Stagnant home prices - why don’t more people know?

[swaler]

We live in inner London. Hardly anyone lives in a house where we are, it’s just flats. Many of which have private outside space.

We bought ours in 2020 for £770k. We just got it valued at £740k, four years later. We’ve spent over £30k on upkeep and £13,500 on SDLT. Moving costs etc upwards of £10k. So we’ve basically made no saving really vs the cost of renting.

Our neighbours have a much bigger garden flat and they bought for £1.8m in 2014 and it’s now valued at £1.6m. So they’ve lost a significant amount of money in real terms.

But why then do people insist that buying property is the only sensible option?

Possibly partly because they are flats rather than houses. Houses are always a better investment (provided they aren’t leasehold houses).

No one really lives in houses in inner London unless you have 3-4m+

Buying property can’t be viewed in the short term. The economy is dire right now. First time buyers can’t get on the ladder. People aren’t selling starter homes to get into bigger properties because they can’t afford it. My friend was on the market 18 months living with her XH because they couldn’t sell, neither could buy the other out or rent as well.
Over time, unless there’s an expensive issue like subsidence, a property should gain value (but you won’t see that in the current climate after 5 years)…whereas you’ll never gain money from renting.

Probably because most people aren't concerned by inner London property prices, and outside that high-income pity party bubble the property market is quite different.

Spending £30k on upkeep over 4 years is not the norm, especially in a flat. I assume you got a new kitchen and bathroom or something?

I’m guessing your flat would probably be about £2500 pcm to rent out, so you would have been spending £30k per year in rent. So you are still ahead as a buyer - you’ve spent £30+13+10k as a buyer, plus £30k depreciation. £83k loss in total. If you’d been renting, you’d have lost £30x4 = £120k over the four years.

I think PP is right tbh. Flats (barring super prime and similar) will always be more susceptible to the circumstances.

“No one lives in houses…” - well, you can / could have take/n your considerable budget and apply it to a house somewhere slightly further out. I live in south London, zone 2. A freehold house here is anything from £500k - £1.8m depending. Lovely high street, excellent schools etc etc.

I think it’s well known flats are depreciating, it’s a mix of lack of out door space following Covid and the whole cladding issue. People don’t want them,

I’d be very interested in knowing where a lovely part of zone 2 has houses for £500k 😀

More people "don't know" because most people don't live in flats in inner London and have no interest in what is happening to prices there.

Oooh where @TheWayTheLightFalls ? I’m desperate for a house not too far out but only have £600k ish

Because your home is secure. Smarting a little here as landlord is selling up. We are trying to buy and hopefully will do so this year and cannot wait.

Renting and home ownership are also not directly comparable purely financially. Even though you may have not been financially ahead with home ownership, you have from a housing security perspective as you haven't had to worry about stability

I live near Brockley, SE4. You can plug that info into Rightmove, select “House” under property type and then sort by Lowest-Highest Price.

The cheapest currently is £410k or so, in rather poor condition aesthetically, and then it goes up from there.

Obviously people make all sorts of decisions about what is important to them and what they want in their homes - as you did. But this idea that the minimum price for a house is in the millions in inner London… you and I disagree about at least one of those definitions.

Property is not guaranteed to rise.

Ask me .- we.had negative equity in early 90s

Ask anyone who bought just before credit crunch.

Both the above have recovered but it took a while if you bought at the heights just before them.

if you look at mortgage costs from when you bought to now. The cost of your flat for any buyer has increased significantly even if the "value" you will receive has fallen.

My DS is buying and I'm.really worried but he needs somewhere to put down roots and more space. Somewhere he will buy furniture for and that may then give him 2 notice to leave! Somewhere where he can paint it a daft colour that he likes, where he can nail his pictures to the wall. Somewhere big enough to invite mates. These are the reasons he is buying now. He's waited until he has a decent deposit to get a good rate and give some buffer against drops.

The property market always has dips and rises so you need to take a long term view.
In 20 years or however long you have left your mortgage will be paid off. Those who are still renting with have to find 3k per month to rent a similar property including into their retirement. Plus you have no security renting.

Such a chip on your shoulder!

I live in a terraced house zone 3. Prices are three beds are £1m-1.3m. They sell quickly and increase as we are walking distance to three good to excellent primaries, tube/train and parks.
I also own a flat in Fulham. It is true it hasn't appreciated much - I spent £40k on it when I bought it a few years ago and I'd probably make my money back. But I think the killer with the flat market is service charges. The newer ones with amenities like gyms can be astronomical. Plus in prime areas it's a way for foreign investors to park money.
I still think buying is better than renting - I love my flat and may well end up in it eventually. The price to live in such a great location is worth it to me.

In years gone by property was always a good investment, and always went up.over the long term.

The last 5 or 6 years this hasn't happened. I ''sold' my house for 475k ( it fell through) in 2019 and it hasn't increased in value since. Which is a bit of a bugger because I had to move for work so rented it out. I've had to do a lot of work on it which I'd hoped would be covered by a rise in value. I feel like I've lost this money on it as the 'sale' took into account that the work needed doing.

Where I live now there are quite a few houses on the market bought in 2020, lots of people made a big move and regretted it. They are all trying an increase in value from 2020 prices and all the houses are not selling. 2020 prices were inflated due to high demand at the time because of Covid.

I’m not sure anyone in the last 10 years has been suggesting that inner city London flats are a good investment idea, unless you want to rent it out.

But I also don’t think flats are a good investment, certainly not at the minute and I doubt they’ll ever recover.

I’ve got a flat and a house about 30 mins away from each other. I bought the flat for £190k in 2012, and its latest valuation in 2023 was £130k. I bought the house for £300k in 2019 and its latest valuation was £410k in spring 2024. The type of property matters a lot in terms of investment potential.

I don't think inner London can be used as any kind of example for the wider UK market. It's a weird bubble of its own.

Really?
MN is full of apparently high-income people bemoaning their lot.

It is only five years since 2020 and that includes a global pandemic and inflation crisis.

I am also in inner London (zone 1) and bought a flat (ex council) in 2014. I sold it in 2021 for 32pc more so it isn't true that the value of all flats has fallen over that time.

Rightmove suggests it's value has fallen by 4pc from 2021 to now though so it is a product of the last few years being difficult.

I stayed local when I moved into a little house and it's value has risen since 2021 but I've also spent 100k doing it up so when that is taken into account, it is probably about zero.

Surely you have to take interest cost on the mortgage into account. Assuming a conservative 4% on a 75% LTV would be around 25k a year in interest (essentially a mortgage is renting to the bank). Net annual saving of 5k per year vs renting is quickly blown away by maintenance cost as well as service charges. A disastrous financial decision in retrospect, indeed.

This doesn't answer your question directly, but I was interested to see some research a couple of weeks ago showing that since 2015 (when London prices peaked relative to ex-London), price in London are up just about 15% against something close to 40% outside London. I guess maybe the affordability factor finally caught up after 20 years where London tended to outperform, whereas elsewhere prices have changed broadly in line with wages / inflation.

Is it reasonable to assume you bought in LATE 2020 when prices had already started to shoot up?

I'm surprised at that, I would have expected London prices to be going up more than elsewhere.

I'm in the midlands and a house has just gone up for sale on a small road I viewed a property at 6 months ago. It's £75,000 more although it's the same size and layout, and it has a much more dated interior. So I assumed prices were still going up.