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?

I think your 'lovely' might not be the posters 'lovely'- Not being snobby- just being honest.

As a Londoner loads of places that are now considered desirable in London weren’t in the past, for example I walked past drug dealers & prostitution on my way to school. Plus virtually every part of in & around London has nice bits & bad bits so many people miss out on areas because they don’t know about them & think that the whole area is bad eg Croydon or they pay over the odds for say a flat in Morden that is marketed by estate agents as Wimbledon.

I live in north Scotland. My house hasn't really changed in value at all. The flat we had before this which we bought in 2007 sold for the same price last year.

But I have nearly paid off the mortgage so I am better off than renting.

Really I think stagnant house prices are a good thing. I don't want a massive depression as negative equity is a horrible position but just staying the same and allowing wages to catch up seems good. But then it won't benefit those who buy in London and relocate with the profits..

Over the long-term property is a good investment but in the short-term there will be booms and busts.

Yes agreed

just look at Balham and Delboy’s Peckham, or Brockley - impossible to find a nice flats for a decent price in some of those parts and they are totally gentrified compared to even 20 years

elephant and castle is next

very few people can afford to live in the traditional naice parts of London - and there just aren’t that many of those anyway

I live in a flat. There's no cladding and all of us leaseholders own a share of the freehold = no landlord holding us all to ransom😊

It’s sometimes easier to move up the ladder in a falling market as opposed to an increasing one as everything else increases anyway so they gap gets wider.

I do think that Covid changed the concept of London (and other major cities) as there was no need for people to live centrally anymore. Whilst the general economic downturn and increased interest rates has had a general effect on house prices, this is magnified in London.
Things will rebalance, but property is a long-term investment. If you want to move, you’d be better off renting your place out and renting elsewhere until the market perks up.

Not necessarily. It all depends on the relationship between property prices and rental charges for an equivalent property. Yes, rental payments are "lost" to the tenant. But so are mortgage interest charges, stamp duty,.house maintenance costs. There's also foregone profit from potential alternative investments (dividends, stock appreciation) that weren't possible because the house-buyers stuck all their money into mortgage payments.

Internationally, the tipping point from which it becomes more profitable to rent rather than buy is often assessed as the level when property prices reach 20 times the annual rent cost - which would indeed make buying in much of London an unwise decision. But of course the cut-off will depend on individual market specifics and also on other factors such as tenant protection.

www.investopedia.com/terms/p/price-to-rent-ratio.asp

Would you include flats with high service charges and expensive ground rent leases and potential cladding issues? They are getting very hard to sell at all let alone for a profit.

@GrumpyPanda yes, plenty of rich people rent & put their money into other places.

We sold our flat in zone 6, so admittedly not in central London in late 2019 for £450k, I've just seen it's gone on the market for £425k so I think the issue is flats in general rather than your central London location.

There are definitely areas you can buy a house for £500k, friends of our just bought a decent sized terrace in Tottenham for around that - I know this is not the most gentrified area, but people decide what their compromises are, and their priority was being near a decent school and owning a house rather than a flat.

The current generation know that the concept of the housing ladder has long disappeared. But people who bought 20-30+ years ago don’t realise it - and still think houses can double in value over a decade!

Not all flats have made a loss. Garden flats round here seems to be increasing in price very quickly, but it's a short walk to a mainline into London so unsurprising. London was always going to max out at some point, it seems like you've found the tipping point.

While I feel sorry for the couple in this article, it also doesn't make much sense

They were renting as property guardians so cheaper than normal as renting a flat on their own in that area was too expensive.
They were able to buy a one bed only through a subsidy scheme - eg buying a one bed on their own in that area was not possible.

They now want a house in that same area.
But they have never really been able to afford to live in that area - they have been able to do so through choosing property guardianship which is cheaper than normal market rates and then through a subsidy scheme for first time buyers which makes a property cheaper than normal market rates.

If their wages have not risen significantly faster than inflation (through getting promotions), then nothing has changed - they cannot afford to live in that area at market rates at the salaries they earn. Plus they have to pay for childcare now.

If the value of their flat has doubled, the value of the house they want to buy would also have doubled so it's not about that flat price stagnating, it's that property prices in that area are too high for their income.

Which is sad and shows that much more house building is required in London and the SE but it also isn't a huge surprise.
Buying a subsidised property means being "stuck" with it unless your income rises significantly. Or you choose to move to a cheaper area.

The article seems to bemoan the fact there is no subsidy for them to help them move to a house. The last thing the property market needs is more artificial subsidy to support property prices - Help to Buy lead to higher prices for starter flats because it meant more buyers. Subsiding a move to a two bed fixer upper terrace house would push prices higher and the cycle just continues into the next generation when their child won't be able to buy a shed.

@TheWayTheLightFalls I live very close to Brockley and most houses are £1.0m of over. Flats on my road (including my own) are selling for over £500k and they are cheap in comparison to flats in Peckham / Nunhead.

Sure. But freehold houses are available for much less. Not in Telegraph Hill, but on the west side of Brockley or very nearby they are. It’s of course absolutely fine for people to choose a flat on Erlanger rather than a house on a close off Turnham Road, but it’s incorrect to say they don’t exist.