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?

@Hotpinkparade how much did you spend redecorating? I think it's ok to be annoyed.

Look at it this way: you were able to weather Covid-related work downturns with a cheap roof over your head, which perhaps you wouldn’t have been able to do otherwise; your partner was able to study (to presumably expand employment opportunities for long-term financial gain) rather than work to pay off market-rate rents. You own a full half of a £625k property – wait, plus 5%, so half of £656. Giving you £328k cash to split between a substantial deposit and the stamp duty, conveyancing etc. You’re better off than 99.99% of people! You just might have to move to a new area if you want a house for your £300k deposit, and suck up paying a bit of mortgage too. That’s what most of us do when we need more space: find the place we can afford it, and tie ourselves into paying it off for 25 years.

But you would have still had to pay to live somewhere.

I did pay stamp duty as I also inherited a property abroad (I know, I know - if it makes anyone feel better I run this as a rental but it doesn’t make any profit, just covers its costs) - so I paid second home stamp duty and will have to again on the next purchase.

My block is run by a cabal of vultures and I feel like I’m constantly under watch - one of the reasons we want to move. But yeah I’m aware freehold is going to be out of reach. Share of freehold in a conversion would be a massive improvement, or leasehold with fewer restrictions (we really want hard floors and a pet, neither of which are allowed in our building!)

You would never have invested £312k in 2017 and had 512k today.

OP said "I paid £625k in 2017. (I put this into an inflation calculator that said this would be ‘worth’ £822k in 2025.) To make matters more complicated - I bought half the flat, and the other half was purchase by a trust overseen by my dad."

If she had only paid half of the £625k, she wouldn't be expecting a £200k increase in her own money.

We spent £25k before we moved in - new kitchen and bathroom, new central heating and redecoration. Also general maintenance since then, new boiler etc etc.

Yes, exactly.

but as you were paying no rent or mortgage you could / should have invested some cash each month, which would then have made you some profit.

as others have said, however, a flat is primarily your home, not an investment.

It does sound a bit like you may have overpaid a bit for it though in 2017.

think you just need to put it out of mind and get on with crunching the numbers and looking for a new place.

There is absolutely nothing OP could have invested £625k in 2017, and ended up with £825k now

My S&S are down from what they were but still significantly up but not inflation busting

Right. Inflation favours mortgage purchasers not cash buyers.
Regardless.
Op has benefitted from secure home for eight years paying less than market rent on 50% of the flat.
Some flats do not gain so much in value
But it s not an actual loss just a way of seeing things.
If she sells for 623 she gets her half share back. Which yes will buy less than it did eight years ago

But during that time you've had somewhere to live. That doesn't come for free!!

Well I'm going to go against the flow @Hotpinkparade . EA are undervaluing because their jobs are on the line. So if your property is done up it may well be worth more. Whether someone will pay more or bid on property where the owners are desperate to sell is anyone's guess.

It's a difficult market, you may find a bargain when you move up . It's a buyers market.

Since 2020a 2 bed nice mansion flat in nw3 would set you back 2500 a month in rent and nearer 2900 since 2023. That's significant saving for op over time

How does inflation favour mortgage purchasers?

So if your property is done up it may well be worth more.
Or, the property being done up is what’s kept it above £625k, and if it were still a fixer-upper it might be worth a lot less.

Thanks, OP.
I have recently read that the Covid effect on London flat prices has started to reverse as employers want staff back in the office. It may be worth doing some research and possibly holding onto your flat for another couple of years.

If I'd inherited nearly 20 times the median after-tax UK annual household income, allowing me to live mortgage- and rent-free for 8 years, saving probably £150k in rent and interest, I would be pretty happy with that.

Also, there's no need for that amount of money to keep pace with regular (retail price) inflation, unless you're planning to downsize, retire early, and live off the money for monthly expenses. For most people with no mortgage, house prices and equity might as well be in a completely separate financial world. Maybe bread has gone up 50%, but as you are finding out, houses haven't, at least in your part of the country/city.

🫣

Then you should have thought ahead and bought a house. You will never get a good return on flats, unless they are in Belgravia or equivalent.

Thanks for this (and everyone else who said similar), it really helps to think of it this way. Between us my partner and I were paying around £1600 before we moved in together - even without accounting for the fact that this would have gone up in this period, and the rent we’ve paid to the trust and service charges in this time - by my dodgy maths we’re about £50k better off.

If you had to rent for 7/8 years you would have paid at least €50k depending on the rent.

We could all have made notionally far more money if we had put it into the S&P500 (until two weeks ago!) but you also need a place to live presumably. Perhaps what has killed some of your profit is the service charge. But 25k for a bathroom and kitchen and redecorating is not too much to invest in a property in that postcode. I feel the opposite of you and have been looking to upsize in a more established area as the prices there have continued to outstrip those in our ‘up and coming’ area which is now quite expensive in certain roads (including ours) but still about a million short for a similar house in the more ‘known’ area!

Then you should have thought ahead and bought a house. You will never get a good return on flats, unless they are in Belgravia or equivalent.

Not true, people who bought them early 00s often made loads without doing anything.

Why can’t you sell the second home, put that money together with your £328 equity, and take out a mortgage? I’m no mathematician but all together that should buy you a house.

It is 2025.