House buying and redundancy

stevat

Hi all,

hope you are all well, and sorry for the wall of text below, but I am looking for some perspective.

Last week we learned that my wife will most likely be made redundant within the next 2 months. At the same time, our landlord (who have been excellent throughout the whole tenancy) got in touch to let us know they’re considering selling the 1-bed flat we’re renting and offering us the opportunity to buy it. Our understanding is that they’re looking to exit the market before any significant CGT raise in the autumn budget, otherwise they might not sell at all (unless any CGT raise is small). Knowing the usual timings of the property market, it seems that selling to us is the most viable way of getting a sale by that time.

We do have the funds for a significant deposit towards a 1- or 2-bed now. We are reluctant however at this stage to tie a large part of our house funds given that we are suddenly a single-income family. We both work in IT, and the redundancies in my wife’s company are in a big part due to offshoring and the introduction of AI. My employer is also introducing AI. We are not feeling great about our job security, both in our current companies and in the profession in general. Therefore we don’t want to over-extend ourselves and prefer to keep a generous cash pillow to allow us flexibility and give us security if we both become and stay unemployed for a while. By the way, my wife’s employer is offering a voluntary redundancy package which she’s thinking of taking and offers roughly 5 months of salary.

However, given the redundancy news, the last thing that was on our mind now was to buy a property. So we are now reconsidering our options:

Option A: do nothing, stay put, taking the risk of either having to move out eventually or both end up with no job and unable to get on the property ladder for unknown time

Option B: buy the 1-bed flat from the landlord

Option C: look to buy a 2-bed flat now which is what we want space-wise

We do find moving a big hassle and would like to avoid solutions that involve multiple moves.

Another consideration is that if we buy this 1-bed now with a view to upsizing to a 2-bed in the next few years, we’ll have lost our FTB stamp duty discount and we won’t be chain-free then (so might need to get a 2nd mortgage with all associated costs, if we want to be able to move quickly if a good opportunity arises). There’s a new development nearby that we have our eye on, but that won’t be ready for a year or so.

The flat we are currently living in has served us very nicely, both space- and location-wise, over the last few years, and we did in fact ask our landlord to buy it a few years back. In the meantime, we realised we’d like to have more space (we don’t plan to have kids).  

What you would do in a situation like this? 

Brie

how flexible is both your skill sets? could you and would you be willing to move into a completely different line of work? jobs are always available in large cities but it depends on how willing you are to take the jobs available at any given time.

having been through redundancy more than I would have liked I have always tried to approach it as an opportunity rather than a disaster. I was at one point in the middle of a move - offered on house, mortgage arranged when it appeared I'd be made redundant. Not moving wasn't an option so I made it work - stupidly stressful but I did it! Then again I have a naturally positive outlook which helps immensely.

all that said - I would only be considering taking on what you honestly believe you can afford. Yes moving is a hassle but getting the flat you already are in is likely to be the less expensive and least hassle of moving to a bigger place and all the actual costs etc of the move itself. Knowing you won't be forced into a move in several months' time would be good too should your landlord go ahead and decide to sell the place to someone else.

SarahB16

Very sorry to hear that your wife will be made redundant. If you think your careers are both at risk of redundancy due to AI could either of you diversify into a slightly different sector and use transferable skills that you have.

On to your question re your move:

I would look to move to a house (not a flat) but if it is to be a flat then a 2-bed flat (do not consider any 1-bed flats) but I would only buy when your wife has secured a new job. Then if you were made redundant you would have your wife's salary and your joint savings rather than solely relying on your savings. You may also need both of your salaries to get a mortgage for the type of property you want too.

If you are only looking at flats then do take into account the service charges that you will need to pay on top of the mortgage. Also, note based on historic prices that house prices have increased at a higher rate when compared to flats.

Does that new development you have your eye on have any houses? Have you checked the planning portal to see what the planning permission documents say? Given that you don't like moving then moving into a new build may be better and you could just rent until it's ready. Maybe try to get an idea of the likely prices of that new development.

Please do not underestimate how difficult 1-bed flats can be to sell so I would rule out buying a 1-bed flat as you may feel 'trapped' in your flat and unable to move to the larger home that you want to.

To summarise if I were in your shoes I'd get more details re that new development and if they have houses that you like and think you could afford then speak to the developer and get your name down on a waiting list. You could pick your favourite house too (e.g. south facing back garden, etc) and in the meantime I would rent. Honestly, a year or so is no time in house buying and selling timescales.

Grumpy_chap

Option A: do nothing, stay put, taking the risk of either having to move out eventually or both end up with no job and unable to get on the property ladder for unknown time

Option B: buy the 1-bed flat from the landlord

Option C: look to buy a 2-bed flat now which is what we want space-wise

Option B does not look great as it will always be a 1-bed when your long term needs (wants) a 2-bed.

Bigphil1474

Have you thought of emigrating to New Zealand? They are usually looking for IT people. My brother did that and ended up living there for over 20 years. He left there a millionaire and is now living back in Europe. (His house made more money than he did from his wage though)

Personally, I'd always look for a house rather than a flat, and avoid fleecehold new estates. Could you afford a mortgage on one salary (presumably so if you can afford rent). Owning a home isn't as inflexible as you think. My lad owns a house he bought over 20 years ago but hasn't lived in for at least 10 years - rents it out and lives in rented as his job moves him around every few years.

I would also not sink all your savings into a deposit. Look at around 10% deposit and the rest mortgage - if the figures add up. If you have spare savings and want to reduce the mortgage more quickly later on, you can overpay (usually 10% extra inside a fix).

mta999

Agree with the above and also remember flats are becoming more more difficult to sell and are being reduced considerably so be careful about what the asking price is - but again caution against buying a one-bedroom flat anyway

Albermarle

Our understanding is that they’re looking to exit the market before any significant CGT raise in the autumn budget, otherwise they might not sell at all (unless any CGT raise is small). 

It sounds like there is a good chance that the Landlord might not sell at all, and even if he did you could still be there for a good few months until you are eventually evicted. Combine this with your wife's redundancy/ future employment prospects and your general uncertainties, then the best course of action may be to do nothing and just sit tight for now.

There is a saying Up North - 'If in doubt, do nowt'

Herzlos

How important is getting a 2-bed flat? Do you like the current flat?

Normally I'd suggest waiting to get the house/flat you really want, and that you can afford to wait until the landlord evicts you, but if you like that flat and a bigger one is just a "nice to have", and you get it at a good price, then it'll be the lowest risk approach going forward. Especially if you could get the mortgage on a single salary.

poseidon1

As regards the increasing unpopularity of 1 bed flats on a number of fronts, the following article with regard to the impact on mortgageability in relation to quantum of annual services makes rather bleak reading -

https://thenegotiator.co.uk/news/rental-market/lenders-reject-flats-as-service-charges-breach-1-red-line/

stevat

Hello all!

Thank you so much for offering your perspective, it's useful to see some views from the outside.

To answer a few questions:

• yes, we're set on flats rather than houses. We enjoy living in this area and apart from very old and cramped houses, everything else in the area is blocks of flats.
• we are aware of the issues with leaseholds, such as ground rent clauses, EWS, high service charges. We didn't know though about lenders' reluctance when service fees breach the 1% threshold, so that's something to think about.
• we have lived in this flat for several years now. It works for us as it's a really big for one bed, but we've grown a bit frustrated by the lack of an extra room. So while it's not an absolute necessity, we want to eventually move to a 2-bed (well, 3-bed, but these are rare and super expensive!). If we buy the one-bed now, it'll make moving on to a 2-bed in, say, one or two years time a very expensive and stressful exercise, or are we exaggerating here?
• New Zealand sounds great, we've been there and enjoyed it massively, but we're not adventurous enough to pick up and move to the other side of the planet :D
• The new development is flats only and scheduled for Spring 2027 for the release of the first batch of properties, but I'd be surprised by move-in dates earlier than autumn 2027.
• With regard to the job situation, we've started thinking about options if our profession becomes unsustainable. Bur for now we have decent salaries and hopefully my wife will find a new job reasonably soon. So, re-training to do something else using our transferrable skills is on our minds but possibly a bit later on.
• We do have decent savings, but due to job uncertainty we want to keep a generous cash pillow, so that we'll be able to pay rent/mortgage and living expenses even we both end up staying out of a job for a year or two, having to re-train and then taking on jobs with much lower salaries than our current. Hence why we're considering the option of the one-bed, it gives us a property right now, rather have to wait for an unknown future.
  

So, basically the question is, do we go for the "easy" solution that is in front of us right now, or hold fire for a year or so and see what happens? Hopefully our landlord is only considering of selling to us and will not put it on the open market (but people's circumstances change, that's outside out control)

Again, thanks all for your perspective so far!

TroubledTarts

Until you know the price of the 1 bed flat you are in you can't do the calculations. The landlord may be willing to sell it well under market price as the easy option.

That said, as is clear into he market, properties are not increasing in value as they once were and that gravy train is currently stalled.

Conversely you haven't said how much rent you are paying and how much you might pay on a mortgage.

Lots of things to consider