Dilemma to buy a flat - is it the right market?

grad101

Hi all,

I am interested in views as me and my partner are a bit torn on whether to make an offer on a flat, and generally if it is a decent time to buy.

It is a 2 bed in London, in a block we really like and good location for us. It's on at 440k. However, I saw a 2 bed in the same block go at the end of last year with an asking price of 375k (slightly less good spec). 

I really like this place but not sure whether to hold out or offer lower - my understanding was the prices in London haven't really changed that much in the last 2 months, let alone risen by 15-20%! 

Secondly, flats in this block don't seem to be a good investment. Looking at previous sales many selling last year have not made money or minimal since 2020. I think the over-priced asking offer is an attempt by the seller to make their money back as they didn't buy it from far off that number. 

Is that just reflective of the turmoil in the last few years economically? Can I expect buying now in London to be a decent investment in 5 years like it has been in the past? We are spending 2k a month on rent so my main motivation is to put money towards our own place at an affordable level, but the 'benefit' becomes less once you factor how much goes towards interest, costs of any repairs, and costs of selling if you will struggle to sell with a profit.

Thanks in advance.

lika_86

I'd definitely say it's overpriced if a similar flat in the block went for £65k less. 

Assuming the mortgage is about the same and assuming about half would be interest, that's still £60k in equity if the flat sold for the same you bought it for. Obviously you'd have to deduct costs of buying and selling, ground rent and service charge, cost of any renovations/decoration/alterations you may want to do. You'd also lose first time buyer and chain-free status. Is it still worth it? Obviously turning a profit isn't the only consideration, there's definitely value in stability and being able to make a place home.

propertyrental

Dilemma to buy a flat - is it the right market?

Are you buying as an investment ie as a BTL? If so, lots of preliminary research needed.

Or as a home - in which case you are asking the wrong question. You should ask:

Dilemma to buy a flat - is it the right time in our relationship?

If the answer is yes as a home and yes right time, then the final question is

Dilemma to buy a flat - is it the flat for us?

Albermarle

 my understanding was the prices in London haven't really changed that much in the last 2 months, let alone risen by 15-20%! 

I would expect a minimal change in the last 2 months, maybe have even weakened a bit but it varies in different parts of London.

Secondly, flats in this block don't seem to be a good investment. Looking at previous sales many selling last year have not made money or minimal since 2020. I think the over-priced asking offer is an attempt by the seller to make their money back as they didn't buy it from far off that number. 

Were they new build flats in 2020?

 Can I expect buying now in London to be a decent investment in 5 years like it has been in the past? 

As nobody can see into the future, nobody can answer that question with any certainty. The only thing we do know is that London prices have dipped a bit ( 5%) last year and seem to be stabilising/very slightly increasing so far this year.

JM68

Was it a new build in 2020?  If so, most new builds do sell for less than paid as the 'new build' premium goes.

If the one you are looking at is trying to get back at least what they paid for it, and it was a new build in 2020, its likely significantly overpriced, as the one selling for less suggests.

Has it got tenants in it?  I ask as my experience is that over the last year or so a great deal of BTL stock is being listed at higher prices than it should be by landlords just as a sort of 'chance my luck' while they continue to collect rent.

Lastly, if it was a new build in 2020, there may be build quality issues and high service charges and ground rent to consider, not only as outgoings but putting future buyers off when you come to sell.

Have you considered flats in more established, older blocks?

AlexMac

If you’re buying the flat to live in, whether or not it’s the “right market” is maybe not the issue. You’re buying a home, not an investment, although most property eventually increases in value over time. ( and say that having lived through the House price crashes of 1987-88 and 2008 when prices dropped in some areas by 20-25%. But they recovered within a few years, and some places, like the more popular bits of London, held value better)

Even if prices drop a little , and unless you overpay, it won’t matter. You’ll still have a home and if you ever trade up to a bigger place in a falling market, you’ll save more pro-rata on the (dearer) new purchase.  And 5 years is worth the gamble; I can’t see great fluctuations in price in the next decade?

There are lots of other factors and questions I’d be asking about as well as whether I love a flat:

I’m with JM above
What kind of structure; is it low rise, traditional construction (brick and pitched roof of tile or slate; my preference; lower maintenance like my two BTLs which don’t even have lifts!) ? 

Or is it a high rise and system-built block with a flat roof? Or even worse, with cladding? Newish flats near us are shrouded in scaffold to remove the stuff and repair the leaky flat roofs, sometimes for the 3rd or 4th time, according the the builders we chat to 

Tenure; I prefer freehold or if it’s a leasehold flat “shared freehold” where the leaseholders are in control of management and maintenance. This is unlikely in new blocks, so check…

Who’s the Freeholder? (I walked away from one purchase after nosing about neighbours and Google revealed an unsuccessful “Right to manage” fight by occupants against a grasping and incompetent Freeholder). Ditto managing agent. Competent? Responsive?  

Service Charges?  My two Ex-Council leasehold flats have very reasonable SCs of £1.5k pa  (for buildings insurance, routine maintenance, caretaking and upkeep of shared areas and grounds) but mates’ ones with Concierge and gym etc crept up to an eye watering £5k plus pa; more than some mortgages. And is there a “sinking fund” for the inevitable one-offs like external decoration or roof repairs (I’ve copped £4-5k every 10 years or so as my share of suchlike as my Council freeholders don’t retain surplus SCs in a Sinking Fund). But that’s what you’d expect with your own freehold house. 

A problem is that Estate Agents (or even the vendor) often claim not to know any of this stuff but you can ask. The EA’s replies aren’t legally binding, so you can only rely on the vendor’s replies to the standard Qs by your solicitor. But by the time they ask you’ll have committed fees and emotion!

Possibly TMI; don’t panic. Go for it; I’ve never regretted buying and karma also plays a part. Good luck

propertyhunter

I know new build flats around Wembley stadium that sold for less after 5 years than when new, so don't think about the investment potential when buying a home for yourself. Increasing values of properties is not guaranteed, especially flats. 

The price of the flat you're looking at seems overinflated (the London flat market is stalling if not falling). How long as it been on the market? Offer what you think it is worth to you, but it might be worth playing the long game and waiting for a price reduction - or telling the estate agent you're interested at the right price and asking what the seller would accept (rather than going in too low and them disregarding you altogether). 

As others have said, look for red flags - onerous ground rent clauses, service charges, fire risk etc.

ReadySteadyPop

propertyhunter said:

I know new build flats around Wembley stadium that sold for less after 5 years than when new, so don't think about the investment potential when buying a home for yourself. Increasing values of properties is not guaranteed, especially flats. 

The price of the flat you're looking at seems overinflated (the London flat market is stalling if not falling). How long as it been on the market? Offer what you think it is worth to you, but it might be worth playing the long game and waiting for a price reduction - or telling the estate agent you're interested at the right price and asking what the seller would accept (rather than going in too low and them disregarding you altogether). 

As others have said, look for red flags - onerous ground rent clauses, service charges, fire risk etc.

There is a Metro article out today on London flat market which makes interesting reading, they are adjusting for inflation, interest rates and COL, but interesting all the same.