AIBU to be gutted my house has lost me money?

[Hotpinkparade]

I guess I’m really wondering if anyone else has been in this situation and what I can do… I bought a two bed flat in a nice area of London in 2017. Redecorated, replaced the kitchen and bathroom, and have lived here happily since.

We’re starting to outgrow it and decided to get the flat valued and see what’s out there. Two valuations, both for the same as we bought it - maybe 5% growth if we’re lucky. I’m just gutted. With inflation over that time, we’ve essentially lost £200,000. The estate agent said house prices in our area haven’t gone up over that time because it’s not ‘up and coming’, it came up a long time ago and has stayed desirable. What do we do? Just suck it up and sell, or wait and see if anything changes?

In fact op you had a sum of £325k - are you seriously thinking that if you had invested that (and lived where on £1k a month that you were paying?) it would have turned into £825k??

I think you have done ok. I sold my first house at a loss, or just about for what I paid. That was fine - I had lived there for years, that was what it was for, not to make money.

The previous owner bought in a recession when prices were probably low and sold when the recession had ended when the prices had risen again that’s why he made quite a large profit
You bought when the value of the flat was already high so not surprised really it hasn’t really risen
Are ye looking to stay in the area or would ye like to buy a house somewhere

When I bought in 2019 everyone was saying the ladder was dead. I bought expecting I would never buy a house. I did think i could buy a marginally larger flat in a few years as it's the same market but there aren't actually that many 3 bed flats so they are quite expensive in comparison and not worth the marginal increase in space given the higher interest rates and stamp duty (also only having 1 child).

I thought we mostly bought cos we didn't want to rent or live with family or wanted predictable mortgage payments for 2, 5 or 10 years as well as ability to save aggressively for retirement in our 40s (realistic if you buy in your 20s)
.

@Hotpinkparade don't forget the prior owner would have bought at the peak with his proceeds from the sale to you. It's unlikely he 'cashed in' that £300k rise.

I think I got waylaid here on the inflation idea here, you’re totally right. When I told my brother (who, you’ll all be glad to know, bought a small house in an unfashionable part of London and has made a tidy profit and moved up the ladder) that my flat hadn’t gone up in value, he assumed I meant in line with inflation, and was surprised when I said not. So that put the idea in my head but this is a much better way of thinking about it, especially as, yes, I am looking to stay in the area.

Two bedroom flats in London are the worst for stagnating – there’s just far too many of them, so they don’t perform as well as other properties. Bought my south London flat for £380k in 2015 and it went for the same when sold in 2023. I just looked up my old neighbours flat as I know she sold it too – bought for £390k in 2016 and sold for £396k last year.

Agree unless he moved out of London altogether, in which case he may have

The people who used to buy flats in London- 20 something urban professionals have mostly seen real terms cut to their wages. So they have to delay buying and then they reach the age where they want to move to the commuter towns.

Dh's mum bought a flat in her 20s as a secretary with Dh's father (who lived with parents for 10 years) . Today they would be earning maybe 60k combined which isn't enough to buy a london flat really. We managed to buy a 2 bed flat after 3 years of working in our 20s but dh was working as a junior at an investment bank

I actually think in a previous generation we would have been able to buy in OP's area without inheritance, Dh would love to live in Nw3! We don't earn enough esp with childcare fees and we need to buy in an area with good catchment (also down to our wages) so given op probably doesn't live near the desirable hampstead state primary schools given the price of her flat, it's not an option. We live in a much more ordinary part of nw london but which ticks more boxes.

At least they didn’t go down, I know someone in which that happened to, it was only by 10k but still

Nw3 is totally crazy for 3 bed flats and houses anyway. The house price appreciation thing to fund forward purchases only really works if you are moving further out or a less desirable area e.g. to finchley or Muswell Hill or even Whetstone. That's what many people did, moved out a zone or out of London altogether.

If you are staying within nw3 you need a larger mortgage (or higher income) or some sort of windfall.

Of course it's not an idiotic mistake. You've had a secure home you were happy with, and you were vanishingly unlikely to make the sort of returns on a flat that people got 20 odd years ago. Nobody saw lockdown coming, and your decision to buy rather than invest and rent privately meant you were sheltered from the worst of it when your income went down.

Sounds alright, tbh?

Exactly this.

Don't be ridiculous.

Presumably you'd have to have lived somewhere and that would cost.

If you feel sorry for yourself have a look at flat prices in Aberdeen. I know plenty of people who after the oil town turn are stuck.

Paid 100k and now be lucky to get 70k now. Or the people after the 2008 crash left in negative equity.

You don't even have a mortgage to worry about.

I think one of the problems you have run into (bearing in mind that as a property owner in London you are in fact enormously fortunate, even if not as fortunate as you may have hoped) is that the property market has phases where it drops and phases when it goes crazy. I bought a flat in NW London back in the 90s and for over 10 years I had negative equity. Fortunately I didn’t want to go anywhere and needed somewhere to live so I wasn’t affected by the fact I was “living in a loss.” When I did sell after about 15 years, it went for 3 times what I had paid. So the huge swings are real and a lot is about luck of timing. When the property market is depressed, even on a local basis, it can remain that way for a long time. But it can be hard to plan your life around that.

You definitely lost money relative to if you had invested it in the stock market instead. The opportunity cost is what matters.

But you would have had to pay rent for the last 8 years?

I think it's also flats in general that have not kept pace. We sold our flat in 2018 in another nice area of London for £425k which was double what we had paid for it in 2007; however I have just seen it's gone on the market recently for £430k despite the current owners getting a new boiler and replacing the kitchen. It's also decorated much nicer than we had it. I think the market for flats never recovered from the pandemic when they became much less desirable, and also dues to costs of moving and people buying their first home much later in life than for previous generations, people seem to want to miss the flat step of the property ladder and go straight for a house.

@Papricat that's not the case. @AndImBrit has checked.

If you’d invested £625k in a FTSE tracker on 1 April 2017, and cashed it in yesterday you would have cashed in £668k, about a 7% increase

As a private renter this is a hard read

you’ve had security, autonomy over your future. The ability to paint, have pets and enjoy absolute freedom in your home.
and
peace of mind

do not underestimate how much that is worth

from someone whose paid out approaching £300,000k to landlords

Just chalk it up to experience and move on.

If you want to make money you need to pick the right property in the right place. A 2 bed flat with no garden in Hampstead was never going to be either!

If you’d invested in a 2 bed terrace in somewhere like Walthamstow, or Clapton etc, extended the kitchen and say added a bedroom, that’s the sort of thing that can make money. That said it can be a miserable experience, you can lose money if you have to abandon the renovation half way through and you also wouldn’t have been living in such a “naice” area for the last 8 years. So you take your pick really.

The house that made me the most money we picked the area well. When we first moved there it had a working men’s club at the end of the road, 10 years later it was a mini Waitrose and a Gail’s!. Equally the closest school was ofsted RI, now it’s outstanding and sought after.

BUT we also completely renovated a very run down terrace from top to bottom, 2 bed loft conversion, side-return, complete re-wire, new boiler, new bathrooms, all redecorated etc (much of which I did myself) and I spent weeks over time making a beautiful garden. We were lucky that this was pre-Brexit but it still cost a lot of money and I had a year of living in a building site having daily conversations with builders etc. That’s why we made money!

We own a flat in a desirable part of West London and as per your valuations our flat also hasn't gone up in value to the extend of flats in less desirable areas, as this area is already desirable IYNWIM.
We bought in 2012 and over 13 years and with complete renovation it has gone up by about £200000 with not much change in about 5 years.

people seem to want to miss the flat step of the property ladder and go straight for a house.

My estate agent said this, she has first time buyers looking for houses of over £1 mil (2 city salaries and help from parents). She said stamp duty is so high people want to get somewhere they can stay for 15 years and raise kids etc, rather than climb the ladder paying stamp duty and other costs every 5 years.

Literally not allowed a pet, or to decorate how we want, which is why we’re leaving, as I mentioned in an earlier post. Leasehold isn’t the same as owning outright in terms of autonomy, not by a long stretch. But yes I recognise I’m fortunate not to be renting and I’m very grateful for that.

I think your expectations are off why would it have made £200k, that's a huge increase in value in just 7 years.

Its not always for London.

I bought a flat for £360k amd sold it for £580k 3.5 years later. We hadn't done anything except repaint.

However OP, most people get hit by this at some stage. The person who sold to you probably also bought their next property "high" and is now stuck feeling they haven't "made a gain". If you had bought when things were "low" it would probably have been low because mortgage rates & other investment returns were also low.

But surely if they invested it in the stock market they would have had to pay rent for all those years so I doubt they would have made much money