Some questions about potentially selling one bed flat

MiseryChastain

Hi there

I bought a one bed room flat in Zone 2 London about 1.5 years ago for approx. 480K using a HTB loan (not the London maximum) and traditional mortgage and some of my own cash from savings. I just need some advice thinking ahead as circumstances may change in a few years and I may look to buy somewhere with my partner.

1. I am generally concerned about the potential to actually sell the flat in the future. It is a new build in Zone 2, but the general issues surrounding HTB do worry me. The main concern with the scheme being that you have a bunch of new houses built and purchased by people using the scheme but the flats becoming unsellable because once they because a second hand flat nobody can use HTB to purchase the flats as they are no longer new builds. If I could go back, I don't think I would have done HTB for this reason. Do you think there would still be a market for one bed flats either as an investment or to live in? Or would I have to significantly drop the price? I know nobody can say what house prices will do in the future but just want anyone's experience / advice.

2. In a similar vein, do you think it would be seriously offputting to buyers if the flat is in a relatively okayarea (i.e. zone 2, next to a large park, near a trendy area) but it forms part of a regeneration scheme (i.e. a mixture of buildings which are shared ownership, some council housing and also private property)? I think again going back I would maybe have thought twice about the purchase as there are some council properties on the estate which although they were refurbished the people living in them are dodgy / the council flats normally look a bit of a mess.

3. The general consensus seems to be that house prices will drop slightly in London or stay the same for the next few years. Taking into account my flat was a new build and I therefore paid a premium on it, is there much point overpaying my mortgage (which I am doing by £400 per month at the moment) if house prices are to stagnate or drop plus taking into account the actual value of my flat may be lower than the purchase price.

4. What is the likelihood of a new build flat in Zone 2 London selling in a few years for at least the purchase price? Do they ever significantly drop or at least stay the same?

5. Is there any point whatsoever in touching the equity loan if I plan to try to sell within the first five years of the equity loan? I sometimes wonder if I should use investments / savings to pay it off just to have the benefit of potentially being able to sub-let the flat if I tried to sell but had difficulty shifting it?

6. If I was going to buy somewhere with a partner, would I simply have to shift the one bed apartment and redeem the HTB / mortgage, rent somewhere while looking for new house. Or would it be possible to time the sale of the flat with the joint purchase of the new house?

7. Is it worth getting the property valued now just for the sake of curiosity? Do businesses like Purplebricks etc do valuations for free? How do I go about this? At the time of the purchase, I had 50K cash equity in the property. So I'm curious as to what my current equity would be taking into account mortgage repayments over the last 1.5 years. Mainly because I'd be curious to know what the actual current value is - I am well aware that I paid a premium when buying, I want to know by how much though...

In short, I do not see my current flat as a long-term place to live and I am starting to think of a get-out strategy for the next couple of years. The flat itself is lovely, and I do wish to stay here for at least another year or two. I haven't had any problems personally and I love the area, but I am thinking longer term moving out of London and want to make sure the whole thing wasn't completely pointless / for nothing and that I can actually sell the thing.

eddddy

As a starting point, search Rightmove for similar properties around your postcode to see what the asking prices are.

You can click "Include Under Offer and Sold STC" to see if many properties are going under offer (you'll see their asking prices, but not their offer prices).

If you want to go a step further - talk to some local estate agents, and get market appraisals - they won't charge.

The agents will know how well properties are selling in the local area, what prices they are achieving etc (but they might be a bit overoptimistic).

(You mention Purplebricks - their people are unlikely to be local and may not know your local area well. So you might get less useful insight from them.)

silvercar

Sounds like buyer's remorse.

In answer to some of your points:

1. I agree, your potential buyer won't be able to use HTB; but then many people will be nervous of HTB and also buying a new build so all isn't lost.

2. it's fine because it is a trendy area, it's London so different rules apply, it's mixed housing and near a tube.

3. Yes. You reduce your mortgage giving your more options on remortgaging when your deal runs out. You will always owe the money, so overpaying is sensible.

4. Who knows, crystal ball territory.

5. At some point you are going to have to tackle this. Either by selling or remortgaging to include the equity loan. There is an argument for saving for this rather than overpaying your mortgage.

6. Preferable to do both at the same time, particularly if your new mortgage loan amount is dependent on you selling the current property.

7. Try zoopla website (choose the house prices option at the top) for a rough indication.) Won't be accurate, but for a new build it will give an indication.

MiseryChastain

silvercar wrote: »

Sounds like buyer's remorse.

In answer to some of your points:

1. I agree, your potential buyer won't be able to use HTB; but then many people will be nervous of HTB and also buying a new build so all isn't lost.

2. it's fine because it is a trendy area, it's London so different rules apply, it's mixed housing and near a tube.

3. Yes. You reduce your mortgage giving your more options on remortgaging when your deal runs out. You will always owe the money, so overpaying is sensible.

4. Who knows, crystal ball territory.

5. At some point you are going to have to tackle this. Either by selling or remortgaging to include the equity loan. There is an argument for saving for this rather than overpaying your mortgage.

6. Preferable to do both at the same time, particularly if your new mortgage loan amount is dependent on you selling the current property.

7. Try zoopla website (choose the house prices option at the top) for a rough indication.) Won't be accurate, but for a new build it will give an indication.

Thank you for the answers. I think it really is buyer's remorse...

hazyjo

I'd worry about it when the times comes. The London market is difficult to predict long term. Of course it will be static or even drop for a while cos of Brexit as people sit tight, but once people realise the sky hasn't fallen in, they'll buy again. Many want to move now but are waiting until after Brexit so I'm guessing 6+ months after, there will be a lot coming onto the market. That may or may not do you a favour!

Don't get too caught up on the HTB bit - everyone (nearly) always pays a premium for a new build. They're not all HTB. People will still be buying second hand one bed flats in Zone 2.

If yours drops in price, more than likely so will whatever you move to. Yes, pay down your mortgage as much as poss to avoid any chance of negative equity.

If it's in a slightly dodgy area, it may take longer to sell. Are we talking somewhere like East London? Stratford may take longer to sell as it's flooded with flats. If somewhere like Hackney, I doubt you'll have any probs.

People will be more concerned with safety than who their actual neighbours are. It's Zone 2. Of course there will be council properties nearby and estates.

Personally, I think you're worrying way too soon. If you were talking a year away, fair enough. But 'a few years'? Nah, don't panic. (Although you do change to saying a year or two later on. Still too early to panic though - I would be waiting 2 years or so in your shoes.)

No, don't get it valued if you're not selling. Pointless. The market is way too unpredictable. You can see what things have sold for yourself - that's as near as you need to know right now.

Start following a few similar flats on rightmove and see how long they're taking to sell. Set up some alerts. You can draw areas if you want to limit it even more to nearby streets.

MiseryChastain

silvercar wrote: »

Sounds like buyer's remorse.

In answer to some of your points:

1. I agree, your potential buyer won't be able to use HTB; but then many people will be nervous of HTB and also buying a new build so all isn't lost.

2. it's fine because it is a trendy area, it's London so different rules apply, it's mixed housing and near a tube.

3. Yes. You reduce your mortgage giving your more options on remortgaging when your deal runs out. You will always owe the money, so overpaying is sensible.

4. Who knows, crystal ball territory.

5. At some point you are going to have to tackle this. Either by selling or remortgaging to include the equity loan. There is an argument for saving for this rather than overpaying your mortgage.

6. Preferable to do both at the same time, particularly if your new mortgage loan amount is dependent on you selling the current property.

7. Try zoopla website (choose the house prices option at the top) for a rough indication.) Won't be accurate, but for a new build it will give an indication.

The Zoopla estimate came out 25K below below the purchase price. Does that sound like an accurate premium for the new build? Is there any way I can make up for the 'drop' (although it is not really a drop, it is a premium) e.g. painting and decorating the place which I am doing next month. Or is the best bet to make up for it by overpaying the mortgage?

hazyjo

MiseryChastain wrote: »

The Zoopla estimate came out 25K below below the purchase price. Does that sound like an accurate premium for the new build? Is there any way I can make up for the 'drop' (although it is not really a drop, it is a premium) e.g. painting and decorating the place which I am doing next month. Or is the best bet to make up for it by overpaying the mortgage?

Ignore zoopla estimate. It could easily be wrong by that amount.


Overvalued one of my houses by over £150k, and undervalued my last house by around £100k. Absolutely not to be relied upon.

MiseryChastain

silvercar wrote: »

Sounds like buyer's remorse.

In answer to some of your points:

1. I agree, your potential buyer won't be able to use HTB; but then many people will be nervous of HTB and also buying a new build so all isn't lost.

2. it's fine because it is a trendy area, it's London so different rules apply, it's mixed housing and near a tube.

3. Yes. You reduce your mortgage giving your more options on remortgaging when your deal runs out. You will always owe the money, so overpaying is sensible.

4. Who knows, crystal ball territory.

5. At some point you are going to have to tackle this. Either by selling or remortgaging to include the equity loan. There is an argument for saving for this rather than overpaying your mortgage.

6. Preferable to do both at the same time, particularly if your new mortgage loan amount is dependent on you selling the current property.

7. Try zoopla website (choose the house prices option at the top) for a rough indication.) Won't be accurate, but for a new build it will give an indication.

hazyjo wrote: »

I'd worry about it when the times comes. The London market is difficult to predict long term. Of course it will be static or even drop for a while cos of Brexit as people sit tight, but once people realise the sky hasn't fallen in, they'll buy again. Many want to move now but are waiting until after Brexit so I'm guessing 6+ months after, there will be a lot coming onto the market. That may or may not do you a favour!

Don't get too caught up on the HTB bit - everyone (nearly) always pays a premium for a new build. They're not all HTB. People will still be buying second hand one bed flats in Zone 2.

If yours drops in price, more than likely so will whatever you move to. Yes, pay down your mortgage as much as poss to avoid any chance of negative equity.

If it's in a slightly dodgy area, it may take longer to sell. Are we talking somewhere like East London? Stratford may take longer to sell as it's flooded with flats. If somewhere like Hackney, I doubt you'll have any probs.

People will be more concerned with safety than who their actual neighbours are. It's Zone 2. Of course there will be council properties nearby and estates.

Personally, I think you're worrying way too soon. If you were talking a year away, fair enough. But 'a few years'? Nah, don't panic. (Although you do change to saying a year or two later on. Still too early to panic though - I would be waiting 2 years or so in your shoes.)

No, don't get it valued if you're not selling. Pointless. The market is way too unpredictable. You can see what things have sold for yourself - that's as near as you need to know right now.

Start following a few similar flats on rightmove and see how long they're taking to sell. Set up some alerts. You can draw areas if you want to limit it even more to nearby streets.

Thanks for this, it is quite reassuring. It is by the Clissold Park in Hackney.

sal_III

1. The thing is that currently HTB equity loan scheme is only funded until early 2019, and there are doubts it will get the funding beyond that (I think the original end was 2020 anyway). Meaning that it will soon be unavailable for people who are looking for new(ish) flats. I wouldn't worry that much about it, unless you are desperate to sell.

2. If you have concerns about sell-ability in your area you haven't done much research when you bought, live and learn I guess. Just keep an eye / track similar properties in RM/Zoopla and see how fast they sell and at what price, this will give you an idea of the desirability of the area. Mix of SO, Council, affordable and new build homes is hardly a novelty in London. As long as you have a tube station less than 1/2 mile you are most likely OK.

3. Personally I have opted to save up to staircase the equity loan at an opportune time, when the prices dip, my mortgage is at 1.59% and there are plenty of 1.5-2% saving accounts meaning I don't lose by not overpaying the mortgage.

4. No one knows, but rapid rise in prices is extremely unlikely, it will be either dip, stagnation or very slow creep up. Again all depending on specific areas. Popular areas will retain value, where unpopular areas where people were only buying, because there was nothing else available on the market will suffer.

5. If the current value of your property is lower than the purchase price, you are likely to gain more equity by repaying the HTB loan instead of repaying the mortgage.

6. HTB loan is irrelevant here, you can get in a chain and sell at the same time as you buy. The difference is that a chunk of the proceeds form the sale will go towards repaying the loan.

7. Free valuations are worthless, you can do them yourself by looking at sold similar properties in your area. If the development is still being build you can check the price of the new builds and reduce it by 5-10% this should give you a ball park figure of what your flat is worth.

TBagpuss

Ignore Zoopla estimates. They are often way off.

Yes, prices in London may go down in future, either in london or generally, but none of us can tell you when, or by how much, or whether it will happen in your area. If they do fall, then that will apply to any property you may be moving to as well as to the one you are selling.
Paying down your mortgage can help you to avoid negative equity, if prices do fall.

I would expect the value of your property to have fallen a bit as it is no longer brand new, then recover value if/when prices generally go up.

Until you are in a position where you are starting to think about moving on, don't worry too much about it. Think of it as a home not an investment.

When you start to think about moving on, do some research at that point into prices.

If you want to know out of curiosity, then look at the sold prices sections of rightmove and zoopla, but bear in mind that these use information from the Land Registry, which tends to have backlogs, so the details will always be a few months out of date.

hazyjo

So N4 rather than E8? I should imagine E8 commands more, but who can tell. London is such a funny place. One day things are in demand, the next somewhere else is more or equally as popular.


I really think you need to sit tight on this one. I have not got a crystal ball, but in say four years, I doubt you'll make a loss (don't hold me to it or shoot me if I'm wrong lol!).