Help, first time buyer in London with £55k/year

Mark1987 · 9 July 2017 at 11:25AM

Hi guys!

I'm a 30yo IT professional guy currently living and working in London (Farringdon).
My current salary is £55k/year, which could reach £60k in the next 1-2 years, and I could use savings for £140k, no more.

I am single and at the moment I am renting a 1-bed flat for £1300/month (bills included) so I was thinking to buy something to avoid this big waste of money.

I am very confused because I am not sure I will stay in London in the next 2-5-10 years but everything can happen, I may change mind. I would like to invest my money to buy something to avoid to pay the rent and to have a profit, when reselling this property in the future. What would you advice me? I don't have any idea where I can start. Should I consider flats or houses with my budget? What is a realistic price for a house I can afford?

I like west London generally and it's very convenient for IT jobs, in case I will leave my current company.

Also, do you think it's a good period now to invest in properties?

Thanks a lot for your help!

economic · 9 July 2017 at 11:56AM

i wouldnt invest in london right now if you dont have a lot of money until there is a meaingful correction. with your savings and salary i think you could afford upto 450k in value. that doesnt buy much in london. maybe a 1 bed flat in a good area within zone 2-3. obviously further out you get more for your money.

if you think about even if you were to buy all for cash london offers a gross yield of 4% at best for a decent property. compare this to a stock like british land where its diversified, has no other costs you get 4.5% at least now.

does not make sense to buy london where growth is now questionable in short-medium term and rent is not enough for illiqudiity and other costs.

Mark1987 · 9 July 2017 at 11:58AM

Honestly I don't mind to find something in zone 4-5-6 or even just outside London. I saw a few decent houses around £350k. Would anything change in your opinion?

Pixie5740 · 9 July 2017 at 12:04PM

Do you want to buy a home or do you want to invest?

Mark1987 · 9 July 2017 at 12:09PM

I want to buy a home but keeping in mind that I may leave London in a few years so at that point I would like to have a profit from my sell. But as I said I am single and young al everything could change. I may decided to remain here.

economic · 9 July 2017 at 12:22PM

Mark1987 wrote: »

I want to buy a home but keeping in mind that I may leave London in a few years so at that point I would like to have a profit from my sell. But as I said I am single and young al everything could change. I may decided to remain here.

then i wouldnt buy. you will be punting. unless you have a reasonable level of confidence at least that you will make a profit. such as buying to develop.

if i were you i would perhaps look into buying where you are looking to move to. if you have no idea when and where you will move then a combination of savings and stock investments is best. what combination is impossible to say and only you know as you know what is likely to happen in your life.

economic · 9 July 2017 at 12:25PM

i myself am 34 have my own property in highgate (340k equity) and also stock investments (250k worth) and some cash/p2p (180k). the key is to remain diversified. i would not put everything in a property unless its your home in the long run.

Mark1987 · 9 July 2017 at 12:30PM

If I leave London I was considering to transfer the mortgage to another property or rent the house I bought. Is it a bad idea? Even though I buy something around 300-350k?
The problem is that i am spending too much for renting because I am single and i would never consider again to move back to a house shared

economic · 9 July 2017 at 12:39PM

you pay £1300 rent incl bills. bills are what £300? so rent is £1000. if you buy assuming you borrow 300k (which you will need to), then interest payments are like £500 a month. so you are only "wasting" £500 a month (1k - 500). if you stay london for 5 years thats 30k "wasted". however you dont need to pay stamp duty, solicitor fees, agent fees when you sell etc which all adds up plus dont need to worry about making a profit when you sell. so it makes no sense whatsoever to buy and sell when you leave.

to let out is another story but one in which i mentioned above does not make sense. and all to just say you own a property in london and be proud of that fact. its really not all that. imo stocks will outperform london property over the long term.

Mark1987 · 9 July 2017 at 12:53PM

My rent is £1500 and the bills £150.

Currently I have my money invested which return me roughly 4-5k net a year but the problem in my mind is that house prices rise more than 4-5k a year so every year I will always be a few thousands pounds less able to buy a house. Especially considering the fact that these 4-5k that I earn every year don't go all into my saving but I spend some of them for car repair, holidays, etc..

If I am able to find a decent property around 250-300k, which means borrowing only 150k do you still think it is not worth?
As I said it may happen that I will remain in London and in that case the risk I take now will be worth.

Mark1987 · 9 July 2017 at 12:55PM

Even if I will leave London at some point I would like the idea to have a base here where I can come back anytime so renting the house that I buy could be a a valid option.

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Help, first time buyer in London with £55k/year

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