Is the Property ladder a dated myth from another time?

emmet1

We bought a new build property off plan 3 years ago in London.
It took 1 year to build (delays etc).
Our kids have gotten bigger so we thought about trying to move, wanting to stay in same area but would like a bigger garden etc.
Had our property valued by 3 estate agents, the lowest valuation gave us a minimum equity of £200,000.
The problem is that even with this now supposed large deposit our incomes have only increased marginally so the amount we can borrow is still roughly the same as it was 3 years ago.
As all the property in our area has increased the only thing we can afford to buy is the place we already live in.
It seems to me a few rungs have fallen off the ladder.
We cant be the only ones in a situation like this and if this is the case wouldn't situations like this slow down the market?
Unless wages start rapidly increasing how do people afford to keep moving up?

BitterAndTwisted

There never has been a "ladder" it's always been a figment of the imagination. In the past people bought whatever sized home they could afford and stayed there until retirement. Now, after three minutes of ownership some think they should be able to "move up" into a detached house with massive garden, a utility, en-suites to every bedroom, plus a home office, a "playroom" (whatever that is) on the same salary they have always earned.

£200k of equity? You've won the lottery of life! Put that towards a home outside London and start commuting like everyone else.

Foxy-Stoat_3

My wages haven't increased in the last 10 years so the amount the banks will lend to me hasn't increased either as the multiples won't and shouldn't change. The only thing you can do is overpay the mortgage so the equity increases.

If you want to "move up the ladder" you need to beat the price increases in your area by overpaying, being in London you need to put more than 10% of the value of your house in extra a year and it will probably take you more than 3 years to achieve this.

pinkteapot

With the transaction costs of buying and selling, it rarely makes sense to own a house for as little as three years. Unless it's one you can add substantial value to (not a new-build!).

Marmaduke123

emmet1 wrote: »

As all the property in our area has increased the only thing we can afford to buy is the place we already live in.

In the past there have been several periods when we couldn't have afforded to buy the house we live in!

Most people can't afford to move up the so-called ladder unless they get a better paying job.

StuC75

Having bought New and ultimately wanting to stay in the same area is what's limiting you the most here, since the increase in your value would be reflected elsewhere in what you look to buy on..

The bigger swing comes where you are able to buy a property, add value to that through the work that you have done (i.e. buy something needing modernising), along side the natural growth in the local market, so that then can look to start elsewhere (maybe outside that area) and build back up again..

Then at the end you 'sell up' and use the proceeds to buy something outright..

pinkteapot

StuC75 wrote: »

Having bought New and ultimately wanting to stay in the same area is what's limiting you the most here, since the increase in your value would be reflected elsewhere in what you look to buy on..

Yep. With unchanged salaries, all you have extra to spend this time is the amount by which you've paid off the capital on your mortgage. Which won't be much in the first three years, unless you've made significant overpayments.

Pre-Sarah Beeny, the "property ladder" really just meant that as you get older, you go from a cheaper to a more expensive house, because you've paid off some of your mortgage (which has exactly the same effect as putting money into savings). And that's exactly what you'd be doing if you move - you bought your house for £300k or whatever, and this time you can afford a house for £350k. You are moving up the ladder.

jjlandlord

You have a house and, so far, it has also turned out to be the best investment of your life.
What are you complaining about?

Foxy-Stoat_3

Without the property value or starting equity no one will know if equity of £200,000 is a good or a bad thing.

agrinnall

Foxy-Stoat wrote: »

Without the property value or starting equity no one will know if equity of £200,000 is a good or a bad thing.

Well, in theory no, but given the increase in London prices if it's not a good thing then it must have been a catastrophically bad purchase in the first place.

DRP

emmet1 wrote: »

We bought a new build property off plan 3 years ago in London.
It took 1 year to build (delays etc).
Our kids have gotten bigger so we thought about trying to move, wanting to stay in same area but would like a bigger garden etc.
Had our property valued by 3 estate agents, the lowest valuation gave us a minimum equity of £200,000.
The problem is that even with this now supposed large deposit our incomes have only increased marginally so the amount we can borrow is still roughly the same as it was 3 years ago.
As all the property in our area has increased the only thing we can afford to buy is the place we already live in.
It seems to me a few rungs have fallen off the ladder.
We cant be the only ones in a situation like this and if this is the case wouldn't situations like this slow down the market?
Unless wages start rapidly increasing how do people afford to keep moving up?

Sounds like your shrewd choice of location means you have effectively 'earned' back all those fees and mortgage payments you paid over the last 3 years - plus a decent bonus!

But you'll probably need to move out of the area and not buy a new build if you're to capitalise on all that equity - in some areas you could buy a pretty decent house for that 200k, and live in semi-retirement for the rest of your days ... food for thought.:cool::money: