How will the future property market work?

[confuseddotcom2]

Hello all

I've namechanged & aplogies in advance as this is London/SE centric.

So as a young inexperienced property novice can someone try to explain to me how the market will work in the future?

We are looking at flats priced at 500k & would plan to sell in 3-5 yrs to upsize. Where I'm confused is historically when its time to sell our budget would be determined through a combination of house price growth (say 200k), paying off some mortgage & wage increases so the next property we would buy would be in the region of 750-800k. This would ideally afford us a house if we moved out a bit.

However I don't see now see how our 500k flat is going to increase by much in the future, so how will we be able to afford a house? Plus there are very few areas where 750k will get you a decent house in a good catchment area.

Right, sorry OP. That is certainly not an assumption you could make on anything bought after probably early 2000s.

I would assume minimal capital growth over the next few years (Brexit, interest rises, etc) and look at your likely earnings plus repayments.

Based on that if you aren’t getting a large chunk of money from somewhere (bonuses, inheritance) you won’t be able to upsize dramatically.

So buy somewhere smaller and accept you’ll be in it longer than 3 years, or move further out now. It’s the choice the majority are having to make at the moment.

No worries. My mums house is worth about 1.8 mill (conservative fig) so when she downsizes I will get a bit but obviously my siblings & I don't won't to rely on that.

I don't live in London but have just sold my property in a city not far from London. In 4 years, my property price increased by 55%. I was very lucky though as I think we've hit a ceiling here with how much more it may go up.

So the 55% jump along with what I paid initially with deposit + mortgage payments over those 4 years, means I am able to move into a property double the price of my first place.

I would second to buying a place that can be extended if necessary, or buy a little outside London where house prices may not have yet hit their peak ceiling prices

I know people have explained this already, but once you’re on the housing ladder house price rises don’t make it easier to buy a bigger house.

If you buy a place today for £500k and it increases in value by 10% it’ll be worth £550k when you sell. The bigger house you then want to buy will also have gone up by 10%. So if it was £550k today, then when you want to buy it it’ll have gone up to £605k. So today there is a £50k price difference when you sell in the future there is a £55k price difference.

It must be awful as a ftb in London right now, especially in the south west. As horrible as it seems I really don’t think that there are many opportunities for ftb there at all. The market has just gone way out of reach of anyone who isn’t very wealthy.

Honestly with the uncertainty in the market your best bet is to make sure you buy a house that can last you for a long time. Don’t buy something that you will need to upsize in a few years, not only is it horribly costly in fees and stamp duty, but if the market does fall you are stuck in a flat you can’t sell and doesn’t have the space you need.

Maybe look further out, check out the website commutefrom.com which is excellent for figuring out where to live based on your commute. Cross rail isn’t far from being completed now which will bring areas of Berkshire/South Bucks within an easy train ride of London. Maybe have a look along there (that’s what we’ve done and we love it out here!)

I don't mean to sound like the voice of doom, but it's worth thinking of a few other things: firstly, are you absolutely sure your wage will increase instead of stagnate? Are you quite sure any increase will not be wiped out by the rising cost of living? What happens if one of you becomes very ill and is unable to work? What if your parents leave their house to Battersea Dogs' Home, or become long-term ill with dementia or similar and need long-term nursing care which can cost thousands per month? (And have you considered inheritance tax?). These things happen. I wouldn't assume best-case scenario in a situation like buying a house, where so much money and risk is involved.

eastwest I'm confused by your post. Our 500k budget is based on our current earnings (80-90k) & the deposit of 170k which we already have. We are able to borrow more but I don't want to over burden ourselves for the reasons you have mentioned.

I only mentioned my mothers house in reply to kylo in regards to upsizing in the future but specifically said I don't want to rely on that.

I think the point eastwest was making is that you need to think about all the contingencies. No-one is saying you can't afford the house now, but what happens in the (likely) event of interest rate rises, or (God forbid) serious illness that means one of you can't work for a couple of years (this happened to us),or post-Brexit redundancy, or a drop in the market that puts you in negative equity?? Just make sure you cover your back a bit! Get somewhere you don't mind riding out the storm as the clouds may be gathering.