What would you do with a flat that is rising in value?

The_Living_Coin

Mr & Mrs X bought a flat for £315k in Feb 2014 and now have a mortgage of £250k against it. The same flat next door just sold for £400k. Ridiculous I know, but we don't run the market.
The flat is small and Mr X would like somewhere a bit bigger so his wardrobe actually opened without bumping into the bed - he's not that greedy.
Mrs. X likes that the flat is in a nice place and close to a few friends and family. Mr X likes this too but also likes the idea of that £85k price difference working for him rather than just being hypothetical, as it is now.

What would you do if you were either of them? Feel free to be creative, but please also be realistic.

anselld

If your decent flat has gone up £85k then anything else you might like to buy as an "upgrade" will have gone up £85k or more.

There is no point buying a dump and thinking the £85k in the bank will compensate, it won't.

MARTYM8`

anselld wrote: »

If your decent flat has gone up £85k then anything else you might like to buy as an "upgrade" will have gone up £85k or more.

There is no point buying a dump and thinking the £85k in the bank will compensate, it won't.

Yes – an obvious point people miss when glorifying in their house going up in value.

You buy a flat for £200,000 – it goes up in value by 50% to £300k. Great - £100k profit.

But you want to upgrade to a property that previously cost £300,000 – but has also gone up by 50% to £450,000.

So thanks to the price rises you now need £150k more to buy your new place – rather than the £100k extra you would have needed to buy the place had prices stayed flat.

So in actualite – you are not £100k better off but actually £50k worse off! And all thanks to house price rises.:D

searchlight123

yep. agree with all this.
rapid price increases only really work in your favour if you are downsizing or moving from a rapid growth area to one that is flat in terms of price rises.

Thrugelmir

And the cost of moving?

harrys_dad

Oh the myth of "profit" in housing. Whatever you do you need somewhere to live. The only way to close out any "profit" is to move to a cheaper area (you can't downsize from a tiny place).

The key when you are moving is the same as buying a car, it is "the price to change", the difference in price between what you buy and what you trade in. With houses you also have significant additional costs related to stamp duty, solicitors fees etc etc.

When house prices are rising the rungs on the ladder get further apart, hence the price to change increases, and you are actually worse off.

When I last moved house, 5 years ago after 32 years in the same house, my house had fallen in notional value by £40000 in the previous four years. The house I eventually bought had fallen in notional value by £80,000 in the same time. Instead of my house plus £100,000 it was my house plus £60,000. Despite falling prices I was £40,000 better off.

Fidel_Castronaut

tonygold wrote: »

yep. agree with all this.
rapid price increases only really work in your favour if you are downsizing or moving from a rapid growth area to one that is flat in terms of price rises.

This is what we're doing currently. Our flat has appreciated by £70k since we purchased it around 4 years ago. We want to move to a house but in an area that is still growing but nowhere near as fast. We understand and accept the cost and we still come out with a mortgage which we could realistically pay off fairly quickly and comfortably.

Personally, for our circumstances, taking the cash and running is the best option as properties where we live are already silly money. We don't have debt at all aside our small mortgage so the large cash injection into our deposit allows us to purchase somewhere more expensive but also allows us to have a mortgage which is not much more expensive that we pay now.

The_Living_Coin

Thanks all - yes, I agree with all that. Other shoeboxes are now more expensive too. I know moving to a bigger place in our area is not an option for that reason.
I was hoping for maybe some other creative thoughts, not necessarily moving but getting this notional increase in value to work for us (apols if I didn't make that clear)....maybe for example, increasing the mortgage on this flat and using the additional money as deposit on a (much cheaper) holiday let or investing elsewhere or such like... just any ideas really...?

PS - I'm not glorifying in it - the whole merrygoround is a joke!

Mattygroves2

If it really was the flat next door I'd have been tempted to buy it and rent it until such time as I could knock through and create a larger place in the area you want to live in. You could have remortgaged yours and used your savings (assuming you've got some) for the deposit and then a BTL mortgage for the rest.

Obviously the yield would have to stack up and you'd have to be in it for the long haul in case property prices dropped but that would solve your location/size problem. Might take 10 years though depending on likely salary increases and rents available.

ReadingTim

• The property you want
• The price you want
• The location you want

Pick 2...

Baby_Angel

ReadingTim wrote: »

• The property you want
• The price you want
• The location you want

Pick 2...

Well said,.

2 years ago we bought a house to "live in" for the price we wanted and in the location we wanted (not the property we wanted). It was on the smaller side but all that we could afford at that time. Today it is has gone up by 85K. We used the price increase to re-mortgage at 65% LTV this week for 5 years:T. Something came out of the increase, though buying a bigger property is completely out of the question, as I cannot even buy this same house again today (if I had to, with all the new affordability tests)