The struggles of climbing up the London Property ladder

[helen1819]

My partner and I are in our late 20s, would love to have a family in 3 year at the latest and are struggling to decide whether to:

1. Buy a flat in London now to avoid the miseries of renting - 70k deposit, budget of 340k

2. Wait a while, continue renting and have a joint gross income of 120k in 2.5 years, which could afford us a 500k property.

A few weeks ago we decided we were fed up of renting, and starting going on viewings in Bromley (South), Wimbledon Chase (South), and Tufnell Park (North). Our plan was to buy a small flat, and then work our way up the ladder every few years.

But quite frankly so far the search has been really frustrating! The older, period freehold flats are a bit dingy and we worry about taking out a 25-year mortgage on a non new-build.

A new build we looked at (refurbished 1930s) in Wimbledon Chase called "Vision House" seems like the materials used on the inside are super cheap. Also, half of the flats in the building are still unsold despite completion pending in July!

The developer (Chinese) also seems a little suspect, having listed the same flat for 325k and 315k, even after we made an offer on it via the estate agent, which was accepted.

We worry about being able to resell the flat at a profit in 3 years, and make a climb.

What do you think we are doing wrong? Should we rethink our strategy? Should we prioritize freeholds over leaseholds?

Thank you so much

If you can save £70k in a few years and rent, keep renting, save £500 k , move up north and buy outright with no mortgage. Change jobs and relax.

@Lemonylemony, the ISA cap is very annoying. Not many decent properties under 450k in London and I would say most FTB in London start off in the 550k bracket and upwards as they tend to have very high borrowing power.

@Fiddlersgreen, the solicitor we appointed a few days ago laughingly said that he wasn't surprised that the government was easing restrictions on house buying because stamp duty is such a cash cow. I don't think he was joking!

Have you thought of Worcester Park? Not especially trendy probably but not far from Wimbledon Chase where you've been looking. Direct train into a Waterloo every 15 minutes, with Wimbledon, Clapham, Vauxhall on its line in. Good primary schools. Spacious 2 bed apartments on for 350k and plenty of houses in the area if you move in a few years:

https://www.zoopla.co.uk/for-sale/details/52305326?utmsource=v1:5bWFDybfWx7C7AGpeagt7mP3PgcqjuqJ&utmm_medium=api

https://www.zoopla.co.uk/for-sale/details/51818279?utmsource=v1:5bWFDybfWx7C7AGpeagt7mP3PgcqjuqJ&utmm_medium=api

Buying a new build is a bit like buying a new car.

No one wants a ‘second hand’ new build when actual new builds that look the same are offered with developer perks and cash backs, and when the warranties and guarantees have run out.

Plus many are on dodgy lease and ground rent contracts.

@TaleOfTheContinents

www.finder.com/uk/first-time-buyer-statistics

The average house price in London (Inner and Outer London averaged) was understandably the highest, costing £438,000 compared to just £110,000 in the North East of England.

It does correspond with my experience, i bought a 2 bed flat with communal garden (zone 3) in east finchley for £392K. you definitely have to spend over £550k for a freehold house though.

One point to note about older homes is that expensive things like roofs have a finite lifespan and the older the house, the closer you are to potentially needing to repair or replace.

It's by no means definitely going to need doing, but just something to factor in mind, perhaps when considering surveys.

Both new and old have pros and cons, you need to prioritise what the most important things to you are.

I’d look at cross rail - bigger properties geographically further out but commuting distance will be just as quick once the line completes next year as much further in and you get a lot more for your money. Plus there is more growth opportunity

Sorry Commuting time Not distance

If op banks on price rises and resell at (big) profit in 3 years then op presumes the 500 k property is also going up ....

No one knows but best for all is prices stay steady .

You need to look at rental yield. If you aren’t able to cover the cost of servicing a BTL mortgage on your property you are going to be stuck with it unless you are lucky enough to sell.

@Fiddlersgreen considering that the property will most likely be exempt from CGT (and possibly IHT) when you eventually dispose of it I’d say that’s more than fair.

Why did you mention the developer was Chinese? What's that got to do with price of eggs?

I'm another who doesn't understand the issue with getting a mortgage on an older property. Personally I prefer them to a new build. I find them soulless and lacking in character, and there are often difficulties with them until they're properly settled.

New build flats often come with very high ground rent/maintenance charges, in addition to (very often) considerably higher prices per sq m
than older properties.

When I was looking with a dd in an OK but non trendy part of SW London, a new build one bed flat of 50 sq m or even less, with the kitchen rammed in at one end of the living room, nowhere to put anything and no parking, was going for roughly the same price as purpose built 2 bed Edwardian maisonettes of 70 sq m, many with their
own small garden and on-street parking.

Many in nicer roads, too.

I would not consider buying any property less than 40 years old
unless I'd built it myself.

Georgian and Victorian properties will outlast most of the modern crap that is spreading across the cities and suburbs.

@EmperorCovidula

I don’t know what CGT or IHT are but we don’t plan to “dispose” of any house we buy, we are late 30s now and having just realised we will have to pay stamp duty, we are now at least 3 years away from being able to buy as we have to save much more now.

Personally I would chnage your criteria and look in other areas.

Lets face it we all know Lonomdon is expensive and with current stamp duty it's just so much money to move about.

I was looking at 2beds but the second bedroom was always to tiny, I ended up with a 3bed house one I can grow into with a family and not have to worry about mo ing and all the extra costs that come with it.

If you know you are going to start a family buy a house that will allow you to do that because you dont knownwahybyou can get or afford in the future.

@Fiddlersgreen

CGT = capital gains tax (not applicable if you buy a home and live in it)
IHT = inheritance tax

If houses are in the £500-600k bracket and you’re ready to move, might if he worth you speaking to agents and keeping a look out for anything suitable under £500k? We don’t know how much the pandemic will change the market but what we do know is there are currently fewer buyers around and if someone Is really keen to move you might get something under the threshold.

@Fiddlersgreen they’re taxes. CGT stands for Capital Gains Tax. You have to pay it whenever you sell something that has increased in value (with some exemptions, including a property that is your primary residence). IHT is inheritance tax which you pay when you die. By owning as joint tenants one of you will escape paying IHT on your property altogether, the other may benefit from a special exemption (in the form of a nil tax rate on your family home). You’re avoiding a lot of tax on your property as it is because the government has been gracious enough to treat property owners favourably for their first property. You’re lucky that you’re only asked to pay SDLT (stamp duty).

@BlueLadybird
@EmperorCovidula

Thank you for explaining :)

No one has mentioned the word potential. Buy somewhere, even a one bed that can be refurbished (when your salary increases). It might have some kind of hidden extra space, the possibility of making a car parking space or adding a garden room for working from home or something else. If it's lower priced due to, for example, an old style kitchen don't let it put you off.

Hi all, great to hear all these thoughts.

I will update you on where our property search takes us in the coming 12 months!!

I wouldn't buy a flat in London (or anywhere else atm for that matter) as I don't believe you will make a significant profit to move up the ladder within three years. The costs of moving as have already been pointed out also make this a bad idea.

DD2 and her boyfriend in their mid-30s are still renting (in Kent) and saving like mad but have no plans to buy for the foreseeable future.

I'd carry on saving for the time being even though it is hard thanks to rental prices.

You might be earning more in 2-3 years time but may also have childcare fees (£1.5K a month!) or have one of you working part-time - both of these affect the affordability calculations. Therefore I'd say you're better off buying a two bed now that you can live in for 5-7 years at least.
With your budget, this might be tricky in Tufnell Park (I only know north of the river). To get a 2-3 bed you'd need to go north to Finchley. This might not be a bad idea anyhow if you're going to put down roots in good time, e.g. nurseries and schools. You're also on the doorstep of Muswell Hill, Highgate and Whetstone for good restaurants and pubs.