To sell so we can live mortgage free - or sit tight?

[threefeethighandrising]

Please help me decide if I should sell up or not!

I've posted in this before and got some great advice. I just got my London flat valued this week and I wondered if that would make a difference to the advice I get.

They said it's likely to achieve £230,000 as it is, or £250,000 if we do it up (we'd need to plaster the walls - currently horrible woodchip! - paint & lay new carpets throughout and a couple of little jobs like tidying garden).

We actually live out of London, in a rented flat. We're likely to be in our new town for another 3 years for sure, then we may move on or get jobs locally we're not sure yet (depend on jobs at the time).

I'm fed up with managing the London flat (which is old with lots of expensive problems building up). We have about £150K equity in the flat which is enough to buy a modest place and live mortgage free in our new town.

People keep telling me I'd be mad to sell up in London yet as London property is still a good investment. But ... as £250K is a bit of a ceiling because of stamp duty, then actually there's going to be a period of time when prices go up elsewhere but our flat doesn't, so that is a vote in favour of selling sooner, isn't it? (Of course long term it will catch up once it breaks through the £250K sticking point - but how long?!).

Incidentally my upstairs neighbour put his flat on the market a couple of months ago, he got lots of interest and it sold in a matter of weeks. Ours is an up and coming "trendy" area, loads of new people moving in. (Although in reality it's pretty rough, lots of people want to be there!)

Also we're full-time students and so although our friend lives in our flat technically it's still our main home (we stay there when back in London) and where we live now is our "term time address" so we don't need to worry about Capital Gains Tax AFAIK.

Any advice would be much appreciated, thanks :)

"I'd be tempted to stick to your budget and make cheeky offers personally." I like your style :)

Hullygully - may I ask why?

You sound very keen to sell, so I think you should! No one really knows what the market will do and for the sake of what could be gaining a few grand over a few years (or losing a few grand) on the flat, you could be enjoying yourselves living elsewhere, with the money to rent somewhere lovely or own another home of your choosing, however modest.

Personally I think that house prices will be stagnant (at very best) for the next 10 years or so..however I do think that we might be in for a big crash.

Depends how much a risk you want to take. If it were me I'd put it on the market now.

Without knowing exactly where your flat is in London (or where the other town is where you are living at the mo) it is difficult to be precise, but I'd say if your flat is in a popular area of London it is likely to be a sounder investment (whatever the market does) than somewhere out of town. If your London rent covers the rent on your flat (and presumably your mortgage) then you sort of are mortgage free in that you haven't got any expenses for housing. To be honest whatever you do is likely to be a bit of gamble given that noone really knows what the property market is going to do, but I'd be happier to gamble on property in London going up than take a chance elsewhere.

My flat is in Hackney, we would be looking for a flat in East Sussex, somewhere between Brighton and Hastings.

Sorry should have said looking for a new house / flat in East Sussex (hoping for a house!)

Why don't you ask over on the House Price Crash forum. I read it occasionally and there are some really smart people there. They usually give good advice.

WhaohThere I've never heard of that, thanks I'll have a look :)

cat64 we'd get a 3 bed here, mortgage free. So we'd have no rent to pay, and we'd also have the option of having a lodger possibly.

depends on your own situation (and age) and finances but mortgage free is overrated... what are you going to do in this tricky time with the money you would have paid into the mortgage? Gamble on shares? Leave in the bank with pathetic interest rates as they are now and inflation as it is?
London property is always a "hold" IMO.

Basana - Personally I'm a firm believer in spending the money that would otherwise have gone into my mortgage.....

From a purely financial perspective, there are a few things for you to consider. Firstly, in terms of property prices, London is currently defying gravity - prices are falling pretty much everywhere else. This does not mean London is some kind of safe haven though. In the crashes of the early 90s and 2008, London prices fell at exactly the same rate as everywhere else.

Secondly, the London market is being propped up by 'cash rich' buyers and investors - this makes London house prices more susceptible to market dynamics e.g. what do you think serious investors will do when prices start to wane or a better opportunity presents itself. Look at how much the FTSE has dropped since the dotcom crash if you need a concrete example of what can happen to markets in a bubble.

You say your DP is not keen on investing money as he thinks its all about to collapse. Consider this then, where would be hit worst if the current financial crisis escalates? Clue: financial centres. Also consider that given property prices are falling by between 2-10% per annum outside London and you could be getting 3% interest on that 150K, your equity would be growing nicely relative to property prices (effectively covering your current rent perhaps).

Hope that helps.

Interesting topic! I'd say London prices ar very strong and might still be rising only in very prime locations. Foreigners with cash do not really buy away from the prestigious areas (def not Hackney!), though buy-to-renters definetely do buy in Hackney now, as it's a popular place to rent for younger profs etc. I've been observing London market for years, and say in areas like Clapham prices were very stagnant or even slightly fallen in hte last few yrs, even though it's very popular and still quite trendy, safer than Hackney to some extent (well, riots were only on the high street, and it;s a big place). They aer not likely to fall massively though. Only prime areas like kensington/chelsea ridiculously defy the trend, for now, but I think even there prices reached their peak and might slightly go down (on bigger houses, but not likely on flats).
You can buy a huge three storey house in Hastings for the price of Clapham small 1/2-bed (i.e. 250K)! But it is quite remote for anyone who needs or likes to travel around the UK. Brighton and Hove aer nearere london prices but I thinkthere there will be a drop to an extent - market overfooded with flats at the moment.
I'm in a similar position (kind of) though I HAD to sell in london (short lease, expensive to run, and fed up with lack of space), and I want to buy in Bristol, based on better space and good amenities in town etc.
Does anyone have opinions whether Bristol prices are as likely to head for a big crush like some other areas, or less so ? there is a definate lack of GOOD flats in the best areas there (been looking for two months), so I'm hoping this means the prices ar going to hold at least more or less. Hope Op doesn't mind me asking?

alabamawurley thanks that's interesting advice. However I don't think DP or I woudl be comfortable with our money in a bank instead of in bricks and mortar. Even if prices fall, I know that my money is worth the flat / house it has paid fo.! I don't have much appetite for risk when it comes to my home. I expect I may well be loosing out financially for this way of thinking, but I accept that. I would be too anxious that something could go wrong if I invested the money somewhere, and I wouldn't enjoy that feeling!

Can I ask whereabouts in London your flat is?

passionsrunhigh The riots were on our doorstep! Yet my upstairs neighbour sold his flat within weeks of putting it on the market, and had lots of interest.

Hackney is a trendy area right now, despite its often troubled underbelly.

If you go to one of the parks on a hot day they're absolutely packed young (and not-so-young) hipsters hanging out having picnics / drinking these days. The demographic has visibly changed, immensly from when I was young and growing up there.

When I first moved to Clapton (from Dalston) all the shops were very scruffy looking (mostly independents). Now there are lots of trendy little places opening up - organic food shops, an italian deli, a great second hand bookshop. (And tesco has decided it wants a piece of the pie too.) If that's not gentrification in action I don't know what is! It's still rough, don't get me wrong! But the trendies are moving in. Oh and the police have finanlly shut down the pub whose customers openly traded crack in the street outside. That's made a big difference too :)

Stokey38 I'm guessing not too far from you by your name? :)

Well, I would say in that case hold on to it. Property is sky rocketing in that area. We sold ours last year to move over the river to SE (sobs) and a flat next door to ours has just gone on the market for £50k more and we didn't do badly on ours at all.

Stokey do you mind if I ask how roughly much yours was? I'm thinking because mine is at the £250K sticking point (because of stamp duty) that it wouldn't go up for a while, but perhaps I'm wrong.

Actually I'm guessing if you were in Stokey then your was definitely more than £250K!

we sold ours for £259k which was the asking price. It went for the asking price within 2 days of it going on. Stoke Newington does not appear to be feeling the property pinch!

threefeet, oh yeah, I know Hackney is TRENDY and then some, when i sold my short lease central flat I lookes around where else to buy in london and was amazed at prices in Hackney, and also the quality of interior design in hte flats, as hip people do live there. But, the same happened to Clapham, and partls of Brixton where prices really gone up, andthey got a lot of gentrification, esp Clapham and Balham. But after the itial 'rocketing' they now stopped and even fallen slightly - I think the same will happen in Hackney if it hasn't yet. It's still not the area to raise children in (Clapham is seen as much better and greener) so Hackney heavily relies on young City workers and artistic types - but those WILL get affected by recession and job losses. Also rich foreigners won't buy ter for themselves, so I stand by my opinion that the prices will crush there like in manmy other trendy places when there is another dip in recession. It won't be DISASTROUS but if you wait, your flat might well drop in price - I'm sure in fact, it's just we haven't hit the proper dip yet. If you like E.Sussex and don't need to travel much, I'd definetely advise it as you can get a really good property there compared with london, and if you move, there will be more people mocing tere in a few yrs due to them not being able to afford London. BTW their flat might be valued 50K more than yours, but now people just don't offer asking prices bar very prime places. And they will alwaystry to get to under stamp duty. Still, what's happening now will not be happening next year.

Interesting to see someone mentioning the bargains to be had in Hastings (East Sussex). I considered buying there when I was living there in the mid 90s before I got married - prices looked like a bargain then and I could have easily afforded my seafront flat. Went back there recently and was surprised to see how little prices had risen in the last 16 years and very glad I didn't buy. I think the truth about East Sussex is that there are bargains to be had - certainly in comparison with what you can get for the same money in London - but unless it is going to be your forever house (in which case whether it goes up or not is immaterial) you are unlikely to get much of a return upon your investment. If you consider what happened to London prices in a similar period it is a no-brainer.

agree about Hastings (I mentioned it), it;s because it's so far from everywhere bar South coast, and not so many jobs there. But I think Op likes the area and would stay there if there was a permanent job for her dp, if they did have to move in three yrs, then I don't think they'd make money, but i can't see prices dropping there - already so low - in fact there is a chance of slight rise if people start moving into the area towards Hastings, from Kent, say, due to job losses/ recession but still needing family space.