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LuckyOne

Buying A House Now Is All About Loss Limitation .......

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We all know that we have been through a dead cat bounce / bull trap / bear market rally (in many asset classes and not just house prices) in the last few months. I hope that my observations and question are not misinterpreted. I am still as bearish as ever as rental yields and affordability ratios still mean that house prices are unsustainable at these levels.

As some on this site have observed, there are people who have legitimate reasons for wanting to get on with their lives and buy places to live even if their outlook is for lower prices in the medium term.

Apologies for yet another London centric question but my thoughts and question are as follows :

- Prices for houses are not homogenous. Changes in the price of each house will be positively correlated to changes in the overall market but not consistently so.

- I have always thought that the most sensible thing to do is to buy the worst house in the best area. This view was probably clouded by market behaviour in a bull and then bubble market.

- I am now coming to the conclusion that the best houses in the worst areas are actually less risky to buy in a decling market.

- My observation with respect to price action during the bubble is that postcode snobbery has resulted in a quantum overinflation of prices in "desirable" postcodes and only a massive overinflation in "average" postcodes (assuming that quantum = a multiple > 1 of massive).

- Does anyone have an opinion about the proportional loss that could be expected in "posh" bits of London compared to "normal" bits of London?

My assessment is that the "posh" bits of London are still priced at 400% of 2000 prices while the "normal" bits of London are priced at 150% of 2000 prices. While buying in either area will still result in a capital loss over the next 5 to 10 years, does anyone have any opinions about the areas of London that are most interesting from a loss minimization perspective?

Examples might include things like Highgate is x% less risky than Hampstead, Chiswick is y% less risky than Chelsea or Ealing is z% less risky than Wimbledon. My view is that x=10%, y=20% and z=30%.

y and z would probably different if it were not for the risk of changes to arrivals flight paths into Heathrow from the east if the third runway gets built. More parts of Chiswick and much of Wimbledon could both be on the approach to Heathrow if the third runway gets built which depresses their value relative to Chelsea and Ealing.

Thoughts and opinions would be most appreciated.

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We all know that we have been through a dead cat bounce / bull trap / bear market rally (in many asset classes and not just house prices) in the last few months. I hope that my observations and question are not misinterpreted. I am still as bearish as ever as rental yields and affordability ratios still mean that house prices are unsustainable at these levels.

As some on this site have observed, there are people who have legitimate reasons for wanting to get on with their lives and buy places to live even if their outlook is for lower prices in the medium term.

Apologies for yet another London centric question but my thoughts and question are as follows :

- Prices for houses are not homogenous. Changes in the price of each house will be positively correlated to changes in the overall market but not consistently so.

- I have always thought that the most sensible thing to do is to buy the worst house in the best area. This view was probably clouded by market behaviour in a bull and then bubble market.

- I am now coming to the conclusion that the best houses in the worst areas are actually less risky to buy in a decling market.

- My observation with respect to price action during the bubble is that postcode snobbery has resulted in a quantum overinflation of prices in "desirable" postcodes and only a massive overinflation in "average" postcodes (assuming that quantum = a multiple > 1 of massive).

- Does anyone have an opinion about the proportional loss that could be expected in "posh" bits of London compared to "normal" bits of London?

My assessment is that the "posh" bits of London are still priced at 400% of 2000 prices while the "normal" bits of London are priced at 150% of 2000 prices. While buying in either area will still result in a capital loss over the next 5 to 10 years, does anyone have any opinions about the areas of London that are most interesting from a loss minimization perspective?

Examples might include things like Highgate is x% less risky than Hampstead, Chiswick is y% less risky than Chelsea or Ealing is z% less risky than Wimbledon. My view is that x=10%, y=20% and z=30%.

y and z would probably different if it were not for the risk of changes to arrivals flight paths into Heathrow from the east if the third runway gets built. More parts of Chiswick and much of Wimbledon could both be on the approach to Heathrow if the third runway gets built which depresses their value relative to Chelsea and Ealing.

Thoughts and opinions would be most appreciated.

I think its very hard to generalise - lots of unique factors in each area.

I can only really comment on Hampstead Garden Suburb, which is a conservation area in the LB of Barnet (parts of N2 and parts of NW11), and I think it will hold value better than neighbouring areas. HGS is a posh area where peak was probably 200% of 2000 prices rather than 400% like Hampstead. Therefore I don't think it will fall as far as a posh area that got to 400% of 2000 prices.

The great thing about HGS is that the HGS trust has photographed all the houses and using one of the house price site very easy to work out from agents photos what each house is worth.

http://www.hgs.org.uk/mystreet/index.html

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I would like to say that anywhere within 1 mile of the City and Canary Wharf are 10% more risky than anywhere else but unfortunately people have shockingly short memories.

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My assessment is that the "posh" bits of London are still priced at 400% of 2000 prices while the "normal" bits of London are priced at 150% of 2000 prices. While buying in either area will still result in a capital loss over the next 5 to 10 years, does anyone have any opinions about the areas of London that are most interesting from a loss minimization perspective?

I guess thamesmead is the most realistically priced then. If they dont bulldoze it in 5 years time (and rebuild it should we have another credit bubble)

As i said in another thread, ive been tempted by some prices in some non-prime areas, but we have to imagine what these places will be like after the fall of the Welfare state. London will be a warzone, my advice would to be somewhere like St. Georges Hill or another big private estate with non-state funded security if you must live in London.

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I guess thamesmead is the most realistically priced then. If they dont bulldoze it in 5 years time (and rebuild it should we have another credit bubble)

As i said in another thread, ive been tempted by some prices in some non-prime areas, but we have to imagine what these places will be like after the fall of the Welfare state. London will be a warzone, my advice would to be somewhere like St. Georges Hill or another big private estate with non-state funded security if you must live in London.

Where in London is St Georges Hill?

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The Airport - since that is the way out of the country

London will be losing jobs (especially in the government), and depopulating.

Why would you want to own property there/

Escape while you still can !

I agree with part of that statement, but would not be driving to the airport for a permanent exit more like a long drive south west of London. ;)

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The problem with London is that the genuinly nice areas are extremely expensive. The quite nice areas are often quite grotty, and are still expensive. The cheaper areas are just plain grim, and not exactly cheap anyway. Its for these reasons and others that I moved out to Sussex and commute in daily.

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Where in London is St Georges Hill?

(If that's a genuine q ) It's in Weybridge - huge gated estate of expensive houses, some of which would look perfectly at home in Beverly Hills.

Schoolfriend of a daughter used to live there - it was always a nightmare trying to find the house and at night it was pitch black - no street lights - the kid's mother apparently had to take a torch when she walked the dogs at night. Plus, among all those dark trees and heavily planted areas of huge shrubs were 100s of what we call 'lurky' areas at night. It gave me the creeps - TBH I'd never have felt safe there, indoors or out, without a couple of large dogs.

Also, it was miles to walk to any public transport. As a result of this and all those 'lurky' areas even at 14 or so this kid wasn't allowed to go anywhere alone, even in broad daylight. Mum or dad taxi everytime.

To reply to the OP, though, if you're talking family houses then IMO proximity to good schools will always be a factor. Therefore I'd go for the worst house in the best area, where 'best' = near good schools.

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(If that's a genuine q ) It's in Weybridge - huge gated estate of expensive houses, some of which would look perfectly at home in Beverly Hills.

Schoolfriend of a daughter used to live there - it was always a nightmare trying to find the house and at night it was pitch black - no street lights - the kid's mother apparently had to take a torch when she walked the dogs at night. Plus, among all those dark trees and heavily planted areas of huge shrubs were 100s of what we call 'lurky' areas at night. It gave me the creeps - TBH I'd never have felt safe there, indoors or out, without a couple of large dogs.

Also, it was miles to walk to any public transport. As a result of this and all those 'lurky' areas even at 14 or so this kid wasn't allowed to go anywhere alone, even in broad daylight. Mum or dad taxi everytime.

To reply to the OP, though, if you're talking family houses then IMO proximity to good schools will always be a factor. Therefore I'd go for the worst house in the best area, where 'best' = near good schools.

I was wondering as the only St Georges Hill is the one that you mention in Weybridge, which is certainly not London. I live quite close and you do hear rumours of some assaults taking place on the Hill despite the security. I used to go to the tennis club but have now joined David Lloyd as gym is much better. I know a chap doing a couple of builds on the hill at the moment - selling for >£10m a pop - crazy money!!

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The problem with London is that the genuinly nice areas are extremely expensive. The quite nice areas are often quite grotty, and are still expensive. The cheaper areas are just plain grim, and not exactly cheap anyway. Its for these reasons and others that I moved out to Sussex and commute in daily.

From where, to which station, and how long does it take door to door?

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From where, to which station, and how long does it take door to door?

East Grinstead to Victoria (also trains to London Bridge). Train takes just under an hour, always get a seat as we are at the end of the line. 3 mins drive at the East Grinstead end, on street parking then 5 min walk to station (could do the whole walk in 17 mins though but sleep is precious) and its a 5 min walk the other end. Hour and 20 door to door, but I usually get at least half an hours sleep on the train. Got a 3 bed house with a decent sized garden for the price of a one bed flat in Muswell hill where I was living.

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East Grinstead to Victoria (also trains to London Bridge). Train takes just under an hour, always get a seat as we are at the end of the line. 3 mins drive at the East Grinstead end, on street parking then 5 min walk to station (could do the whole walk in 17 mins though but sleep is precious) and its a 5 min walk the other end. Hour and 20 door to door, but I usually get at least half an hours sleep on the train. Got a 3 bed house with a decent sized garden for the price of a one bed flat in Muswell hill where I was living.

Thanks.

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Stratford is your best bet :)

until the last moment of the Olympics :(

_____________________________

Re:- St. George's. The last three times I was there I just drove in, no-one to check me out.

& no I wasn't going to visit Cliffy <_< - I know a real person living there, probably the only one?

Yep, the most expensive gated estate in Britain had no security .............. Maybe the guys were on the golf course?

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East Grinstead to Victoria (also trains to London Bridge). Train takes just under an hour, always get a seat as we are at the end of the line. 3 mins drive at the East Grinstead end, on street parking then 5 min walk to station (could do the whole walk in 17 mins though but sleep is precious) and its a 5 min walk the other end. Hour and 20 door to door, but I usually get at least half an hours sleep on the train. Got a 3 bed house with a decent sized garden for the price of a one bed flat in Muswell hill where I was living.

how much is the annual train fare?

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Re:- St. George's. The last three times I was there I just drove in, no-one to check me out.

& no I wasn't going to visit Cliffy <_< - I know a real person living there, probably the only one?

How long ago was this, as the gate I tended to use had numberplate recognition, and you needed a pass to open the gates?

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how much is the annual train fare?

Just shy of £1,900 (without tube tavel card), it may have gone above that now, but I renewed December last year so thats last years price. Not too bad compared with a travel card. I dont need to get the tub in London, which bumps up the cost of the season ticket considerably if you need to get the tube when you get to London.

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How long ago was this, as the gate I tended to use had numberplate recognition, and you needed a pass to open the gates?

Summers 2004/5.

I think in the earlier of the two I wasn't stopped all week, even using my own car. Maybe they had a face recognition system?

I only ever use(d) the one gate, it's the only way I know to get in!

EDIT:- for grammatical nonsense

Edited by Laura

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How long ago was this, as the gate I tended to use had numberplate recognition, and you needed a pass to open the gates?

I once had to drive round for ages, looking for a gate that would let me in! Thank God I'm past the stage of having to take kids to birthday parties in St G H - you'd think the mother might have told the guards she was expecting 20 odd kid-ferrying parents.

I was fuming by the time we eventually got there - talk about a Keep Out! zone.

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In London you have to avoid what I call 'frontline' areas. Eg, roads that mark a boundary, usually a postcode, between a good and bad area. A classic example in London is Mansfield Road which marks the border between Hampstead (NW3) and Kentish Town (NW5). So your property is in Hampstead proper (not 'Hampstead Borders') but is only over the road from really dodgy areas.

Now I'm going to sound a total snob but I'd also advise avoiding any area with a lot of social housing. This doesn't always mean big 60s estates. Eg, a friend lives in West Kensington, which has a fair proportion of social housing but in terraced victorian properties. This means you get many of the problems associated with social housing - feral kids, teenagers hanging about, noisy parties etc - but in area that on the surface looks 'respectable'.

This, IMO is the main reason why places like Highgate and Hampstead are expensive - there is very little social housing and they are a long way away from dodgy areas. They have never been dodgy, so don't have any undesirables left over from their pre 'up and coming' days. Hilly places help as well, as most dodgy characters can't be bothered to climb very far, and the air is better.

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My assessment is that the "posh" bits of London are still priced at 400% of 2000 prices while the "normal" bits of London are priced at 150% of 2000 prices. While buying in either area will still result in a capital loss over the next 5 to 10 years, does anyone have any opinions about the areas of London that are most interesting from a loss minimization perspective?

Twaddle to try to make a sweeping statement. London is so far from homogenous that it is not worth trying. e.g

Marylebone W1, 250% of 2000 prices.

Bow E3 300% of 2000 prices

Bermondsey SE1 500% of 2000 prices.

I think that SE1 continues to look cheap compared to posh bits, it continues to gentrify and it continues to be within walking distance of the city. Nobody would have been seen dead in SE1 a decade ago.

Bow continues to be on the doorstep of Canary Wharf - which didn't (really) exist in 2000.

Whilst last-up-first-down is a good rule of thumb; for places that are well situated they wil continue to become more fashionable.

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The problem with London is that the genuinly nice areas are extremely expensive. The quite nice areas are often quite grotty, and are still expensive. The cheaper areas are just plain grim, and not exactly cheap anyway. Its for these reasons and others that I moved out to Sussex and commute in daily.

Indeedy, that's why I currently rent a 2 bed flat in Walthamstow and am looking to buy a 3 bed semi with garage very soon on the Essex Borders - Hornchurch/Gidea Park where prices have fallen 20% (apparently) but it's still going to cost us the same in monthly repayments as it would have done 2 years ago at the peak (due to lack of 10% LTV mortgages available and high rates for FTB's) so we're in a lose-lose situation :huh:

Still, not going to put life on hold while I line the pockets of a Landlord when I could be paying off capital on my own slice of the pie and have the security and peace of mind in a nice neighbour hood - all for an extra £150 a month - that's worth paying for IMO. x

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Indeedy, that's why I currently rent a 2 bed flat in Walthamstow and am looking to buy a 3 bed semi with garage very soon on the Essex Borders - Hornchurch/Gidea Park where prices have fallen 20% (apparently) but it's still going to cost us the same in monthly repayments as it would have done 2 years ago at the peak (due to lack of 10% LTV mortgages available and high rates for FTB's) so we're in a lose-lose situation :huh:

Still, not going to put life on hold while I line the pockets of a Landlord when I could be paying off capital on my own slice of the pie and have the security and peace of mind in a nice neighbour hood - all for an extra £150 a month - that's worth paying for IMO. x

Good for you, I actually used to live in Walthamstow, and some of my family do at present. I dont think they would mind me lumping it in the not so nice but still quite expensive bracket. I never felt in danger there, but the whole place is pretty untidy. I looked at loads of houses to buy around there, but at the time they were all really quite pricey especially those in "the Village".

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Good for you, I actually used to live in Walthamstow, and some of my family do at present. I dont think they would mind me lumping it in the not so nice but still quite expensive bracket. I never felt in danger there, but the whole place is pretty untidy. I looked at loads of houses to buy around there, but at the time they were all really quite pricey especially those in "the Village".

Nah, Walthamstow is OK, but it's going to the dogs a bit (pardon the pun!) since more immigrants moved in and treat it like s**thole so there's no community now - too many renters coming and going. The nice bits (the Village) are too expensive and the area is not nice enough to make me want to stay and raise a family (been there since 2001!).... but hey, there are much worse areas! House prices fallen a bit too so you can pick up a 3 bed terrace for about £220k..... not that I'm looking haha! :)

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The Airport - since that is the way out of the country

London will be losing jobs (especially in the government), and depopulating.

Why would you want to own property there/

I know you are joking (partly) but if you mean City Airport, that is surrounded by new Royal Docks development and close to CW so therefore new build apartments abound.

Therefore high risk!

Didn't Londons population fall dramatically after the war? White flight and slum clearance causing Londoners to spread into Essex and Milton Keynes, Northampton etc.

Might be wrong but I think that London's population is only sustained by immigration and higher birth rates. Only my guess. I've not done a detailed study on the subject. Its population is disproportionally younger though.

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