Nervous about buying in London - advice needed

princeperch

as long as you dont pay over the odds, buy instead of renting.

we purchased our first property in July 2011 on the south side of victoria park in east london. a 1 bed flat, 700sq ft, in a converted warehouse. We paid 250k and put down 10pc. We were paying 6pc on that mortgage which wasnt fun, but no SDLT.

We overpaid another 10pc over the next 12 months and then refinanced the flat with another lender at 3pc, instantly knocking 500 quid a month off the repayments.

in feb 2012 nthe bank valued the flat at 17k more than we paid for it for remortgage purposes. that gave us our 25pc for the 3pc mortgage deal.

we will live in the flat for the next 3 years and then either get consent to let or remortgage on a BTL deal and buy a house out in essex (probably) for about 400k.

the point being is that if you buy at a good price or buy somewhere and add value, you dont need a 25pc deposit, 10pc or 15pc will do - but that approach comes with a risk (i.e it doesnt value up).

the flat next to ours is identical and rents for 325/wk. Taking into account the service charge of 2k/yr that would give just under a 6pc yield if we rented ours out for that.

the HPC forum is full of idiots who sold to rent back in 2002 in london and are now kicking themselves.

I cannot see london going down in the foreseeable future nor can I see interest rates going anywhere for probably the next 7 years. money will never be this cheap again.

anecdotally, a 1 bedder has since sold (considerably smaller than ours) for 290k in our block. a 2 bedder at 800 sq ft has also recently sold for 410k and a 3 bedder recently sold for 550k (1100 st ft).

padington

I would argue London's a bull market because of supply and demand, unique position and more so because the paper money markets are uniquely precarious.

Betting against a bull market is really hard. Best thing you can do is to take your 'position' whilst you can and hold on for the long haul. Sometimes you can tell which way the wind is blowing like 2007/2008 was an obvious time to not buy in straight away but right now, no one really knows. Also don't forget there are many people that have had the opportunity to buy a piece of London but decided to wait instead and the wind blew the wrong way and they'll now be renting for the rest of their life because they got priced out - not buying when you can is quite a gamble too.

Don't forget - you're not talking about just an investment but also a rent free home for your family forever.

Last year I bought into the market when things were looking a little wobbly, talk of prices going south this time last Christmas and instead my place went up by 10%. if I had waited I would be kicking myself now and would not be able to afford the place I got.

Saying that, I was told that no city that's held the Olympics has ever NOT had a price crash Dip/ crash afterwards. The previous form is to go up and then down sometime after. However I'm tempted to say that London is such an unusually well placed city right now, it's going to break that rule.

I predict a few slightly down months for 2013 but more up months next year leaving London with another above inflation rise this time next year - we shall see.

sebtomato

demontfort wrote: »

My take on this is, right now don't buy at all. Open your eyes.... London is an overpriced, crime ridden cesspit. I've got £230k in liquid assets (cash and shares) which is growing every day

So you'd rather invest in shares than in property in London!!!

I'd love to know what type of return, after tax, you get from keeping your assets liquid, and how much is actually really protected.
The thing with buying a property with a mortgage is also leverage: instead of getting a return on £230K, you get a return on the full property price.

I bought my flat two years ago, and value has increased by 20%, while my mortgage is costing 2.49%., making a return of about 13% per year on my deposit/cash, tax free (considering all associated costs of owning vs. renting). By keeping it in cash, it would probably have made -3% (minus) after tax, considering also the rent being paid...

Even if the property price was to stay the same (0% increase per year), I would still be better off than renting.

padington

demontfort wrote: »

My take on this is, right now don't buy at all. Open your eyes.... London is an overpriced, crime ridden cesspit. I've got £230k in liquid assets (cash and shares) which is growing every day and I could get a mortgage for another £300-400k but I'm not that dumb. I'll not sink upwards of £600k into a crumbling terrace in a vibrant/up and coming area (translation people are getting stabbed everyday) just so I can tell my mates that I own a house in London. I'd rather rent, keep earning good money in London then take my hard earned cash elsewhere. I'll leave the desperate "young professional" suckers to mortgage themselves to the hilt just to buy into the London nightmare. :rotfl::rotfl::rotfl::rotfl::rotfl:

I suspect you are really kicking yourself you plumed for cash and shares in the last three years, instead of putting it in the London property market and renting. Just in the last year you could have increased your nest egg by 60k on your leveraged 600k possible mortgage and saved 5k in rent and rented a room out and made another 5k, all tax free bar stamp duty.

What shares are you investing in that are paying a better return ?

Also don't forget the possible downside - cities are really robust they can survive atom bombs and bankruptcies, they always outlive and out thrive most human inventions, especially companies - companies usually last decades, cities last thousands of years.

Buying land is more akin to betting on the success of a species rather than a particular creature, it's much safer.

Yolina

Typhoon2000 wrote: »

Try something like E16 in the Royal Docks area. 2 bed houses are 250k and 3 beds from 285k in the Brittania village development by Royal Victoria Dock. Next to the DLR into Bank/ Canning Town Tube and Stratford, City Aiport, Cable Car. Carary wharf is next door, and the clincher is the forth coming Cross Rail station next to Excel. All the new builds going up are all apartments too so a house will always be sort after.

And get all the noise from City Airport which also got permission to increase flight numbers...

I'm on the southern end of the Isle of Dogs, just opposite Greenwich and next to Island Gardens park. The Isle overall isn't the prettiest of areas (the parks are nice though ) and they aren't many shops in my bit (just the essentials which is fine by me - newsagent, chemist, post office, pub, that kind of things) but I absolutely love my flat which has a south-west facing terrace and I've been there about 14 years. I can walk to Greenwich in less than 10 minutes (foot tunnel!)
Pobably not the right area for the OP though with regards to where they need to commute to and the only places for less than £250k will most likely be ex-LA, 1 bed or not particularly close to the DLR

demontfort

I'm not having a dig at the OP, good luck if you want to buy. I'm just challenging these myths about UK property and London property in particular. I see the same naive and tired old arguments being trotted out day after day. Good areas always hold value, interest rates will be 0.5% for the next 5 years, prices only go up, supply and demand, renting is dead money. In summary you have this blind faith that you can't go wrong with London property. If I tried to punt the same argument for investing in stocks I'd be labelled the next Bernie Madoff.

The London property market is a massive bubble right now only been held up by the cash being pumped in by the asians, arabs and russians who clearly have more money than sense. Outiside of Westminster, K&C and a few other hotspots prices are stagnating or dropping but people can't face up to the truth. Buy now if you plan to stay in that place for the long term, otherwise you could find your cash locked up for a very long time unless you want to take a loss when you sell. As for me at the click of a mouse I just cashed in a £12k profit this morning on a £27k Seven month investment in Baobab Resources so I'm more than happy to keep trading shares and you can all keep your piles of bricks. Different horses for different courses and all that. :rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:

sebtomato

demontfort wrote: »

Outiside of Westminster, K&C and a few other hotspots prices are stagnating or dropping but people can't face up to the truth

You clearly don't know anything about the property market in Greater London...
As for the interest rate, I don't really see the base rate increasing massively in the next two years.

sinbad182

demontfort wrote: »

I'm not having a dig at the OP, good luck if you want to buy. I'm just challenging these myths about UK property and London property in particular. I see the same naive and tired old arguments being trotted out day after day. Good areas always hold value, interest rates will be 0.5% for the next 5 years, prices only go up, supply and demand, renting is dead money. In summary you have this blind faith that you can't go wrong with London property. If I tried to punt the same argument for investing in stocks I'd be labelled the next Bernie Madoff.

The London property market is a massive bubble right now only been held up by the cash being pumped in by the asians, arabs and russians who clearly have more money than sense. Outiside of Westminster, K&C and a few other hotspots prices are stagnating or dropping but people can't face up to the truth. Buy now if you plan to stay in that place for the long term, otherwise you could find your cash locked up for a very long time unless you want to take a loss when you sell. As for me at the click of a mouse I just cashed in a £12k profit this morning on a £27k Seven month investment in Baobab Resources so I'm more than happy to keep trading shares and you can all keep your piles of bricks. Different horses for different courses and all that. :rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:

No offence and all that but you sound like a complete fantasist

demontfort

sebtomato wrote: »

You clearly don't know anything about the property market in Greater London...
As for the interest rate, I don't really see the base rate increasing massively in the next two years.

you see little or no changes in the base rate in the next 2 years


So now you're an Economic Clairvoyant. Well it's still better than the online clown who predicted 0.5% interest rates for the next 7 years.


....thanks pal Wednesday morning I'll be passing on these little prophetic nuggets to the EMEA fixed income trading desks at the bank where I work...we're going to make a killing. Any stock picks, any predictions on the WTI Brent spread, even lottery numbers for the next couple of years we're all ears.:rotfl::rotfl::rotfl:

abankerbutnotafatcat

demontfort wrote: »

you see little or no changes in the base rate in the next 2 years


So now you're an Economic Clairvoyant. Well it's still better than the online clown who predicted 0.5% interest rates for the next 7 years.


....thanks pal Wednesday morning I'll be passing on these little prophetic nuggets to the EMEA fixed income trading desks at the bank where I work...we're going to make a killing. Any stock picks, any predictions on the WTI Brent spread, even lottery numbers for the next couple of years we're all ears.:rotfl::rotfl::rotfl:

I don't think he said anything particularly speculative. I also don't think base rate will move very much in the next two years, it can't go much lower and given the US and Eurozone troubles it probably won't rise an awful lot. 12 month Libor is 1.01% isn't it? Which tells you what the market thinks (can't remember 2 year but it's an indication).