Buy a flat now for wait another year or more for a house?

[AfterTheRainComesSun]

We have been saving for a house for a while but with high childcare costs, it is taking us a while. Current interest rates also means that we would be able to borrow less than expected so realistically, we wouldn't be able to buy a house for at least another 9-12 months and that would mean stretching ourselves whilst also still paying for DD's nursery (although it won't be too long as she starts school in 2 years).

I just saw the news re interest rates not going down for the foreseeable future and started wondering whether it makes sense to keep waiting and waiting to get a house eventually or whether we would be better off buying a smaller property now with a 5% deposit. I know this would mean higher repayments but if we stay within a certain range we would pay very little stamp duty (live in SW London so even a small 2 bed flat would cost more than £450K) so could potentially just buy a place now, pay the mortgage, keep saving and then hopefully move to a house in 2-3 years time once we no longer have childcare and can afford a higher mortgage.

Would it be silly? Is it better to just keep saving and wait until we can afford a house?

We are both late 30s almost 40 so not very young. I do desperately want a little house with a garden but wonder if I need to be more realistic about it all?

I would wait and save up for your house with a garden.

Are you renting now or living with family?

I live in a flat with DP & baby and while I do sometimes feel sad that we don't have more space/a garden and won't do for a while, I am also glad that I bought when I did and we don't have to worry about rent increases or having to move until we are ready, and when we are we will have a decent deposit due to paying the mortgage for the past few years.

I think if you can afford a 2-bed flat then I'd do that sooner rather than wait, as your deposit is better off in property which will likely appreciate rather than in the bank getting lessened by inflation.

Only caveat would be to make sure you love the flat as you may end up staying there longer than first planned. We are coming up to 5 years in our flat now, which I thought would probably be the upper limits of how long we'd stay, but now with nursery costs we wouldn't be able to borrow enough to move...so I'm glad I like it!

I would save a bit longer for the house.

We are renting currently. Although with the high mortgage costs and high rates (also because of 5% deposit) we'd also "waste" a lot of money just on interest.

@LindaDawn I just said flat in my OP but actually, could potentially also get a tiny house further out but still not a place where we could see ourselves for a long time

I think definitely if you can afford a small house I'd do it as soon as possible. House prices seem to just go up and up so my opinion is it's better to just get on the ladder so you can at least ride up with them instead of just getting further away each time you check (which is how I felt). My flat has increased to the point where today I wouldn't have been able to buy it on what my wage was at that time, so I do feel fortunate to have been able to buy when I did.

Interest rates are high, which is a pain, but you could take a 2/3 year fix and revisit then, hopefully they might be lower.

I really think it depends on how much in demand flats are likely to be in the future, in the area in which you intend to buy.

And what you're income's likely to be, and whether losing money is a big concern.

I've been analysing Land Registry data for North Yorkshire to see what the patterns are re: price drops and gains from 2005 - present amongst 4 different types of property.

I started off with flats, because they're the smallest, so first on my list to look at.

I found that in 2007 the median (not average) price was 137k; then the economy went to shit, and it wasn't until 2016 that they reached 140k, after various falls and long periods of stagnation.

That's an awfully long time to be stuck in a small home.

I also posted a chart yesterday: data analysed by Alex Groundwater, where he took the latest Land Registry sample and analysed by property type, and he found that flats have dropped over 19% in value over the last year.

https://www.mumsnet.com/talk/property/4809779-house-prices?reply=130386286&utm_campaign=thread&utm_medium=share&utm_source=copylink

If you're looking for an 'it'll do for now' scenario, you'd better be certain as you absolutely can that your area is not going to suffer massively over the next few years, or, if it is, that you can still afford to buy your way up to your bigger home.

What's the first time buyer stamp duty allowance for London at the moment? I'm sure I heard the other day that Jeremy Hunt is considering increasing it to 600k to sweeten the London voter base. If he does, that will be announced on 22nd November.

If you think you could do the house in 9-12 months, I'd wait for that. It will fly by.

If your rent is less than the interest and maintenance costs of a house then wait. Prices are not rising and you could save for something you want. Also dont underestimate the cost of selling and buying again in a couple of years, the costs will be considerable so its very expensive to upgrade.

It’s also incredibly stressful and unsettling to move again!! House prices may well continue to fall. Really I would wait!

There's a strong chance that if you buy a flat now and sell it in a few years time, you'll make a loss. A couple of my friends have sold London flats this year for a loss. The general advice of "prices only go up" is a bit dated. The market for London flats is stagnant right now.

I agree with previous post that flats do not always increase in value as much as a house would do. Think a lot of people are trying to bypass the flat stage and save up for a house. A compromise might be a maisonette. They usually come with a garden and their own front door.

I would not buy a flat, unless I'd plan to live there for 5 years or more. It's expensive to buy and sell and flats in big cities can be quite volatile.
Having said that are you sure that you will be able to buy in a year or so? Maybe settling for a flat is not a bad idea if you only have 1 child. You could try for a garden flat or maisonette if you want a garden.

It's my view that buying is better than renting long-term, and it's better to buy what you can see yourself happy in for 5+ years. I don't think a knee-jerk flat purchase would suit your family long-term, but a house a bit further out from your chosen area might suit better. Only you can decide, but I would choose a house over a flat.

In the current economic climate, 2-3 years really isn't long enough at all. and with a 5% deposit, you possibly will have chipped off a very small amount off your mortgage. Waiting 9-12 months is best for you at the moment. Moving so soon afterwards will also be very expensive.

The only flats that have increased significantly in value where I am (SE coast) are garden or balcony flats in large Victorian houses in sought after areas which really are as expensive as a similar sized house anyway. I sold a flat in London last year - identical flats in the same development were selling for 10 to 15% more in 2015.
Given the cost of moving and the uncertainty of the property market in the short to medium term I think it would be worth waiting to buy a property that will suit you for at least 5 to 10 years.

OP I have just given up selling my "starter" home to buy a bigger home. I've been on the market a year and had 2 chains collapse and have now given up rather than start from scratch again.

Seriously don't give up your first time buyer status too readily or something you don't realy want, it was so easy when we bought our first, being in a chain is absolute shite. I would definitely save a little longer especially as houses may dip in price over the next 12 months and it'll cost you in stamp duty too. Xx