The London Flat Market

[NotwatchingSpooks]

My dd is currently looking at 2 bed flats to buy in London. She has saved really hard for her deposit. What do you think the market is doing, everything I am reading is saying flats are not selling, but she is getting a different message from the estate agents. Having had negative equity myself in the past, I am trying to help advise and would be grateful for any thoughts.

In the long term, property always increases in value.

Forgot to add - also, if flats really aren't selling, then that puts her in a good position doesn't it? She gets more choice of flats to buy.

Where I am in east London I think that there are so many new builds on the market with incentives that it's harder to shift older properties for a profit.

When I look on Rightmove at sold prices for the building I'm in, most have lost money from original listed purchase price in 2016. One that sold in Jan was for 6k higher than in 2016 so not made back the stamp duty.
And we don't have cladding issues or anything.

Don’t buy a new build!

Market for flats is pretty flat at the moment. Ex council flats in London can be good.

My first flat was a one bed ex council which I still have and it was great to live in abs is a great investment.

What’s her budget?

DO NOT buy a new build or use help to buy. They are all overpriced at at least £100k more than equivalent older properties and won’t retain their value. New build owners near me are in negative equity already after buying within the last 2 years.

I bought a flat last year in SE london (not a new build) and already similar flats on my road and in the area have increased by about 20-30k. I would advise looking at an up and coming area rather than an already popular well-established one - I say this because flats in sought-after areas rocketed in value so much over the past 5-10 years that these are the ones people are now not buying when they can get far cheaper ones a little further out. For example: I’m in south Norwood, my small one bed was 200k, but just up the road in west Norwood/tulse hill area you’re looking at 4-500k for a one bed and people are struggling to sell because much cheaper ones are a 10 min bus ride away.

Also remember to check the length of the lease (I would advise not buying anything under 120 years so you have a good amount of time to live there and not worry about extending before you sell) and the terms, and the service charge. If it’s a share of freehold, what are the other owners like who you’d have to deal with to get communal things fixed?

We have just managed an offer on our flat- it took 4 months to get to this point (though 3 of those were with a slightly rubbish agent!).

We have made money on ours- if our sale goes through we will have made just over £100k in 8 years which isn't too bad. The local houses though (which were a similar price when we bought) have gone up by £200k.

It all depends on what her position is, what her budget is. Is she single? Does she want a family? Is she thinking about having flexibility in a few years of going abroad/moving to a different city so the property needs to have good rental potential?

If this first property is going to be a stepping-stone onto the property ladder and she's planning on selling in a few years, she's better of buying a house- even a little two bed starter home in a less desirable area.

And if she does go down the flat route, make sure she is clear about service charges etc. ours is high (I think about £3.8k a year) and it's been fine for us as it includes a lot, but it's been the biggest barrier to securing a buyer.

I'd look for a period property with a garden. Close to good transport links. Up and coming area obviously has more potential but if you want safety of your investment I'd be tempted to say stick to a nice area, which will always be popular. Depends what you can afford.

In answer to questions.

She is looking at between £400 and £500k, would rather spend less but could stretch if she saw something fabulous. Good advice re looking at starter homes, but she wants as short a commute time as possible. Which has so far just thrown up flats. She is late 20s and single, so wants something secure and in a good area, with potential to rent a room out if needed.

Where does she need to commute to?

With that budget definitely advise getting a period flat/masionette rather than new build, for all reasons mentioned above. Garden flat is good but there are positives to living top floor as well (don't deal with neighbour noise, less issue with damp etc). If she can find somewhere with share of freehold even better.
Look at bits of SE London - new cross, Deptford, catford, Brockley, forest hill, camberwell. Streatham and Tulse Hill also good. As PP says, south norwood a good shout and very affordable, but maybe too far?

She is currently commuting into Waterloo, but going to the Strand. So could be Waterloo or Victoria. She is a mix of working from home and Regis or We Work type offices as they don’t have a permanent office at the moment

Please be careful about ex council flats!

They can be very spacious and good value for money but there can be difficulties when it comes to paying for works on shared areas. Unlike a block where all flats are owner occupied and there would be a sinking fund and costs spread across all leaseholders in the whole building. Leaseholders in ex council flats can be expected to pay for communal work between however many of them their are with those flats occupied by council tenants are not liable to pay anything. There is also not always a sinking fund. Therefore if e.g. the building needs a new roof, it can end up being much more expensive than in a block of owner occupied/privately rented flats.

£500k is a decent chunk of budget and I second pp that she should be able to get a 2 bedroom terraced house in some parts of London for that which might be a better long term purchase than a flat.

@SixteenTwelve

Please be careful about ex council flats!

They can be very spacious and good value for money but there can be difficulties when it comes to paying for works on shared areas. Unlike a block where all flats are owner occupied and there would be a sinking fund and costs spread across all leaseholders in the whole building. Leaseholders in ex council flats can be expected to pay for communal work between however many of them their are with those flats occupied by council tenants are not liable to pay anything. There is also not always a sinking fund. Therefore if e.g. the building needs a new roof, it can end up being much more expensive than in a block of owner occupied/privately rented flats.

£500k is a decent chunk of budget and I second pp that she should be able to get a 2 bedroom terraced house in some parts of London for that which might be a better long term purchase than a flat.

yes and often quality of work is poor and over priced....my friend didnt need or want new windows but was forced to contribute and have them and bodged up....also every 5 years a cycle of large works...i would go for a split house with share of freehold if poss.

Thank you such wise advice. I will discuss with her. She really likes Clapham, but her budget is not high enough.

We’ve recently viewed an amazing 3 bed flat in a period building with a pool, gym, tennis courts, sauna, on-site bar for £474k
No idea why it’s not sold, it’s been on the market for a year. Only reason we didn’t offer was because we’re no longer moving

www.rightmove.co.uk/properties/90687166

Whilst her budget wouldn't stretch to Clapham it would work pretty well a bit further in - so Vauxhall/Kennington and she could walk to work. Best bet would be either a period conversion or a private mansion block

Georgian conversion in Kennington - but you will have a lot of MPs as your neighbours....
www.rightmove.co.uk/properties/118443398#?channel=RES_BUY

Nice street right by Kennington Park/Oval Tube/nice shops etc

www.rightmove.co.uk/properties/119299523#/?channel=RES_BUY

Almost in the middle of a park and in a conservation area which is very posh (£2m+ houses...) with a great community of young professionals and older families with one of the best pubs in London on your doorstep.
www.rightmove.co.uk/properties/119504573#/?channel=RES_BUY

1930s mansion block 5 minute walk from the Embankment close to Little Portugal for cafes and restaurants etc.

www.rightmove.co.uk/properties/118232324#/?channel=RES_BUY

Why it's not sold? Location, location, location...

We have a 2 bed flat in South Kensington, have had it on the market since Sept... Still no offers 😕 there are lots available around us that have been on the market for a similar length of time, many dropped prices after Xmas.

SD25 its not 'location' in this case but the very high charges for the leisure facilities on site as well as maintenance charges. Fab flat otherwise.

One of my siblings bought a two bedroom flat in Bermondsey back in 2016. Sold it last year for £25k below what they originally paid for it. Like others have said……there’s so many new flats on the market, it’s diluting the premium they would once command. Plus combined with the fact that many people can now WFH so are moving outside of London/M25.

The flat market is stagnant as a result of the cladding crisis.

My building doesn't have cladding but the government has now introduced new rules about insulation so now all insulation needs checking etc. So many buildings are affected

There is a lovely flat on sale next door to us, Victorian conversion but it is totally over priced and is on for over 700k. I would say 550k would be more apt.

I’m in NW London. Majority of people still live in flats (usually period conversions) as property prices so high. Definitely no downward turn yet.