View Full Version : Buying a new house

21st May 2008, 18:59
Background, ORAC is single and has sort of sprawled through the house, but rarely goes into several of them. I basically live in the big kitchen, the lounge, a double bedroom I have turned into a study and the en-suite bedroom. The dining room and other 2 bedrooms are never used.

Just about to exchange contracts selling it as my work as moved me to around Uxbridge and I need to buy near there. I will have about 200K in the bank.

Family think I need to buy a 2 bedroom apartment - but all the ones I look at have small rooms and tiny kitchens. I really need a very large lounge-diner, 2 double bedrooms and a good sized kitchen, they don't seem to build them that shape.

Been haggling with Barretts over a new house on the Oxford Road in Reading - 4 bedroom again with a massive en-suite bedroom taking up a floor, big lounge etc. Starting price was 352K. With the state of the market I have brought them down to offering it to me at 300K - and they will also pay the stamp duty.

Family say I should leave it and move into rented accommodation for a year or two while the market goes down and keep looking for what I want, and see if I can get it with a minimal mortgage - but I am not sure how much prices will go down in the M4 corridor - or what I can realistically get for, say, 250K, within commuting distance.

Oh - and I have to really make a decision on the house in the next couple of days as all the search docs etc from their solicitors are on my table as I speak.

Any opinions? Reading OK or to be avoided? can I get an apartment or house to meet my needs for much less than the house price? Should I rent?

Just thought I'd gather some opinions, informed or otherwise...


21st May 2008, 19:16
Starting price was 252K. With the state of the market I have brought them down to offering it to me at 300K - and they will also pay the stamp duty.

With that sort of negotiation, can I sell you a used Merc. I only want 8K, but will settle for 9K.

21st May 2008, 19:50
I would say your family have it right.

Put the money in a good savings account and let it help towards your rental expenses.

21st May 2008, 20:24
First, I would advise you to go not with your head and not with your heart, but with your gut. Do you instinctively feel that this is the right thing to do?...if so, trust your instincts.

Your family have a view; but this your house, your life, your future. By all means listen to them, but they are not the final authority. You are.

M4 corridor is a good place to be. The one thing about land is that they aren't making any more of it.

Second, I would offer 275K (or 265K.. or however brave you are feeling) on the basis that if they say 'yes' you shake on it. See what happens. I bet they are keen to deal. You will also have a very small mortgage relative to the property value.

Rent? Well...if you rent for two years at say 2k/month (based on a 10% return for the letter on a 250K property) you will have spent 48K and probably earned about 16k in interest on the funds on deposit.....how confident are you that prices will be 30K+ cheaper in two years? That's what it comes down to. My bet is that will look like a poor deal....but of course I could be wrong.

21st May 2008, 20:41
In the current climate I think renting for a year or so would be sensible.

In the Uxbridge area a 250K-275K property can be rented for around 1000-1200 a month - not 2000 as in selfloadingcargo's example. So a 10% fall in prices would be equivalent to nearly 2 years rent.

I know the area well, and can give you some ideas of where to find apartments which don't have small rooms and tiny kitchens. Will PM.

21st May 2008, 20:49
I bow to stagger's local knowledge; if you can get a place you like at 1000/month, then it has to be an option. Assuming you like Uxbridge.

But I still advise you to trust your gut on this.

21st May 2008, 22:22
ORCA, for around $500,000.00 USD (250,000.00 Pounds) you would not believe what you could buy/build in Oklahoma City. (You would definitely have room for a pony.)

Course the downside is that you would have to live in Oklahoma City, but then the upside is that we could have beers together and you could have some of my famous or infamous fried turkey. :ok:

(There are some really excellent local breweries here.)

(We got to have some excellent breweries, not much else to do here but drink. :()

(Oh, and doge the occasional tornado. :eek:)

Here are three examples, all priced around your price range.




21st May 2008, 22:24
The down side of that Con is getting residency and the cost of the medical insurance on top.....

21st May 2008, 22:47
The down side of that Con is getting residency and the cost of the medical insurance on top.....

Hummmmmm, well the residency bit very well could be a problem, however, as you are single you can get excellent medical coverage for around $700.00 USD a month with co-payments through Blue Cross/Blue Shield. Or if you can pay the first $5,000.00 USD of medical expenses a year and have 100% coverage. Well, up to 10 million, that is our limit anyway.

Anyway, good luck finding a house you like.

Perhaps someday we can have a few beers anyway, cheers. :ok:

21st May 2008, 23:12
...You would definitely have room for a pony.

We have indoor toilets over here as well now con! ;)

21st May 2008, 23:20
We have indoor toilets over here as well now con!

I was referring to the 'Bucket woman'. :p

"sauna and room for a pony" ;) One of my favorite BBC comedies.

"B-u-c-k-e-t, pronounced 'Bouquet'!"

21st May 2008, 23:20
ORAC, take a stroll down the Oxford Road in Reading at night and THEN you'll make your decision. :}

One advantage of Reading (and I used to work there) is that you don't have to go far to be in some lovely areas!! And, unless you love stop/start/nose-to-tail-first-gear-only driving in the morning, you might not want to be so far from Uxbridge!



21st May 2008, 23:42
ORAC, take a stroll down the Oxford Road in Reading at night and THEN you'll make your decision.

Amen to that whirlygig, i was thinking the same when ORAC mentioned the Oxford rd in Reading. It's noisy, polluted and somewhat unsavoury, especially at night, although a redeeming factor would be the fetish clothing shop next to the kebab shop, if that so interests you. I was, by chance, given the 'opportunity' to walk from Reading station for several miles along said road 3 weeks ago whilst visiting relatives and all i can say is, save yourself now!!!

Seriously, if it's not too late then i would implore you to sit tight in a rental property (smaller than you have been living in) for the next 6 months to 1 year and make a decision then. If you have excess 'stuff' then use it as a chance to clear the clutter and put it in storage. The market might not go down (although i think it will) but i believe that a better deal in all senses will be available then.

Wishing you a calm decision.



21st May 2008, 23:59
A few ideas I follow when considering such things.

1. If you buy well and it goes down in the short term it will go up again in the long term, (You were not thinking of reselling in the next ten months were you?)
2. By the time you realise property is going up again it will be the price it is now and you will have spent the rent for no return.
3. Never buy a property where someone else controls the cost of maintenance and when you must spend it.
4. Count up the annoying inconveniences, eg parking, debating management, shortage of storage space etc, etc. You can say "I could put up with that if I had to," but do you really need to?
5. Lower price to start with, smaller profit per percentage rise in the market.
6, Always buy in the best location you can afford.

And the biggy,

Look at the property and say to yourself "Which would I rather come home to?" As my wife asks when I am considering something cheaper and less than I really want, as I approach/leave it will it be "I am glad I bought this" or will it be " Well, it's not great, but I can put up with it for a couple of years," and then if I go under the bus in two years, what good did that do?

22nd May 2008, 00:20
although a redeeming factor would be the fetish clothing shop

Not sure "redeeming" is the operative word here but I used to do the owner's accounts!!! :} :eek: It was the first sex shop in the country outside London (opened in the70s) - if that's a claim to fame!!!



22nd May 2008, 01:33
You remember that chap and Baghdad and Samarkand? The Tartan Gannet confessed on these pages to living in Reading, maybe still does. Just think! Supposing you were to move there and ........

22nd May 2008, 03:53
For many years my living and working habits were somewhat as you describe - unmarried and with essentially no lines drawn between my work and personal life, schedules, etc, many times to the improvement of both. Buying larger houses in relatively nicer places worked well for that, with general growth over time taking up the slack and paying for the difference.

The advantage to not buying now is having substantial liquidity and little tether to a fixed location, thereby having the freedom to come and go. If that is not a need of yours, then having a secure and ample place to park ones things is certainly a persuasive benefit.

You do not describe a list of options and alternatives, suggesting you have already framed this is an all-or-nothing juncture. Perhaps a little deep breathing is in order.... and some further time for reflection, research and due diligence. A serious offer of 275 or 280 might be in order... giving an extra cushion that you could find handy later and perhaps stalling the process for a week if you are feeling overly pressed.

These are strange times. I find it difficult to discern for certain if it is now 1929, 1939, 1949, 1959, or 1969, but surely the economic and political weather seems like we are reliving one (or all) of the above.

We can hope good luck and fortune will follow whichever choice you make.

22nd May 2008, 06:22
It is not the area I eventually wish to settle in by any means. Kith and kin have suggested I buy a property somewhere I would like to eventually settle, with a minimal mortgage, rent a one room apartment in Uxbridge, or a B&B for Mon-Thur nights, and go home at weekends. That way I have the property and room I want and the overall cost needn't be greater than current outgoings.

Leastwise, I have decided to pull out of the purchase, rent a decent apartment for a year, with a six month break-point, and start looking further afield.

Family (sisters and their families) live near Hove & Brighton and the suggest I can get something nice near Hastings/Battle if I don't mind buying away from the railway station commuter catchment area; conversely I always liked Norwich as a city, so I could buy there or on the broads (a reasonable height above sea level!!). Maybe I'm a swampy at heart.

I was born and breed in London, but prefer a country village with a good pub and a decent bus service to a railway station.

Suggestions within a radius of Uxbridge where I could drive home for the weekends appreciated. I presume just about anywhere on the south coast would be in range, or east Anglia?

22nd May 2008, 06:51
Hastings & environs would give you an almighty headache when it comes to getting to see the family in Brighton. Hastings also has a notorious crime level. I'd avoid personally.

Somewhere not far from Uxbridge and round the corner from the motorways is Denham & Harefield. Very nice spot & handy for Harefield hospital just in case the ticker decides to pack in...

22nd May 2008, 07:23
and a decent bus service to a railway station.

ORAC, what are these words? I don't understand!! However, I can comprehend "good pub" - plenty of those in East Anglia.

Public transport in any rural idyll is a contractidiction in terms these days, possibly more so in Norfolk. However, N'Arch is a fine city indeed and the North Norfolk Coast is beautiful - far nicer than the broads and less touristy.

However, infrastructure in Norfolk is not good - there are no motorways and only a few stretches of dual carriageway. The standard of driving is appalling!

However, I love here for the peace and quiet, the pace of life and the people who are the friendliest in the country!!!



22nd May 2008, 07:43
The house I am selling is in/next to Little Dunmow. An hourly bus service to Stansted during the day and 2 hourly in the evening. Which gives/gave access to further local and national buses, rail, air etc. that's what I mean by a good service....

I was, before my work moved to Uxbridge, looking at a new house just a bit further north in Sudbury. Big 3 bedroom house next to a nice pub on the dge of town - and they said they could get me in for 204K in total. I presume I could probably haggle that down a bit more and pay cash with no mortgage. But if I can go further afield the coast is a possibility.

I don't see Denham or anywhere near the M4 corridor as being within the price range where I could buy what I want, say up to 220-230K, in a good location. (rather than in Reading, Slough etc...)

22nd May 2008, 10:07
what you should do is this.....

Barratts used to be after margin rather than volume - see quote below:

In what has been a more challenging environment, we have continued to pursue our strategy outlined in the Interim Management Statement of protecting our margin rather than driving for volume. Our focus continues to be on holding selling prices whilst delivering cost savings and this should enable us to deliver a first half operating margin well within the range of previous guidance.

But now, like the other builders they are now gasping for cash flow rather than profit as the market has deteriorated significantly in the last 6 weeks....

Their gross margins on house building was 16.8% for financial year 2007.
see link

take 17% off the 352 and you reach roughly 300 - so they are offering you the house at cost (its real worth). But their need to get cash in will over-ride that for their half year point - which is end of June.

What you should do is promise to complete before end of June, but because you think house prices will fall a further 5%, only offer them 285.

Put the offer on the table now, and say it is good till mid June. They will huff and puff, and say no. But then, come mid June, they might call and say: "you know that 285 offer - we might deal if you made it 290...."

Have fun !

22nd May 2008, 11:47
Hoorah ORAC!

You are in a position that most are not, no real ties (schools,kids,wife,history etc) and are effectively a free agent, that is aside from being close to Uxbridge for work. Take your time, you really do have the luxury, revel in it!

The advice to haggle on the house is good, but will you be happy there in 6 months plus ? It would seem that apart from Uxbridge, you could be anywhere. Our siblings and family will always want us near them (depending on closeness), but why would you want to enter into a binding financial contract to live somewhere without really knowing the place ? Hastings isn't the nicest of places on the south coast to be honest and if you wait i'm sure that buying opportunities will present themselves in the coming year. There are lots of lovely little villages in and around the south-downs that might fit your requirements and be close enough to the sea to visit easily by bus or bicycle.

What about renting on the extremities of north London where it's quasi countryside and take the metropolitan line to Uxbridge ? The older we get the quicker those 6 months seem to pass and i'm sure that you'll appreciate the 6% interest that you would have received on your house sale money.



22nd May 2008, 12:06
I don't know about British income tax rates. If the "6% interest" is subject to income tax, it is effectively considerably less.

One of the loopholes here in the USA is that municipalities and states can issue bonds that are not subject to federal, state and local income tax. Their interest percentage may be lower than can be obtained by taxable bonds, but the net result is a higher return if one's marginal income tax rate is high.

22nd May 2008, 12:33

The 6% rate quoted was plucked out of the air and is "ish" as i certainly don't know what interest rates will be doing in the next year.

You are correct that 'this' rate would be subject to income tax, BUT it would be a much greater return than buying a property that could well (through no real fault of ORAC) go down in value in the next while and that's not forgetting all the ancilliary costs of selling/buying/moving home. The only advantage that i could see would be that ORAC would have somewhere to go to at the weekend as he would still need accomodation in the week near his work.



22nd May 2008, 14:15
As an addendum, the cost/value discussions with my accountant (OK, my brother-in-law - he and my sister are both accountants - my other 2 sisters are teachers. I got out and was in the RAF for 25 years - but now I'm a systems engineer. Some things are in the genes... :sad: )

Anyway, make to money...

Invest the 200K and I make 6%(ish) - about 12K a year, minus 40% tax = 8K net. Renting an apartment at about 1300pcm = approx 16K a year, net outgoings 8K per year. Assuming I would have paying 1600 pcm on a mortgage, I can save/invest an additional 10K per year in the savings account.

Overall result is an increase of savings/value of 8K per year.

Buy the house at 300K and I have a mortgage of about 120k (diiference is the cost of built in wardrobes and other asscoated costs etc), interest rate on mortgage is about 6.75% or also 8K per year. Remainder of 1600 mortgage payment pays off capital at 800 pcm.

Overall result is an increase of savingsvalue of 10K per year.

The difference being in the first case I would have to sell the house and pay legal and estate agent fees (my current house took almost 6 months to sell, I have neighbours still on the block after a year). I also run the risk of the fall in house prices going below my 300K value (the builders can always undercut me) and that 10K could easily evaporate or turn into a negative figure.

In the second case I can watch the market and take advantage of price drops. if the market calls 20% over 2 years at an eventual target buying price of 200K, it will have started out at 250K - an additional virtual saving figure of 50K over 2 years.

In other words, the additional cost of renting for 2 years rather than buying is at worst zero and at best 70-90K.