London prices

LondonBuyer1stTime

Hi all, We are somewhat frustrated first time buyers having a tough time of it in the current market and are trying to make a bit of sense of our experiences - would really appreciate any advice from people who have seen something similar.

I'm going to try and give the full details so bear with me if it gets a bit wordy!

We are first time buyers looking in SE London in the Beckenham area. We've been looking for houses since around July last year, and in that time have offered and missed out on 6 properties that we have offered on. A number of these properties have been on for OIEO, and all of them have gone for over asking price the weekend after they've come on the market. We feel we have been realistic and putting our best foot forward, at times offering up to £20k over asking price ourselves. For a few of the houses we have upped our offers as it's clear the estate agents are going back asking people to come up, but it seems like no matter how high we've been willing to go, there are always others willing to come up a bit further. It's worth saying at this point that so far we have largely been within our budget, and it's a case of not being willing to come up so far above what similar prices have sold for, rather than not able. We have accepted that to buy in this market we might have to swallow overpaying what other properties have sold for, but being first time buyers we are also a little worried about crossing that line too far and leaving ourselves in a bad situation if prices fall.

The logical person in me says sit tight and eventually it will happen for us, as the feedback has been that we've been very close on some occasions. Also if there is a property that comes up that we really love (the last couple have had a few compromises) then we need to be willing to come up more than we have - so far, so good.

On Saturday we viewed a house which came to market at £750k, on the same road as a house we had previously offered on, which was marketed at £675k in January. The houses are very similar spec, same number of bedrooms, same size etc. The one from Saturday was a bit more nicely done out, and had a few touches to justify adding to the asking price, but not significantly. Given that, our feeling was that the house was overpriced - our uninformed view was it felt like somewhere around £700-£725k might have been 'fair' in context of the houses that had sold recently in that area. We put in the best offer we could (at this point we were unable to come up higher rather, than unwilling) - the house sold for £775k after receiving 7 offers. We spoke to the estate agent and they had told us that they were hoping for a figure of £725k+, suggesting that our original hunch wasn't a million miles off.

So it seems to me that the buyer has put forward a large offer which has upped the benchmark for houses in that area. Presumably the next seller is going to take that into account and price (assuming a similar house) the next one at £775k, maybe higher?

I understand that ultimately any given house is worth what someone is willing to pay for it, which in this case was a lot more than us. What I'm really struggling to figure out is the impact this has on similar houses nearby - will this single transaction genuinely act as inflation for similar houses, or is it more likely that things drop back and sort of discount these types of transactions where the house sells for significantly more than nearby sold prices? Am I overthinking this? It almost feels as if between January and now we've gone from being strong contenders to buying a house to being completely priced out of something similar, which is quite difficult for me to get my head around.

I'm also struggling a bit with where we go from here - an obvious answer is we could compromise on location or size/quality of house to get something within our budget, but we'd hate to do that and then see something come back up in our preferred area at a price we could afford (as was the case in January). Any advice from someone who has been in a similar situation would be greatly appreciated.

moneysavinghero

Put yourselves in the shoes of the person who owns a similar house on the same street as the house that sold for £775k. Would you want to sell it for £725k or £775k? I would guess you would think £775k, you might even think put it on the market at £800k and see if get any interest.

Now of course what you advertise the property for does not automatically translate to a sale. Maybe the people with bottomless pits of money will no longer be around and you might end up finding that £725k is the best offer you get, But you would defintely want to try and get at least that £775k the neighbour got.


In London everyone wants to buy a house currently. So if you could cope with living in a flat you will it a lot easier to buy. Or you could wait until furlough ends and see how that pans out - when people start losing their jobs it may have an effect on the housing market.

Scotbot

It is not just London. I look at new listings in my area and think you must be kidding. Who knows what will happen going forward. I don't think furlough ending will make much difference as these are mainly low paid jobs in retail and hospitality. These people are not buying 700k properties and banks wont lend to them for cheaper properties. What will make a difference is if interest rates rise but the BoE will try to avoid this as long as possible. Will prices continue at this rate? Unlikely once the SDLT holiday ends


OP no one has a crystal ball but if you intend to be in your house long term (5 yeats plus) you are unlikely to lose out. Equally you my well not make any money. 

LookingForLondon

I’ve seen the same thing happening. Similar houses in the 1-1.5m range just seem to add £100k to the most recent listing price and they still sell - even if this was a couple of months earlier! 

People have completely lost their minds - I fear we may be next to do so!

bouicca21

A quick search on Rightmove suggests there are loads of houses in Beckenham up at £700k or less.  Are you set on a particular micro area of Beckenham?

Sistergold

As @LookingForLondon is saying “you need to lose your mind” to buy in London. When I was looking in 2018/19 it felt like no matter what I offered it was never enough, also I was also almost always told there was a cash buyer also offering. I was so confused what I needed to do to buy a house. Had to keep on reviewing my budget upwards. All I can say after some time you will get it right. In the end I had to offer way more than I planned, on a dilapidated house most will not want, I was so fed up I didn’t care how much anymore I just wanted a place of my own. At the end of the day I was already throwing away money at some stupid rent. Unfortunately that is London always cut throat! The house was overpriced really as it was so run down and I still had to spend thousands to bring it to a livable state and even then I am not yet done with the renovations. The location, size, quietness, close to school and train etc that is ticked all boxes except it was run down. Basically be a bit more flexible with something like needing renovations or price if need be and do not be so flexible about noisy road etc and you will get there 

You will get there in the end when the right house comes, being sold by right agent and right person. You just need one stroke of luck so hold on. 

Good luck 

princeofpounds

It's quite likely that any EAs with new similar listings in the area will try to price off the new transaction, yes.

That doesn't mean the next house is necessarily worth that much. 

Sometimes you get bidding wars that break the price ceiling on an area. Sometimes no-one comes up with the new higher asking price based on that new ceiling, and the seller ends up accepting a bit of a discount. And so marketing prices creep higher or lower as this information filters through to EAs and the public. 

Even in the context of the UK's housing boom of the last 30 years (with brief interruptions) 2020-21 has been a bit of a 'special' period.

Interest rates (which determine the cost of mortgages and therefore largely the price of houses) slumped*, whilst the government provided further stimulus to the housing market with the stamp duty holiday (which is more impactful than its monetary value alone because of the psychological signalling effect and also because of the way it concentrates demand into a specific time period).

Both are in the process of reversing. Rates have now partially recovered, but that will take about 3-6 months to reflect in mortgage pricing.  It's an open question how much further they go, and it will depend on how strong the recovery is and how inflation expectations develop. The stamp duty holiday has been extended, but will probably end at some stage.

It's impossible to say confidently that prices will move in any particular direction, but there is a strong likelihood the dynamic we have seen in recent times will cool down significantly.


* why interest rates move as they do is a complicated topic so I won't elaborate here beyond what I stated above.

You can see the movement in yields here (use a 5yr chart for some perspective). This is a 2yr government borrowing interest rate that moves closely with the cost of shorter-term fixed mortgages which are amongst the most popular in the UK, although the rate is lower of course because there is little risk lending to government compared to a person buying a house.

https://www.investing.com/rates-bonds/uk-2-year-bond-yield

HpXp

A big factor people are overlooking is that there is a lack of supply on the market due to the pandemic and people being weary about having strangers look around their homes. Once people are confident that the risk from Covid has gone them more will think about selling.

The economy and housing market is also currently being supported by various schemes which come to an end later this year, including mortgage and eviction holidays, furlough, stamp duty etc. I'd wait and see how the year pans out but I also think prices will have calmed down by next year if you can wait that long. 

[Deleted User]

You were up against 7 others, and not all will be as value orientated or rational as you. They all liked the house, the successful bidder may have had a finance ceiling well above the eventual sale price. The difference between 750 and 775 is not a big percentage either. Perhaps they had missed out before and were influenced by the competion, pressure and frustration of past experience and current opportunity. The asking price in a market like that will orient and influence people, whether the true value is 700-725 like you say, the asking price sets the scene. In fact lots of people were interested at that price. It just doesn't sound like a market for a value seeker and either you change perspective to go all out to secure the property or wait in the hope that the market cools.

Alan2020

LondonBuyer1stTime said:

Hi all, We are somewhat frustrated first time buyers having a tough time of it in the current market and are trying to make a bit of sense of our experiences - would really appreciate any advice from people who have seen something similar.

I'm going to try and give the full details so bear with me if it gets a bit wordy!

We are first time buyers looking in SE London in the Beckenham area. We've been looking for houses since around July last year, and in that time have offered and missed out on 6 properties that we have offered on. A number of these properties have been on for OIEO, and all of them have gone for over asking price the weekend after they've come on the market. We feel we have been realistic and putting our best foot forward, at times offering up to £20k over asking price ourselves. For a few of the houses we have upped our offers as it's clear the estate agents are going back asking people to come up, but it seems like no matter how high we've been willing to go, there are always others willing to come up a bit further. It's worth saying at this point that so far we have largely been within our budget, and it's a case of not being willing to come up so far above what similar prices have sold for, rather than not able. We have accepted that to buy in this market we might have to swallow overpaying what other properties have sold for, but being first time buyers we are also a little worried about crossing that line too far and leaving ourselves in a bad situation if prices fall.

The logical person in me says sit tight and eventually it will happen for us, as the feedback has been that we've been very close on some occasions. Also if there is a property that comes up that we really love (the last couple have had a few compromises) then we need to be willing to come up more than we have - so far, so good.

On Saturday we viewed a house which came to market at £750k, on the same road as a house we had previously offered on, which was marketed at £675k in January. The houses are very similar spec, same number of bedrooms, same size etc. The one from Saturday was a bit more nicely done out, and had a few touches to justify adding to the asking price, but not significantly. Given that, our feeling was that the house was overpriced - our uninformed view was it felt like somewhere around £700-£725k might have been 'fair' in context of the houses that had sold recently in that area. We put in the best offer we could (at this point we were unable to come up higher rather, than unwilling) - the house sold for £775k after receiving 7 offers. We spoke to the estate agent and they had told us that they were hoping for a figure of £725k+, suggesting that our original hunch wasn't a million miles off.

So it seems to me that the buyer has put forward a large offer which has upped the benchmark for houses in that area. Presumably the next seller is going to take that into account and price (assuming a similar house) the next one at £775k, maybe higher?

I understand that ultimately any given house is worth what someone is willing to pay for it, which in this case was a lot more than us. What I'm really struggling to figure out is the impact this has on similar houses nearby - will this single transaction genuinely act as inflation for similar houses, or is it more likely that things drop back and sort of discount these types of transactions where the house sells for significantly more than nearby sold prices? Am I overthinking this? It almost feels as if between January and now we've gone from being strong contenders to buying a house to being completely priced out of something similar, which is quite difficult for me to get my head around.

I'm also struggling a bit with where we go from here - an obvious answer is we could compromise on location or size/quality of house to get something within our budget, but we'd hate to do that and then see something come back up in our preferred area at a price we could afford (as was the case in January). Any advice from someone who has been in a similar situation would be greatly appreciated.

You need to consider many factors, we live in London.
On our street we live on the side where our gardens are south facing, the houses opposite us are about £100K less like for like - our kitchen diner has 7.5m long glass patio door and the sun streams in, on the other side this is simply not possible due to aspect.
one parallel street up the south facing houses drop £50k in value due to proximity to a main road, and on the main road £150 drop. Go one parallel street down again price drops as you are getting towards tube line drop, go a mile away £200k drop as you are under a flight path.
Your price comparison is nonsensical in London. Prices are based on each houses location.

eskimalita7

Hi
I am also looking in Beckenham in the same price bracket as you, so perhaps we have been looking at the same houses. I sold my flat on Foxgrove Rd in January (at a fair price - conveyancing still in progress) and we have seen prices shoot up since then. Lots of local estate agents have been over-valuing and I know of at least one that was down-valued by the bank. I am also unsure as to how honest some local agents are - KFH in particular have lied to my face about why I should increase an offer. I would be very interested to compare notes with you about what estate agents are telling you if you want to PM me?