Is now the worst time to buy a house in London?

[adriennewillfly]

I'm about to get married to my lovely partner after an 18 month engagement and it can't come soon enough! We're really interested in buying a house to start a family but now we're looking around, everywhere is so expensive.

I'm lucky to be in a well paid job, and have stashed away £100k. We're hoping to get a 4 bed house (or 3 bed with potential to convert the loft) in the Walthamstow/Highams Park area. Initially we were looking to spend around £450k, as that was the sold prices in the area 9-12 months ago, but asking prices have shot up to £500k+ (as have some of the sold prices).

I know we're lucky to be in a position to save this kind of deposit, but I'm really nervous about this purchase. It seems like we're on the tipping point, similar to 2007. I know a couple of economists in high-level banking roles, and privately they're expecting a major economic meltdown in the Far East soon.

Part of me doesn't want to get ripped off, but the other part of me wants a nest for my family.

I absolutely hate the idea that I've had to work really long tough hours, and given up so much for this deposit, just to give it along with the next 25 years of my earnings to a pensioner who's had a cushy 9 to 5 public sector job with a final salary pension.

Could really do with some emotional support!

[WhatKatyDidnt]

Hmm. I'd say the fact that you're in the market for a long-term home means that any dips in prices would only be annoying - rather than financially disastrous - for you.

The thing about large-ish homes is that people tend to stay put when prices dip. (Unless they are forced into moving by one of the three "Ds".) That means that when the market wobbles, supply is low and people looking to buy are doing so from a reduced pool. My experience of trying to buy between 2009 and 2013 was that few decent 3/4 bed houses in moderately-priced London burbs came up, and those that did were in high demand.

In short, if you see something you like and can afford it then go for it. Don't worry about what may or may not happen to the market after that. There's a lot to be said for getting settled before kids come along - wish I had!

[Karcheer]

In 1999 my ex dh and I bought a house, every one said it was a dreadful time to buy, turns out it wasn't.

The thing is, as long as you aren't planning on selling the house in the next year or so, it doesn't really matter, prices are most likely to go up eventually.
You won't loose the £100k and the rest (mortgage) I always think of as rent, you'd have to pay that anyway (unless you moved back with your parents). Once you've bought it, forget about what it's worth because it really, really doesn't matter.

[christinarossetti]

I agree with the previous two posters. If you and your partner can afford to buy something you're happy with and can afford, then do so.

The alternative is paying rent whilst prices continue to rise. Nothing that dramatic happened to London house prices in 2007. They stagnated for a while, but certainly no 'crash'.

An advantage to getting a mortgage now is low interest rates. I know everyone's been saying it for years, but they can't last....

[cosmicglittergirl]

Agree with PP, if you're going for a long term home, just do it as a drop would only affect you in the short term.
What I really came on to say is if you want to buy in that area move quickly. I was looking in Blackhorse Road for nearly a year, for a three bed to convert and do up etc. We started looking at spending 450-550k, but have just spent 680k on a four bed (already converted by a developer). Prices rose before our eyes and what we know now is that houses ripe for development are snapped up for cash by those in the trade, so maybe go for something that's already a home. We saw dawdled thinking prices would level out/drop etc. Not at all!
Good luck. And if the Stow is too much, Coppermill down to Boundary road is a bit cheaper and Wood Street.

[wickedwaterwitch]

I think £100k deposit insulates you a bit and you're going to have to pay rent anyway as a pp said, so you might as well go for it, especially if it's going to be a house you live in for a while. Check you'll still be able to afford it of interest rates rise though.

[ThroughThickAndThin01]

Yep as pp, if you can ride out any market corrections and in it for the long term, buy now.

[Lemonfizzypop]

I absolutely hate the idea that I've had to work really long tough hours, and given up so much for this deposit, just to give it along with the next 25 years of my earnings to a pensioner who's had a cushy 9 to 5 public sector job with a final salary pension.

Hahahahahahah

[Chchchchangeabout]

If anyone knew the answer to your question they would be exceedingly rich! If I was you I would buy now. If you wait you may not be able to buy the same size/location later. If you buy now you will have your nest.

[IrenetheQuaint]

If you can find a nice house you'd be happy to live on long term with a mortgage at a good rate you can afford with some leeway for interest rate rises, then I'd go for it. Prices may fall a bit but it won't affect you in practice and is better than the alternative of hanging around waiting for them to fall before buying.

The people who are stuffed by house price crashes are those with expensive mortgages on starter homes which they are then stuck in for years because they are in negative equity and can't sell.

[ThroughThickAndThin01]

Last point very true Irene. Or redundancies and little chance of finding another job any time soon.

[HeadDreamer]

Agree with other posters. If you are looking at long term it doesn't matter for a bit of price wobble. I'm sure in London, prices are way above 2007 already isn't it? Having your own home is a very nice thing.

[Acer77]

"I absolutely hate the idea that I've had to work really long tough hours, and given up so much for this deposit, just to give it along with the next 25 years of my earnings to a pensioner who's had a cushy 9 to 5 public sector job with a final salary pension."

Ha ha -yes it is a bit depressing to not be one of that generation who bought their London house for £40k long ago!
Look at it this way - better to be paying off your own mortgage for the next 25years than paying off someone else's through your rent with nothing to show for it in the end!
You've got a sizable deposit so should be able to access good rates.
Move fast while a) you can get access to low interest rates and b) Walthamstow still has any house under £600k! It appears to be rising faster than any other area in London at the mo!!

I wouldn't worry that you are buying at the wrong time. I think it will slow down next year due to interest rates rising but even the 2007 crash didn't stop London for long. We bought in 2010 and prices were already recovering by then... As long as you aren't overstretching yourself on your mortgage you'll be fine.

[jevoudrais]

Even if the Far East crashes that doesn't increase the supply of housing stock in the UK which is half of our trouble at the moment.

Plus, if you have to take a hit on your house others will too. Getting on the ladder is the first bit, once you're on, at least you have something to barter with. This is also why we were very careful what house we bought. Ours isn't perfect, but we could extend and have lots of options.

[Postchildrenpregranny]

I'd get a move on . DD1 had offer accepted on a flat end of April . Fell through end Sept (vendor took it off market-suspect he realised he couldn't afford bigger/better) Has had offer accepted on another, but is paying £17,500 more. On a two bed flat with small garden, SE London. And there is hardly anything around. What there is gets snapped up very quickly .
If she needs to move out of London she will probably keep it and let it out.
No one who hasn't lived in London realises the huge difference in the housing market . If you are taking the long term view you will be fine .

[Postchildrenpregranny]

And as a pensioner with a final salary pension (though I never had a 'cushy' 9-5 job) who bought their own house in 1981,I would point out that interest rates then were 18% .

[Viviennemary]

It's anybody's guess what will happen to propety prices. Personally I think the market might have peaked. But I don't think they'll go into freefall.

[StrawberryTeaLeaf]

I absolutely hate the idea that I've had to work really long tough hours, and given up so much for this deposit, just to give it along with the next 25 years of my earnings to a pensioner who's had a cushy 9 to 5 public sector job with a final salary pension.

That's a very interesting way of looking at it.

[HeadDreamer]

postchild the rise in the Southeast outside London is crazy too. We sold in may for £250k. Just saw one of our old neighbours with identical 3-bed semi listing with same agent for £290k. And crazy thing is, we got the agents in to have a look before Xmas in 2014, and he gave us an estimate at £230k back then. I don't think this is sustainable at all.

[HeadDreamer]

And we sold at list price with 3 bids within a week. Many houses we looked at were at over asking price from day 1. The agents told us they were only accepting offers above listing price!

[HeadDreamer]

But yes we are talking much smaller amount of money here. I agree you can't loose having a place in London.

[JassyRadlett]

^It seems like we're on the tipping point, similar to 2007.

The reality is that in London prices didn't really drop that much even in 08.

We were FTB at the very bottom of the market in 2008. In reality, we saved maybe £20k from peak, and the market covered that within 6 months.

Your attitude to public sector workers and work is... interesting. Having worked in both, I'm not quite so deluded or offensive in my views.

[InternationalEspionage]

Parts of London are definitely selling cheaper than sales data 12 months ago. Check out sw8 (interestingly this dip is widely attributed to forex movements and exodus of investment funds from far east in particular Malaysia). Price points for this effect vary, I would think anything below 700k is ok but interest rates will rise, because whatever BoE says, UK always raises in line with US and they are on the edge. Anything above 800k is a bit risky right now IMHO. Also remember the business case for buy to let has been a bit shafted in London. Yields have been scrappy for a few years, but now for those highly leveraged they've been annihilated...cgt tax now for foreigners...plenty of landlords exiting the market.

It's worth tracking your particular streets of interest obsessively for several months. Historical actuals on house prices.io are also helpful. As is the market trends data section of right move which can show you how stock levels are building up in some postcodes, particularly areas like se1 where there's a glut of new builds coming to fruition.

Good luck whatever you decide to do OP, it's a big decision and I believe you are really wise to question things.

[Viviennemary]

I agree you are wise not just to rush in. If interests rates go up that might mean house prices fall or that nobody will be able to afford to move so less houses are on the market. I think I'd wait till next year and see if they drop back a bit. If there is even a hint of a fall then those big investors won't be entering the market and there will be less buying frenzy. I don't see how prices can keep on rising. I think the bubble will burst soon. Of course I could easily be wrong.

[InternationalEspionage]

By the way, in at least some parts of central London, prices fell a good 20% post GFC. This dump was delayed for a while because everyone (including me!) was in denial that London could ever go down. As always price point dependent. I rode out the storm and was fine, but lesson learned.

[Applesauce29]

We're in a similar situation. In some (previously a bit down at heel) areas of south east London prices have gone up £100% over the past 5 years, so I'm extremely nervous about buying now, plus angry that I'll essentially be paying off someone's mortgage / giving them a massive cash boost they would probably have never earned of working a non-banking job!

I'd compare cost of interest on £400k with cost of renting a smaller flat for the next year. You need to be very careful if you're planning children soon, as London schools are massively oversubscribed, with tiny catchment areas. You don't really want to be in a situation where you feel you have to pay for private school, or move again!

We're actually considering moving out of London because even with finance jobs the ratio of house prices to salary near outstanding schools with reasonable commuting distance is so crazy, it doesn't seem worth it!