Would you buy a house in London today?

N1AK

padington wrote: »

If you ask me ...

Londom will carry on rising on average for a couple of years, rents will go up even faster. Looking beyond that, really couldn't say. Mostly depends on politics and taxation.

There will be a pause for breath at some point with prices going sideways for a while rather than a crash I should imagine.

The reason I'm staying away from London property is exactly because I have no idea what will happen. Property is London is clearly partially valued as an investment, not just as residential property. Like any asset the value is founded as much on confidence as anything else. As prices get higher and higher the effect of small shocks on the market can be magnified.

Consider the scenario of UKIP getting 30 MPs in the general election and as part of a coalition government declaring a referendum for 2016. Suddenly hundreds of thousands of people have huge amounts of money tied up in property in the capital of an international city, ruled by a government that is very insular, wants to drive down immigration and is likely to be unfriendly towards foriegn investors. Add onto that the risks around actually leaving the EU and many investors will want to get as far away from London property as possible.

There are other scenarios, many far less severe that could still have a sizable impact on London property. London is the only city ever to see property prices reach insane heights, and plenty of the others have then gone on to lose the majority of their value.

LydiaJ

Lyncroft wrote: »

Renting in London but flat being sold. Am coming into a bit of money but not enough to buy in London but enough to buy in the Milton Keynes area where with a bit of maneouvering at work I could be relocated to. Could buy a nice freehold house there with garden but away from family and friends. No idea what to do!

Depends on your circumstances.

Two people have recently joined my work who've each moved from London to be able to afford a nicer place to live. (Both are married with small kids and wanted a house with a garden etc.) In each case, they're very happy they did it. Yes, family is further away, but they have settled into the new area and are making new friends locally as well as staying in touch with old friends from a distance. Neither would move back to London now.

IveSeenTheLight

LydiaJ wrote: »

Depends on your circumstances.

Two people have recently joined my work who've each moved from London to be able to afford a nicer place to live. (Both are married with small kids and wanted a house with a garden etc.) In each case, they're very happy they did it. Yes, family is further away, but they have settled into the new area and are making new friends locally as well as staying in touch with old friends from a distance. Neither would move back to London now.

Seem to be the norm for people I know as well.

Move to London, focus on career, enjoy the life, benefit from HPI and once married and settled down, life changes mean they prefer a more open, spacious property so benefit from moving out of London

TrixA

We recently had a house purchase in London fall through. Prices in that area have now risen to the point that for the same money we can only afford a flat. I personally think buying a flat in this market is pretty risky, unless you can afford zone 2 near a tube station (we can't). I think it's likely we will either continue renting, or move out of London.

ruggedtoast

I've never seen panic buying the like of which there is in London at the moment. People I know who started looking 12 months ago are being priced out monthly and are offering silly money over asking just to get a look in.

It used to be bad but not that bad.

I suspect with the new rules on mortgage affordability a lot of this nonsense is going to evaporate. Unless you really think you are getting a bargain, anywhere outside the M25 that you can commute in from has to be better value.

movilogo

Problem is there is not much well paying job outside London (or M25 for that matter).

You can live further and commute but rather than paying the mortgage company, you will be paying train companies plus the exhaustion of travel to London daily.

Govt. never looked back beyond London/M25. That is the fundamental problem.

ukcarper

Train fairs from where I am about 45mins from London equate to about £50k on a 4% mortgage yet you can buy a nice 4 bed detached for about £400k or 2 bed flat for £180k.

mobfant

I don't see how the bubble can possibly burst in London. I can see it stagnating, or deflating, but the pent up demand is such that I don't see how a fall of more than 10% could happen in London.

If action is taken by the Bank of England, and/or by Government that affects expectations of future rises along the lines of the 6% per annum for 5 years that some have suggested, this may have an effect on the "froth". People will be feel less pressured to stretch themselves or to call on parents, BTL'ers will need to focus on yields rather than capital gain which makes paying over-the-odds much less attractive, and those who would be happy to rent for a bit longer but feel like they have to get "on the ladder" now would take it easy for a year or two more.

However, given the shortage of supply that, with the best will in the world by Government (legislation, tax changes, etc) will take up to 5 years to address, people will want to live in London so rents will rise - making property more attractive for BTL'ers by increasing yields - and those want to buy now will do so but in a more central location/larger property than they otherwise might.

On top of that, a fall in prices would likely just lead to current homeowners holding on to their properties, so only those who need to sell will do so.

So, I think it's impossible for the bubble to burst, but it might deflate by 5-10%. The bubble in London hasn't truly burst for 20 years, so maybe it's not a bubble...

Thoughts?

ging84

the question should really be not would you buy a house, but would you pay an inflated price to get a property
if i was living in london i would still consider buying, but not in a market where you have to dive in and buy a property 2 days after it came on the market paying 10% above the asking price.
I suspect the people who have done that in the last 6 month, will find in 3 years time at best they're no better of for buying than they would have been for waiting, particularly if they are on more than 75% mortgages.

sebtomato

I think it is down to basic market laws: demand and supply.

Given the population in London (not likely to decrease) and the properties available (not likely to increase significantly in numbers, as people still want their small houses instead of large blocks of flats), then the market will remain imbalanced and therefore prices will stay high.

They won't probably carry on increasing at the current rate, as it's not sustainable in the medium term (and currently more speculation than anything else), but I can't see a significant drop happening, unless there are some very strict mortgage rules being introduced (e.g. max 3 x salary etc) or some very fast interest rate increase, making most properties unaffordable to most people. I can't see that happening either...

Realistically, getting a mortgage is going to become a bit harder (for some healthier borrowing) and base interest rates are going to increase to 3% within the next 3 years. Those two factors will cool down the market a bit for 95% of the buyers in London (excluding cash buyers and foreign investors), but won't make prices to drop significantly when there is demand, higher salaries than the rest of the UK, and ability to borrow over very long terms (30 years).