Buy a London flat that has decreased in value?

[matchboxcar96]

My partner are first time buyers and we’ve finally saved up enough to buy a flat. We saw a flat last week that has almost everything we want - two bedroom, balcony, parking, easy commute. Two cons - leasehold rather than freehold (but 120 years) and the bedroom backs onto a busy road.

The flat is on for offers over £500k, but seen online that the current owners bought it in 2016 (new-build) for £495k and it is now valued at £480k.

I know it can by typical for new builds to depreciate a bit initially... could this be a chance for us to take advantage of lack of interest in London flats and get a good deal? Or is it risk that the flat isn’t going up in value?

I’m going to chat to our mortgage advisor next week and aware I probably need a professional opinion. It’s just going round my head over the bank holiday!!

Also for life context: no children, undecided and wouldn’t be for a few years. I’d anticipate moving for a family, but the flat would work for a bit if we did decide to have a child (current owners have a toddler and lovely set up). Thanks for advice!

What do you mean you have seen online that it is valued at 480k? If you are talking about zoopla etc you do know that they are just an algorithm that can be way way out! A properties value is what someone is prepared to pay for it and what the buyer will accept.

Whether or not this is an opportunity to get a good deal will depend entirely on the seller.

Who values it at £480? If you like it, and you have seen a few flats, you should have an idea of it's value. If you like it then offer what you think it's worth!

Thanks for the replies! You are right, the valuation is from a website so it might not be accurate. Perhaps I am reading too much into this information.

I think I phrased my post unclearly - I meant, would you consider it a big risk to buy somewhere that supposedly hasn’t increased in value in the past five years? Even if the flat is worth what somebody is willing to pay, the seller is offering the flat for pretty much the price that they bought it after not being able to sell it for a higher price last year.

Obviously I wouldn’t want it to be a higher price, but as it’s our first home I’m a bit worried if it doesn’t increase in value then we will be stuck and not able to move up the ladder later on. I suppose nobody can know without a crystal ball, just a very nervous first time buyer as it took me such a long time to save up! Opinions very welcome.

PS. Good point @Livingintheclouds - we have only just started viewings so I feel a bit naive. Maybe need to get a few more viewings under our belt to have a better idea and make a more informed decision.

I wouldn’t buy a new build personally. They don’t tend to appreciate well. It’s hard to predict though and I expect that’s not true across the board.

MIL has a NB London flat.
It is about 10 years old now.
At first it lost a fair chunk of value but then it started to gradually climb and now is worth a decent amount more than she paid for it.
This seems to be a normal pattern in her area.

We bought our flat in 2014. It was 7 years old when we bought and we paid £2500 more than the original owners had paid for it when it was new in 2007. We're about to put in on the market for £120k more than what we paid. (Whether we can get that or not remains to be seen.)

All depends on location.
If it's a good area, the market may have slowed down for now and the seller needs to sell regardless - but it will climb up again in future. If fthe area not great then yes, it may fall in value even more - esp as on busy road.

A property is worth what people will pay for it - you can't say it's "worth" 480k or over 500k if no one has made offers yet.

I would offer what you feel the flat is worth to you, compared to others you have seen or researched. If you feel that 480k is fair then offer that amount and see what they say.

One thing my DD has found with her two bed flat is that a second bathroom is wonderful! We have two bathrooms in our London flat too. It does help with selling and makes the flat more desirable if you ever need to rent out a room. We found location and two bathrooms were the deciding factors. That usually leaves you with conversions of buildings or newer builds. We have bought conversions. Good ones in good locations. Not by main roads but both near great transport links.

Hope that helps. Happy house hunting!

Is the flat covered in flammable cladding? A lot of London flats built in the last decade or so do, affecting prices:

www.cbsnews.com/news/cladding-grenfell-millions-uk-face-financial-ruin-stuck-in-death-trap-homes/

@PresentingPercy

One thing my DD has found with her two bed flat is that a second bathroom is wonderful! We have two bathrooms in our London flat too. It does help with selling and makes the flat more desirable if you ever need to rent out a room. We found location and two bathrooms were the deciding factors. That usually leaves you with conversions of buildings or newer builds. We have bought conversions. Good ones in good locations. Not by main roads but both near great transport links.

Hope that helps. Happy house hunting!

That's interesting, because I've also seen a second bathroom or an ensuite in a 2 bed flat as wasteful. But then again, I guess circumstances matter. I wouldn't be buying a 2 bed flat with the intention of renting out the second room.

For me personally, I'd rather have a walk-in wardrobe than an ensuite. The thing with ensuite bathrooms is that they tend not to have a window (certainly in London) which is another bugbear of mine.

*should have written "I've actually seen second bathroom as wasteful"

@smallgoon
At our own flat we have one en suite with a window and one does not. At DDs flat neither have windows. It makes little difference to the quality of the bathrooms as no-one is really looking out of the window. However get main bedroom big enough to fit in a big wardrobe along one wall and you really get everything!

Younger people buying flats really do have to consider renting out a room from time to time an even if you have guests, the second bathroom is great. I would add that no bathroom we have or DD has would make a great walk in wardrobe. Slightly too narrow - all of them.

Buying a new build is a bit like buying a new car - it looses ££££ the minute you drive it off the forecourt - you pay a premium for the “newness” which is often significant ££ and you can’t sell that on.

I saw a flat recently that also was on at the exact same price the owners had paid 10 years before - which seems crazy given in this area of the SE property prices have risen significantly in that time.

I would also look at how many other new builds, nearly new builds and new builds that are planned in the area as some places are becoming flooded with these type of properties so competition when you sell on could be steep and the only lever you have is to keep the price low.

With your budget have you considered a small freehold house even if slightly further out - it would be future proof and save £££ on flat service charges and an another move down the line.