Buying options

desperate_buyer

Hi,

I've been trying to buy a newish 1 bed flat in London for the past 9 months without success so far. I've had three failed sales (seller pulled out before exchange, 2 lenders declined mortgage on a new build due to cladding issues, 2 lenders declined mortgage on recent build due to cladding issues). Needless to say, I have lost a lot of money on solicitors and valuations as well as time.

I'm trying to buy the flat to avoid paying expensive rent and the plan is to live for a few years and then just rent it out.

At the moment pretty much any building has the cladding issue thus I can't buy anything. The houses in the area are far away from the station and they need total revamp. High cost + the need for another 50K cash to revamp are off putting. I tried ownership in a new development that has a cladding certificate but I was declined due to exceeding the income threshold because they have counted disc bonuses towards my income.

My only options at the moment are buying a new build at ridiculous price off-plan and hope that prices won't crash till next summer (Q2 2020 completion) or waiting for the cladding situation to be resolved so that I can buy 2nd hand flat at a discount. Based on what I've seen, I don't believe that the cladding will be resolved any time soon as most of the buildings have some sort of cladding which will have to be removed.

The off-plan build seems the more attractive option but I'm really worried about prices crashing till next summer and thus being unable to get a mortgage. Any advice would be appreciated as I'm totally desperate at this point.

hazyjo

Surely the answer is to buy a flat without cladding? Am 100% sure they don't all have cladding! :think: Are the ones you're looking at priced accordingly cos of the cladding (which is why you're seeing so many cladded flats while searching in your budget)? If so (and it's not coming as a great shock that the vendors have never noticed it), then it looks like maybe you can't afford to buy yet so keep saving.


Where will you go if you rent it out? Surely you'll be back to paying expensive rent again?


Buy further out maybe?

sal_III

Not all newish blocks of flats have cladding and out of these with cladding many are not using the "bad" types, so they only need a certificate stating that. Just ask the EA in advance, before you commit to solicitor fees.

If you are so afraid of price crash in 2020, just keep on renting until then and buy on the cheap, once the prices drop.

Buying a off-plan new build now will not prevent you from getting a mortgage if there is a price crash in 2020. Your mortgage offer will be valid until completion in 2020 with the valuation made during the application.

Retired_Mortgage_Adviser

I will add a note of caution here. From experience, if property values start falling sharply, lenders may change their mind about lending you as much as they promised or even withdraw the offer. This happened to many of my clients during the 2007-08 crash.

That wouldn't be a huge problem in itself, but the developer could still hold you to the contract you signed at the higher price. If the property can only be resold for a lower price, it could sue you for the difference. And you will almost certainly lose your deposit.

sal_III wrote: »

Buying a off-plan new build now will not prevent you from getting a mortgage if there is a price crash in 2020. Your mortgage offer will be valid until completion in 2020 with the valuation made during the application.

tom9980

In my opinion now could be one of the worst possible times to be buying a flat in London.

Election.
Winter.
Brexit.
10 years since last housing crash.
London prices been falling for the past few years.
Cladding/Fire safety concerns.

Whats more you only seem to want to live in it for a couple of years, you realise the next purchase if you rent it out will cost you 3% extra in stamp duty? not to mention more regulation for Landlords on the way after the election no matter who wins.

foxy-stoat

If your plan is to buy somewhere and rent it in a year or 2 and buy another place, you will need to find 25% deposit and then another 10-15% on the next purchase.

If you have crunched the numbers on being a landlord then I wish you all the luck.

But I would buy somewhere without cladding issues or wait.

Cakeguts

So you want to buy a flat in London to ultimately let just at the time when many very experienced landlords are thinking of getting out of letting residential property because of government interference that is about to make it more difficult to evict bad tenants? You think it is a good idea to buy to let now? Why?

desperate_buyer

Thanks everybody for the interesting answers, I'll try to reply to everybody.

Indeed, some of the flats don't have cladding, however, lenders want somebody to put that in writing (suitably qualified professional) and at the moment nobody wants to do that because this isn't law, just a guideline and nobody wants to be responsible. Building owners tell sellers that they won't do anything. The issue has nothing to do with price unfortunately - both low and high end flats have the same problem.

In terms of why I want to buy - most likely I will leave the country for a while but I want to start paying off a mortgage. I don't intend to make money as a landlord - in fact, I'm even willing to take a bit of a loss as long as the mortgage gets paid. Idea is that I might return one day with a semi-paid off flat or always say in 5-10 years time. I'm aware of the stamp duty implications as as a non first-time buyer but this isn't a concern, neither is another deposit.

At the moment the new flats in the area I'm trying to buy are growing with roughly speaking 25K every year.. (385k in 2017, 450k in 2020) in a few years time they will easily go over the 500K mark so I'd rather buy now at a bit less than at this ridiculous price. 1 beds are fully bought out off-plan years before the actual completion.