Buying in London now - should I go ahead or not exchange?

[John C]

Hi there!

I'm seeking some advice from forum readers, hope someone will be able to help.

I am getting close to exchange for a flat I'm buying in London SE8 and doubts are starting to to assail me, after reading doom & gloom stories about the UK property market (and especially London) flatlining and potentially gearing towards a massive decline.

I fear that I'm about to buy at the peak of a property bubble, which may soon burst, leaving me in negative equity with an overpriced studio flat in my hands that is worth much less what i paid for.

The specifics: I'm purchasing a large-ish (35smq) studio flat in Deptford, London, which has a short lease and is in need of major renovations (with everything that comes with that - lawyers' fees, negotiations and various hassles).

The asking price is £200,000, with a further £30,000 I am expecting to pay for the lease extension and renovations. On a positive side, in a couple of years I could find myself owning a long-leased, completely renovated, super studio (separate kitchen, separate bedroom, lounge, hallway) for £230,000. For the current market conditions, and considering it is 2 minutes' walk to two mainline stations, 5 minutes by train to London Bridge and 10 to Cannon Street, it seems a bargain.

However, here's my doubt: what if the market continues to decline and potentially slumps in London after the elections and because of the Brexit uncertainty? What if the same property in six months' time would be worth 10% less its current asking price and I find myself in negative equity?

I know no-one has a crystal ball to predict what's likely to happen, however I am reaching out to see if anyone is in the same boat, faces similar dilemmas, and what their thinking is.



Thanks!

 

[Nicholas Wallwork]

Hi John!

Welcome to the forum firstly!

My basic advice is buy for you not the market. It sounds like it's a flat to live in right? In which case you're buying for the long term (which is sensible with property investment unless you're a developer). Markets always rise and fall and as long as you can pay the mortgage and you can hold onto it long enough then it will almost certainly come back due to the great location and high demand in that location for both sales and rentals.

Negative equity is only a problem if you plan or need to sell at that time really so don't be too afraid of it as a short term situation. Given it sounds like you're adding real value (and the increasing the capital of the property) then you have an extra buffer built in there too.

Don't believe everything you read in the (bad) news either make up your own mind with due diligence and speaking with all the local agents to get their opinions of the specific area.



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[joeepifanio1302]

well said @Nicholas Wallwork

 

[John C]

Thank you @Nicholas Wallwork - much appreciated. I'm a first buyer so a little apprehensive about whether I'm making the right choice. But your advice sounds very sound. I wouldn't be selling it back after one or two years so I see where you're coming from. Thanks a million for your reply!

 

[Lime Auction House]

Hi there!

I'm seeking some advice from forum readers, hope someone will be able to help.

I am getting close to exchange for a flat I'm buying in London SE8 and doubts are starting to to assail me, after reading doom & gloom stories about the UK property market (and especially London) flatlining and potentially gearing towards a massive decline.

I fear that I'm about to buy at the peak of a property bubble, which may soon burst, leaving me in negative equity with an overpriced studio flat in my hands that is worth much less what i paid for.

The specifics: I'm purchasing a large-ish (35smq) studio flat in Deptford, London, which has a short lease and is in need of major renovations (with everything that comes with that - lawyers' fees, negotiations and various hassles).

The asking price is £200,000, with a further £30,000 I am expecting to pay for the lease extension and renovations. On a positive side, in a couple of years I could find myself owning a long-leased, completely renovated, super studio (separate kitchen, separate bedroom, lounge, hallway) for £230,000. For the current market conditions, and considering it is 2 minutes' walk to two mainline stations, 5 minutes by train to London Bridge and 10 to Cannon Street, it seems a bargain.

However, here's my doubt: what if the market continues to decline and potentially slumps in London after the elections and because of the Brexit uncertainty? What if the same property in six months' time would be worth 10% less its current asking price and I find myself in negative equity?

I know no-one has a crystal ball to predict what's likely to happen, however I am reaching out to see if anyone is in the same boat, faces similar dilemmas, and what their thinking is.



Thanks!

Bit risky buying a short lease property.


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[menachem]

Nicholas is right. If you will own the flat in the future then, don't doubt to buy it. If you are worried about the market. It will always lead you to more doubts. Market flow will never be fix.

 

[Nicholas Wallwork]

Bit risky buying a short lease property.


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Not if you can agree the lease extension before exchange... it's a nice opportunity that might put others off...