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Should I Buy In London Now, Or Wait?


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#1 Anders

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Posted 17 April 2012 - 07:06 PM

Hello. I'm currently planning to buy a house for my children in the outskirts of London. I'm not a UK resident but my children are (they are currently renting).

I've been searching this and other forums and online articles for opinions on whether London's property market is likely to turn down or upward in the near future.

I'm aware that this is a subject that cannot have any definite answers, but the thing is that I wouldn't appreciate to buy a house now, only to find out in the near future, that prices started moving downward. Personally I support the theory that it is best to buy at the beginning of an upturn, but since I have never lived in the UK, I don't have much background knowledge about the housing market, and feel it's difficult for me to "spot the trend".

So, since we are currently witnessing a buyers' market, does this mean now is a good time to buy, or should I wait another couple of months (I'm a cash buyer, if that may be of any significance)? Any advice would be much appreciated.

#2 Anders

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Posted 22 April 2012 - 07:56 PM

Hello,

I'm planning to buy a house in the outskirts of London, but I'm not sure if now is the right time to buy, considering the predictions that the property market may be heading for a downturn.

I'm a cash buyer, but I'm not sure if this would be to my advantage when it comes to negotiating prices, as I've understood that its mainly sellers who are in a hurry to sell that prefer cash buyers.

Coming back to the market situation is it likely that the London property market would see a turn upward or downward in the near future? Should I buy now, considering that it is currently a buyers' market, or should I wait? Any opinions and advice on the above would be much appreciated.

#3 bland unsight

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Posted 22 April 2012 - 10:28 PM

Hello,

I'm planning to buy a house in the outskirts of London, but I'm not sure if now is the right time to buy, considering the predictions that the property market may be heading for a downturn.

I'm a cash buyer, but I'm not sure if this would be to my advantage when it comes to negotiating prices, as I've understood that its mainly sellers who are in a hurry to sell that prefer cash buyers.

Coming back to the market situation is it likely that the London property market would see a turn upward or downward in the near future? Should I buy now, considering that it is currently a buyers' market, or should I wait? Any opinions and advice on the above would be much appreciated.


Welcome to the Forum.

Posted Image

What do you think the graph says?

Should have cleared the worst of the interest-only SNAFU by 2035, after that, fill your boots.
Wendell: It's a mess, ain't it, sheriff?
Ed Tom Bell: If it ain't, it'll do till the mess gets here.

#4 Sine270

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Posted 23 April 2012 - 10:57 AM

Welcome to the Forum.

Posted Image

What do you think the graph says?

Should have cleared the worst of the interest-only SNAFU by 2035, after that, fill your boots.


Your graph is of UK home prices, not of London home prices so it is very misleading. London prices are now above 2007 "peak prices". It is for this reason that I have also decided to buy now.
Strange as it may seem, I want to lock in this price as it could easily go higher in the good areas. Good homes are in very short supply in West London so unfortunately not a buyers market.

#5 thejaksie

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Posted 23 April 2012 - 11:33 AM

I don't think anybody can answer that question for you and you can only get views in the end.

My view (and I am just in the process of selling my flat in central london at a loss and having had it on the market for a year - after 5 years of ownership- and reverting to renting) is that there is a high risk associated with a purchase but each person should decide for themselves whether this is a justifiable risk.Let me tell you that all the stories in the news about london booming and being a safe investment (which I am sure is the only thing you hear as a foreing investor) are simply not based on fact. This is desperation of the property developers and estate agents to find the last person on the planet still wanting to buy in London. The reality is London is not as isolated from the UK (and the European economies) as some might like to believe.

My key reason for not wanting to buy my next place is that assuming current low interest rates and no price appreciation renting is cheaper like for like over a 5-7 ownership horizon. I have just done a detailed calculation in the place I am about to rent and with a 5 year horizon renting is 11% cheaper over the period. This is very fundamental driver for the overall market.

Increase in interest rates (which in my view are very likely over a 5 year period) would make ownership more expensive - very much so actually, ie a 1.5% increase in interest rate would make it 30% more expensive to own in this case (assuming stable rent and no HPI). This is the almost the same for 100% equity as you would need to take into account lost interest. You might think as a cash buyer this doesn't impact you but it does impact the wider market. Foreign buyers are sometimes unaware that a majority of the UK is on flexible mortgages and is extremely exposed to interest rate shocks like the early 90s.

Only increases in house prices would offset this and this is the only reason for anyone to buy as renting is better proposition (yields are around 5% gross and there is amply supply of rental properties).

In my view there are some fundamental reasons why further house price increases are extremely unlikely:

-- the average age of first time buyer is something like 35
- practically noone can buy property without help from parents
- unemployment is up
- salaries are down
- the average house price is something like 6.5x earnings

The mix of the above reasons make the current property market unsustainable, ie this cannot continue for ever and something needs to give. The market is only held up by a very small number of transactions partly by wealthy parents or foreign buyers who don't know these dynamics and believe the newspapers, and some people who still believe in the property dream (living in lala land) and want to buy into the chelsea dream. This is evidenced by historically low volumes (lower now than post Lehman in 2008).

So only if you think interest rates willl stay low forever, employment will increase, salaries will go up materially and the current trend of urbanisation (which is recent) will continue an increases in house prices would be a possibility.

You would have to be extremely naive to believe all of this would come true (but some people do believe this, human nature is to be mostly positive about the future in the end).

In my view you would be lucky to fetch the same for a property you buy now in 5 years. I personally think one of the variables above will change and prices will correct, starting from the east after the "dream" of the olympics has shown its nightmare aftereffect (10,000 unsold flats).

The further you stray from Chelsea the more true the above becomes.

Conclusion outskirts of london ? Avoid like the plague in my view (ps. Of course it could be inflation will increase , interest rates to stay low, and a tokyo 1989 style bubble will follow. you have to make up your mind.)

In the end if you're happy to lose 30% of the house value to support your kids this might still make it work for you, which is why I said this is a personal decision.

#6 thejaksie

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Posted 23 April 2012 - 11:37 AM

London prices are now above 2007 "peak prices". It is for this reason that I have also decided to buy now.


Excellent reasoning

#7 Bruce Banner

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Posted 23 April 2012 - 11:57 AM

Hello. I'm currently planning to buy a house for my children in the outskirts of London. I'm not a UK resident but my children are (they are currently renting).

I've been searching this and other forums and online articles for opinions on whether London's property market is likely to turn down or upward in the near future.

I'm aware that this is a subject that cannot have any definite answers, but the thing is that I wouldn't appreciate to buy a house now, only to find out in the near future, that prices started moving downward. Personally I support the theory that it is best to buy at the beginning of an upturn, but since I have never lived in the UK, I don't have much background knowledge about the housing market, and feel it's difficult for me to "spot the trend".

So, since we are currently witnessing a buyers' market, does this mean now is a good time to buy, or should I wait another couple of months (I'm a cash buyer, if that may be of any significance)? Any advice would be much appreciated.


I would wait, don't listen to the estate agents.
.



----------------------------------------------------------------------------------------------------------
Lest there be any doubt.

No I believe prices will fall and am astounded that a so called Conservative led government could act in such a stupid way. As you can see from today, there are 2,000 HtB applicants and it has been on MSM none stop all day and they make up about 3.5% of a typical months mortgages.

BTL is a good potential way to bankruptcy and yes sometimes I make points to hopefully make people think.


#8 Sine270

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Posted 23 April 2012 - 07:30 PM

Excellent reasoning


LOL Ok not the best of logic from me there. My actual reason for buying is that I'll save a fortune in rent. Putting up 50% and the rest will be paid off in a couple of years. Found a house that we like at the right price and these are few and far between in the areas we like.
Anyone who disagree's take a look on Rightmove and see what it costs to rent a 2 bed house in and around Chiswick, Sheen, Richmond.

#9 Anders

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Posted 23 April 2012 - 07:32 PM

Thanks to all for the feedback.

But what is it that keeps property prices in London moving upward?

- Because the jobs are in London?

- Because of wealthy foreign buyers (are they really that many...)?

- Because "London is London"?

Why is it that London price indexes give the impression that London is isolated from the economic problems that affect prices in the rest of the UK property market?

#10 Sine270

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Posted 24 April 2012 - 06:42 AM

But what is it that keeps property prices in London moving upward?

- Because the jobs are in London?

- Because of wealthy foreign buyers (are they really that many...)?

- Because "London is London"?

Why is it that London price indexes give the impression that London is isolated from the economic problems that affect prices in the rest of the UK property market?


All of the above. Have you tryed calling about any properties you've seen for sale? It didn't take me long for me to realise that if you see something you like you have to be quick. Its wierd to see myself typing this as I've been a housing bear for longer than the site's been set up.

#11 Son of Taeper

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Posted 24 April 2012 - 08:36 PM

Hello,

I'm planning to buy a house in the outskirts of London, but I'm not sure if now is the right time to buy, considering the predictions that the property market may be heading for a downturn.

I'm a cash buyer, but I'm not sure if this would be to my advantage when it comes to negotiating prices, as I've understood that its mainly sellers who are in a hurry to sell that prefer cash buyers.

Coming back to the market situation is it likely that the London property market would see a turn upward or downward in the near future? Should I buy now, considering that it is currently a buyers' market, or should I wait? Any opinions and advice on the above would be much appreciated.

London is a big place.
What postcode are you looking at?
And why would you wait if you say it is a buyers market and you are a cash buyer :unsure:
The views expressed in my posts are my own based upon what I read on other information supplied by other HPC members.
These should not be used a a definitive answer to any posts I attempt to answer.

#12 nuki

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Posted 25 April 2012 - 11:08 AM

There's a good market time to buy and then there's your own good time to buy... no one can really advise you on this. But being a cash buyer, why rent long term and possibly lose money (easy to do the math there, cost of renting over 5 years in London can easily be more than 50K... compare that with the cost of buying/selling and any assumed price drops)

Check the long-term stats by area. London graph might look very different than let's say Acton or Richmond charts. It's hard to find a recession-proof area but for sure you can find an area that's likely to get less affected in a recession.

Buy in an established residential area with good schools and transport links and where prices have been fluctuating less than in others. And buy freehold if you can. If you are a cash buyer, chain free, and can wait, you are in a good position to negotiate a good deal.

One thing that I want to mention though since you seem new to the UK: the process of buying here is awful, as compared to many other countries.

There are many risks involved and no guarantees whatsoever. For instance, there's no legally binding written agreement of sale before contract exchange, therefore anyone can pull out of the sale at any time and screw the other party royally :) Sellers can and will list the property with multiple estate agents, very rarely there is an exclusivity contract (and there is an extra risk associated with that). And estate agents should be generally speaking regarded as your enemy, regardless of whether you are buying or selling. And there is a form of property called 'leasehold' that should have been abolished long time ago like everywhere else in the world... but it isn't, and with that comes a whole host of potential issues.


Disclaimer: I'm a recent first time buyer in London, and I bought leasehold, so take my comments with a grain of salt :)


PS. I thought it was a buyers market too, but I ended up being involved in competitive bidding for 2 properties last month. And I lost a couple other properties to people who offered asking price in less than one week on the market (literally next day after first viewings). I believe it all depends on the area and also to some extent the price tag you're looking at. I ended up buying under asking but not by much.

Edited by anukis, 25 April 2012 - 11:47 AM.


#13 Anders

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Posted 25 April 2012 - 06:28 PM

London is a big place.
What postcode are you looking at?
And why would you wait if you say it is a buyers market and you are a cash buyer :unsure:


I'm looking at SE9.

I would wait to see the direction of the market, as I wouldn't like to buy a house now for 200k, and after a few years or so, realize that its market value has dropped significantly. Re. the cash buyer thing what I understand is that sellers usually don't bother about cash buyers, unless they really need to do a quick sell. So I'm not sure how much bargaining power I will have as a cash buyer. Any advice would be much appreciated. :)

#14 24gray24

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Posted 25 April 2012 - 06:40 PM

Which upsets you more: wasting all that money on rent, or losing twice as much money when house prices drop?

I'd say Wait.
2012 prediction:

banks fall like dominoes in 2013, as funds are withdrawn into PMs.

Sarkozy, Obama and Merkel all fall from power.

the british housing crash is not gradual and slow, it drops like a stone on the day interest rates rise.

#15 Anders

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Posted 25 April 2012 - 06:41 PM

There's a good market time to buy and then there's your own good time to buy... no one can really advise you on this. But being a cash buyer, why rent long term and possibly lose money (easy to do the math there, cost of renting over 5 years in London can easily be more than 50K... compare that with the cost of buying/selling and any assumed price drops)

Check the long-term stats by area. London graph might look very different than let's say Acton or Richmond charts. It's hard to find a recession-proof area but for sure you can find an area that's likely to get less affected in a recession.

Buy in an established residential area with good schools and transport links and where prices have been fluctuating less than in others. And buy freehold if you can. If you are a cash buyer, chain free, and can wait, you are in a good position to negotiate a good deal.

One thing that I want to mention though since you seem new to the UK: the process of buying here is awful, as compared to many other countries.

There are many risks involved and no guarantees whatsoever. For instance, there's no legally binding written agreement of sale before contract exchange, therefore anyone can pull out of the sale at any time and screw the other party royally :) Sellers can and will list the property with multiple estate agents, very rarely there is an exclusivity contract (and there is an extra risk associated with that). And estate agents should be generally speaking regarded as your enemy, regardless of whether you are buying or selling. And there is a form of property called 'leasehold' that should have been abolished long time ago like everywhere else in the world... but it isn't, and with that comes a whole host of potential issues.


Disclaimer: I'm a recent first time buyer in London, and I bought leasehold, so take my comments with a grain of salt :)


PS. I thought it was a buyers market too, but I ended up being involved in competitive bidding for 2 properties last month. And I lost a couple other properties to people who offered asking price in less than one week on the market (literally next day after first viewings). I believe it all depends on the area and also to some extent the price tag you're looking at. I ended up buying under asking but not by much.


That's plenty of good advice, much appreciated. I'm trying to do whatever "homework" I can, to learn the ins and outs of buying property in the UK. I'm still unsure about how to get into contact with a good an honest solicitor, but I'll keep searching for info on this.

I've often read that, once your offer has been accepted, you should ask the estate agent to take the property off the market... but how do you accomplish that if the seller has the house listed with several agents?




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