buying a London flat- doing the right thing?

ojosverdes

Hello money saving fans!:beer:

I would be grateful if someone can give me their opinion on if what I'm doing is the right thing.

For quite some years I've been saving for a deposit to get on the market and every time I was too worried making a step on the ladder due to the rising prices and the risk of getting gazumped (it happened to friends of mine and they lost over £1000's each time:mad: ). Also with the prices climbing, the flats for sale - which compared remotely to the rented flat I'm living in now -kept being out of my reach. Also wanted to have enough of a deposit together.

The last few months with the prices coming down I thought I'd make my move. I've saved £75000 in Isa's and e-savings :j , lots of this through the advice I read on :money: this site!!! I earn £57000 a year. I phoned some banks to find out what I could loan and started flat hunting.

It is definitely a buyers market and I didn't feel I had to rush in making decisions. I went back a couple of times to view the flats I short listed.
I found a beautiful flat in the Clapham/Wandsworth area. It's a 2 bed Victorian conversion with garden in a quiet road. I was on the market for £420.000 and I offered £350.000. It was rejected in the first instance, but then 2 weeks later (I was already doing 2nd viewings of some other flats I found) I was told that the vendor would now accept my offer.

The valuation was accepted at my purchase price and I got a mortgage. My mortgage payments come to £1800 a month which is feasible as my net income is £3270 (Also I've been paying £1200 rent at the moment, so for £600 more I have my own place )
I'm now moving forward to exchange. So exciting time!


Now, what worries me; if the house prices keep dropping will I be in trouble in 3years time (when my 3y tracker runs out -repayment mortgage) to get a remortgage? I mean if I go in negative equity I probably won't be able to remortgage? Or can I still get a remortgage if I didn't go in arrears and payed off some capital?
My offer on the flat was low and comparing house prices for that road I found the following: a similar flat went for £460.000 in the beginning of the year. in 2005 one went for £340.000. in 2001 one went for £220.000.

I'm hoping to keep the flat for at least 10years before thinking of selling, so hopefully the house prices would have gone up by then. Especially in the area I bought - popular area in London.

The flat is THE dream flat for me, but perhaps I'm blind and naive. Can someone tell me if I'm being silly and looking for disaster:eek: ?

Many many thanks

lincroft1710

How much did you borrow and over how long?

dopester

ojosverdes wrote: »

I found a beautiful flat in the Clapham/Wandsworth area. It's a 2 bed Victorian conversion with garden in a quiet road. I was on the market for £420.000 and I offered £350.000. It was rejected in the first instance, but then 2 weeks later (I was already doing 2nd viewings of some other flats I found) I was told that the vendor would now accept my offer.

I would never buy now... but if you are absolutely wanting to buy, even thinking prices could recover in 10 years (think 25 years according to Capital Economics) then they've messed you around.

Your offer now looks attractive to them in a steeply falling market. Just for messing you around I would offer a take-it-or-leave-it offer of 10% lower with an answer required in 24 hours.

morg_monster

I think you are moving too fast. You've seen prices come into your range and have jumped straight in.
Prices have just begun to drop in that area (i live there too), why not wait and see if they fall more over the next 6m-1yr. You'll save more towards your deposit too (which is, admittedly, big - well done - but "only" 20%). You would think that area is immune to falls, being full of posh yuppies, but I'm not so sure. A lot of the desire to live there is aspirational and I think a lot of that is going to disappear as the credit crunch kicks in. I think a decent chunk of people in that area will be affected by a recession and it could change atmosphere; after all it hasn't always been so desirable. Finally, there are a LOT of 2bed conversion flats in that area. If the price of any property is going to fall, it'll be the ones there's a healthy supply of.

How do you know you will want to live there for 10 years btw? Why not go a bit further out of london - you could get a 4bed house for the same money and still be within an hour commuting of most parts of London.

Finally, your salary is good but for London and buying on your own in that area it isn't massive. I guess it just doesn't quite sit right that you have been MSE enough to save such an impressive deposit (so I assume don't have a silly "London" lifestyle) yet are so keen on buying at the moment.

meester

It's not difficult to see the price falling to £250k. As others note, it's damned expensive to live in that area.

This is 19 minutes train ride away, same price (well, £395k, which looks priced to sell to me actually), 4-bed detached.

http://www.rightmove.co.uk/viewdetails-17961700.rsp?pa_n=1&tr_t=buy

£1800 mortgage on £3270 salary is quite high IMO, and there shouldn't be a premium for buying over renting, quite the reverse because you have more costs and responsibilities as an owner, and also are putting up £75k of capital!

ad44downey

You're at the very least 6 months too early to buy anything.

oskar.marke

Do not buy now !
Market is going down.

Wait a year or two you will make your yearly wage.

ojosverdes

thanks for the reply morg_monster. :T

I've been renting in London for the last 9years and I'm so tired of dodgy landlords. Had 3 so far! I'm getting so !!!!ed off thinking about the money I've been throwing away on rent. :mad: Also speculation is the rent will keep going up as people can't afford to buy any longer.

I took me 7years to get this amount of savings together and been eager to get my own flat. But prices in nice central London areas where always just out of my reach. Also I don't want to move outside London, my life is here, with my friends in Clapham, Battersea and Dulwich.
I feel I finally can afford buying the place I've been dreaming off and still live in central London-ish. - cycling distance to work and my friends.


:think: I'm just trying to justify it now, am I?

Tassotti

75K in savings and 57K per year, I would look at moving to the outskirts of the m25 and buying a beautiful 3/4 bed property with pool and gym..(They are there) Thats just me

Are your wages likely to increase at all, otherwise you might find it a struggle.

You can still get mortgage if you are willing to put the 75K in as a deposit.

Lenders will bite your hand off.

If your friends are around the Clapham area, take a look at Balham. Some nice areas, and bargains coming up all the time.

Lenders will still probably allow almost 4% of your wages, so £228K plus 75K (less expenses..ish),

so you are looking about 300K....

Hmmm..keep saving I think

Tass

morg_monster

ojos - yes does sound like you are trying to justify it. Remember - renting is not dead money in a falling market - in fact you are saving at the moment by renting instead of buying at the mo. and your rent will be going up by 50% to make the mortgage payments - as someone else said, there are a lot of costs associated with buying a house and that £1400 left over a month may not go as far as you think, especially if you don't have any of your own furniture left, and with covering increasing gas & elec bills by yourself. Rents might go up, but I haven't seen evidence of that round here YET, and your rent is safe until you have to sign a new contract.

I really don't think anyone would tell you you would lose out by waiting. give it 6m, start using property bee on firefox, and see what starts to happen with the market.
Also you say where your friends live - but where you are talking abotu moving too is one of the most expensive little parts of that area! it is fab tho, isn't it... oh and as the poster above says, what about Balham? love it!

ds1980

what absolute rubbish. Go for it. All ive seen so far is what if this and what if thatwell what if your all wrong. its v easy to say something when its happening. Mke sure you do your research and if your comfortable then go for it. you haven't got another person by the sounds of things so if that happens your quids in. Renting is a joke. Remember you'll never be able to make money out of your rented accommodation or pass it on to your children. Good luck and just be sensible you'll be fine.