If you purchased a property at the peak of the market you are certainly in negative equity, but at least you are probably living in your home and have a low interest mortgage. But for some property buyers it has become an absolute nightmare ….
The property prices in Belfast have fallen further than the UK average, price falls of 30% to 40% from the peak in 2007 are typical. Now picture this situation, you found a new build development early in 2007, whilst prices were still rising, you paid your 10% deposit, and sat back waiting for completion. Today your new built flat is completed, but the value has now fallen by 30% to 40%, what do you do?
Do you buy at the peak price and accept a 30% to 40% loss on your money? Do you accept you will lose your deposit and buy somewhere else at today’s lower prices? Maybe most of us would accept the lost deposit and buy somewhere else, but a company called PBN Property Ltd is reportedly taking up to 10 property buyers to court for refusing to go ahead with their purchase at the originally agreed price, they are trying to force buyers to complete at the agreed purchase price.
PMB Property Ltd’s action raises some interesting issues, and one in particular. As property prices have fallen by 30% to 40% most of the property buyers will not be able to get mortgages, or at least they will only be able to borrow based on “today’s valuations”, in effect this could leave buyers needing to find around 50% for the deposit, e.g.:
- Original agreed price in 2007 was say £300,000
- Then a 35% fall in prices giving today’s value of £195,000
- Then a 20% deposit (£39,000) needed to buy a property valued today at £195,000.
- Thus there would be a maximum mortgage of £156,000 on the original agreed purchase price of £300,000, the buyer needing to find £144,000 deposit.
For most property buyers they will not have the money to pay for such a large deposit, so lets hope a compromise solution is found, or hopefully there will be a get out clause in the legal agreement to buy at the 2007 prices.
If you purchased a property at the peak of the market you are certainly in negative equity, but at least you are probably living in your home and have a low interest mortgage. But for some property buyers it has become an absolute nightmare ….
The property prices in Belfast have fallen further than the UK average, price falls of 30% to 40% from the peak in 2007 are typical. Now picture this situation, you found a new build development early in 2007, whilst prices were still rising, you paid your 10% deposit, and sat back waiting for completion. Today your new built flat is completed, but the value has now fallen by 30% to 40%, what do you do?
Do you buy at the peak price and accept a 30% to 40% loss on your money? Do you accept you will lose your deposit and buy somewhere else at today’s lower prices? Maybe most of us would accept the lost deposit and buy somewhere else, but a company called PBN Property Ltd is reportedly taking up to 10 property buyers to court for refusing to go ahead with their purchase at the originally agreed price, they are trying to force buyers to complete at the agreed purchase price.
PMB Property Ltd’s action raises some interesting issues, and one in particular. As property prices have fallen by 30% to 40% most of the property buyers will not be able to get mortgages, or at least they will only be able to borrow based on “today’s valuations”, in effect this could leave buyers needing to find around 50% for the deposit, e.g.:
-
Original agreed price in 2007 was say £300,000
-
Then a 35% fall in prices giving today’s value of £195,000
-
Then a 20% deposit (£39,000) needed to buy a property valued today at £195,000.
-
Thus there would be a maximum mortgage of £156,000 on the original agreed purchase price of £300,000, the buyer needing to find £144,000 deposit.
For most property buyers they will not have the money to pay for such a large deposit, so lets hope a compromise solution is found, or hopefully there will be a get out clause in the legal agreement to buy at the 2007 prices.
