Will 2 bed flats in desirable parts of London hold their value? Would you buy now?

[tryingtomakegooddecisions]

I'm just wondering about the London market for flats. I moved to New York a couple of years ago and we have been watching the market closely, we have a very specific criteria really so nothing came along and prices were crazy through pandemic in the particular area we're focused on.

Obviously London and New York are very different markets but there are some similarities too so thought it interesting to compare.

Sometimes I wonder if we completely missed the boat and that old saying holds true about the best time to buy always being a year ago. But then here we are seeing more interesting properties coming along and feel optimistic again. Rent is eye watering here, same as London so definitely factors into the bigger equation.

I know most of MN is UK based but curious if you think it would be a good bet to buy in London now or would you have thought last year was the time to make the leap before the stamp duty deal ended?

Would you wait longer or do decent flats in a sought after part of London always hold their value?

Erm my instinct is that flats in London haven't gained much value in the last 5 years, so yes my instinct is now is not a bad time to buy. I would avoid a new new build as they are very overpriced generally in the UK. Curious as to whether this really helps you in your New York decision though?

@starpatch Thank you for your thoughts. It's not directly comparable at all, it is more a curiosity about the way London is going and the way New York is going as I find property interesting and lived in London for years so still interested in what happens there.

Flats in London are not increasing in London, partly because there are so many of them now especially in the Vauxhall area, and also because of dangerous cladding post Grenfell. Service charges tend to be high too.

Sorry. Oh for an edit button Mumsnet HQ.

Are Victorian conversions not a different market to ex council flats with the cladding issues, and the new luxury apartment types, though?

There are similar market divisions here in NY with new lux buildings which cost a fortune in monthly fees, and then lovely converted apartments in old townhouses which tend to have much more modest charges.

Yes, very different market. MN generally not a good place to ask about london flats as you just get tons of people saying how they would rather have a 3 bed semi in new malden! Conversions , mansion flats and low rise 50/60s block have held value well in desirable areas.

I’d say it’s a good time to buy, I’d go for a well laid out conversion with a garden or at least a balcony. Nice flats with outside space in sought after areas are likely to hold their value.
I prefer a spacious flat to a small house (have lived in both) and although there’s a fear of leaseholds, I’ve never had a problem, check management company reviews and that service charges are reasonable with a decent reserve fund and there’s no history of ad hoc demands for costly repairs.

I think nice flats hold their value. We sold our two bed victorian conversion last year for 815k, which was a 265k increase on what we paid for it in 2015. It was ground floor with garden and that was certainly a key selling point post-pandemic (and also the reason we bought it).

Another benefit of ground floor conversions is the potential to extend - a side return extension can turn a two bed to three bed. If you do buy make sure you get share of freehold too.

There are still plenty of very expensive two bedroom period flats in london. Even in fairly up and coming or not traditionally desirable areas I've seen 2 beds marketed for £800 plus!

Decent two bed flats with a garden in central areas will I think hold their value well as there aren't really that many of them to match demand. That being said, we are clearly going into either a full on market crash or at least a gentle fall in prices. Unless you have a pressing reason to buy now (annoyingly, we do) then I would hold off personally, give it a year or two until interest rates settle down and the effects of the high mortgage rates filter through.
Large parts of London were fairly insulated from the last crash but there's no guarantee they will be this time round.

Don't buy in a big building or you'll have awful service charges mine has just gone up so so much due to cost of living everything costing more from £99 to £250 a month I think that would make my flat harder to sell now

Flats have had a bad few years - new build ones are at risk of cladding complications and the pandemic showed how unattractive it can be not to have your own living space. I know people who were trying to sell 1/2 bed flats in London c2021 and could not shift them at all. But as ever it depends on the area and the building. It looks like mortgage increases are slowing down the whole housing market so it may turn out to be a good time to buy soon.

12 months is not long to wait, by then we will have a better idea of the size of the correction. I suspect London flats are currently overvalued relative to the more normal cost of borrowing we seem to have moved to. By how much is guess work - but for sure they won't be increasing in value in the short term. I'd say wait and see unless you really have to buy.

A lot of the new build flats at Vauxhall have been bought up by Chinese buyers (they are sold off plan in Hong Kong, Shanghai and Beijing first, in a lot of cases). A few years ago, the Russian market was also targeted. I don’t think you can compare these with eg a mansion flat in Central London or a conversion in a Victorian house in zone 2/3/4 as the target market will be very different.

Of course they are.

Lots of people are snobby about ex council flats and won't even view them, whereas Victorian conversions are always popular. And buyers are naturally wary of properties with cladding, though hopefully that issue is getting sorted now.

My DS is currently wondering whether to buy a flat in Greenwich as his rent is likely to raised so much as to make a mortgage cheaper. It's clear that new builds first sold in 2017/18 have not appreciated at all and some are being sold for less than they paid originally. Many are sitting on the market because understandably sellers at least want their money back and haven't adjusted to market realities. There are also a lot of ex rentals about as landlords exit and new landlords and oversea investors are not picking up the slack.
So in some ways it is a buyers market but I do think prices may drop further in the next few months. So if you're not in a rush I would say look around, do your research but no hurry. DS is up against a contract renewal date but we have said it's better to pay up and look big on rent rather than make a bad purchase. We are doing viewings today but if he fins something we will be in a good negotiating position.

Oh and yes service charges... We have seen similar flats with service charges between 1800 and 4000 per annum.

Don't bother with hearsay on MN. Just look at the actual evidence for yourself. Pick a postcode and review.

https://houseprices.io/?q=NW11

Orange means a real terms fall (inflation adjusted). Red means a nominal fall (got less than previously paid).

It's 6 months out of date - reflecting prices agreed 6-9 months ago. Then ask whether economics have improved or got worse in the last 6 months.

Same. We've been looking for a 2 bed flat in Marylebone and the service charge is often £8-10k per year. Then you've got the lease extension once it gets to 80 - that's been £500k for a couple of flats we've looked at.

As PP have said, flats in central London haven't been the investment other properties have in the last five years. The 2 beds in Marylebone have fallen 15-20% in price on average since 2015/6. Whereas we lived there in the late 90s/early 00s and doubled our money in a few years.

The buy to let market has gone mad but the yield is still pretty rubbish at 2-3%. With remote working here to stay, the prospects for capital growth on a central London property are holding me back. Much as I love Marylebone, I don't want to lose money.

Interesting @XVGN. I looked up where I have a London flat and found they have sales as late as 4/2023. Good resource! I don't think my flat has gone up much (8% in six years is my best guess taking into account my renovation costs), but I get 4% return from rent (3.5% after fees and service charge).
OP, be aware the any recent fall comes after a recent rise, so you have to look at trends for some years back.
It also makes a difference if buying with cash or mortgage. My flat would not make financial sense if I had a mortgage on it, though my long term plan is to retire into it, and by the time that comes around I'd never be able to afford to buy it as I plan on giving my current house to my children.
So if you have cash and were to rent it out, the rental market is sizzling hot!

While people are extolling Victorian houses that have been converted into flats there are issues there with noise, more so than purpose built flats. New builds often have smaller rooms so mansion blocks, or flats built in the 1930s with concrete to prevent sound transferring are your best bet.

I have a roof terrace with my 2 bed flat in southwest London. converted from a 1930s building, which I bought in 2007. Values have gone down, up and down again since then. Service charges have only gone up obviously. But it is my home and so values are not of great importance as I have no intention of moving.

I'm in Sydney and after some falls last year, it seems we are off to the races again with well located flats going up 5% in the past 6 months. Everyone (economists, housing 'experts,' etc) were all saying prices would fall through 2023...and the opposite has happened. An influx of immigrants is being touted as the reason for the increase.

So in short - noone knows. Even those who should know better than anyone. ignore the noise and buy when you're ready, and find a place you'd be happy living in.

Yes now is not a bad time to buy, with a few conditions-

• Reasonably established area with good local amenities
• Either conversion or low rise/ low density development
• No cladding
• Reasonable service charge
• Either office or potential for office area outside of the main living area (like potential to expand, add a garden room or convert the loft)
• Outside space
• Ideally not looking to sell for a few (at least 3) years.

Although I think properties with most of the above are still fetching decent prices so I wouldn’t expect a bargain.

I’d avoid 2 beds in massive modern developments in slightly edgy locations unless you’re going to hold onto it for longer (10 years plus).