London Investment - how long is too short?

heyya99

I have been renting in London for 5 years now and am considering buying. I am 34 now but cannot see myself being here when I'm 40.

My question is, is it worth buying a one bedroom flat (all I can afford) and selling it in such a short time period (5 years)? Bear in mind, my rent (£1400 per month) is usually just slightly less than a potential mortgage ((£1700 per month) so even if I don't buy in the 5 years, I still pay a lot of rent.

economic

are you certain you will need to sell in 5 years? could you let it out as an invesment?

if you needed to sell i wouldnt buy and continue renting. london prices in my view wont rise much more then inflation in my view and one beds can be more difficult to sell.

economic

also how much of the 1.7k mortgage is interest componenet? you should compare rent to interest part of mortgage payments for a fairer comparison.

heyya99

Interest is 900 per month about.

heyya99

economic wrote: »

are you certain you will need to sell in 5 years? could you let it out as an invesment?

if you needed to sell i wouldnt buy and continue renting. london prices in my view wont rise much more then inflation in my view and one beds can be more difficult to sell.

No, definitely not certain. Just a feeling I might be sick of London, and if not, sick of a 1 bed at 40. I'm not sure I could afford a buy-to-let mortgage as I'm already not giving myself much lee-way on a resident mortgage.

economic

so youre "wasting" extra £500 a month on rent then owning which equates to £30k.

now if you were to buy youd have to pay stamp duty and fees and when you sell in 5 years youd have to pay agent fees and legal fees. assuming property price stays the same id say its not really worth it to save 30k. you would need to see the value of your property rise and theres no guarantees of that. 5 years is too short, so i would say rent.

heyya99

economic wrote: »

you would need to see the value of your property rise and theres no guarantees of that. 5 years is too short, so i would say rent.

And you don't think it would rise in London, as it has been for years now? Why would the rises stop?

heyya99

The last time I rented a one bed was 3 years ago and the rent was 1400. I'm guessing it'd now be 1600, at least.

It would kill me to have to pay 1600 and not put it into an investment. But if it's not viable, it's not viable.

Kynthia

economic wrote: »

so youre "wasting" extra £500 a month on rent then owning which equates to £30k.

now if you were to buy youd have to pay stamp duty and fees and when you sell in 5 years youd have to pay agent fees and legal fees. assuming property price stays the same id say its not really worth it to save 30k. you would need to see the value of your property rise and theres no guarantees of that. 5 years is too short, so i would say rent.

I'd disagree slightly. Rent is likely to increase over the next 5 years and in London it could increase a lot. Plus it is very likely that the property would increase in value over that period of time, particularly if you can be flexible about when you sell. Then there's the security of ownership where you can't be thrown out at the whim of the landlord, which is expensive in regards to moving costs and new credit checks. Plus you get to decorate somewhere to your tastes and make it your own, without anyone inspecting it every 6 months and possibly telling you how to live

economic

never said prices wont go up, just that there are no guarantees. OP has to sell in 5 years, what if prices are lower at the time of sale?

Nobbie1967

heyya99 wrote: »

And you don't think it would rise in London, as it has been for years now? Why would the rises stop?

House prices don't rise continually, they tend to go in cycles of boom and bust. Given the meteoric rise in the last few years, you can't rule out a correction within the next five years. If that happen before you want to sell, you could be stuck. Just look at house price graphs over the last 40 years and then look at where we are in that cycle. Not saying it's going to happen, as 'things could be different' this time, but it's certainly a risk worth considering.