “House prices and values” and “Area stats”.

It is also recommended that you keep a very close eye on the various property indices, property news and the opinions of property experts.

If you believe prices are in for a prolonged and substantial fall, and you will need to sell in a year or two, you should be looking to sell as soon as possible if you want to minimise losses.

It is probably not a good idea to gamble on prices climbing strongly in the short term – if you are wrong you may lose out badly. 

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3. You don’t need to sell for another 10 years

In this situation, there is less pressure on you to sell – more time for you to consider all your options, speak to others, take advice and reflect.   

However, if you feel the fall in prices will be steep and long lasting, you may consider selling now.

If you believe in the 18 year property cycle, you may be concerned that the bust may occur quite close to your 10 year mark.

A lot will depend on your circumstances…

  • If you are a homeowner with a good job and prospects you may be happy to stay put.
  • If you are a buy to let landlord with a tiny rental return you may consider it prudent to sell up and find a better investment in another area which seems less vulnerable.
  • If your rental returns are very strong, able to offset possible increases in mortgage costs, you may be more inclined to stay put.
  • If you own an investment property which has enjoyed strong capital growth and you expect such growth to be clawed back disproportionately in any downturn, your preference may be to sell fast.
  • If you feel the downturn will be steep with a rapid recovery, you may opt to sell now and have a big war chest ready to leverage and buy additional investment properties as soon as prices tumble
  • If you have several investment properties, you could hedge your bets by holding some properties and selling others.

The main point is that a 10 year time frame gives a great deal more room for manoeuvre than a 1-2 year period. 

With 10 years to play with, you could decide to wait and see how things develop – doing nothing but watching carefully to gauge where things are going.


SELLING TIPS
When is the best time to sell? (timing your sale for maximum advantage)
8 fab ways to add value to your home (especially before selling it)
Show off your home for zero cost! (make your home irresistible on the market)


4. Conclusion

It is pretty much impossible to accurately predict how the property market will perform over a period of a few years.

Longer term we know that house price crashes will happen and are followed by a recovery, usually to levels in excess of previous highs.

Price falls don’t always last and don’t necessarily lead to a major downturn or crash.

There were serious property experts expecting a price crash in 2005, the crash did not arrive until 2008-9.

Most property forecasters are useless without hindsight.

If you feel there is going to be a major downturn or crash, you should assess how that may impact on you personally and financially. Will you be able to ride out the downturn or could you lose your home or investment property as a result?

Consider key matters such as your:

  • Financial health
  • Family
  • Risk tolerance 
  • Equity in the property
  • Savings or reserves
  • Mortgage position
  • Responsibilities
  • Goals
  • Priorities.

Take the perceived level of risk into account and act in your best interest.

If you are going to have to sell in a year or two, it makes sense to look at selling now rather than run the risk of having to sell in wholly unfavourable conditions.

If you don’t have to sell for decades, you can chill out and relax.

If you don’t have to sell for another 10 years, you will have a wide range of options centered on your specific circumstances.

The main thing is not to panic but to carefully assess the position and your circumstances before doing anything – ensuring that you seek professional advice before making your final decision. 

How did the 2008 property crash affect you? Did you sell a property before the crash and was it a good decision or bad?

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Dalton Barrett
Rebel Property Coach

Please follow me on Twitter @Dalton1London
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My website is: www.rebelpropertycoach.com

 

 


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