Buying a studio flat in London

HappyMJ

ruelle wrote: »

You're right. Obviously in 10 years any property in London will be worth a lot more. I guess because it's a studio I can't see myself living there for 10 years but it's all I can afford at the moment.

If you really want to be on the property ladder maybe you could buy a property outside of London with a higher gross return, let it out then use the rent you receive to pay the rent on a property that you really want in London that you would otherwise be unable to afford to buy outright.

ruelle

HappyMJ wrote: »

If you really want to be on the property ladder maybe you could buy a property outside of London with a higher gross return, let it out then use the rent you receive to pay the rent on a property that you really want in London that you would otherwise be unable to afford to buy outright.

I'd rather just buy in London as that's where I'm looking to stay long-term.

HappyMJ

ruelle wrote: »

I'd rather just buy in London as that's where I'm looking to stay long-term.

In London you can get more for your money if you rent.

Gross rental yields on property in London are only about 3 to 4%. http://www.londonpropertywatch.co.uk/average_rental_yield.html Mortgage rates and cost of capital (the interest you lose by using your savings as a deposit ) is about 4 to 5%.

westernpromise

ruelle wrote: »

Did you end up selling it in the end?

Yes, offered at £200k in 2012 and fell through, let it out for a year, tried again in 2013 and sold for £190k.

It was a probate sale and I let it out because the estate needed cash to pay the service charges whether it was let or unoccupied.

The best guide to whether a place is resellable is whether you'd want to live there yourself. If you do, then someone like you will come along in x years' time and will want to do so too, and will have it off you. If it's a dive and the only reason to buy it is because its price will go up, you've got a problem, potentially, if its price stops going up; you don't want to live there and neither can you sell it.

ruelle

Yeah, I can see myself living there and it being a home just a slightly cramped one.

I bet if you'd sold that studio now you would've got loads more!

westernpromise

ruelle wrote: »

I'd rather just buy in London as that's where I'm looking to stay long-term.

Over the first five years of a 25-year mortgage at 3% interest, you'll repay ~15% of the loan. So if you buy at £200k with a 10% deposit, and fix for five years, then at the end of the fix - when you can sell and move on without an early repayment penalty - you'll owe £153k on the mortgage. Meanwhile, you don't have to care what local property prices do (you're on a fix) and you don't have to care what interest rates do (you're on a fix).

As long as you can sell your flat for at least £155k by that time, you will not face negative equity, and you will not be stuck there indefinitely. So as long as prices in 2021 haven't crashed by 22.5% you'll be OK.

I'd take that bet, broadly, as long as I was happy with committing to living in that place for that length of time. And if not then not.

westernpromise

ruelle wrote: »

Yeah, I can see myself living there and it being a home just a slightly cramped one.

I bet if you'd sold that studio now you would've got loads more!

Probably about £220k now, although I put my share of the proceeds into my own house so I don't feel like I missed out.

Verbatim

Walthamstow is a great area with a lot of young professionals moving in. Prices have been going up fast over the last few years with multiple people being given the same timed slots for viewings for properties at weekends. Given the fantastic transport links to central London I'd say buy now as you may not be able to next year. Prices have increased a lot in the last year and are still rising.
If as others say you want to move on in a few years you'll be able to afford more when the time comes given the equity you'll have built up than if you had left your depositin the bank earning a paltry rate of interest.
Of course I don't have a crystal ball but people tend to regret the opportunities they didn't grab...

ruelle

Verbatim wrote: »

Of course I don't have a crystal ball but people tend to regret the opportunities they didn't grab...

Very true... Would be annoying if I passed on this, couldn't find anywhere better and it continued to go up in value. Which could happen. Walthamstow house prices have gone crazy over the past 2 years.

HappyMJ

ruelle wrote: »

Very true... Would be annoying if I passed on this, couldn't find anywhere better and it continued to go up in value. Which could happen. Walthamstow house prices have gone crazy over the past 2 years.

That would scare me off actually. Am I buying at the height of the market and the only way is down?

Make the wrong choice buying and you can lose tens of thousands of pounds if the market goes the wrong way.