Help me understand property values

[LouisaJG]

Let’s say you buy a London flat for £250k, and in 10 years it doubles in value, so it’s now worth £500k. Theoretically you are quids in. But the reason it has gone up so much is that property prices generally have. So if you sell and want to buy somewhere else, you won’t actually be able to afford somewhere twice as nice as previously, you’ll just be in the same situation as before. The only thing that would make a difference is you’re earning more and/or you’ve inherited some money, so you’re able to buy somewhere bigger for that reason. But not because of the flat going ‘up’ in value. Surely?

Presumably the only way to make money on property is if you are lucky enough to buy in an area where prices shoot up, and then you want to move to an area where prices have remained stagnant, so then you can afford more? But if you still want to be in London, then surely your property is basically worth the same as it ever was, despite that fact that you paid £250k for it and it’s now ‘worth’ £500k? Doesn’t do you any good if the bigger flat that cost £500k ten years ago now costs £750k, or £900k?

So. Say you bought the flat with a £50k deposit and a £200k mortgage, in ten years you have probably paid off, say, 120k of that mortgage. So you now owe the bank £80k.

So you sell.your flat for £500k, £80k of that goes to the bank to pay off the mortgage and you are left with £420k in cash. You use that as your deposit for the next place you buy. If you are buying a larger place in the same area you may need a mortgage on top of that. If you are moving to a much cheaper area you may be able.to buy something outright.

Of coirse there may have been other developments in those ten years - you could have inheriteted some money, you could have incresed your salary and been able to save.

Its about the equity OP, you will pay down your mortgage, some of it anyway, over time.

Pay down your equity and always buy a house that needs improvement so you can add value. If done properly, the increase in value will be higher than the cost of improvement.

DH and I have gone from a £200k property to a £650k property in 10 years over 2 house moves, without increasing our borrowing. It takes time and effort though!