London property market bubble?

namecheck

legoanakin wrote: »

Sorry, yes, I guess "the City" could mean a lot of things. No, I do not have deep pockets. I mean Zone 2 if I can and if not, Zone 3.

My primary reason for wanting to do it is a financial one. I want to buy a flat now that is likely to increase in value in the near future (say 2-4 years) so that when I want a bigger place I have greater equity. Living alone in a small flat for now is fine but I don't want to be still doing it in 10 years time.

My other reasons are to cut down the commuting time and to actually start paying towards something for me instead of paying off someone else's mortgage.

My daughter lives in East London (Clapton, Zone 2-3), quick to get to Liverpool Street. She has friends in the area who recently wanted to buy something bigger. They put their flat on the market and could have sold many times over.

Comments from viewers included...have paid rent for years and annoyed with the thousands of £s spent in doing so/don't want the expense and time wasted on commuting. (Train commuting is expensive, sometimes unreliable, and I know many people who do not even get a seat for the journey.)

If you feel you have reasonable job security, I would say buy your own home. But be prepared for price rises (currently) in this area and do some homework on what is available. There are some recent new-build developments which are shoe boxes, with tiny rooms and/or weird shape layouts.

There is a lot of competition for anything half-decent, and a ready supply of people with cash available (not just "investors").

And never trust an estate agent!

Ultimately, it's a bit of a gamble I suppose. If I was young, I would want to buy in London. My husband, who was born in London, hates the place and would rather commute!

marksoton

legoanakin wrote: »

I am a first time buyer looking to buy a flat in London.[ /QUOTE]

Do you currently live in London / have experience of the place?

If not be very careful. After a near decade of both living in and commuting to the capital i'd had enough.

You'd be paying a premium to live in the capital and it can become tiresome.

I love the place but would never live or work there again. I'll make do with visiting as and when it suits.

benjus

thesaint wrote: »

Your small property may increase by 5%, whilst the bigger one you want to move to increases by 10% in 2 years. Your equity is not much use to you.

But if the alternative is to continue renting, that 5% may well be more than the OP is able to save in the difference between rent and mortgage.

cloo

Nobody has a clue. I'd always say if you *can* buy and can find somewhere you want to live for some, buy, regardless of the what anyone says about the market. We bought in 2007 literally on the cusp of a crash that, to be honest, we knew was very likely to happen. Eight years later, we sold the flat for nearly 50% more than we paid.

It might be a different matter if you think you'll be somewhere less than 5 years, or intend to turn around for profit in a few years, but if you're intending to stick around and can afford it, buy.

thesaint

benjus wrote: »

But if the alternative is to continue renting, that 5% may well be more than the OP is able to save in the difference between rent and mortgage.

"May well" being the operative words.

legoanakin

marksoton wrote: »

legoanakin wrote: »

I am a first time buyer looking to buy a flat in London.[ /QUOTE]

Do you currently live in London / have experience of the place?

If not be very careful. After a near decade of both living in and commuting to the capital i'd had enough.

You'd be paying a premium to live in the capital and it can become tiresome.

I love the place but would never live or work there again. I'll make do with visiting as and when it suits.

Mark, thanks for your thoughts. Yes, i've lived in London (Zone 6) for more than 10 years now and have been commuting into the city for a while. I love London, the hustle and bustle, the variety, everything about the city, except the property prices!

westernpromise

The correct MSE way to think about this, I suggest, is to ask yourself a series of questions.

1/ Is your personal and financial situation stable - i.e. are you in a full-time career that is likely to persist (eg accountant), or in one in which constant relocations are likely or necessary (schoolteacher, theatre director)?
2/ Based on this, what is the horizon over which you reasonably expect to live with this decision? Are we talking one year ahead, or five, or ten?
3/ Hence, what are your actual available housing options? Typically, these are (i) rent (ii) buy, either a/ close into town or b/ further out of town.
4/ What are the in-and-out transaction costs in each case given your horizon? Buying involves lawyers, surveys and SDLT, and then you have to sell. Renting doesn’t, and so tends to be cheaper over shorter terms.
5/ Which do you see as the greater liability: (i)a 25-year mortgage, or (ii) the sum of all the rents you’ll pay if you rent for the rest of your life? If you perceive (i) as debt but not (ii), you should rent.
6/ What can you actually afford given the above?
7/ Next, what matters to you more: whereabouts you live, or what you live in? A small flat in town may involve a mortgage that costs £10k a year and a commute that costs £2k a year. A bigger flat out of town may mean only £8k for the mortgage but a commute that costs £4k. You don’t get your commuting costs back when you sell; are you OK with that? You might well be - many see this as the price they pay for more space.
8/ Have you thought forward to where you expect to be at the end of your horizon period? This is important. If you take a £100k fixed rate mortgage at say 3% for 5 years, you would pay off 15% of it over that term. Assuming you also put down a 10% deposit, this means that even if house prices fell 25% the day after you completed, and then didn’t recover at all over the next 5 years, you wouldn’t be in negative equity at that point. You could sell up, clear the mortgage, and move on unhindered. Do the maths for a few such outcomes (and don’t forget that twice in the recent past, when house prices fell, rents went up).

Whatever you do, and this is the really important thing, don’t FGS treat buying a home as a speculative financial trade in which, with your deep cunning and unmatched financial acumen, you will outwit all those stupid sheeple who have done whatever you didn’t do. This applies whether your punt is on property, by buying (because you think the price will go up), or against it, by not buying (because there’s going to be a crash).

There are some very, very unhappy people around who treated this decision as just such a punt, and called it exactly wrong years ago because they thought they were placing a bet rather than buying a home. They either paid far too much on what they thought was a surefire winner, or they passed up buying (so they are in effect “unvested interests”) at what now looks like a ridiculously low price. In either case there are as many people who now bitterly regret their choice, just as there are people who think they “won”.

ANGLICANPAT

As everyone has pointed out, whether prices go up or down is a gamble, and I havent a clue whether its best for you personally to buy or not, but for what its worth, from my experience, because of the uncertainty of the market , ie it could go down significantly,

---

as well as the essentials, Id be looking for a property that has particularly attractive features that would make it much easier to sell in a depressed market. Such as a stunning South facing terrace or garden in an area that doesnt have a lot of properties with outside space -- or something with all original features, or maybe unbelievable storage areas , perhaps internal bike space and combined with that, as near to a station as possible. Might cost marginally more, but you buy the best bargain you see in that catagory .I believe it gives an advantage at the sale end , of maybe,maybe not more money, but a quick sale which could be important to you if you spot something good for your 'move up' later. If the market goes up, you still have an advantage. Just my opinion.

Generali

It's a bubble.

cells

westernpromise wrote: »

The correct MSE way to think about this, I suggest, is to ask yourself a series of questions.

1/ Is your personal and financial situation stable - i.e. are you in a full-time career that is likely to persist (eg accountant), or in one in which constant relocations are likely or necessary (schoolteacher, theatre director)?
2/ Based on this, what is the horizon over which you reasonably expect to live with this decision? Are we talking one year ahead, or five, or ten?
3/ Hence, what are your actual available housing options? Typically, these are (i) rent (ii) buy, either a/ close into town or b/ further out of town.
4/ What are the in-and-out transaction costs in each case given your horizon? Buying involves lawyers, surveys and SDLT, and then you have to sell. Renting doesn’t, and so tends to be cheaper over shorter terms.
5/ Which do you see as the greater liability: (i)a 25-year mortgage, or (ii) the sum of all the rents you’ll pay if you rent for the rest of your life? If you perceive (i) as debt but not (ii), you should rent.
6/ What can you actually afford given the above?
7/ Next, what matters to you more: whereabouts you live, or what you live in? A small flat in town may involve a mortgage that costs £10k a year and a commute that costs £2k a year. A bigger flat out of town may mean only £8k for the mortgage but a commute that costs £4k. You don’t get your commuting costs back when you sell; are you OK with that? You might well be - many see this as the price they pay for more space.
8/ Have you thought forward to where you expect to be at the end of your horizon period? This is important. If you take a £100k fixed rate mortgage at say 3% for 5 years, you would pay off 15% of it over that term. Assuming you also put down a 10% deposit, this means that even if house prices fell 25% the day after you completed, and then didn’t recover at all over the next 5 years, you wouldn’t be in negative equity at that point. You could sell up, clear the mortgage, and move on unhindered. Do the maths for a few such outcomes (and don’t forget that twice in the recent past, when house prices fell, rents went up).

Whatever you do, and this is the really important thing, don’t FGS treat buying a home as a speculative financial trade in which, with your deep cunning and unmatched financial acumen, you will outwit all those stupid sheeple who have done whatever you didn’t do. This applies whether your punt is on property, by buying (because you think the price will go up), or against it, by not buying (because there’s going to be a crash).

There are some very, very unhappy people around who treated this decision as just such a punt, and called it exactly wrong years ago because they thought they were placing a bet rather than buying a home. They either paid far too much on what they thought was a surefire winner, or they passed up buying (so they are in effect “unvested interests”) at what now looks like a ridiculously low price. In either case there are as many people who now bitterly regret their choice, just as there are people who think they “won”.

someone needs to sell house price crash insurance

something like £500 a year for a 6 year term and if prices are more than 10% lower at the end of the term the insurance pays out the difference. Property owner would need to pay for the survey after the 6 year point if they wish to determine value of property to make a claim


basically an insurance policy that would never need to pay out and hopefully it will stop the 2%?? of the population that are uber conservative and would never buy irrespective of price and would instead set up a forum to discuss why their logic is sound