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?

Agree, the area I live is so crap that it almost reduces me to tears. However my house which I thankfully own outright is my home and I take care of it because it is where I live my life

No you wouldn’t, because you’d also have been paying rent. Weird, weird way of thinking!

My flat has barely increased in value (owner of 1930s 2 bed london flat) but I had stable mortgage payments from age 26 to 32 of 1k per month and service charge barely increased..now going on mat leave and mortgage fixed at 1282 until next June. Dh director of residents management company so we have oversight of service charges.

I was on a low income in my 20s and it didn't increase until 2023 (bought in 2019). Dh was on london average income (around 50k mark) and his pay only substantially increased in 2022.

I probably wouldn't have been able to afford rent fluctuations and would have stayed with my family.

And I think I did gain equity cos I used my spare money to overpay mortgage- my balance went down by 60k. But I only overpaid when our salaries increased, didn't overpay for first 3 years and not overpaying now cos I am expecting and we have lots of costs associated with the baby and my DH's health (£700 a month on medication! And he has employer health insurance).. but I will overpay after baby gets free childcare hours. Owning a property does give you more flexibility re earnings which allows you to cover other necessary costs..

I bought a flat in 1995 in the postcode W13 for 41k. Sold it in 1996, 18 months later, for 56k. Lat time ex h looked it sold for 250k. Growth like that is over in the main I think.

edited to change the latter time as I think it was longer ago.

Well imagine that happening to your income without half a free flat. You'd have had to live somewhere half the price. So I am still finding it hard to consider you made a poor choice. I suppose if you'd invested your 600,000 or whatever it was and lived somewhere grottier you might have made a bit of profit - but would your 8years ago self have wanted to do that? Would you now? (You still could, after all)

OP, we sold our first flat at a genuine loss (as in, sold it for less than we paid for it), but we made that up on the sale of our next property. If you stay in the property market, it will even out in the end.

If you still owe say 100 k in 10 years of inflation then it s effectively lower than the 100k it was 10 years ago.
Inflation erodes debt relatively speaking.

The opposite of op "losing" out due to inflation.

Inflation can reduce the real value of debt because it decreases the purchasing power of the money used to repay the debt. This means that a fixed sum of money owed will buy fewer goods and services as prices rise due to inflation, effectively making the debt "cheaper" to repay in real terms.

Here's a more detailed explanation:
Decreased Purchasing Power:
When inflation increases, the cost of goods and services goes up. This means that the same amount of money will buy less than it did before.

Real Value of Debt Falls:
As prices rise due to inflation, the value of the debt (in terms of what it can buy) decreases, even though the nominal amount owed remains the same.

Example:
Imagine a mortgage of £200,000. If there's 10% inflation, the real value of the mortgage will effectively be reduced to £180,000 in the future because the same amount of money can buy fewer goods and services.

Impact on Debtors:
Inflation can be beneficial for debtors, especially those with fixed-rate loans, as they can repay the debt with money that has a lower real value.

Impact on Lenders:
Conversely, lenders (e.g., banks, bondholders) may see a decrease in the real value of their assets (loans, bonds) if inflation is high.

Government Debt:
Inflation can also erode the real value of government debt, potentially making it easier for governments to repay their debts.

Factors to consider:
Wages and Inflation:
If wages increase at the same rate or faster than inflation, the real burden of debt may not be significantly reduced.

Debt-to-GDP Ratio:
The impact of inflation on government debt is greater in countries with higher debt-to-GDP ratios, <a class="break-all" href="https://www.google.com/url?q=www.oxfordeconomics.com/resource/how-inflation-eroded-governments-debts-and-why-it-matters/&sa=U&ved=2ahUKEwjVvr-io9-MAxUOQaQEHeMALC8QjJEMegQIPhAB&usg=AOvVaw103fneNCrrbz04tQX7JRpO" rel="nofollow" target="_blank">according to Oxford Economics.

Interest Rates:
Inflation can also affect interest rates. Central banks may increase interest rates to combat inflation, which can make borrowing more expensive.

Deflation:
Conversely, deflation (a decrease in prices) can make it more expensive to repay debt, as the same amount of money can buy more goods and services, increasing the real burden of debt.

OP, I'm saying what many others have but looking at the rate of inflation is really the wrong thing to assess whether it was a good decision to buy this house or not.

If you had not bought the house in 2017, and instead had stuffed the 625k under your mattress you would definitely be worse off now because you would have been paying rent AND your 625k would buy you about 200k less 'stuff' now. [Edit - I know it's not 200k that way round but I can't be bothered to do the maths]

If you had not bought the house in 2017, but instead had spent the 625k on an awful lot of loaves of bread (as a PP was using as a comparator) you would be even worse off because that bread would be worthless now and you'd have had to pay rent. Similar if you'd spent it on holidays (although obviously not everything in life is about money).

So the question is what could you have spent that money on in 2017 instead of buying a house, and would that investment have made you more than you would have had to pay in rent (minus any costs of buying and selling)? Absolutely if you'd picked the right investment, but would you have done? You could also have lost it all. If you'd put it in something very low risk you would probably be about where you are now, but you wouldn't have had a home to enjoy.

Hindsight is a great thing, but this wasn't a bad decision, it's just not made you lots of money plus you've had the security of owning your own home.

You have gained all the rent or mortgage repayments youveouldnhave made

That's at least £1000 per month.

You aren't looking at this at all logically

I can understand why you’re upset- as you say if you’d bought a different property you might have expected to benefit from an increase in value, which many others will have done over that period. But on the other hand you’ve had 8 years of no mortgage (which also means paying no interest), no rent and a secure home. And you have the full sale price in equity to help you with your next purchase. I wouldn’t think holding on to it is likely to benefit you in terms of price rises going forward, as that would likely have already been the case by now if it was going to happen, so unless there is an extraordinary event such as a new train line opening nearby planned for the next 5 years I’d sell if that’s what suits your life now and move on.

We bought a property in 2012 for £500k, sold it in 2021 for £900k having spent £175k doing it up. So we made £225k profit, less stamp duty and fees. The people who bought our house spent absolutely nothing on it, did no work and made a profit of over £100k when they sold it just a year after buying it from us. Just the way the timing works sometimes- growth isn’t linear and you can get rapid rises and falls.

I’m in the same boat OP.

Flat bought 2016. Using the BOE inflation calculator we have lost £125K. Flat will probably sell for less than I paid for it back then.

It’s ex-council so that’s a massive drawback in value appreciation.

It’s all well and good PP saying we shouldn’t have bought a flat or a leasehold but this was the only way to get on the ladder in London. Houses and freehold flats were and still are out of sight.

My lease is also running into the mid 80s. Do you mind me asking how much you paid to renew yours?

Op many flat owners were living in far worse places before they bought.

Dh and I were living in a freezing mouldy room in MIL's house. Victorian, no double glazing, mouldy shower, kitchen and bathroom not replaced for 35 years. After we bought we thought we would stay with MIL for a bit longer as we thought we couldn't afford furniture. But it was freezing so in the end we left even though we couldn't afford movers and I tried to bundle as much of my life in the back of the uber.

We bought a second floor 1930s flat in nw London with new carpets (albeit cheap ones) and at that time a spare room (now nursery as I am expecting). I kept small pets for 5 years before I developed an allergy during pregnancy.

My friend who bought a 2 bed flat in Coventry during the pandemic, he lived in a shared house/quasi drug den as his flatmates were druggies and then his mother's house. His mum kept asking him to go. I don't think he cares how much his flat is worth.

Another friend, living in a HMO and the rent kept increasing so he got fed up and bought a 1 bed flat..

The average UK homeowner has "lost" money over the last two decades. House prices are down 11% in real terms since 2017, and 22% since 2007.

"If you still owe say 100 k in 10 years of inflation then it s effectively lower than the 100k it was 10 years ago.
Inflation erodes debt relatively speaking.
The opposite of op "losing" out due to inflation.
Inflation can reduce the real value of debt because it decreases the purchasing power of the money used to repay the debt. This means that a fixed sum of money owed will buy fewer goods and services as prices rise due to inflation, effectively making the debt "cheaper" to repay in real terms."

That really only works if you haven't been paying interest on the debt. If you've been paying interest at inflation or above, then the purchasing power of the total amount (cap+int) is reduced.

Genuinely interested as to how you could be sure of that/ and what would you have invested in?
You seem to think you would have made 200k between 2017 -2025 on what?

I appreciate it won’t guarantee you a sale, but you can still try putting the flat on the market at a higher price and see how it does. When I sold my house - couple of years ago, the estate agent valued my house and recommended I put it on the market for £10k less than the valuation amount, for an easy sell. I wasn’t in a hurry, so asked for it to be put on for £10k more than the valuation and ended up getting the full asking price for it. I was £20k better off, as a result. It can’t hurt to try for more than the valuation and if you don’t get what you want, you can always take it off the market again.

Thanks for this - you’re totally right, seems like anyone who bought at a similar time to me is in the same boat, selling for modest gain or in some cases a loss. Definitely helps to know that it’s just the market in this area and not an idiotic mistake on my part.

Yanbu to be disappointed that your flat isn't worth more than you paid for it. But it's just one of those things and you'll need to make your peace with it. Years ago, we sold our house at a loss. That's just life sometimes.

Gold is up 30%

https://www.business-standard.com/markets/news/gold-prices-up-30-in-2024-set-for-best-calendar-year-show-in-10-yrs-wgc-124121300285_1.html

with trumps tricks people turn to gold as a safer bet

Only if you invested it. But even then if you would have accumulated 200k from investments on top, you would have easily spent it on renting.

However, unless the flat is extremely premium area, worth 1-2m and up, I don't see how you have expected to to make 200k on it. Covid boom was temporary, even houses are back to pre covid prices now.

If you had invested, you’ve got an average of about 2 1/2% over the last eight years. Say it cost you 400,000 when you bought it. You would’ve got roughly 100,000 in interest on which you would’ve paid tax as unearned income and then where would you live? You would’ve been paying rent so yes you’ve saved a lot of money. You probably have paid £1500 a month for eight years Work that out.

So someone who was lucky enough to inherit money which means they're presumably lived rent free and mortgage free for the last eight years is upset that they also haven't been able to make a large profit out of their good fortune.

I paid £625k in 2017. (I put this into an inflation calculator that said this would be ‘worth’ £822k in 2025.)

OP you've really misunderstood what this inflation calculator is telling you. £625k is £625k - whether that's in 2017 or 2025. £625k doesn't magically become £822k in 8 years 'just because inflation'. The purchasing power of £625k is less in 2025 than it was in 2017, meaning if you wanted to buy goods included in the components that make up the inflation figure (bread, yoga mats, TV subscriptions, pre-packed salad, dry-cleaning, ceramic tiles, curtains etc), you'd get fewer of those items today, than you would have in 2017.

So, if you sold your house today, you wouldn't be able to buy the same number of yoga mats with the proceeds, as you could have in 2017. That's true. But presumably you have no intention of selling your house and using the proceeds to buy pre-packed salad and TV subscriptions, so it's completely irrelevant. What's relevant, is if you sold your house and bought another house, what that level of inflation is i.e. house price inflation. In your area, house price inflation has remained static - so the purchasing power of your house proceeds is the same. You could buy the same house, for the same price, so you've not lost anything at all.

Valued the same as you bought it, so what money have you 'lost'?

The advice to property investors is to avoid london like the plague, its plateaued so no profits to be made and flats are actively going down (harder to sell, often leasehold, issues since grenfell etc...).

You are never guaranteed to 'make' money on a house, if you can get what you paid back thats a win. Look at it as basically 8 years rent free living.

I think the least extension came to about £20k total. Value (as I’m sure you know) based on the future value of the flat with a long lease, and had to pay the freeholders fees at their expensive choice of solicitors! So hope yours may be a bit lower.