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Crazy Herts

Hertfordshire Madness

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How long can the madness of property prices in Hertfordshire continue? Surely sanity will return at some point.

we bought our 2 up 2 down Victorian terraced house for £220000 in 2012 and are looking to buy a much needed bigger house as we have 2 kids and another one on the way.

To my absolute astonishment the house went on the market and within days it was sold for £350,000!!! A 2 up 2 down property?! That's an increase of £130,000 In 3 years!!! How is this possible?!

You would think me and the mrs would be over the moon wouldn't you?! Here is the big BUT..

To upsize we are looking at a minimum of £500,000 for a 3 bed semi. Nothing flash trust me. Just a normal 3 bed semi detached house. We have seen a few and believe it or not one was on the market for 495,000. just about in our budget. We put in what we thought was a very sensible offer based on other houses sold in the area but appreciate the uplift in the last 2 years, after all we have gained on our house. An offer of £490,000 went in. Was this your full and final offer the Estate Agent said? Yes I said. Cut a long story short this bog standard 3 bed semi with a new kitchen needed and dated décor went for £510,000!! 15k over the asking price.

Other 3/4 properties in our area which would suit our needs are going for anything between £550,000 and £725,000 there is literally nothing on the market. and the houses that do come up are sold very quickly. Way over our budget.

Needless to say our buyers are getting restless and the pressure is on us to find somewhere else.

We are in a great position as we own our property outright and we don't have a mortgage currently and I earn a decent wage of £40k per year, my mrs works part time and earns 10k per year. I know we are fortunate and am not looking for any sympathy what so ever. But if we cant even afford to purchase a family home then what chance do other have?!

I hear talk of a crash in imminent but there is no sign of this in south west Hertfordshire. Hopefully it will change because it absolutely crazy!!!

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Sorry I should of been clearer. We are looking at possibly renting our house out at believe it or not £1300 per month!! (that is the going rate, nuts I know!!) Then we can afford around an extra 700 per month to rent a 3/4 bed house.

There is no way I would sell the house and then have to pay every month £2000 (That again is the going rate) That would then eat into our proceeds we will have in the bank from the house sale.

It is absolutely nuts!

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Sorry I should of been clearer. We are looking at possibly renting our house out at believe it or not £1300 per month!! (that is the going rate, nuts I know!!) Then we can afford around an extra 700 per month to rent a 3/4 bed house.

There is no way I would sell the house and then have to pay every month £2000 (That again is the going rate) That would then eat into our proceeds we will have in the bank from the house sale.

It is absolutely nuts!

That isn't an option I would choose, In any case you need to work through the numbers properly before you decide

Remembering

  • loss of investment income from £350k free cash
  • Letting costs
  • income tax on you profit
  • capital gains tax (if this turns into a long term arrangement, say 5years plus, you will become liable for cgt )

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I've been following an area in Herts and can confirm the £500K minimum for a bog standard 3 bed semi. The prices have risen at quite a pace for the past several years (approx £350K in 2007 to £500K today). My theory is that people in London in the know are selling up while the going is good and moving out to within commuting distance hence pushing up prices in the smarter areas. This is the so-called ripple effect in action. However when the London bubble bursting picks up speed who's to say that ripple will also not spread outwards? I don't know what I'd do in your situation except hold on to my hat :)

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The story is the same in Surrey (commutable Surrey at least).

Yes, its the ripple effect - grim/pokey flat in london (but with all the city location offers) vs acceptable house outside of London (but with a commute time/cost) was a trade-off that became unbalanced a few years back when London prices went mad. The trains are busier than they were in the mornings,

I am surprised at the rises in Surrey, similar to what you say here for Herts, in the timeframe. I guess they are unsustainable, particularly if London falls or stagnates and the London living option becomes somewhat do-able again for more than just those given a hefty financial start in life.

commutable surrey : 30-35 minutes to Waterloo : 270k now 360k for low-end 3 bed semi in three years, 220k now 300k for a low-end 2 bed terrace in 3 years.

(PS - please don't shoot the messenger, It's madness and is sucking all disposable income out of the economy, plus giving those in their 20s/30s a lack of hope in life)

Edited by Does Commute Abit

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The problem is that all bets are off now (and they have been for the past 5 years imo)

Back in 2010/11 when prices in my area had recovered to the levels pre 'the blip' in 2007/8 that some describe as a crash, I would have definitely advised someone in the OP's position to sell and rent for a while until the crash came.

What awful advice that would have been! Prices have doubled in some areas around London in that time.

The link between prices and income has been totally lost now because of constant ramping by the government, foreign investment and low interest rates. Of course it will all go pop very badly at some time in the future and the public will be admonished for buying into the bubble and people will question how they didn't see it coming when it was so obvious.

The question is when will that happen? I don't see any reason why they can't keep the plates spinning for a few more years. I live on the very edge of London and I remember the conversations when small Victorian terraced cottages hit £300k, £500k etc. Now some of them are near £1m and the ripple effect is going out even further.

If someone sells their flat in Clapham for £800k they think nothing of buying a semi in Surbiton for £1m and the recipients of that £1m go and drop it on a nice big detached house in Woking and on it goes.

Great news for the Government continuing their illusion of wealth as prosperity, bad news for millions like the OP who need more space to house their families.

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you swim with the sharks but don't expect to get bitten?

I take issue with those who sell their home for a "crazy price", only then to whine about how expensive everyone else's homes are when they realise they can't afford to move up the "ladder". Surely common sense denotes you should have an idea of how much your home is worth before you look at moving to another. Also consider there was probably someone under you who bought your old home, with the exact same feelings.

Don't pick up the ball if you don't wanna play....

Edited by spunko2010

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My friend has just informed me that he is selling his victorian terrace in Twickenham and upsizing to Berkhamstead where price per square meter is 25-30% cheaper. Given that public transport from Berko gives better access to London than it does from Twickenham it looks like a no-brainer to me.

I would expect prime south herts to perform much better than south west london for the forseeable future. Of course if the overall London market is soft than Herts will suffer too.

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My friend has just informed me that he is selling his victorian terrace in Twickenham and upsizing to Berkhamstead where price per square meter is 25-30% cheaper. Given that public transport from Berko gives better access to London than it does from Twickenham it looks like a no-brainer to me.

I would expect prime south herts to perform much better than south west london for the forseeable future. Of course if the overall London market is soft than Herts will suffer too.

Friend above exchanged last week and completes on Friday. He later found out that the person buying his house is an "investor" taking 75% LTV BTL mortgage and the asking rental price would give a gross yield of 3.65%!!! This madness from the greater fool BTL "investor" (aka Idiot) has allowed my mate to slighly overpay for the rig in Berko, I still think it is the right thing to do though,

The above example shows how the ripple effect works in many different ways, and what can seem an irrational price to you is entirely rational in the context of something else in the chain that you aren't privy to.

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