London madness

TrixA

We're trying to buy our first home in London and feeling increasingly depressed. We had an offer accepted in March but the seller recently pulled out. Now we've started looking again but it seems that supply in our preferred area has dried up and prices have gone completely mad, to the point where we're not seeing anything within our price range that we would even consider viewing.

One thing I find weird is that all the official sources for figures on house price increases over the period seem to greatly underestimate our own experience. Both land registry and the RightMove London house prices index suggest that this area has had an increase in the region of 16-17% in a year, in line with the London average, but our experience is that asking prices have increased by more like 30-40% in the year we've been looking. Needless to say, our salaries have not increased by 30-40%, nor has our deposit!

I don't want to moan and I know that people in our situation often move outside London to escape the madness, but when you're a professional couple on a joint income of £100k+ unable to afford homes that are currently owned by single mums and taxi drivers, it's hard to avoid the conclusion that something is really broken in the economy.

mobfant

Yep it's crazy. I've been trying to buy a two bed in Brixton and have had a similar experience. The mortgage valuer has just valued it lower than I've offered (£485,000 vs £500,000), and the lease is 70 years, not the 110 the vendor told me, so that's going to cost thousands to extend. Not sure what to do, as everytime you blink house prices increase by another £10k. Is the ladder being pulled up from under me and I'll be a permanent generation renter?

If you want to be optimistic, there are small signs that the market is calming in places it has already heated up, and the number of mortgage approvals has fallen in consecutive months even before the new rules kicked in. Plus the Financial Policy Committee who meet later this month may recommend reducing the help to buy maximum, for which the signalling impact will be far greater than the practical effect. On top of that, while there is a supply shortage, the bubble is being driven by BTL'ers and panic buying. If and when the former starts to calm, particularly when interest rates finally start to rise (hopefully next year), then prices should flatline and maybe fall. For the latter group, affordability is likely to restrict their ability to buy especially with the new more stringent rules. So, rent for a year and try again later.

If you want to be pessimistic: the economy is improving, houses won't be built fast enough, there is no sign that the Bank or Government truly want to depress house price rises in London, bank of mum and dad will help people jump the affordability hurdle, BTL'ers are a crazy bunch and can probably afford interest rate increases, interest rates will go up so slowly that most people be able to manage them, and even if there is a dip, people won't want to sell their properties as they'll hope prices go up again in the future.

It is literally the least fun thing I have ever done. On the plus side, there is a whole generation of people consigned to this so we're not alone. We're also very fortunate to be among the top earners in the country.

CLAPTON

TrixA wrote: »

We're trying to buy our first home in London and feeling increasingly depressed. We had an offer accepted in March but the seller recently pulled out. Now we've started looking again but it seems that supply in our preferred area has dried up and prices have gone completely mad, to the point where we're not seeing anything within our price range that we would even consider viewing.

One thing I find weird is that all the official sources for figures on house price increases over the period seem to greatly underestimate our own experience. Both land registry and the RightMove London house prices index suggest that this area has had an increase in the region of 16-17% in a year, in line with the London average, but our experience is that asking prices have increased by more like 30-40% in the year we've been looking. Needless to say, our salaries have not increased by 30-40%, nor has our deposit!

I don't want to moan and I know that people in our situation often move outside London to escape the madness, but when you're a professional couple on a joint income of £100k+ unable to afford homes that are currently owned by single mums and taxi drivers, it's hard to avoid the conclusion that something is really broken in the economy.

I'm not sure that the economy is broken but we have a rapidly rising population due to immigration, combined with the rise in single person households and some evidence of 'investment ' buying.
Much of the increase is focused on London which simply does not build sufficient new housing.

wymondham

if prices are out of reach then it means people are buying ... if people on your wage are having trouble though then this is madness indeed!!

CLAPTON

wymondham wrote: »

if prices are out of reach then it means people are buying ... if people on your wage are having trouble though then this is madness indeed!!

no, it isn't madness, if the number of people living there is constantly increasing and there is not enough building then prices will rise in reasonably desirable parts.

100k for a couple isn't a particularly high income for London

TrixA

mobfant wrote: »

It is literally the least fun thing I have ever done. On the plus side, there is a whole generation of people consigned to this so we're not alone. We're also very fortunate to be among the top earners in the country.

This is what makes me think it can't continue. I know salaries are higher in London, but I don't understand who the people are who can afford to pay these prices. Maybe investors, but the people queuing up with us at open homes look to be couples like us.

It's always an option to 'rent for another year' but our reason for buying is to be able to start a family and we're getting to an age where it feels like now or never. I still would be prepared to wait if I thought there was a reasonable chance that prices would come down, but I'm just not convinced they ever will. I pretty much have my dream job at the moment but we're seriously contemplating leaving London, and even the UK, to find somewhere we can afford to establish the life we want.

Sorry to hear about the situation with your flat purchase, in any other market you'd just walk away and find something better but I know from personal experience that's easier said than done.

mobfant

TrixA wrote: »

This is what makes me think it can't continue. I know salaries are higher in London, but I don't understand who the people are who can afford to pay these prices. Maybe investors, but the people queuing up with us at open homes look to be couples like us.

It's always an option to 'rent for another year' but our reason for buying is to be able to start a family and we're getting to an age where it feels like now or never. I still would be prepared to wait if I thought there was a reasonable chance that prices would come down, but I'm just not convinced they ever will. I pretty much have my dream job at the moment but we're seriously contemplating leaving London, and even the UK, to find somewhere we can afford to establish the life we want.

Sorry to hear about the situation with your flat purchase, in any other market you'd just walk away and find something better but I know from personal experience that's easier said than done.

There are still options especially if you have your dream job and £100k is a £500k mortgage, plus deposit? You can still start a family in a rented flat. Or look to buy somewhere on the Overground, and/or somewhere slightly further out with fast trains to London. Walthamstow, Forest Hill, Croydon, Brockley, Tooting, might work? Depends on need and how much you want to compromise.

I find the most difficult factor is the hope that maybe prices will settle/fall, and so I don't want to be stuck with somewhere far out worth a lot less. Yet maybe prices will continue to rise and I'll be off the ladder forever. But that's the ball game. And why this is a bubble far more than just a question of supply vs demand

TrixA

mobfant wrote: »

There are still options especially if you have your dream job and £100k is a £500k mortgage, plus deposit? You can still start a family in a rented flat. Or look to buy somewhere on the Overground, and/or somewhere slightly further out with fast trains to London. Walthamstow, Forest Hill, Croydon, Brockley, Tooting, might work? Depends on need and how much you want to compromise.

I find the most difficult factor is the hope that maybe prices will settle/fall, and so I don't want to be stuck with somewhere far out worth a lot less. Yet maybe prices will continue to rise and I'll be off the ladder forever. But that's the ball game. And why this is a bubble far more than just a question of supply vs demand

Walthamstow is where we've been looking. We both work in North London so would like to stay this side of the river if possible. My partner is older than me so we're restricted in the length of mortgage we can take out, but even it were otherwise I would never contemplate borrowing £500k on a £100k salary. What happens when interest rates rise? What happens if we have a child and have to go down to one income for a while? If borrowing 5x joint salary is considered normal these days, no wonder we're being out bid.

Like I said, I know we have options, one is that we're both citizens of other countries with relatively saner housing markets. I'm also acutely conscious that there are heaps of people worse off than us. It just feels nasty to be priced out of an area in such a short space of time. I think in the past there were always affordable pockets in London, even in the inner boroughs, but now it feels like you need to move to zone 4 and beyond to get anything even vaguely affordable.

BillJones

CLAPTON wrote: »

no, it isn't madness, if the number of people living there is constantly increasing and there is not enough building then prices will rise in reasonably desirable parts.

100k for a couple isn't a particularly high income for London

No, it's not really out of the ordinary at all. A couple in their twenties in any of the decent paying professional fields will be on this nowadays.

I know that it seems strange if you work far from here, but London has a lot of very, very highly paid people.

OP, where are you looking? Gentrification is proceeding apace all over the place nowadays, so there are areas which were not worth looking at five years ago that now are quite nice.

michaels

What about a train commute suburb instead, generally the schools are better and you get much more for your money although of course there is the season ticket to factor in but train tickets only go up at RPI not like mortgages tht can double if interest rates rise.

wymondham

CLAPTON wrote: »

no, it isn't madness, if the number of people living there is constantly increasing and there is not enough building then prices will rise in reasonably desirable parts.

100k for a couple isn't a particularly high income for London

its a different world from the one I inhabit.. good luck to those that want to/need to live in London...