I was faced with a similar situation in 2008. We lived in a bit of a dodgy area and my wife didn't feel safe there, and I wanted to move closer to work. However at the time we were looking (early summer 2008) the writing was on the wall, house prices already falling (we actually lost money on our first house bought in 2006), interest rates on the way down (personally this was good news as I moved us onto a tracker in January as I expected rate falls following the run on Northern Rock etc, but it was an indicator of a downturn). I remember feeling a bit unsure about it and phoning my dad for advice as I didn't want to waste a bunch of cash in a falling market. In the end we went for it because quality of life is important and we were not at risk of negative equity or anything like that due to large deposit, although I was fairly cautious about not pushing the boat out (we bought a 3 bed terrace but technically could've afforded a 4 bed detached).
We still live here 12 years later. House prices fell but as we weren't moving out it didn't really have any impact. Based on the sale of neighbouring properties it's probably worth about 40-45% more than we paid now (pretty poor rise compared to some areas but the point is if you survive a downturn history suggest prices always bounce back - yes it's possible we might have saved money by delaying purchase but with us buying on a new build estate it wasn't that straightforward as there might have been no properties available).
To be honest it sounds like you are fairly sold on the idea of moving already (found a house, mortgage lined up etc) and this is just cold feet a bit like I experienced. I would go for it, I think you could end up regreting it if you stay in a house that's too small for a growing family.
If we buy, and that happens, we're going to be in negative equity in the near term, and judging from the last crash in 2008 it will take the best part of a decade to recover
It actually only took about 7 years for prices to recover to their peak level in nominal terms (which is what matters in relation to negative equity) following the 2008 crash. In some areas like London, Oxford & Cambridge it took less than 4 years to recover.
The other thought I had is, you can potentially 'crash-proof' yourself if you buy a property you can extend and add value to (the one we're looking at has a lot of potential to do that). So if the market drops by, say, 10%, but you've added £100k to a £200k house (after spending around £50k)
Adding £100k to a £200k house in market you describe (16-30% drop) is quite optimistic I feel but obviously possible if you find the right property. Keep in mind if there was a 23% drop (midrange of your estimate) then for that property to be worth £200k after the crash it would effectively need to be worth £260k in 'old money'. So that's a mighty big extension you've built to make the house worth more than 2.5x what it was when you started. You've also got to find the £50k to fund the extension which I assume if you are worried about negative equity isn't that straightforward as you must be mortgaged to the hilt already.
edit: I guess you mean £200k precrash so ends up worth about £154k so you break even.
I think we'll know a lot more after furlough ends (this/next month?). Whatever damage has been done will be evident then, so at least the uncertainty will be mostly over.
I think there will be a lag, furlough will end but people are then getting redundancy payouts, paid holidays etc on top of their savings, so they won't get evicted straight away. You've also got this £1k bonus for retaining furloughed staff so for a few lower paid staff may get retained on low hours until January before being given the boot.
My guess is a fair portion of people who will lose their jobs when furlough ends are not going to competing for the same sort of house as you. I don't have any stats to back this up but you've obviously got a bunch of people in the catering and hospitality sector at risk who will not be earning megabux to begin with and hence not able to afford family houses. A large proportion of those furloughed are young (
https://www.bbc.co.uk/news/business-53416673 ) and again young people are less likely to be buying family homes.
As someone mentioned above, unlike 2008 there is also loads of cheap credit available, really low rates on offer and high LTV. Although low rates do mean there is little left in the monetary policy tank to prop things up.
Unless it really is a dream house. If it's a first house that's just too get on the property ladder you'll likely get something better in 6 months.
Even a 5 percent drop is a lot of money
Sounds like it's not a dream house from your post.
OP has subsequently stated it is a dream house. If you buy in the next six months you save on stamp duty which offsets a bit of a the fall anyway.
If it wasn't for the hassle of doing it I would consider moving to take advantage of stamp duty holiday as would like a bigger house.