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?

If you look at it as a HOME then you havent lost a penny.

House A is worth 100k in 2017
House B is worth 200k in 2017

If house A appreciates by 25% in 8 years then its worth 125k
If house B appreciates by 25% in 8 years then its worth 250k

So to move in the 8 years would cost £25k more if both houses appreciated at 25%.

BUT your estate agent has said your area hasnt appreciated and taking my example house A is still with 100k. Therefore house B hasnt appreciated either and is still worth 200k.

How many years are on the lease as leasehold properties can deppreciate unless you pay the freeholders for a brand new 99 year lease. Is that an option?

I never said I thought it would double in value 😂

I was just disappointed it hadn’t even kept pace with inflation I suppose. It’s my first time selling and I didn’t expect to be in a worse position than when I started, which is what it feels like.

This is true of course, but I think OP has already factored in inflation to the £200k amount she thinks she ought to have gained anyway. And what people are saying is that she expected to now have (value of flat) + 200k, when she in fact just has (value of flat). However, as she would have likely spent the imaginary £200k on rent, she doesn't now have less money than she would have had if she hadn't bought the flat.

OP, that seems a very low return for a ground floor flat, even for London. Did you buy the flat new? Or from a property developer?

Does it have a short lease or high service charges? A shared freehold?

Well, probably not, as you would have been paying rent to live elsewhere. I very much doubt the interest from the investment would have been higher than your rent.

That’s not how inflation works

if you purchased a house in 2017 for £200k and now can sell it for £200k but in 2017 a loaf of bread was £2.50 and now a loaf of bread cost £4 - you literally can’t buy as many loaves as f bread - as inflation has increased prices

If the bread was still the same price, and inflation was zero - then you’d not have lost any money

We have extended the least as it was running down towards 80 so now has an extra 99 years on it.

You can't think about the inflation gain without taking into account the interest you would have paid on a mortgage.

If the mortgage interest would have been lower than a savings rate over that time then that's just a lesson to be learnt

Yeah I think we agree. I have lost money because the price of bread has gone up so much. My £625k is worth a lot less now than it was in 2017.

It sounds like it could have been a new build? This happened to me 15 years ago but on a slightly smaller scale.

Have you thought about getting a BTL mortgage on it to release some funds, renting it out, then using the released funds as a deposit on your new place?

I don't know how the numbers would work for you without variables like rental value and so on, but it's just an idea.

It's a bitter pill to swallow as so many have seen years of exponential growth but flats purchased post Brexit really have suffered in many parts of London.

I don't think things will change, well maybe in decades but contrary to what the message has been affordability does matter even in London & without huge equity gains it's very hard to keep funding ever increasing house purchases when wages have also stagnated for years.

The obvious question is did you overpay in the first place?

No it’s a mansion block, around 100 years old. Service charge is high (around £4k a year) but not unusual for the area - the block next door is £10k a year (albeit including heating and hot water.) Lease is at around 180 years, we are leasehold owners.

House prices are not included in the 'basket of goods' used for measuring inflation (Consumer Price Index), so I'm struggling to understand why you think your house should have kept pace with inflation? It's entirely feasible that inflation could be at 8%, whilst house prices fall by 5%.

Get another valuation, this sounds nuts.

I know lots of flats where this is the case.

I don't think house proces have risen as quickly as inflation

For many they really haven't. 1m in 2020 needs to be 1.25m today

The high service charge is an issue particularly as it includes communal heating.

Unfortunately I think this may be the case! It felt a fair price compared to other flats at the time and has suited us really well but I appreciate other people have different priorities so the appeal is not market-wide.

Im taking some comfort in the idea of factoring in the rent we would have paid over that time, so thanks everyone for the sense check there.

This as well.

I don't think anyone's denying that your £625k would have bought more goods and services in 2017 than it would now, or saying that you are not worse off in real terms than you were then. I think people are arguing that you are not worse off now than you would have been if you'd invested the money instead of buying the flat. Because of the cost of rent, and because your investments could have gone down as well as up.

I wouldn’t wait and hope it goes up. The London boom has been and gone. Covid meant a lot of people wanted to get out. I doubt there will be any huge drops, but it isn’t going to surge again either. Stagnation time.

I don’t think this is accurate for London at all. There is a huge price difference between a 2 bedroom flat and a 2.5 terraced house in most areas of london. Even many high household incomes can’t sustain the 40% increase. You’re talking a 150k household income plus family money to buy a terrace even in a shitty part of London.

People are moving to outer boroughs to buy a house & skip the flat stage or moving to other cities.

I bought a house in 2016 for 920k. The inflation calculation shows it should be worth £1.24 million now. There’s no way we would get that for it. The most that a house on our streets has sold for is £1.04 million and that was in 2023 when the market was more buoyant.