Buying a flat in the current market

[whatwouldbeydo]

DH and I have been looking for a house in the outskirts of London for what feels like a literal age. We're not being overly picky, but have a few non negotiables, and we're just not finding anything within our budget. We're pretty desperate to move, and I don't know how much longer we can hold out waiting for the market to settle / for the right property to come up. So I've started looking at flats. Not ideal, I want a house, but something's gotta give. My main worry with potentially buying a flat (other than associated costs such as service charge etc) is that we're potentially setting ourselves up for a loss as everyone wants a house with garden (us included lol), and therefore the market for flats will stagnate and we'll find it hard to sell up. We're not necessarily looking to buy to make a profit, but we couldn't swallow a loss.

It would only be a stopgap for us for a few years - max 5, maybe less - so not a long term investment.

Am I jumping the gun/should I learn the art of being more patient (tips welcome) or do people think there will always be a market for flats?

(One thing that puts me off is I have a relative who's had his flat on the market since July and has had to reduce his price twice already to try and shift it - and still hasn't managed to do so)

I am sceptical that the price of flats and houses will continue to diverge. A lot of house buyers are selling flats, so if flat prices continue to fall, will buyers still be able to pay ever higher prices for houses?

Also, a lot of flats are rented. If prices are falling, but rents are not, they will become more attractive to investors, which will prevent them falling too far.

As houses have increased so much I would actually be more worried about future falls in house prices.

The main worry about flats is if the current fire regulations are extended to all flats:

www.nakedcapitalism.com/2021/09/is-the-uks-cladding-crisis-about-to-get-even-worse.html

In terms of service charges, unless you’re living in a large or luxury block where there are going to potentially be big-ticket maintenance items or high charges associated with cleaning miles of communal hallways, maintaining large communal gardens, employing a concierge etc, they’re broadly reasonable. Aim for non-new builds, small, low-rise blocks without lifts, maisonette blocks or period conversions and your service charges and maintenance bills aren’t likely to be any different to what somebody who owns a house spends on keeping it in order. What I spend and expect to spend on external repairs and maintenance annually and over the next ten years on my house, is roughly on a par with what I ever had to spend in service charges when I lived in flats (and frankly, it was much more convenient when it was somebody else’s responsibility to arrange and coordinate everything, as opposed to having to sort it all out myself now.)

Yes, there will always be a market for flats because not everyone can afford a house either as a first time buy or ever, especially in London. I think what we do have to accept is that the days where you could buy a London property and see it practically double in value in five years (which was always unsustainable) are over, and expect much smaller gains. Your relative might have had to drop her asking price, but unless she bought within the past few years then I expect she’s still going to make a decent profit.

I think the buyers wanting outdoor space causing flats to stagnate is a red herring. Yes, people are now thinking they want outdoor space. But people have always ideally wanted outdoor space. If they couldn’t afford it before the pandemic, they still can’t afford it now. Most FTBers in London stretch themselves to buy whatever they can afford, and if all they can afford is a flat with no outdoor space, that’s what they’ll be buying. Few buyers will decide “well, I can’t afford to buy a house with a garden so I’ll just stay in rented accommodation for the rest of my life”, not least because most people in rented flats don’t have a garden, either.

I guess you could always look at flats but with the proviso that they are freehold/share of the freehold?

There are still 9m people in London and they have to live somewhere. Not everyone can live in a house. Hence why flats become popular in Victorian times. Population boom made even the rich ‘having to’ live in flats (mansion blocks) as there was not enough space to build family houses.

London is a very peculiar place and there are different rules here when it comes to property market.
Yes- small flats without garden are not popular now, and probably won’t be for a while. The new found love for outdoor space will stay for a while too.
Areas where there were lots of flats build around a particular area of interest are a risky investment (like canary wharf for example, where the only reason for anyone to live was close proximity to the office and now thousands of flats sit empty)
Areas which are historically ‘affluent’, family oriented, green, with a village feel (most of SW London) will always be sought after.
Myself having lived in both, flats and houses, i see advantages and disadvantages of both.
I am currently living in a big house with even bigger garden and i can’t wait to move to my new london flat. Garden and outdoor space are a hassle and liability unless you have a gardener or are a keen gardener yourself.
Where in London are you looking ?

I'm selling a flat in Essex and now at the point of talking exchange dates. It is on the main road with no outside space and it sold within 6 weeks. So no problems finding a buyer.

I think the market for flats will pick up again so if you are a FTB you're in a good position to get a better deal at the moment, although I'd still avoid new builds. Just be careful looking at whether a flat is freehold/ leasehold, has good sinking fund provision and whether any major works are anticipated (or if the block looks in a state of general disrepair).

Oh, btw my friend just had to drop £18k on a new roof & scaffolding etc for his house in west London. Having bragged for years about ‘silly buggers’ living in flats with high service charge.
As long as it’s a reasonable amount, it’s not too much more than keeping your house looked after.

We have a gorgeous flat and for 5 years I'd really recommend it - a means to an end. We'd never have got anything as nice (space, period features etc) if we'd been aiming at houses.

It's part of a converted house so no cladding issues.
It has a very secure garden and no history of burglary or attempted burglary in 30 years.
It's share of freehold so no service charge to pay.

If you can get those things then I think it's definitely worth it. We don't plan on selling but have people putting notes through the letterbox asking if we would sell to them regularly! (Perhaps that's all of London though, I've no basis of comparison).

Recently sold a large maisonette in London zone 3 (1400sq ft) with a small terrace. 2 mins walk to a large park and 5 mins to woodland. There was plenty interest and it sold for asking price. I was really worried about not being able to sell but in a good area with good schools people will make compromises.

Interesting perspective me

@WoolyMammoth55

We have a gorgeous flat and for 5 years I'd really recommend it - a means to an end. We'd never have got anything as nice (space, period features etc) if we'd been aiming at houses.

It's part of a converted house so no cladding issues.
It has a very secure garden and no history of burglary or attempted burglary in 30 years.
It's share of freehold so no service charge to pay.

If you can get those things then I think it's definitely worth it. We don't plan on selling but have people putting notes through the letterbox asking if we would sell to them regularly! (Perhaps that's all of London though, I've no basis of comparison).

You say share of freehold so no service charges to pay, how are you upkeeping the building? All properties require maintenance of some sort. Are you just paying as and when stuff comes up? Or really not doing maintenance? What about asbestos, electrical safety (if you have a communal area at all).

Service charges are not all rip offs. All properties require maintenance of some sort.

Anything can be sold at the right price so if you can get the flat at the decent price it should be fine. Also, it really depends. I was looking for flats as well and noticed that the more desirable ones (i.e. big flat with garden in a leafy area, preferably with a lovely park nearby) still sell well. It is the ones with no garden, one bed, with cladding issues or council estate that are having issues.

The thing I would worry more about is regulation. I find the leasehold system idiotic - but you probably don't have any other choice if living in London. Also, PAS 9980 is being published in December so maybe worth waiting for it as well.

My upstairs neighbours (zone 6) have had trouble selling their flat and it is now on the market for £50k less than I bought mine for 4 years ago. There is a lot of development the my area with tower blocks of flats being built so I can't see the market recovering here for quite some time.

@Georgist this is from the draft guidance. Flats of conventional masonry construction would not require the invasive surveys.

I think the main argument is that people who uses to live in London flats would move outside London to live in a house and commute twice a week. Firstly not everyone WFH. Secondly the houses outside London in nice towns aren't cheap either esp the ones with nice gardens. The other day, I showed someone a 500k house in hitchin and she told me that it was 'outside space' not a garden.

Resale is for any property is about supply and demand. So choose what (ie not new build, no lift, etc) and where (ie not where there are hundreds more available or soon to be built).

I’m selling a flat in Crystal Palace in South London if you want it 😜 well I was…. We were on the market for a year and although we have plenty of views, nobody really wants a flat without a garden. Sad really as it’s a LOVELY flat and we’ve enjoyed living here. But we get it!! We also want to move to a house with a garden but out of London.

I think once the pandemic has passed then demand for flats will increase again. You can probably find a bargain atm!

Also, an agent told me that rental demand for flats has always been and likely continue to be very high. So their value at resale not likely to be an issue.

I'd say the market for flats will revive, for sure. A lot of the world's population lives in a flat, and LOTS of young couples don't want the responsibility of a garden. As long as you have access to green space, it will be ok. But if you are desperate for a garden, a flat still has some possibilities - lots of flats have shared gardens (I've live in them in Putney, Hammersmith, Acton). My friend bought a maisonette in north London with a garden, long lease. Would that be a good compromise?

Personally if it it was a few years I'd go for it flat that you could sell to a couple, or to someone who was going to let a room to a flatmate. I would look as close to "proper" London as I could - a dodgy flat on the outskirts is a bit depressing. Be completely open to what you might find, search on Nearest To a central point in London, and select "Must Have" garden (and parking if you like):

So how about something like this place, right by Battersea Park, it looks gorgeous:

www.rightmove.co.uk/properties/111075488#/?channel=RES_NEW

I love my flat and never want to leave it, but it’s in a small mansion block in zone one, with a good sized shared garden. Our neighbours sold theirs very quickly recently, for the asking price. Our new neighbours bought it for the same reasons that we did - we like living so close to the centre of town, near theatres, museums, shops. We’re also used to living in flats, as we lived in Paris for several years.