Buying Property in London

Henry9

Hi all, would any of the long term Londoners ever consider buying a home here rather than renting?
By any measure a lot of property in London is insanely expensive, but considering the high rents isn't it hard not to tot up in your head the 'dead money' you'll pay over 5-10 years?

The problem obviously is a crash and then you're fecked. That and knowing the place well enough to know where to buy. I lived in Dublin long enough that I know where I would and wouldn't live.

Has anyone looked into the 'Help to Buy' scheme?

Lump

I bought a flat 2 years ago. Best thing I've ever done. Rent is wasted money. If you can find an affordable area then it's a no brainer. I had make a decision to move further out of London, or buy in a less desirable area. I went with buying a 2 bed (large-ish) flat in W12 (White City) It was affordable and now with TVC being redeveloped and westfield expanding I am onto a winner I hope.

I had to have a healthy deposit, but I bought on my own. I suggest everyone do it if they can afford it!

Henry9

Any idea of a map of areas and 'affordability'? I remember seeing one for rents that wasn't far wrong.
I would be buying on my own too, paying the monthly rent is breaking my heart.

Lump

No clue really, I went to an area I first lived when I moved to London. It's a council Estate, still a number of council flats, but a fair number are privately owned too.

Council flats are good as the leases tend to be long and the yearly fees are alot better than private management companies. However, if they decide to replace the lifts I have to contribute to that which is a pain as I live on the ground floor.

It's been good so far, my mortgage is about £100 more than my rent was! I have been letting out my spare room since I bought the place, so have actually made money on it over the past 2 years!

What area's are you thinking of buying?

Henry9

Lump wrote: »

It's been good so far, my mortgage is about £100 more than my rent was!

That's what's influencing my thinking, I wouldn't mind paying another hundred or two if it was on a mortgage rather than to a landlord.

At the moment I'm focusing on SW. It's a huge place and that's the only place I know so far. I could move further out once it's near the train line, but I don't see the point in moving to suburbia.

There are possibilities on the North side, Kentish town might be do able.

Actually found this very interesting, I can't vouch for it's accuracy.

Putney looks surprisingly 'reasonable'.

http://www.londonpropertywatch.co.uk/avg_prices.html

hfallada

There is talk of a bubble in London. Since so many people are pouring money into uk property as its in GBP and not the "dodgy" EUR. Remember although mortgages are cheaper now. Can you handle normal interest rates ie base rate of 5% with Bank of England meaning your interest rate is about 7-9%

afatbollix

Personally I think London prices are only going higher. With this help to buy schemes & a million extra people moving to London in the next couple of years it only means prices are going to go up.

Personally I think house prices are guaranteed to increase for the next 5 to 7 years.


Im looking at the help to buy scheme low deposit and I could have the mortgage paid off in 10 years and then have the cash for a big deposit on a family house.

theteal

We're toying with the idea of buying in and around Romford at the moment - I know it's not "London" London but 25mins from Liverpool street is close enough for me. The average 3 bed house is £220k-£260k and we're paying £1k per month in rent for a 2 bed house as it is so it certainly appears that a purchase would be more cost effective. Prices are definitely rising at the minute and this cross rail thing is going to push that further.

jonnyfingers

I'd love to buy but the houses where we want to live are just too expensive. I also have a horrible feeling that by the time I save the massive deposit necessary to buy an expensive house the London property bubble will burst. But that's the risk you have to take.

Regardless we can't do anything for a couple of years as we're getting married in a year and all our savings are going towards that at the moment with little left over to put towards a deposit. But assuming house prices stay pretty static it's a good idea to buy if you can.

BrokenArrows

Its a tough one.

I know I want to buy in the next year or two but I don't know if im still going to want to stay in the UK for enough time to justify getting a mortgage here.

I see better value in buying back in Ireland.

As for a bubble in London. Im not sure that London would ever crash. It might slowly decrease but that's not going to happen over night.

The crashes in Ireland were simply caused by supply exceeding demand. That's not happening in London.

djpbarry

BrokenArrows wrote: »

The crashes in Ireland were simply caused by supply exceeding demand. That's not happening in London.

Not exactly. Everyone in Ireland thought they could get rich selling property to each other. Property investors in London are thinking exactly the same thing. The arse has to fall out of it sooner or later.

The average house price in London is way, way more than the average Londoner can afford and yet prices are still increasing - if that's not an anomalous bubble...

Fysh

jonnyfingers wrote: »

I'd love to buy but the houses where we want to live are just too expensive. I also have a horrible feeling that by the time I save the massive deposit necessary to buy an expensive house the London property bubble will burst. But that's the risk you have to take.

Regardless we can't do anything for a couple of years as we're getting married in a year and all our savings are going towards that at the moment with little left over to put towards a deposit. But assuming house prices stay pretty static it's a good idea to buy if you can.

Obviously it's your own business, but would it not make more sense to focus the majority of your savings towards purchasing a valuable long-term asset rather than propping up the wedding industry?

(I realise that just by typing this I may have invoked a Category 4 Bridezilla attack, in which case I shall go and cower behind the sofa and grovel for forgiveness...)

djpbarry wrote: »

Not exactly. Everyone in Ireland thought they could get rich selling property to each other. Property investors in London are thinking exactly the same thing. The arse has to fall out of it sooner or later.

The average house price in London is way, way more than the average Londoner can afford and yet prices are still increasing - if that's not an anomalous bubble...

Part of the problem London has right now is that it's a popular foreign investment site. With the likes of the Chinese government clamping down on real estate investment, and increasing numbers of Russian millionaires wishing to invest their money outside of Russia, there's demand for property amongst exceptionally wealthy folks that is at serious risk of driving out the people who live and work here. That won't last forever (eventually even the Tories won't be able to justify the usual excuse of "Well go live somewhere else you can afford then", because it's already the case that you want to be earning at least £10kpa more than the national average to live in London and that's without any dependents or childcare costs). At which point, investment properties may turn out to be less profitable than previously.

Personally, I wouldn't dream of buying in London, for 2 reasons:
1) There's not a hope in hell I could afford what I'd actually like to live in within the M25 - I'd like space, 3 bedrooms, a garden and good local facilities, which in my area would mean a horrific amount of money for what I'd get, and
2) I have no idea whether I even want to be in the UK in 10 years time, never mind London. So a mortgage would be a commitment I can't really guarantee I'll be happy with.

As ever, I would point out that if you know you want to stay here long-term, a mortgage makes more sense than rent (if you've got a deposit and can get a reasonable rate), but for those of us with itchy feet and a tendency to wander, one of the things we get from paying rent is the ability to say "I'm leaving" at the end of the tenancy and not have the hassle of selling on to someone else. (Not to mention the freedom of knowing that issues with eg plumbing or infrastructure are paid by the landlord not the tenant...)

jonnyfingers

Fysh wrote: »

Obviously it's your own business, but would it not make more sense to focus the majority of your savings towards purchasing a valuable long-term asset rather than propping up the wedding industry?

(I realise that just by typing this I may have invoked a Category 4 Bridezilla attack, in which case I shall go and cower behind the sofa and grovel for forgiveness...)

Oh believe me, it's crossed my mind. But we're not going too crazy and everything is already planned really, so we just need to pay for it!

83ste

Interesting reading on this subject today: http://www.theguardian.com/books/2013/aug/18/default-line-extract-faisal-islam-housing

Henry9

djpbarry wrote: »

Not exactly. Everyone in Ireland thought they could get rich selling property to each other. Property investors in London are thinking exactly the same thing. The arse has to fall out of it sooner or later.

The average house price in London is way, way more than the average Londoner can afford and yet prices are still increasing - if that's not an anomalous bubble...

Maybe it will, but there's a difference in buying off the plans in Leitrim and buying real estate in zone 2. I can't say it won't crash, but I think a 'quality' area will hold up better. There won't be any ghost estates let's put it that way.

The story seems to be foreign investors pushing everything up alright. I don't know how anyone on a lower income can afford to work in London, but they seem to be everywhere I go.

The help to buy scheme seems to involve a deposit of 5%, an interest free loan from the Gov of 20% and you borrow 75%.
Worthy of Charlie McCreevy I think.
Plus the media are really starting to pump up the hype around the market, a bad sign I think.

But given the scheme isn't ending anytime soon, and rates are probably staying where they are for another year or two, there's more left in this market before it stalls I think. Maybe enough to have a sufficient cushion when it does come down again.

All speculation on my part though, I wouldn't be an avid watcher of the London property market.

Henry9

serrity wrote: »

Interesting reading on this subject today: http://www.theguardian.com/books/2013/aug/18/default-line-extract-faisal-islam-housing

She borrowed 125% of the value. No sympathy for her.

djpbarry

Henry9 wrote: »

Maybe it will, but there's a difference in buying off the plans in Leitrim and buying real estate in zone 2. I can't say it won't crash, but I think a 'quality' area will hold up better. There won't be any ghost estates let's put it that way.

There are areas of prime real estate in the heart of Dublin left idle because the developers (or builders, as they used to be called) who own them want to hold out until the price recovers before selling. They're not ghost estates, but they are ghost plots. There's no reason why the same thing can't happen in London.

Nika Bolokov

Recently looked at a place to rent, 2 bed a few minutes walk from Fulham Broadway tube. SW6, nice flat, nice area.

Rent is about 18K per year. A flat in the block 'in need of updating' sold recently for 575K. That gives a yield of about 3% not taking in to account expenses. 18K - 20K a year is prob what it costs to rent a two bed around here and most are selling north of 550K.

The average interest rate over the past 100 years was about 4%. So not the best investment from a historical perspective.

Taking the above example imagine prices in London go up 15%, which could happen over the next 18 months, that flat now costs about 660K. To get a four percent yield the rent would have to go to 26K making it a sustainable long term investment, nearly a 50% rise on what it is.

If you can not put the rent up 50% your yield is even worse. The only reason you would buy it is if you feel that the price would go higher again making the yield worse again.

Interest rates will rise, investors will not tolerate 2% yields on property then and the rent rises needed on such highly priced properties to make them pay are beyond the capacity of the market. Salaries will not go that high that quick, if rents dont rise as quick as prices, renting becomes way cheaper than buying and the arse falls out of things.

If you are going to buy maybe run the place through that scenario. Put the price up 15%, check out the rental yield at todays rent and then how much it would have to go up to give a 4% yield. If the numbers look mad think seriously about buying as when interest rates move up, which the bank of England will start to do when unemployment goes to 7% as they said they will, things could get messy as investors pull out.

Marcusm

Hyper prime, prime and near prime London purchase prices are in a bubble; rents have not risen nearly as fast. It won't be the same as Ireland but there is trouble ahead - I speak as one over invested in prime/near prime property. The capital values are not supported by rentals nor economic fundamentals. The impact fo far East investors and loose lending criteria are principal causation factors.

Henry9

Nika Bolokov wrote: »

Recently looked at a place to rent, 2 bed a few minutes walk from Fulham Broadway tube. SW6, nice flat, nice area.

Rent is about 18K per year. A flat in the block 'in need of updating' sold recently for 575K. That gives a yield of about 3% not taking in to account expenses. 18K - 20K a year is prob what it costs to rent a two bed around here and most are selling north of 550K.

The average interest rate over the past 100 years was about 4%. So not the best investment from a historical perspective.

Taking the above example imagine prices in London go up 15%, which could happen over the next 18 months, that flat now costs about 660K. To get a four percent yield the rent would have to go to 26K making it a sustainable long term investment, nearly a 50% rise on what it is.

If you can not put the rent up 50% your yield is even worse. The only reason you would buy it is if you feel that the price would go higher again making the yield worse again.

Interest rates will rise, investors will not tolerate 2% yields on property then and the rent rises needed on such highly priced properties to make them pay are beyond the capacity of the market. Salaries will not go that high that quick, if rents dont rise as quick as prices, renting becomes way cheaper than buying and the arse falls out of things.

If you are going to buy maybe run the place through that scenario. Put the price up 15%, check out the rental yield at todays rent and then how much it would have to go up to give a 4% yield. If the numbers look mad think seriously about buying as when interest rates move up, which the bank of England will start to do when unemployment goes to 7% as they said they will, things could get messy as investors pull out.

I think the problem with your analysis is that it's focused on rental yield.
The more important element to the current investors is price growth (IMO).

Marcusm wrote:

Hyper prime, prime and near prime London purchase prices are in a bubble; rents have not risen nearly as fast. It won't be the same as Ireland but there is trouble ahead - I speak as one over invested in prime/near prime property. The capital values are not supported by rentals nor economic fundamentals. The impact fo far East investors and loose lending criteria are principal causation factors.

I'd agree with that, but what is the definition of 'prime' in terms of price?

I'm tempted to think that if that part of the market bursts, it's separate from the rest. But didn't people in Ireland think that too?

Nika Bolokov

Henry9 wrote: »

I think the problem with your analysis is that it's focused on rental yield.
The more important element to the current investors is price growth (IMO).

Which is the issue as this is the classic sign of a problem. Buying a lump of concrete in the hope someone else will buy it for more in the hope someone else will pay more again for no particular reason as the rents are falling.

Henry9

Mortgage approvals in July were highest since Mar 08.

First time buyers accounted for 56% of loans in London to June this year.
They borrowed an average of 3.67 times their income.

It seems a lot of people are gearing up to buy homes again, but it's hard to interpret data with so little granularity.

Lump

Renting is wasted money and there are areas to guy in london that aren't over priced and expensive - Fulham Broadway is not one of them.

enda1

Lump wrote: »

Renting is wasted money and there are areas to guy in london that aren't over priced and expensive - Fulham Broadway is not one of them.

Mortgage interest payments are wasted money
Maintenance is wasted money
Solicitor Fees are wasted money
Mortgage fees are wasted money
Stamp duty is wasted money
The differential between mortgage payment and rent payment lost interest on future savings is wasted money
The loss of the interest gained on the deposit sum you've put forward is wasted money
Buying depreciable furniture is wasted money
Being stuck in a location tied to the whims of the property market while a better life awaits you elsewhere is far more than just wasted money

Put that argument to bed, it's nonsense.

Jack B. Badd

Lump wrote: »

Renting is wasted money and there are areas to guy in london that aren't over priced and expensive - Fulham Broadway is not one of them.

enda1 wrote: »

Mortgage interest payments are wasted money
Maintenance is wasted money
Solicitor Fees are wasted money
Mortgage fees are wasted money
Stamp duty is wasted money
The differential between mortgage payment and rent payment lost interest on future savings is wasted money
The loss of the interest gained on the deposit sum you've put forward is wasted money
Buying depreciable furniture is wasted money
Being stuck in a location tied to the whims of the property market while a better life awaits you elsewhere is far more than just wasted money

Put that argument to bed, it's nonsense.

Right, you've both had your say. The "wasted money" conversation is going no further than this. Thank you.

Terrontress

My wife and I bought in 2011. We paid 250k (stamp duty threshold) for a 3 bed garden flat in SW2 / Zone 3.

We took a 97% mortgage which ended up £75 less than the rent we were paying.

We are slowly modernising but a well finished 2 bed without garden on our street went for £350k earlier this year and a 2 bed finished to a high standard with a good garden is currently up for £475k.

So it appears that property prices have flown up. This really frightens me and for that reason I'd advise anyone who isn't in it for the very long term to hold fire.

It looks like a repeat of Dublin to me.

djpbarry

Property prices in London have risen an astonishing 9.7% over the past year, but apparently we're "a thousand miles away from a housing bubble"?

A range of other statistics, including mortgage approvals and transactions, suggest that the UK is still a long way from another house price boom.

The most recent figures from the Land Registry, which records house sales in England and Wales, indicate the market is well below the peak reached in November 2007.

Howard Archer, chief UK economist at IHS Global Insight, said: "We are currently some way off any new housing bubble developing, with activity still relatively limited compared to pre-crisis levels."

...

"There is a mounting danger that house prices could really take off further out, especially as a shortage of new properties for sale could be a significant factor in some areas," said Howard Archer.

Nevertheless, Danny Alexander, the chief secretary to the Treasury, said at the weekend that the country is "a thousand miles away from a housing bubble."

http://www.bbc.co.uk/news/business-24124904

Some of this rhetoric sounds awfully familiar. The reluctance among the relevant authorities to acknowledge that these price increases in London are clearly anomalous is rather disturbing.

Nika Bolokov

£745,000 now for a new one bed apartment in Fulham in between a cement yard and a warehouse overlooking a Sainsburys. Granted it will be nice once the rest of the surrounding area is demolished..............:eek::eek::eek::eek:

Mynamehere

Hi all.

Only recently moved over and thinking of maybe buying something in about 1 and a half or 2 years time.

Problem is iv no credit rating/ score. I have no need for a loan for anything at the moment but was thinking of getting one for the sake of getting a credit score.

Does anyone on here know the best way of building up a credit rating for a small morgage. Would getting a small loan and paying it back help at all. Any advice would be appreciated. Thanks.

theteal

Mynamehere wrote: »

Hi all.

Only recently moved over and thinking of maybe buying something in about 1 and a half or 2 years time.

Problem is iv no credit rating/ score. I have no need for a loan for anything at the moment but was thinking of getting one for the sake of getting a credit score.

Does anyone on here know the best way of building up a credit rating for a small morgage. Would getting a small loan and paying it back help at all. Any advice would be appreciated. Thanks.

there's a few bits that add up to help your credit rating e.g. sign on the voting register, get a credit card, utility bills, don't miss dds or ever use an overdraft etc.

do a free experian credit check and it'll give you an idea

djpbarry

djpbarry wrote: »

Property prices in London have risen an astonishing 9.7% over the past year, but apparently we're "a thousand miles away from a housing bubble"?

http://www.bbc.co.uk/news/business-24124904

Some of this rhetoric sounds awfully familiar. The reluctance among the relevant authorities to acknowledge that these price increases in London are clearly anomalous is rather disturbing.

Sorry to revive this thread but, with regard to the above, it's nice to finally hear some dissenting voices:

The business secretary, Vince Cable, on Monday evening infuriated his Conservative coalition colleagues when he chose the eve of the publication of the latest GDP figures to warn that Britain was experiencing the wrong sort of economic recovery and said his party was not wedded to the pace and scale of deficit cuts after 2015 set out by George Osborne.

...

Cable said a third of mortgage debt was held by households who had borrowed more than four times their income. "The US subprime mortgage crisis and its British equivalent were built on the shaky foundations of encouraging mass home purchase in inflating markets and we know where that led. It must not happen again."

http://www.theguardian.com/business/2014/jan/27/vince-cable-george-osborne-economic-recovery