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?

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

Because you're only looking at a specific 4 year period in your already very limited (flats in inner London) example. The market always has ups and downs, but you surely must be aware that plenty of people have made £££ on property in other periods and places. My first flat in zone 2 doubled in price between 2002 when I bought it and 2007 when I sold it. My second property - a house in zone 5 - stayed completely stagnant between 2007 and 2011 even though we spent ££ developing it, because the market was in bad shape. The zone 4 house we're in now has again doubled in price since 2011, but we're staying put so won't 'make' anything on it, but it's a secure home we'll own when the mortgage is paid off.

In short, and as common sense should tell you anyhow, you can't extrapolate anything from your 4 years in a zone 1 flat. And besides, whatever some people insist, there can be benefits to renting too so do that if you prefer it.

https://www.standard.co.uk/homesandproperty/property-news/london-housing-market-flats-house-prices-flat-prices-b1072283.html

So people I know who would have traditionally bought the 600/700k flat in z2/3 are now skipping that stage & buying a house in z4/5 which does make sense if you are older and planning dc asap. Stamp duty alone on moves is £££.

We plan to move in the next 5 yrs to a bigger house but that will be the final move & it will be cheaper than planned. I don’t want to be paying ££££ just on interest.

Presumably the increase in WFH will have affected London prices

Buying property is good if you need a home. It’s secure.

i bought my current house in 2003. I’m sure over the years it’s increased in price overall, though at times it’s fallen. I genuinely don’t care, its numbers on a piece of paper. They’ll carry me out in a box, how much it’s worth means nothing.

if prices are falling/staying stagnant and that discourages property investors and btl landlords I’m happy with that. It’s them that have artificially pumped up house prices meaning it’s so hard for young people to get on the property ladder. I’d be delighted if all houses fell by 50% overnight.

the interest rates are making it harder for landlords to make a profit I guess. A friend of mine owns 12 BTL houses and says if she was starting out now in property rental she wouldn’t do it as would be so hard to break even. She’s in it for long term investment not income though and she does say prices have risen since she bought so she’s in a good place. When her mortgages are up for renewal which will probably be at a higher interest rate than currently she says she’ll sell some. That and the new Labour policy about rentals having to be cat C for EPC by 2030 is going to make a lot of people sell. Prices come down overall then so it’ll probably get worse.

Because you're only looking at a specific 4 year period in your already very limited (flats in inner London) example. The market always has ups and downs, but you surely must be aware that plenty of people have made £££ on property in other periods and places

But the market did change after the 08 crash in terms of lending & the economy never really recovered from then. Then we had wage stagnation (although this started under Thatcher), high rents, less social housing, changes to BTL & we have an ageing population. The house I grew up in was 60k in the 80s, it’s now 1.8m plus, it won’t see anything like the same growth. Also the country is broke so some of that housing wealth will be tapped into either directly or indirectly.

This is a really interesting article. We were FTB in 2018 with a budget of £400k ish. We had a choice between two bed flats in Stockwell / Brixton where we were renting, or moving further out to buy a house. We decided to go for a 3 bed house south of Colliers Wood, which we paid £380k, as at the time we were worried that we would end up stuck in flat that would be too small for us. There were many times pre kids when I thought maybe we should have stayed nearer to central London but actually, it probably was the right decision at the time. We've spent £100k on loft conversion / garden landscaping / general renovations in that time. A house across the road with the same layout but a north facing garden sold last summer for £575k so based on that i hope that when we come to move, we'll have made a decent amount of profit in addition to the equity we are building up.

Because ‘people’ are talking about the whole country, not just inner London. You are not that important. Frankly we have more important things to worry about than if someone has made a loss on their £1.8m property!

Owning property is always better than renting long term:

1. you are paying your own mortgage than someone else’s
2. and land is limited in supply - so if you own some of it, it will go up in value as more and more things are built on land

it’s common sense.

however there are variables to this - flats without much space or garden will always be on one end of the spectrum to house with potential to increase space and a garden

and yes there are many houses in Greater London available for your price point

that said I would also be happy to buy a two bed flat in zone 1 or zone 2 but to rent out

All the free money and the near zero interest rates pumped up the market, everywhere. Now borrowing actually comes at a (still quite a historically low) cost, wages are stagnating and taxes going up, the market is finding its new level.
Will be interesting to see how the new government intervenes with the whole leasehold and service charges situation. Personally I don’t think anything will change.

We sold our flat 7 years ago ( London zone 4) for £475K and the same flats are now selling for only £10K more. Meanwhile our house, only around the corner, has certainly gone up in value. I think flats hit a ceiling a lot quicker than houses generally and also the change in legislation with 2nd properties has led to fewer people buying to let which was very popular with flats. They also seem to sit on the market for longer than houses. I am grateful we sold when we did as prior to our sale they were selling for less but on an upward trend. Then it stagnated.

Plus if you invested the deposit you would easily have 5% pa return on that. 50k deposit invested minus tax is 2k a year.

Then stamp duty and legal fees for buying in the first place is 15k+

I live in London and I sold my mouldy old flat to rent a nice shiny new one for exactly this reason!

In the long term buying is better but in many cases it isn’t.

We have had to leave our last 3 rented homes/apartments because this landlord is selling. The benefit of ownership is that nobody can sell your house from under you

Because flats in the centre of London are an incredibly niche part of the overall UK buying market, appealing to a very particular niche demographic?
I'd suspect the market of "up to a million" flats are targeted at millennial "new money" buyers, and much of that demographic were just starting to make good money when Covid hit, and have now thought "fuck it" to inner London. They are now remote in the home counties, or commuting in.

London just isn't the hot ticket for living in for young professionals that it was 10 years ago.

Well the bank can if you can't pay your mortgage!

• Stamp Duty
• Foreign investors leaving London
• Rising Crime in London
• Interest rates
• Landlords selling up

I think it depends where you are - I bought my first house in 2020 and sold it late 2021 for £40k more (no work done just a bonkers market), my house now is a new build which tend to dip in value initially but is still worth slightly more than when I bought it 18 months ago - I’ve friends in the same position, nobody I know who has sold within the last 3-4 years has lost money.

The house I grew up in was 60k in the 80s, it’s now 1.8m plus, it won’t see anything like the same growth.

Thank god it won't!

This is such a nasty comment. My guess is that to afford such a flat the couple both work 9 till at least 8 every night with plenty of emails overnight/weekends so need full time daycare (2000+ in central London) plus babysitter several evenings (another 800 a month)... so their disposal income would be far less than out of London less high powered jobs. This disparity is pushing more and more educated people to leave the country and it's just not good for the country. So if we could not compound it with unnecessary envious comments like this it would be helpful

Because the current value of my property is irrelevant to me. I own a home I am happy in with no mortgage, who cares if it has gone up or down? It only matters if you need to move.

I'd still rather buy a stagnant/depreciating home of my own than be subject to the madness of the private rental market.
We bought in 2022, house recently valued at about what we paid+what we spent on the new kitchen, so accounting for moving costs, a loss. But it is our home, we can afford it, it is a stable place to live and call our own. The benefits of home ownership are not only the profit.

My DD is buying a flat now in London. It was on at 270 but the vendor has accepted 240. It looks like the peak was just a few years ago and prices have dropped since then but are now making a slow ascent back up - about 2% a year.

Obviously. I didn't bother to write that because it's clearly taken for granted.

But this is completely different to a landlord deciding to sell.
If you're defaulting on your mortgage you know it's happening, you have avenues of conversation with the bank etc. If you always pay your mortgage then bank will never repossess.

In a very clear contrast, a landlord can one day say "I'm selling" and that's it. We have never missed a rent payment.

So to say a bank can repossess is a completely different scenario and does not affect the fact that renting is a lot more unstable than owning.

Peckham and Camberwell have plenty of two and three bedroom houses under £600k.

Are they beautiful period houses, no. But they aren’t awful either. Mostly new builds in housing association estates.

I do think there's a point at which property prices cannot just continue to increase - wages aren't matching house prices, so it's inevitable that at some point the 'value' has to drop. It's utter madness what people are paying in London etc for modest homes.

It sucks when you are the person who gets stuck though. My parents went through this in the late 80s. I'd try to console myself with the thought that you do have housing security (as much as anyone who isn't rich) and at the end of the mortgage term you will own a home. It might not be your dream home, but it will be yours nonetheless and that's so much better than it is for many other people.

I think we've got to get back to viewing houses as homes and not investments, so that if the value drops and you can't sell it, you are still happy to live there

What's not good for the country is having all these "high powered jobs" concentrated in such a small area of the country.

"their disposal income would be far less than out of London less high powered jobs"
In that case it's a choice.