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?

@swaler I think your 'lovely' might not be the posters 'lovely'- Not being snobby- just being honest. I've been to many areas people describe as lovely all over UK , in some cases they are ok , some are 'to me' pretty grim and yep that includes places like the south Devon coast - the surrounding countryside wasn't grim - but lots of the towns you would have to pay me to live in- just masses of places in poor condition or empty of facilities - at the end of the day it comes down to affordability- most people have got limits and the truly lovely places area but few and far between and usually very expensive or poorly connected.

The fact is house and flat buying in UK is a big gambling risk - for most it has paid off over long periods of time, sometimes in short periods but it isn't a guarantee- the one thing it does but to some extent is security of tenure so long as you keep paying and unless you have social housing renting doesn't do that - we rent a very lovely house- one we couldn't buy and pay a fair whack to do so but every 18 months I'm panicking will they renew? How much will it go up ?etc

I've said it before and I'll say it again - In the long term, property always increases in value.

The demand for flats has fallen, though, due in part to the fall out from Grenfell (cladding, sudden increased liability for huge remedial works in management fees etc) which means that people are more risk averse. Even if the flats are not subject to cladding, people are scared of unanticipated joint costs, so most people will avoid.

As far as I can see, houses are maintaining their value in real terms, rising in some areas so I think it may not be London prices. Would need to test this inference, though, by comparing to the rise/fall of prices in flats elsewhere in the country though as I could be talking nonsense!

Well it’s not difficult to work out why that may be - it’s market forces and capitalism…. London is the capital and hub of our financial services sector

unless you are expecting banks and investment firms to set up in a market town up north, there isn’t another way is there

and truth is many of these firms are goikg back to working in the office

Mine has gone up £100k since we bought it 7 years ago. You should have bought a house in Leeds!

@Namechangedforthis25 ”and truth is many of these firms are goikg back to working in the office”.
Yes, even if it’s only 60%, it’s enough. My company have said ‘the majority of the time’ should be in the office for my site.

unless you are expecting banks and investment firms to set up in a market town up north, there isn’t another way is there

Why is this such an outlandish idea? The cost of basically everything is lower outside London (wages, homes, business rent etc) so businesses choosing to stay in London is pure snobbery imo.

Flats go in and out of fashion as does city living. The attraction of a smaller central property waned during the pandemic and people are valuing space, due to work from home but also wanting to save money

I think with property prices you need to think long term and also about the added benefits of the security and stability owning your home gives you.
London market might be a bit non typical, flats may also be impacted differently by the market especially if there are service charges, cladding issues, short leasehold etc.
However DH bought his first house in small town in home counties 1988 at peak boom for 63k and sold it 9 years later in 1997 at a loss for 59k, by thi point property prices had recovered from the early nineties when lots of people were in negative equity.
However I still think buying a house is a good thing to do for many reasons and (providing mortgage payments are manageable) unless you are selling up and living in tent, or moving to a much cheaper area, house prices are all relative anyway.

Might be an area / price bracket thing. We sold our south east London flat 2 years ago for just under £500k, having bought for £430k 3 years earlier. Rightmove suggests things are pretty similar for that type of flat.

London flats will be less attractive to wealthy foreigners now because of Labours Non Dom change in tax policy and other taxes. Wealthy foreigners are selling and leaving UK mostly London, because less tax in most other countries and their money is going with them. I understand Italy has a 5 year ''no tax'' to wealthy foreigners who move there - I know someone who has done that (and he is making a lot of money there now too - in finance).

My house has gone up considerably. Was worth 750k in 2020, last year was worth 840k, I imagine it would be worth even more now judging by sold houses. It depends where you live. Those are sale agreed prices btw. The first time our buyers didn't pull their finger out in time and we lost our purchase. The second time, the buyers gave us a months to find somewhere and the property we’d put our house on the market for was withdrawn. So we’ve stayed out. We are now unfortunately priced out of an upwards move due to a change in finances.

Just chucking in a Scottish perspective here. Flats aren't seen as lesser up here because we don't have the whole freehold/leasehold stuff. If you buy a property, you own it. I live in a Victorian tenement flat in Edinburgh, our local secondary school is one of the highest performing in the country and we have gorgeous shops and supermarkets on our doorstep.

Tenement flats are a large part of the housing stock in all our towns and cities, and they were built to last. Cladding and leaseholders don't affect them at all. (roof repairs and occasional mice, maybe!).

It also really depends whether you got a good deal in the first place, if there wasn't much available or you were in a hurry to buy you may have paid a bit over the odds. You also haven't been there very long, it's a bit like investing in the stock market, you hope things will go up in the medium to long term 10 years plus, at times it can be volatile and go up or down rapidly but in the long term a steady growth.

Edit: Also if the market goes down it means you can buy your next property cheaper, so if you are buying as a place to live (not as an investment) it really doesn't matter if prices go up or down.

There isn't the same infrastructure though. It's a vicious circle, London is more attractive because the money has created housing, transport and leisure opportunities that make London more attractive and so it goes on.

It's not a surprise.

During 2020, properties were selling fast and well over asking price as stamp duty had been frozen during that period.

End of 2022- cost of living- interest rates up, fewer people can afford a mortgage and house prices growth has now stalled.

The value of the house always depends on the current market.

4 years is chuff all though isn't it?
What you have had is security of tenure. You haven't had to move because someone wants to sell, raise the rent or you have asked for something to be fixed. You can decorate how you like.

I think the issue here is isolating a moment in time. A bit like getting in the stock market for 3.5 years and moaning you’ve lost money: short term investments can go wrong.

Ownership over the long term makes sense (usually) but people often vastly over estimate the benefit of house price rises. It isn’t a given.

Flats are particularly vulnerable as few chose the option over house.

Because it is far more efficient to have knowledge industries concentrated in large cities.

When your advantages is primarily human capital (eg skilled workers), you need to be located in areas with higher numbers of potential staff.

If Company A sets up it's HQ in Taunton or Carlisle, every time it needs to hire a finance professional/software engineer/lawyer/quant/biochemist/geneticist etc, it will likely need to persuade them to move to this small town as it's unlikely they live there already. This narrows your pool of potential hires down significantly as most people don't want to move every three to five years for each job change and people tend not to work for the same company for decades any more

This is why there is a clustering effect of industries in an area - why are banks in the US and Germany are largely headquartered in New York or Frankfurt as opposed to Chicago/LA or Berlin? It's because there is then a large pool of potential staff and clients there already.

Life sciences in the UK are clustered around Cambridge and London for the same reason - access to bigger pool of suitable staff. If they were in Falmouth or Lancaster, they would struggle to get staff given there will be few PhDs in niche pharma related subjects based there.

It's not snobbery, it's economics.

Flats are always a massive risk as you do not own the land they are on. I come from a developing country and no one from my background would ever purchase a flat - look at the catastrophe of the cladding scandal? And now the freehold owners have started selling fucking airpace! it is outrageous how little security you have when you pay so much imo. Buy a house and in time it will appreciate. Land is a massive asset in a small country with a growing population.

London property prices are so ridiculous that at some point the pool of people willing and able to pay them is going to dry up.

Labour have now unlocked ‘land’ so it’s no longer being artificially made a scarce resource.

Why does it matter what it's worth unless you're wanting to move? It's your home not a savings plan.

Harsh...but fair 😀

Conveyancer here. Property prices in 2020 were ridiculous due to covid. We warned Clients and they still went ahead. Now lots of them are experiencing what you are.