Can you make money on property in London anymore?

[emmeee]

Had dinner with some cousins who are a lot older (50s) than dp and I. They have made huge amounts of money through renovating London properties. Oh and buying back in the 90s.

They advise to buy a small flat and do it up then sell a year or two later. But I’ve run the numbers on some properties and after stamp duty, there’s literally no money to be made? One two bed flat estimates came in at making £5k which we all know would be eaten up by an unexpected cost.

I dont think that individuals can buy london flats and flip them for a profit at the moment no. There might be some bits of the country where prices are rising and materials, labour are cheaper.

The property ladder is broken and there are lots of articles about why but some people refuse to accept this.

No, those days are gone. If you happen to strike it at the right time in an up-and-coming area there might still be some profit to be made, but much less so when you factor in the increased cost of doing the work.

No. Initial costs and renovation costs are simply too high.

We bought in 2020 and just sold. Did make money and could have made more had we not overspent on the kitchen (we did not intend to move when we installed it so many some expensive choices - but did love it!). That said it wasn't exactly an affordable house to begin with, it was in terrible condition on a sought after estate. I don't think making money on a flat is as easy.

We made money a few years ago through sheer luck - bought in an area we could afford that was unpopular, then gentrification happened unexpectedly. But we've been unusual from who I've spoken to, and it wasn't actually a flat that needed much work so the money was entirely because of the location.

I think the advice was poor as London flats are not the best investment at the moment. A house in an area being gentrified would be more likely to increase in value but they are generally unaffordable to FTBs.

Don’t buy a property as an investment unless you’re willing to do lots & lots of research into which parts of the country prices are likely to rise in over the next few years and what sort of properties there will be most demand for.

For most people it’s better just to buy a property as a home to live in & enjoy. If the property happens to make a lot of money when you sell it (as happened to your older cousins) consider yourself very lucky as these things are hard to predict in advance.

The big problem with London flats at the moment is that leaseholds are the wild west, service charges and ground rents are making most properties impossible to sell- much less with any sort of profit.

We made money when selling our London family home, it gained 50% in 5 years, selling in 2020. But that wasn’t our intention and when we sold it was as we were moving out of London.

Looking at prices online I don’t think it would be selling for much more now than we sold it for, and friends recently moved and didn’t make any money on their 5 bed family home in SW London (again, that wasn’t the purpose of the purchase)

I’d agree that the days of vast London property profit might be on the decline.

Absolutely not.

15 years ago yes, not now though. I just sold a small London flat where many neighbours did similar in the 00s. However prices now are the same they were nearly 10 years ago.

If you did this now you would sell it for the price you bought it for plus maybe the cost of renovation. Not taking into account your time, stamp duty, mortgage interest payments.

We bought, renovated, resold a couple of bungalows in the mid 2010s. We made a profit in a stagnant market but these were full renovations: rewired, replumbed, CH installed.

We made a modest profit because DH was able to do the majority of the work himself (electrician) and had useful contacts in the building trade.

If you were prepared to take a huge punt on leasehold reform legislation going through in the next 5 years there might be profits to be made there. But it would be a gamble. And tbh maintenance costs are genuinely higher nowadays so I'm not sure how much scope there is to reduce high service charges.

Yes I think the only way to make a profit on flipping is if you're able to get the work done at cost, or a very low mates rates markup.

I think it’s to do with location rather than actually doing it up. We bought a house in an up and coming area and have done a bit of work (painting, new bathroom), but nothing major and looking to sell now with a 40% profit. It’s all to do with location really.

Possibly, but you'd need to sit on the property for several years, so you'd need to live in it or rent the property out, and I wouldn't recommend the latter...

The cost of initially purchasing the property, the cost of renovation works, the rise in interest rates and the stagnant values all combined mean it's very very unlikely.

If you can find a complete hovel for peanuts, and do the vast majority of the renovation works yourself (though you'd still need a gas certified plumber and a qualified electrician to sign off those works), perhaps you could make a small profit.

Oh to have been the right age to have bought, renovated and sold property in the 90's (I was still at school then)!

It’s not all to do with location, though that is one important element. More important than location is timing.

You made a 40% profit between which years? A bit of painting and a new bathroom is not enough to be able to make a 40% profit on a London flat in recent years.

Nope, bubble has burst. It's the common theme of older people not realising that times were different 15-25-35 years ago, whether it's house flipping, mortgage endowment windfalls, etc. They think they were "so clever" making tons of money but in reality they were just lucky being in the right place at the right time, and doing the same thing now just doesn't work anymore.

I remember Sarah Beeny's property programs around 20 years ago. Time and time again, people had bought and done up a property, made a profit, but then at the end, she'd say that the same "profit" would have been made had they simply bought and held due to house price inflation and that spending tens of thousands and loads of time to do up only got their cost back, nothing more than inflation would have made. I think that showed the reality of house price inflation making profits rather than the renovation. Same applies today, however, without house price inflation, flippers are going to basically just get back the money they spent, with nominal profit if they're lucky, except for the occasional outlier where for some unusual reason, a much higher profit has been achieved - sometimes due to the flipper, sometimes due to outside factors.

I think the latest season of "The Great House Giveaway" also highlights the current state of the market. OK it's not London, but it shows that profits are getting harder and harder in other parts of the UK too, which in the past few years were ripe for flipping profits.

Time and time again, with no fault on the part of the contestants, the houses make a tiny profit and more than ever are making a loss, some making substantial losses. It's only the exceptional ones that make any kind of worthwhile profits.

In earlier series, losses were very rare, and usually pretty small. This latest series has seen some whopping losses.

Main reasons are massive hikes in material costs, cost and difficulty in sourcing reliable tradesmen, shortages of materials, etc.

I think any form of development/flipping is now a mug's game unless you're going to do 90% of the work yourself, to save labour costs, and have a small team of reliable tradesmen on call to do the stuff you can't, who are going to turn up when they say they will and not fleece you nor con you.

It’s a house not a flat and it was over 5yrs, but still a good increase - well we are happy with it!

Previous place was a flat and did absolutely nothing to it. Only lived there for a year and made 50% on that, but that was 5yrs ago.

Yes you were very lucky with both properties but @emmeee is asking about making money on a small London flat if they buy it soon and sell it in a year or two. Very unlikely to make a big profit on that.

Obviously this strategy only ever works in a rising market.
It also works better when property is generally lower in relation to income due to the stamp duty costs.
It also works better when materials and Labour are cheap.
Also when extra taxes are not imposed on second properties.

Plenty of people lost money in the 70’s and early 90’s on property purchases.

I sold a flat before COVID that I'd owned for over 12 years, and my accountant worked out that I'd lost £65k on it over the 12 years for various reasons (like it being overvalued by the original surveyor). I sold it for a discount to the buyer as she had lived in it for a few years, so I thought that was reasonable, but I found out later that she already owned 3 other flats in the same building and let them all out.

Anyway, the point is that making money on flats is very difficult. I sold another flat I'd owned for 10 years recently and sold it for £1k more than I paid for it, so at least no capital gains tax needed to be paid!!

The only properties that make money near me in London are large houses/shops/former religious buildings/retail units that are bulldozed and completely redeveloped into houses and flats.

This is because you are buying the land to redevelop on.

Oh and the local residents make it extremely difficult for any developer to build any units with less than 2 bedrooms.

@taxguru I agree. We were very fortunate to make a really good profit on the sale of our London flat (we'd had it for 15 years and it was a fairly unique property). Other than some updating to reflect wear and tear over the years, we did no major renovation work and walked away with the same profit as friends who had houses and did the loft/ kitchen extension etc etc. It was purely the market rising that meant we did well.

No I think those days are gone, and I think that's a good thing.