London Has Peaked

Bubble_and_Squeak

YAY!
GARNER ROAD IS BACK!
http://www.rightmove.co.uk/property-for-sale/property-30928713.html;jsessionid=C0F1B809D9A68E6E07579D64B919DDB4

london up 0.7%
garner road down 17%

padington

London property now more expensive than it's ever been says nationwide - dead thread ?

Bubble_and_Squeak

padington wrote: »

London property now more expensive than it's ever been says nationwide - dead thread ?

not on garner road!

System

Bubble_and_Squeak wrote: »

not on garner road!

Perhaps you should rename this thread "One house with a smaller garden and inferior decorative condition has an asking price of less than the previous peak price on Garner road" as opposed to "London Has peaked", which patently isn't true.

wotsthat

lisyloo wrote: »

I wish we could get away from the "renting is dead money" mantra.
There is plenty of "dead money" in buying - for example stamp duty. If you have to pay 40% income tax and 2%(?) NI to get your income first then that is "dead money" too.

The only thing I'd note is that having determined your breakeven point as being 9 years what do you do with that information? If you rent then you're delaying the first step towards that breakeven. The gains are compounding too so the sooner in your life you can get to breakeven the longer you'll get to enjoy the benefit of compounding.

As I understand it you're still looking to be a buyer. In this circumstance I'd ignore the tax rebate on putting the stamp duty into a pension (or fees etc) because you're not saving those costs - just deferring them.

EDIT: Meant to add this link. Different ways of looking at the relationship between renting an buying. Quite like the thinking about rent not being dead money but a fee to get a landlord to borrow money on your behalf. Also argues that every buyer should consider themselves as a landlord with themselves as the best tenant they could possibly get.

http://monevator.com/a-landlord-is-someone-who-borrows-money-on-your-behalf/

lisyloo

As I understand it you're still looking to be a buyer.

Thanks for your thoughts.
At the moment my leaning is towards not owning a "bolt hole" at all and best guess is to rent for 6.5 years when DH will be 55 then return to PPR. I think London is fabulous (call me pathological) but in retirement I believe the costs outweigh the benefits.
So this does mean that the buying and selling fees are in fact additional costs when compared with renting for 6.5 years.
There's a "risk" we could stay for longer and with hindsight would have made the wrong decision and also a risk that work could come to an end and we could leave London in 2 months as well.

The spreadsheet was a paper exercise to see where the cut off point was but we would do have an affordability issue with buying. The monthly payments were very high e.g. £4508 monthly over 10 years, £5308 over 8 years. This would be especially difficult/impossible on one income.
I don't believe we could actually afford (or get) a 6.5 year mortgage and I wouldn't be prepared to lie about expected retirement date to get a longer term.
I don't have an issue with not being able to get a mortgage we can't afford - that is as it should be.

The advantages of the renting/pension option are:

1) Flexibility - we can pack a suitcase at a months notice and change our pension contributions at the next monthly payroll. Clearly with the mortgage we have to make the payments. DH is self-employed so no sick or redundancy pay and no notice period.
2) Liquidity - if we could afford it then it would be extremely tight, especially if anything went wrong (sickness, redundancy etc.)
3) Diversity - compare pension that gives access to whole of market as opposed to a single property.

The gains are compounding too

The pension pots are compounding too, although I understand what gearing is.
That is all factored into the spreadsheet, so I've factored in the capital gains on the property (at an assumed rate of course).
I've also assumed that what we'd do is not take any income for the first year in retirement and live off savings to minimise the CGT bill (I've tried to be equally fair to each scenario).
That ignores the practical fact that we'd be so illiquid we wouldn't have any savings.

I realise the spreadsheet ignores the practical liquidity issues but I wanted to look at what the best thing to do was mathematically whilst temporarily suspending the practical issues. The mathematical answer (based on some assumptions) is that 6.5 years is less than the breakeven 9.5.

But it does look to me like we can't actually afford to buy where we want to because the term is too short. If it was even possible it would be very uncomfortable and put a massive amount of pressure on us.

Of course we could go and live in an inferior area that's a mile from a tube and have a long commute (like some of those posted recently) or we could live in our PPR and travel 5 hours per day (no thanks). We have options of course but the central flat we rent right now is perfect for us, so I've based it on living there and paying exactly the same in both scenarios.

buglawton

How about a new title for this thread - "London prices for properties real working people can afford finally fall"?

padington

Haringey 31% up on the year. Whilst london 31% up on its 2007 peak.

http://www.hamhigh.co.uk/home/property/camden_property_prices_see_strongest_increase_in_london_this_quarter_1_3866683

DanW87

I don't think London will ever peak, the price growth may stagnate at times or slow down but I cannot see it ever really dropping - far too much demand. In Cambridge, where i'm from, I believe will be a similar situation. If the demand is there then I cannot see the prices going down!

Bubble_and_Squeak

padington wrote: »

Haringey 31% up on the year. Whilst london 31% up on its 2007 peak according to the ham and high local paper.

just out of interest, why do you keep quoting haringey?