AIBU to think they should buy rather than rent a tiny flat?

They aren't crazy. The boom time for flats is long gone and even if they did want to buy one they wouldn't have much choice on their low combined income.

Being aware is very different to understanding the breakdown as shown by others upthread. Have a play around with the mortgage calculators and prices in the area they want to live.

You said you’ve lived in zone 2 for many years, did you buy and if so when, or do you rent and if so is it private/ council or HA? All makes a difference. Having worked in LA’s in zones 1 and 3 I know the rates. A very different quality of life was had by my colleagues living in zone 1 council housing paying full rent to those private renting or buying a long way from work with the same household income. You Dd and partners income would be fine in council / HA in inner London but tight private renting and maybe not even possible to get a mortgage on.

I live in zone 5 where you can still get a 2 bed flat around 300k but might be hard for your DD and partner to get a mortgage. Even then they might have to factor in service charges (280 a month?)/ long commutes/ travel cards etc
I’ve met people who bought decades ago saying young people don’t have it harder to buy as interest rates are not high. Completely overlooking the incredible increase in the house price that they are paying interest on and the lack of equivalent increase in incomes.

What part of London are they choosing to live in? Would they have that same choice if buying? If renting and one or both lose their jobs and have to take jobs at a lower income minimum wage they can claim UC to help with rent. It might be much harder to get that help with mortgage repayments in the same circs. They can move much more easily if renting and want to follow jobs or have time to figure things out.

They are crazy. Take it from me, also crazy, rented in London for 15 years, because a moron and wanted to live in Bloomsbury. I wish my parents gave a shit and told me to buy. But they were liberal you see, never wanted to interfere.... I think it is compulsory to interfere in your adult children's lives if they are morons, like me....

I sold my two bed in london for 550k in 2015. It was not a particularly posh one. Leasehold, top floor of a converted old house walking distance to a station.

To buy at that budget now you'd need:
50k deposit
500k mortgage
17.5k stamp
2.5k legal fees, removers, spare in case you end up with a couple of weeks payimg both rent and mortgage.

At a typical 5% mortgage rate over 30 years, monthly repayment would be £2,685 and thats if they can find a mad enough bank to lend over 7 x combined income.

Lets assume they find a cheap bargain for £400k.
£7k stamp & other costs
300k mortgage

£1,880 a month and again theyd need a mad/bad bank to lend well over 5 x combined incomes when interest rates are rising.

Wheres the stamp duty going to come from?

Yes there are some utter dives in shit areas/miles out for under 300k but remember this is unlikely to be a forever home and a shithole is hard to sell on. DBil couldnt shift his first pretty crummy south london flat, and is still stuck with it 12 years later.

Maybe they're not ready to take that step. Either way it's their choice. I'm in my 50s and live in a rental as I have a good deal on a house I could never afford to buy and it suits me for now.

You might be aware of London prices but 350k is not an affordable price for a couple with that joint household income. Theres no wriggle room.
Also it's expensive to buy and sell, so would be very shortsighted to buy a flat that they're likely to grow out of in a couple of years.

And they would have to cover service charge, repairs etc, plus transport costs may go up if they go out a zone or two.

If I put a property of £330k and a deposit of £30k, with one salary at £30k and one at £35k, and zero other loan repayments (do they have student loans or credit cards?) into a mortgage calculator, then the Halifax will lend but repayments would be £1800 pcm.

Same as my DS. He is moving out next year and moving up north (we currently live in the SE). He will have a budget of around £200k. He is getting excited by what properties he can buy compared to down here!

I think the same is true for homes if you just look at short term too. Except the service charge everything you mentioned here applies to home purchases too.

I think for many a flat is their only option for having their own property though. I agree that buying for the sake of buying needs to be thought about carefully as it can turn out more expensive. But equally renting as a pensioner is not for the weak! And your link doesn’t suggest this risk is specific to flats.

Interestingly my aunt never purchased a property for this reason

As others have said:

• they probably won’t be able to afford something they would want in an area (or anywhere close) they would want to live;
• £50k savings is amazing. But I remember being utterly broken by the costs of buying a house. Stamp duty, solicitor fees, checks, surveys, etc. will eat up a significant amount. So really they’re probably looking at closer to £30k than £50k on the deposit;
• lenders don’t care what you’ve managed to afford on rent up until now, they generally agree a mortgage repayment that’s less than that.

Maybe they are saving for a bigger deposit so they can buy a house in a few years.
My DS has a really big deposit but doesn’t want to buy a flat so he continues to save.

Many young people are priced out of London. They won’t get much with that deposit and income if anything. You sound a bit out of touch tbh

Are they saving to buy a house instead? This is what we did - my dad always warned me not to buy anything leasehold. Flats are a liability, especially nowadays with crazy service charges, and the London market is particularly poor at the moment. Plus rents are very high - I live in suburban Essex and there's a tiny two bed maisonette on my road up for £1400 pcm.

Their joint income isn't very high, so they probably can't afford to buy in London despite their deposit, and interest rates look like they're going up.

Interest rates, stamp duty, service charges, lost returns on investing the deposit.

You can do the calculations here https://smartmoneytools.co.uk/tools/rent-vs-buy/

We considered buying a flat but it would take the best part of 10 years to break even, assuming prices don’t go down. Fine if you plan on staying for 10 years plus but we want children so want to be move at some point.

You still have to look long term and balance the risks though. Buying eventually becomes cheaper than renting but you have to be smart, buying for the sake of it is a way to lose money.

Why do you think flats are cheaper to rent than buy in London?

They can't buy with that income and that deposit.

Pull your head out of the old days and actually look at what's available, plus service charge, for the money they have.

I live in a tiny town in The North and my next door 2 bed terrace is renting for £1200pm.

Also as others have said - flats are proving very difficult to sell in London. I wanted to buy a flat as it is what I can afford but seeing how people are struggling to sell makes me worried that if I come to sell in 3-4 years time I will be stuck. Maybe your daughter and her partner feel the same.

How do you know they are not looking to buy and not finding anything?

Yanbu but you can’t interfere

With £50k to cover deposit, stamp duty, moving costs and not completely wipe out their savings (plus usually when you first buy there’s a whole host of furniture curtains etc you need to get - is their current flat furnished?) - they don’t have enough to buy anything even remotely decent in London.

Plus, buying a flat comes with all manner of potential issues as people have pointed out re being leasehold only, ground rent, service / maintenance charges, increasingly difficult to sell. They really are better off continuing to rent at this stage.

(Now) DH and I didn’t buy together until we were engaged, because co ownership is a big commitment

Generally speaking, flats have had their day, especially in London. They could part buy and part rent shared ownership flat on their income but that’s fraught with issues and they could end up trapped for years. Renting these days isn’t always about “dead money”. They’re doing the right thing.