Buy a flat in London now or wait?

RoisinDove

Hi everyone,
Just hoping for a bit of advice or some food for thought. I'm 35/f, single, and possibly in a position to buy my first flat later this year due to unexpectedly saving up way more than usual during the pandemic. My family and good friends are encouraging me to buy asap as they feel I'm throwing away money on rent (have paid over £130,000 in rent since I left home at 18.....eep!) and need to get on the property ladder, but I'm a little concerned about making a rash decision and regretting it. 
I live in London and would like to stay in London ideally, but this is very limiting money wise. I have about £24,000 saved up now towards a deposit, and could get to about £30,000 by late summer. I earn £55K, so the max I can borrow is about £245-250K, meaning that I'm limited to properties under £280K. Obviously at this price, I'm going to have to make huge compromises, and either buy a tiny flat in an OK area, or an OK flat in a bad area (or so far out that transport links are a nightmare). My family reckon that London is always a safe bet property wise, and that I should just buy something I'm relatively happy with asap, as long as I'd be alright with living there for the next five years or so. They said if I decide I don't want to live in London, I can always let it out, and there will be demand. 
My main worries are 1) the London property market crashing and being 'trapped' in a small flat I will struggle to sell, in negative equity, 2) meeting a partner (can only hope!) and wanting to buy a house/flat together, but not being able to because I can't sell or rent mine, 3) ending up working from home almost all the time because all the companies close their offices, and going stir crazy in my flat, unable to move out to the coast or somewhere nice.
I'm not sure if I'm just overthinking this, as nobody I know who has bought in London has ended up with an issue (they've all managed to rent their places out if they've wanted to move elsewhere) but I feel like these times are a bit unprecedented, and it all feels very uncertain. I would appreciate any advice!

Alan2020

Well done on saving and a great pay.  Personally I would not buy a property in London for £280K, you will hate it.
Where do you work in London, then find commutable zone or our of London and buy a freehold house.
Make sure you buy at a minimum 2 double bed, Garden and parking.
You will be better off doubling your efforts in meeting a partner, say if they earn a similar amount then you can sell your house and buy a normal house in London.
Just like anything in life, if you don't put a lot of effort, you won't get a partner, so keep doing that as well.

fewcloudy

@RoisinDove
Short answer from me - buy now. And small in an OK area for me every time. Location, location, location.
I don't think any of your 3 concerns are likely (I don't mean you won't find a partner btw I mean the other bit), and I don't think you are overthinking it as it's a big thing.

steampowered

Out of the box option: You could consider moving out of London? £30k would be a fine deposit elsewhere in the country, even if your salary is lower.

In this age of record low interest rates, buying is generally a good idea if you intend to be somewhere long term. Few years plus. But, if you get it wrong, buying can also be a depressing waste of money, and can make you feel trapped in a property you don't want to live in.

If you are happy to live in the flat for the next 5 years, buying probably makes sense. 

As you are a first time buyer, personally I would hold on for a year or so, as prices in London are likely to soften when the stamp duty holiday comes to an end. The stamp duty holiday doesn't benefit you because you will qualify for first time buyer stamp duty relief.

In the meantime, make the most of Lifetime ISAs. You can pay in £4,000 into a Lifetime ISA each tax year. The government will then add a bonus of 25% when you use it to buy a property - worth £1,000 a year.

RoisinDove

Alan2020 said:

Well done on saving and a great pay.  Personally I would not buy a property in London for £280K, you will hate it.
Where do you work in London, then find commutable zone or our of London and buy a freehold house.
Make sure you buy at a minimum 2 double bed, Garden and parking.
You will be better off doubling your efforts in meeting a partner, say if they earn a similar amount then you can sell your house and buy a normal house in London.
Just like anything in life, if you don't put a lot of effort, you won't get a partner, so keep doing that as well.

Thanks for your reply. I see what you mean, but relationships aren't things you can just get in return for effort, like with most other things. Sometimes the harder you 'try', the worse the situation gets. I think people can sniff out desperation and it leads to very bad places. I almost ended up buying with my ex who turned out to be abusive (I left once it became really apparent), and that would have been much worse than any scenario buying alone, I think  

I work quite centrally in London, but won't need to be in every day. Maybe as little as once a week would be OK. The thing is that I don't want to be stuck in a distant suburb with poor transport links or in a small town, as this will be really isolating and make it even harder to meet people. That's why I thought it might be better to just buy a one-bedroom flat somewhere in zone 2 or 3. Is that a really bad idea? My family are saying it will be much easier to rent out a small flat in London proper than a place way out in a commuter town or the countryside.

steampowered

RoisinDove said:
 My family are saying it will be much easier to rent out a small flat in London proper than a place way out in a commuter town or the countryside.

Buying a flat to rent it out makes very little sense:
1) You are not going to be able to afford two properties with your size of deposit - so if you rent out this property, you will need to rent somewhere else instead.
2) If you rent out this property, you'll be paying income tax on the rent you receive from the letting, plus things like letting agents fees.
3) Even if by some magic you were able to afford a second property, you'll be paying through the nose in higher rate stamp duty.

If you want to buy, make sure it is a flat you are happy living in, at least for awhile. Personally I would be much happier with a 1-bed flat in Zone 2 or 3, then a flat with a long commute. Especially if I was intending to go out and meet people. But that's a personal choice. Others might prefer to live a bit more in the countryside. 

RoisinDove

fewcloudy said:

@RoisinDove
Short answer from me - buy now. And small in an OK area for me every time. Location, location, location.
I don't think any of your 3 concerns are likely (I don't mean you won't find a partner btw I mean the other bit), and I don't think you are overthinking it as it's a big thing.

This is what my family are telling me. I know buying in London on that small of a budget is going to mean a tiny ex local authority flat if I want to be near good transport links or anywhere remotely near to the centre, and that means no outside space or spare room to work from. Not ideal at all, but possibly a better investment, and also would make it easier for me to go out and about in London, meet people, etc.? 

Do you reckon this year is a good time to buy? There's talk of prices maybe falling once the stamp duty holiday ends and the effects of furlough and unemployment start to show, but I really have no idea what to expect. I thought I was another 2-3 years off being able to buy anything at all, so I am grateful to be in a position where it might be possible, but also a bit overwhelmed! I really know nothing about the property market at all!

[Deleted User]

I'd snap this one up!:

https://www.rightmove.co.uk/properties/73745835#/

Lovely area, top floor, share of freehold.    Close to a great park.   And lots of young professionals in the area.

Or look for something similar around SE London where there might still be a bit of value on the edges of zone 2 and into zone 3.   For example around Crystal Palace:
 
https://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION^70306&maxBedrooms=1&minBedrooms=1&maxPrice=280000&propertyTypes=&includeSSTC=false&mustHave=&dontShow=newHome,retirement,sharedOwnership&furnishTypes=&keywords=

RoisinDove

steampowered said:

Out of the box option: You could consider moving out of London? £30k would be a fine deposit elsewhere in the country, even if your salary is lower.

In this age of record low interest rates, buying is generally a good idea if you intend to be somewhere long term. Few years plus. But, if you get it wrong, buying can also be a depressing waste of money, and can make you feel trapped in a property you don't want to live in.

If you are happy to live in the flat for the next 5 years, buying probably makes sense. 

As you are a first time buyer, personally I would hold on for a year or so, as prices in London are likely to soften when the stamp duty holiday comes to an end. The stamp duty holiday doesn't benefit you because you will qualify for first time buyer stamp duty relief.

In the meantime, make the most of Lifetime ISAs. You can pay in £4,000 into a Lifetime ISA each tax year. The government will then add a bonus of 25% when you use it to buy a property - worth £1,000 a year.

I have considered moving, but not sure where would work. I'm already feeling a bit shell shocked with the pandemic and a relationship ending last year, and wondering if a move to a new city away from the little support I have here would be a bit much. I have considered Brighton, as it's close enough to London that seeing my friends and doing stuff would be possible, and it's also an interesting place in its own right. Looks like I might be able to get quite a nice flat there within my budget, compared to what I can get in London, but not sure how likely it would be to hold value, etc. 

Why do you say to hold on a year? I thought the stamp duty holiday was finishing in June? I haven't kept up to date with stuff as much as I'd have liked due to life and work being very stressful recently. I do need to look into LISAs as well. I suppose I should get cracking with that given that there's only a month until the end of the tax year! Is that a bonus of 25% for *any* property? It doesn't need to be a new build or anything? Meaning if I put in 4K tomorrow, and another 4K next tax year, the government will give me 2K? Would I still get that money if I bought towards the end of this year, or would I have to wait for the end of the next tax year? Thanks for your help!

Windofchange

For some people there will never be a good time to buy - will forever say just wait a year, wait another and so on. You're not looking to flip something in 6 months so can sit out any drops in prices. Realistically, what are you going to know in a year that you don't know now? It's not like if a fall comes it will happen overnight, it will take many years to slowly creep down. If you find somewhere you like and you can afford it then 100% buy. There is plenty of value still around the outer zones of London, and plenty of places like Croydon, Bromley etc have fast trains straight into Central London. Not sure what extra value you will get in Brighton - from why I understand prices are pretty much London minus maybe 5% and a stick of rock? 

RoisinDove

steampowered said:

RoisinDove said:
 My family are saying it will be much easier to rent out a small flat in London proper than a place way out in a commuter town or the countryside.

Buying a flat to rent it out makes very little sense:
1) You are not going to be able to afford two properties with your size of deposit - so if you rent out this property, you will need to rent somewhere else instead.
2) If you rent out this property, you'll be paying income tax on the rent you receive from the letting, plus things like letting agents fees.
3) Even if by some magic you were able to afford a second property, you'll be paying through the nose in higher rate stamp duty.

If you want to buy, make sure it is a flat you are happy living in, at least for awhile. Personally I would be much happier with a 1-bed flat in Zone 2 or 3, then a flat with a long commute. Especially if I was intending to go out and meet people. But that's a personal choice. Others might prefer to live a bit more in the countryside. 

I don't mean I'd buy with the intention of renting it out. I meant more that if my life circumstances changed and I wanted to move to a new city or country, it would be an option, rather than me being trapped. If I could cover the mortgage by renting it out and rented a different place for myself (in a cheaper town/city/country), I still wouldn't be any worse off than I am now, if that makes sense? 

I also think I'd prefer a small flat actually in London than a bigger one way out of the city, given my lifestyle and circumstances. I love the idea of having a garden and loads of space, but I would worry I'd feel very isolated out in Bishops Stortford, or wherever. Some of my work colleagues have bought in places like that, but I think it's different when you have a long term partner and/or kids.