What Quarter of a Million gets you in London

Generali

AndyGuil wrote: »

Not really as the next place will be cheaper if the HPI is less. 10% has been very modest recently!

True but as my premise is that prices can't continue to rise at this rate perhaps it's reasonable for me to assume that prices won't rise at this rate indefinitely.

Also, you can't use current prices and current HPI rates. For an analysis to be worthwhile you need to extend out HPI by a couple of years or in your case several.

the_flying_pig

IronWolf wrote: »

Honestly, anyone can see that prices in London are ridiculous. A 2 bed in Balham, not even central, will now set you back £600k. A 2 bed flat would be a starter home anywhere in the UK, except London - where you need to be a top earner to even hope of getting a mortgage on it.

Rental yields in some parts are crazy low, you have to wonder who is giving out these BTL mortgages where rental yields dont even cover the mortgage payments. Or maybe a lot of cash rich people are just being reckless.

Look at this 2 bed flat in Balham, for sale for £600k
http://www.rightmove.co.uk/property-for-sale/property-30567231.html

Now here is a nicer flat on the same street for rent for £1.6k a month
http://www.rightmove.co.uk/property-to-rent/property-45938738.html

Take off £100pm for service charge and that is £1.5k a month gross yield, i.e. 3%! That is crazy! Gross yields should be closer to 6%, which implies the flat is only worth £300k, half what its for sale for.
...

i live very close to that.

yields around 3.0%, very often less for bigger places, have been totally the norm round here in recent months. noticably bubblier than 2007.

the 'prices will go up, meaning i'll make loads of money' motive seems to be a huge motive for buying &/or not selling.

definite risk of a correction of some size or other.

the_flying_pig

always an interesting test is how many people [or younger versions of them doing the same job] who are currently living in a street could afford to buy the house they live in now, assuming [for whatever reason] a big [say 25-50%] deposit.

on my street in SW17 [tooting/balham boundary] i'd hazard a guess that out of c. 150 houses & flats c. 50 are private rental, 100 owner-occupied, of those 100 owner occupiers i can't think that nearly as many as a quarter could afford to buy.

we certainly couldn't and we only moved in two years ago. prices have inflated up by about 30% since.

if a couple with our joint income magicked up a 50% deposit they'd need to borrow, well [does the maths] i suppose they could buy at 3.7 times joint income, but, well, that's a huge multiple. there' no way we'd haev taken that on.

i shoudl think that all the folk who bought 3+ years ago would be hooped.

there's no way that this can continue. there are nowhere near enough jobs in the city [broadest possible definition, including everyone in all forms of banking, finance, law, etc] for all streets like mine in London to be populated by current or retired city workers.

AndyGuil

Generali wrote: »

True but as my premise is that prices can't continue to rise at this rate perhaps it's reasonable for me to assume that prices won't rise at this rate indefinitely.

Also, you can't use current prices and current HPI rates. For an analysis to be worthwhile you need to extend out HPI by a couple of years or in your case several.

I think the market has burst back into life so it will see large HPI. I think HPI will return to more normal levels. We have been seeing HPI well over 10% recently. We could take an average over 10 years. It was roughly £240k back in 2004. Since then we are looking at an average of 6-7%. That is including a recession. If we look before the recession to see the trend it is £65k to just over £300k over 12 years (1995-2007). That gives us 30% a year (averaged).

Generali

AndyGuil wrote: »

I think the market has burst back into lprices so it will see large HPI. I think HPI will return to more normal levels. We have been seeing HPI well over 10% recently. We could take an average over 10 years. It was roughly £240k back in 2004. Since then we are looking at an average of 6-7%. That is including a recession. If we look before the recession to see the trend it is £65k to just over £300k over 12 years (1995-2007). That gives us 30% a year.

It doesn't give us anything remotely close to 30% a year. House prices compound.

AndyGuil

Generali wrote: »

It doesn't give us anything remotely close to 30% a year. House prices compound.

Of course. Averaged out. What we saw during the previous cycle was just over 360% increase in price over 12 years.

Generali

AndyGuil wrote: »

Of course. Averaged out. What we saw during the previous cycle was just over 360% increase in price over 12 years.

Compounded it's morr like 13%!

Wozzie

I wouldn't live in some of those areas if you paid me £250,000, it's amazing how many people get stung by simply not knowing London.

You think a brand new build in NW10 for less than 250k is a steal, but if you know anything about Stonebridge and have heard the names USG or Mus Love then you know that the place is a hell hole.

People don't do their due diligence when moving or buying a house, transport links and square footage should come way below the most important factor which is:

"Is there a street gang formed of feral teenagers hell bent on turning this area into downtown Baltimore, so they can live a movie and have authentic experiences about gun violence to rap about?"

That is the main concern buying or renting a place in London because those little pockets are everywhere and the only way you can really get along in those areas is if you grew up on them.

Also parks, might seem like a great thing especially if you have a dog. However with parks comes kids, other dogs, alcoholics, delinquent teenagers looking for a place to get drunk/high.

Too many people ignore too many important factors and get suckered into paying way over the odds for a place they'll regret buying for the rest of their life, the vast majority of London is a shithole.

AndyGuil

Generali wrote: »

Compounded it's morr like 13%!

10% isn't a bad estimate then.

onlyroz

JencParker wrote: »

Mmmm that's the complete dump of a high rise estate where Colin Stagg lived - no one would mistake Roehampton for Putney. LOL

No, but Roehampton is still cheap, and it's only about 8 miles from Central London.