First time buyers during COVID - did we make a mistake?

[JadeTurtle]

Hi,

I’m just looking for reassurance if possible please because I’m so worried we screwed up big-time.

I’m a Millenial/GenZ cusper and we were raised on the notion that buying a house is the single most financially stabilising thing you can do - stop paying into someone else’s pocket whilst building your own equity.

I’d wanted to buy for years, we were just waiting for a point when we had enough deposit saved. That time came during COVID (end of 2021 to be exact). We knew house prices had risen, but had no idea what was going to happen in the future so felt it was ‘now or never’. We put down 10% and managed to get a decent interest rate of 1.8%.

Fast forward 3 years, we have both moved jobs and needed to be out of the area at quite short notice. We found a good deal on a flexible rental property so are currently renting whilst paying our mortgage on the house while it sells and also paying 2 lots of bills.

The house took several months to find a buyer - many viewers in their feedback brought up fundamental issues which can’t be changed e.g. close proximity to a loud road and steps up to the front door. We were initially estimated £275,000 which is about £20,000 more than we paid for it. After price drops due to it not selling, and negotiations for repairs etc. it is now only selling at £1000 more than we bought it for.

Perhaps this is a tad stalkerish but I can see on Zoopla that the previous owners made about £60k profit on it what they bought it for 3 years prior to selling (they had done some work but probably only a few thousand pounds worth). Our buyers are also selling theirs for about 60k more than they bought their house for 5 years ago.

I feel like the only mug around here not making any money from our house, I also feel like in real terms it means we’ve lost money because house prices have gone up in 3 years and ours hasn’t followed that trend.

We have saved about £30,000 in rent in those three years, but spent £22,000 on mortgage payments and only half of that has gone into paying off the mortgage, the rest is interest.

I toyed with the idea of putting the house back on the market to see if we could achieve more, but we’re losing time if we do that and currently paying for two properties (bills, mortgage, rent) is taking its toll on us. And by the time they have surveys done etc. they’d probably knock us down to a similar point.

I worry we’ve shot ourselves in the foot by paying so much for our house initially that we couldn’t make any profit on the sale, and that this puts us on the back foot for buying our next place.

Please help me feel less awful about it!

Thank you 🫣

First and foremost a house is your home not an investment. In recent years yes people have been able to make money on property, but there have always been times when it was not possible - mid eighties and negative equity.
In most cases 3 years is too short a time to get a return on property beyond it being a saving vehicle so less than rent and paying down equity. Sounds like you will leave with a bit more cash than your original deposit, having paid in less than you would have done when renting and saving so having had a slightly better standard of living,
Hopefully your next property you will be in for longer and that will help you to leave with a bigger deposit.

Property goes up and down in value. Some areas will go up whilst other areas go down. Don't compare apples to pears.
If another property in the same street, same spec, brought and sold at the same time as yours, then that may be a comparison... chances of that happening though is slim.

Property is an illiquid asset, it costs you money to maintain, it costs you to buy and costs you sell.

Youtube: Moving Home With Charlie
Property market is all over the place. Some things sell, some don't, some sell once price dropped.

Honestly, that is just the disadvantage of buying at the peak, which is what you did. We did exactly the same with our first one bed flat - bought in 2006 for 157k and sold in 2010 for the exact same price having spent around 11k on necessary stuff. 6% interest back then too. But the rent savings and overpayment meant we still had a bigger deposit and the security of not being moved on (which happened in our two previous rentals due to owners moving back/selling). We've done it again with our current place, bought in 2021 and would likely make a loss if we sold, luckily no need to this time and we needrd to move when we did. The other examples you gave didn't but at the 2021, it isn't you being a mug, just unlucky timing. And you've still saved over 20k versus renting. We're now in a slow market, even getting a buyer in the current market is good going, look how many threads there are on here from people that aren't managing it. Honestly you need to let this one go for your own sake. If it helps our current house in almost 5x as expensive as that first flat so you do get there, just need time to ride out the ups and downs.

You did buy at a bad time but that’s the issue none of us decide when we are born and have genuine influence over the housing market as individuals. There are four houses in my road that are exactly the same. All the other housing was built in the 1920’s or before but an orchard was developed in the very late 1980’s. Nice 4 bed houses by modern standards decent size gardens though not as big as surrounding properties. One sold at the peak in 2020 for 495k and it needed major work done to it. They have had new double glazing, kitchen and bathroom. The show home next door bear in mind it’s the exact house has been for sale for a year and is on for 425k.

We bought in 1999. Four years later our neighbours bought the house next door, almost the exact same house and they paid almost double. Now that was really bad timing.

I think the fact you put this in "investments" rather than "property/DIY" says a lot.

By your own admission you moved jobs which meant the property was no-longer suitable, this is the type of thing that you need to consider when buying.

Property prices have always fluctuated.
I remember the early 90's with lots of people in negative equity for years and that caused REAL hardship.
I had recently moved and although my house was suddenly worth a lot less than I paid, because my mortgage was much smaller than the purchase price it meant I was not in NE.

We moved a nearly three years ago and since then have paid very a very significant amount of money on the house & garden.
If we were to sell up tomorrow we would not get back anything like what we have paid out but we are not moving and anyway, our house is a home and not a money making scheme.

So… you’ve had somewhere to live, saved a good chunk of money and made 1k in profit for doing nothing? I’m not sure what your problem is exactly?
I’m looking to buy right now and man, the listings are stuffed with houses bought 4/5 years ago and on for 80k more than people paid, for no other reason than they feel they ought to make that much in profit.
This mentality fuels the shitty housing situation. You realise that if your house sells for £££ more than you bought it for then the house you want to buy will also cost you £££ more? The only beneficiary really is the banks. Be glad you will always have a home- lots of people in their 30s and 40s are going to be stuck renting.

Property fluctuates. It just does. I bought my first flat at the end of the 80s for £77.5k. Peak of the market. A few years later I became too ill to work and had to move back in with my parents. Interest rates were something like 14% and the flat was worth half what I paid for it.

I became one of the reluctant landlords until finally selling, 10 years after I bought, for a profit of £6k. BUT because I'd overpaid for a decade (sometimes as little as £10) I had a £50k deposit on my next place.

Had I made different decisions - then and now - I could have made lots more money, or lost it all on the 3:30 at Kempton Park. There is no point speculating

You're three years in. You've made a small profit. Congratulations. This isn't something to complain about. You'll be fine.

If you were buying and selling at the same time then you wouldn’t notice so much as you’re then paying less for the house you’re buying. As it’s all relative really.

Have you looked into changing your mortgage to a Buy to Let and renting your home out?

Look at it this way. Had you rented you would have paid about £30k in rent and not been able to choose the decoration. By buying when you did, you only paid £11k in interest (using your own numbers). You also put £11k into savings (effectively) and had £8k left over as extra disposable income. You also had security of tenure and the right to decorate to your own tastes. On top of it you made £1k of profit! Sounds like you made a great decision to me.

I don't think that sounds too bad at all, it doesn't sound like you have lost money. But like a PP has suggested I would also look into how much it would be to rent out and if it's worth getting a buy to let mortgage on it and keeping hold of it. Ultimately it is likely to be worth a lot more. Then went you need to you can release some equity from that to buy something else.

Similar age and situation to yours here, OP, and DH feels similarly hard done by. I do agree that it's disappointing and frustrating.
BUT there's no point comparing your finances to anyone else's. The people we bought our house from made 100k on it. We've just had it valued for 2k more than we paid, having spent about 10k on it. It is what it is - there will always be people in the world who are better of than you or who seem to get luckier breaks.
I find it helpful (for my state of mind and general wellbeing; no idea whether this is helpful from an investing perspective!) to look at what we have in a vacuum, i.e. without comparing it either favourably or unfavourably with anyone else. We have a house we can call ours. It's big enough for all of us. We've decorated how we like and it feels like home. It doesn't matter that, in comparison, some people are in a shoebox and others are in a mansion, or that some people have millions in the bank and others are using food banks. We made the decisions that were the best for our family at the time, based on the information we had at the time, and those decisions have had both positive and negative effects. That's life. Now do the same thing again - look carefully at the information available to you now and make the decision that seems best for you and your family. Then, whatever happens, you can look back and think "I made the best decision I could" and not get hung up on regrets or bitterness.

You're buying a home to live in, not an investment. Yes it can be an investment but looking at it purely as one isn't helpful. I'm older than you so do have equity in my home but a lot of people my age mortgaged themselves to the hilt as that was seen as a better 'investment' to buy the biggest property possible. Yes they have equity now but also bloody huge mortgages at a much higher rate than they planned for.

My DH often wishes we'd stretched ourselves further than we did as property in the city has increased more in value than the suburbs where we live. But we have a bigger house, smaller mortgage and a lovely community. More important I'd say than the extra 10% we could have earned on our investment.

If you don't want to sell at that price you could always let that house and then try to sell later on when the housing market is a bit better.

Tbh I think when you consider the period of dual bills plus you've also lost your FTB status and will pay stamp duty on your next purchase you've probably ended up worse off in purely financial terms than had you continued renting. You've been the victim of unprecedented circumstances...a global pandemic and subsequent Liz Truss budget. However a lot of people have suffered far worse outcomes from those events. You're young, you have mobile jobs hopefully with good future prospects and once this house is sold you can buy again and you won't be chasing a rising market.

As other have said, you need to see your home as a home not primarily as an investment. You bought when circumstances allowed and are selling because that’s what circumstances require- you’re not trying to time the market.

Yes, as a home owner you’ll probably make money over the years but there will be ups and downs along the way. The previous owner may have made £60k but they may have lost money on a house previously or lose on their current house. Three years isn’t the right time horizon for thinking about this stuff.

So no, you didn’t make a mistake, or rather the mistake you made was thinking of home ownership as being an investment, and a short term investment at that. It’s your home.

Can you rent it out and make enough to break even? It’s very hard to make profit on being a landlord nowadays because of high tax, but property is a long term investment. It will go back up again eventually. This happened to me in 2008 recession, I held onto the property and it eventually sold in 2018 for £100k profit. But I was in negative equity in 2008 having bought with an old 100% mortgage!! I know it’s harder now but I do think house prices have dipped many times but the overall trend if you wait long enough is always up . There’s still a massive housing shortage in this country.

You can't buy at the top of the market and expect to make a profit when selling during a slump. Especially after only 3 years.

Are you able to buy hour next house in your new area? That should be your focus imo. Sell this house and work on your next steps.

It's just the way it goes unfortunately.

My dd bought a house in 2021 that she will be putting on the market soon - she knows she won't have made a profit on it, but she got a great mortgage deal and the monthly repayments were half the amount she'd have paid in rent, so she's saved in that sense.

Property is a long term investment. If you stay in for 25 years then you will make a profit. If you dabble for less than 5 years then here is a reasonable risk you could lose money.

Viewing your home as an investment will take all the joy and comfort from it.

owning your own home is about having security and a space that you can do with what you like. Not making money.

You never know when the "top of the market is".

You only know in retrospect.

If asset prices did come with a label "top of the market" almost no one would buy.

You've only had the house for 3 years which isn't enough time to make money when you've bought at the top of a peak. If you'd lived there for 10 years you would have probably made a lot more.

I think the covid bubble was pretty damned obvious!