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Hi,

I am new to this forum and no doubt you're swamped by this kind of query. Apologies if this is the case.

I have a dilemma that I could use some feedback on. I'm currently living in the home counties but want to move back to London where most of my friends are. I'm currently sharing rented accomodation and have had enough of this, not due to my wonderful flatmates, but because I'm in my thirties and want somewhere I can decorate and organise myself. Not an outrageous ambition I think.

London is key, since I love the city life and can do things with friends in the evening. I'm looking at 2 bedroom places in the Hanwell/Acton area and I have a budget of £300-350k. I can rustle up a deposit of around £120k. I feel almost bad about this but I have a pretty good job and a lot of savings. I'm looking at getting a 10 year fix, which will result in mortgage that's less than renting... Well, at least for the first 10 years.

The thing that's holding me back here is the staggering income/price ratios. I can't quite believe that it's possible how high they've gone. Whenever I hear talk of the unsustainability of the UK property market, London is usually excluded from the discussion. What do you good people think of the safety of the London market? Could it topple precipitously? Common sense economics might suggest that it should, given the multiples involved, but on the other hand, has there ever been a precedent for a big falls in prices in a truly international city? London's status could be seen as special. Along with New York, there is probably no other city where is it not essential to have a buisiness presence.

So on the one hand, my desire for a better standard says 'Yes', but my common sense understanding of economics says 'No'. The prices in this country are ludicrous and this is coming from someone who has a good salary and good savings. I will still be stretching myself to afford a modest flat in the capital, which does seem crazy.

Help me out!

Cheers

WillItEverEnd

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As Mervyn King once said:

"House prices are a matter of opinion, the debt is real"

Do you see London economy improving / growing over the next 10 years? If so then in your opinion it might be worth buying. If you see the economy as topped out / not growing over the next 10 years then it may be better to rent.

Nobody here has a crystal ball, I myself have called the London top a couple of times and gotten it wrong.

This might be worth a watch:

http://www.maxkeiser.com/2013/08/keiser-report-max-makes-a-bet-on-uk-housing-bubble-06aug13/

http://youtube.com/embed/oLVub35bTQ0

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I currently rent in Chiswick, which I know is a very expensive area even for West London, but I love it. Have lived here for 5 years. Will move next year when the contract is up as I will refuse to pay another huge hike in rent. If you are thinking of buying in the area be aware that the majority of buyers here are overseas investors buying up property to rent to people like me. A friend described the experience of flat hunting in west London as like going to an auction to buy a vase for your mother only to discover that the Crown Prince of Dubai had turned up and wants it for his wife. However, Acton is less expensive in this area and you should get something in your budget if you persevere.

Will the market hold out? I doubt it if you look over 10 years. Too much to go wrong. Interest rates must go up and then all this BTL will go on the market as investors go elsewhere. Having said that, if you have friends here and can afford to take the risk it may be the right thing to do, for you

Beware the estate agents though. They look very pleased with themselves at the moment. Big kipper ties seems to be the thing. You cannot trust them and they will make you want to throw up.

Good luck

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Why not just rent a place to yourself? Seems like it will give you most of what you want. If you are desperate to decorate, buy a £20k terraced house up North and splash paint around until you never want to visit a B&Q again.

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London is key, since I love the city life and can do things with friends in the evening. I'm looking at 2 bedroom places in the Hanwell/Acton area and I have a budget of £300-350k. I can rustle up a deposit of around £120k. I feel almost bad about this but I have a pretty good job and a lot of savings. I'm looking at getting a 10 year fix, which will result in mortgage that's less than renting... Well, at least for the first 10 years.

The thing that's holding me back here is the staggering income/price ratios. I can't quite believe that it's possible how high they've gone. Whenever I hear talk of the unsustainability of the UK property market, London is usually excluded from the discussion. What do you good people think of the safety of the London market? Could it topple precipitously? Common sense economics might suggest that it should, given the multiples involved, but on the other hand, has there ever been a precedent for a big falls in prices in a truly international city? London's status could be seen as special. Along with New York, there is probably no other city where is it not essential to have a buisiness presence.

There is a big difference between worrying about price falls in a truly international city and buying in Hanwell. Chiswick it is not. I realise like everyone else you have affordability to consider, but I would not touch that sort of area with a barge pole. If prices start to fall, you're asking for it in that sort of area. The only reason prices are high there is people cannot afford to live anywhere decent and are being pushed out.

I currently rent in Chiswick, which I know is a very expensive area even for West London, but I love it.

I lived in Chiswick (renting for 3 years) and also loved it. Fantastic area and if I had the money to buy there I would. Price falls in the long/short term wouldn't be a major concern because it's a desirable area, always has been, always will be. At least if it all goes t*ts up you're living somewhere you love and not stuck in a compromised area.

My summary to the OP, if you've got concerns about the London Bubble bursting, buy in the best area you can afford without stretching yourself, even if that means ditching a 2 bed flat for a 1 bed.

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I have lived in that area for over a decade.

House prices are overvalued at the moment. The dubious benefits of crossrail has already been priced in such that parts of Acton are nearly as expensive as Chiswick - which is absurd. The good news is that rents around here are very cheap right now. The Housing Benefit cap is biting hard here and rents aren't too far off where they were a decade ago - in nominal terms. Unless you need the stability for the sake of your kids, then renting in London has a lot to offer. Anything else is pure property speculation.

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I bought in west London 2 years ago at the bottom of the double dip that never happened.

My theory was that I'll be protected from neg equity, by the wealth / popularity

Of the area.

Well 2 years later I'm now looking at 80% LTV as prices have risen around 80K !

My advise is to take a good look around west London & think

About the job losses, repossessions & anything else negative...

I did & couldn't find anything negative. The recession barely touched

Anyone around here.

DO NOT UNDERESTIMATE THE WEALTH IN LONDON !

There are a lot of clever people with experienced wealthy family circles, who shrug of recessions

Due to their financial positions. Prices around here recovered

So fast that I missed the bottom of the crash 2007/8 crash by 6 months !!

Bankers money etc ?

Hanwell, ealing, Acton... It doesn't really matter that much

As it's only 30mins or so between each area. Most people could easily upgrade

Towards ealing ACTON etc if they wanted to.

Just take a look at the 30-40k cars parked / driving around in the "less wealthy areas"

If you can afford the better areas then go for it it's a no brainer... All IMO

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It can happen in London and it has in the past.

I bought a flat in Shoreditch in 1985, for £35k. In 1989, during the "bubble" I had an offer to sell it for £73k, but they pulled out. I eventually sold it in 1992 for £45k, and there wasn't a lot of demand. Of course Shoreditch in the late '80s was a bit different than it is now.

In the early '90s I remember lots of people who'd stretched for a mortgage in the late '80s found themselves in crippling negative equity - I knew one couple who'd divorced and who had to divide their, now unsecured, debt.

People are pouring in to London all the time and they have to live somewhere. The big money from Russia and Europe really only affects the top of the market but as long as demand exceeds supply, the London bubble will continue. If (when) the wheels come off the economy and interest rates rise, the tide will turn.

The fundamental advice remains the same: get the biggest deposit you can and anticipate a big rise in interest rates - your situation sounds pretty good, but as other posters have pointed out, properties in "bad" areas drop far faster and are much harder to sell than those "good" areas when the market turns.

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And another thing...

When I bought my flat the price was around 3x a reasonable graduate's starting salary. The same flat now is about 12-15x a reasonable graduates starting salary.

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