to tell my friend I think she's making a huge mistake buying an ex council studio flat for 200k on the outskirts of London at 35 when she doesn't earn much

[entiledornot]

My friend is an estate agent in London. She's currently living in shared houses but wants to buy something. She's had her offer accepted for 200k on a small ex council studio. She has only ever seen house prices rise in her few years as an ea so she thinks this flat will be her way to a millionaire rather than somewhere to live. She only earns 20k and is making virtually no commission as the housing market is dead. Shes looking at it as an investment not a home and can only afford it as parents have given her 60k. If interest rates rise even a bit she will be screwed and she will be paying back for this tiny studio until she is in her mid 60s.it isn't in a great area, zone 3 20 min walk from any tube. Prices are already in a bubble and this could pop at anytime.

Should I just stay quiet or tell her my concerns?

If you earn £20,000 you are lazy?

So, entiledornot and magrate are the same poster. I've noticed posts under both nn and thought . Good to know...

MN is another planet sometimes.

If my friend was thinking of buying a place, we'd chat about it from all angles, thrash out the issues, and both give our ideas and opinions. That is what friends do, it's called conversation.

But on here it's seen as somebody swooping in and delivering a one sided lecture.

Say what you like OP, if she's your friend then it's ok to discuss stuff. From what you've said I reckon she's doing the right thing but what the hell do I know.

Most unreasonable people fail to grasp the price of houses IS manipulated. Low interest rates, help to buy etc. are NOT normal markets.
House prices have been kept artificially high to save the banking system. A system that will ultimately collapse under it's own weight of debt. Sooner or later an indebted country such as Greece WILL default, this will test the banking system to the very limit.
Be warned.

YABU about the danger of house prices decreasing suddenly and dramatically. I can't see them falling through the floor in London any time soon, though they may flatline (no bad thing IMO). YABU about the location - zone 3 isn't that far out of London at all and if it's a slightly down-at-heel area it will more than likely improve during her time there, so probably a wise move.

However, YANBU about sounding a note of caution if your friend really does think that this is the way to make millions, and YANBU to worry what will happen to her in the fairly likely event that interest rates rise in the next 5 years. These issues are about exactly how stretched she really is. If the flat is £200k, and she has a mortgage of £140k, then that is potentially quite a lot on a £20k salary, so I can see why you are concerned. Maybe chat about the specifics with her to make sure she is thinking this through carefully.

She sound like a savvy investor to me. Its a great thing to buy bricks and mortor in London, its virtually impossible to loose. Some people in Chelsea have made more money each week from their property than from working for the last 20 years. There is a reason the world invest in London property. I'd advise anyone to borrow as much as they can.

I think you might be just a teeny teeny bit jealous. Zone 3 is not 'outskirts' is it?

Some people in Chelsea have made more money each week from their property than from working,

I don't think it's any of your business OP, if your friend has been bankrupt in the past she has probably learned from her mistakes and manages her money much better.

I can't beleive someone said that 20k is shockingly shit at 35, who cares!? Is it any of your business what anyone else earns? Not everyone is money driven, as long as they are happy and it works for them, who are you to judge?

If she is your friend, of course you should raise concerns, although she may well not follow your advice. However, she sounds a bit financially inept if she has already been made bankrupt - how did that happen? Was it property related?

A lot of people on MN seem to believe that the streets of London are paved with gold - and for some, they may well be - but I have relations who lost a lot of money in the 1990s property crash, so it can happen.

I also think she would be better going for a one bedder, even if it's in a different area, as it is likely to prove easier to rent out.

It's up to her of course, but I can't afford to buy and so I won't - I am happy to rent rather than push myself to the max to buy something shit. I don't get why everyone's so keen to get on the "property ladder" (hate that phrase), it's not the be all and end all.

Just about always wise to buy for security so good for her. Most of us own a place for 40 or 50 years. Over that time line she will be glad she bought and owned. there may be ups and down in prices over that time but the psychological benefits and generally over several decades the savings in rent and not having to move when your lease comes up are huge advantages which mean for just about anyone buying is a good idea if you can raise the deposit and afford the mortgage.

It would probably be better to buy a one bed if she could though. here is a one bed for about £200k www.rightmove.co.uk/property-for-sale/property-33463272.html/svr/1716;jsessionid=800C23397430FC5AA6F15D89C87286E5?showcase=true

£200k for Streatham sounds about right, but a Studio flat? I didn't think the Council built studio flats??

I think she's dead right. Not sure where you've been reading that the property market in London is dead!

I'd sooner buy this though Studio near Tower Bridge

How many here have heard of fractional reserve banking? Not many, I'll bet......It's where banks can create money out of thin air.... and still charge interest. Money really does, in effect, grow on trees.
This is the reason house prices rise.
Those who believe this is sustainable, ad infinitum, probably believe in the fairies..... :D

I thought that was the whole principal of banking in general, nixy. Seems to have worked so far...

erm yes...... SO FAR..... what could possibly go wrong :D

as I said...

I genuinely think if you wait to buy you tend to lose out at most stages. Okay in some years like in the 90s property crash or 70s property crash prices will go down but they have never not gone up again over the usual 40 - 50 year ownership span.

Of course some people prefer the flexibility of renting and that's fine too if it suits them but for most people get on with it and buy if you can manage it.

Prices in London at the upper end are not currently increasing, but most of us don't buy to make a fortune sell it and live off the proceeds. We buy for stability,psychological reasons, to ensure we don't waste our money, to put down roots and over several decades to have a home we own out right. Those remain good reasons for most people to buy.

I wish I had a spare couple of hundred grand because despite being very pokey the house that Naan has just linked to would make a great London pad for nights out.

The thing is long term over property in london you just cant loose. It maybe hard work for a few years, but as inflation eats away at the debt and sallery increases the repayment s get easier and easier with each year.

I find it hard to believe that any bank would offer her a 7x salary mortgage in the current climate - 3/4 or an absolute maximum of 5x is more like the norm.

Either she doesn't earn 20k or she has more deposit than she is letting on -they probably won't take all her commission into account as it is not guaranteed. Has it all been approved?

No way on earth, Ilkley. And even if, she'd be daft to take it on.

bubble bubble bubble bubble pop

surely we all know that tune?

traditionally don't house prices crash every 7 years? or is it 12?

funny my brother was talking to me about this last night

Theres is a lot that's wrong on this thread

however I thought Sarah Beaney lived in that large house she bought to do up as a wedding venue?