5 year plan - what to do re housing!

[Charlottef94]

Looking for some advice. We currently live in rented 1 bed in London, both working in London, expecting first baby in September.

We have managed to save up a small 10% deposit to buy, we can't afford more than a small 2 bed flat in nice part of London, or a three bed outside London in walking distance of a station to commute within 1-1.5 hours and in need of renovation. We want to have another child when current one is around 3.

I'm worried about how both commuting + kids will work if we live too far from London as grandparents will not be near. I'm not sure if buying for 3-5 years is wise to not make a loss when buying a small place we may want / need to leave? Also, we haven't even considered schools in any of these locations as it feels so far ahead but maybe we should be.

I'm now wondering if we should continue renting in a 2 bed, paying more than we currently are for our current rent, but putting our deposit into investment for 3-5 years instead and then buying, we will be on higher salaries / have increased our deposit for a nice area with good schools.

It's all seeming like a big commitment when we currently don't have the budget for what we'd want really. I'm unsure if more will come onto the market when the interest rates go down, or if the house prices are just increasing really fast.

What would you do in our situation?

Stay in your current 1-bed flat as long as possible for now. No need for a second room with a baby. Your baby can room share with you until age 2 or 3. Some families manage it even older.

That gives you 2 or 3 more years to watch the market and save.

I would buy. Generally three years is given as the minimum to stay in a bought property to make it worthwhile financially.
although there are always peaks and troughs, property overall increases in value and should be a better investment than savings.
also, you’ll have your own place to have your baby in and not worry about a rental being sold out from under you.

A risk of holding off buying for 3-5 years is whether property price growth outstrips your ability to save / grow your deposit. Admittedly talking a few years ago now, when the market was very active, but we bought our first (very modest) home in a London commuter town in 2012 for just over £200k and then sold it six years later for £400k. We had made big improvements which increased its value, but the largest factor was market rises. If we hadn't already been on the property ladder we'd not have been able to afford our original house as FTB at the price we sold it, our salaries hadn't gone up that much (plus had two children by then).

What would be your current budget for buying and where in London do you need to be for work? Do you have flexible hybrid working to reduce commute costs if you did look further out?

This is tricky. Previously I would have always said buy. However friends have lost money on London flats in the past 4 years, where they bought at a peak and sold for a loss. They would have been better off renting.

I would buy a 2 bed in a nice part of London, make sure it has things about it that will have broad appeal when you come to sell in 3-5 years. For example buy on a quiet road with decent transport links and buy in a catchment area for a good primary school. Even if you don't end up ever using that school, it will be a selling point when you come to sell.

Can you put some figures down for us?
Flats in London are not selling so quickly anymore, or for such premiums.

My personal feeling is to buy in a commuter area with the best possible schools, then focus on finding more flexi jobs to minimise commute. Stamp duty is a huge amount to find each move.

But where do you actually WANT to live? Making either option work, either in London or out, and for you to be happy with your choice, will be highly dependent on whether you are there because you like it or because someone else told you it was the "right" place to live.
What life do you picture yourself having with your kids - do you want to be going to big London museums, events etc with them - hanging out with friends in the city? Do you want them to be running around in and out of a house an garden, going out for bike rides etc? Picture the life you really want.

I would be inclined to buy sooner rather than later. What is your budget and to where do you need to commute? Roughly where are you renting now and how much do you pay?