Funds Insider - Opening the door to funds

Welcome to the Citywire Funds Insider Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error
Is it worth investing in a property in London?
+ Reply to discussion
Options
Rosemary Pettit
Posted: 23 September 2015 10:53:49(UTC)
#11

Joined: 18/12/2012(UTC)
Posts: 14

Yes, it's a risk but the odds are very good. London property prices post-war have continued to rise. Given the demand for housing both by UK owners and overseas investors rightly regarding the UK as a safe haven, buying a London property is as safe as any investment will be. But only do so if you are willing to retain it when/if you leave the UK.
Back to top Quote
cc
Posted: 27 September 2015 16:27:53(UTC)
#12

Joined: 31/03/2008(UTC)
Posts: 11
I agree with Rosemary Pettit about London house prices and choice of area.

It clearly can't make sense to pay as much in rent as you would pay for a mortgage, whilst getting no return on the outgoings. Whilst I accept that a weak sales market might mean you have to rent your property out for a while, Graham Fishwick's point (25 vs 40% deposits) is well made and retaining cash would ensure you could protect yourself in periods where no rent was coming in.

I would suggest that you don't buy in new developments, paying a premium for the space. It could be argued that if there are already developers building in an area then you've missed the market there. Others have written above about how to spot a good family area or an area "on the up".

An obvious point to make is that you should make the monthly payments as high as you can sensibly afford, reducing your exposure to future rising rates. More than one bedroom widens your appeal in both the sales and rental markets and would give you flexibility to take a flat-mate should need arise.
Back to top Quote
 |  Edit by user
Alan Selwood
Posted: 27 September 2015 20:25:39(UTC)
#13

Joined: 17/12/2011(UTC)
Posts: 3,379
When/if renting out, do make sure that you identify everyone who will be living in the property, using original ID supplied, and if they are not UK citizens, check extremely carefully that they hold paperwork that confirms that they are permitted to rent in the UK. There are now horrendous fines for renting out to illegal immigrants!
Back to top Quote
Julie Davis
Posted: 28 October 2015 11:59:11(UTC)
#15

Joined: 02/04/2015(UTC)
Posts: 23
I saw a similar discussion to this on a Canadian Money Forum that I talk on. My advice then was to rent as the hassle of buying and possibly selling or managing tenants from afar can be an arduous process. My advice in London would probably be the same, however house prices are only going in one direction in London so it could provide you with a good ROI if you do decide to buy and then rent after three years. Managing rentals from different countries does have it challenges though.

In your situation renting is probably the safer option and would keep your savings secure, however you could also make money through buying. Interesting choice!
Back to top Quote
Alan Selwood
Posted: 28 October 2015 13:48:45(UTC)
#16

Joined: 17/12/2011(UTC)
Posts: 3,379
Julie Davis;29866 wrote:
...... My advice in London would probably be the same, however house prices are only going in one direction in London so it could provide you with a good ROI if you do decide to buy and then rent after three years......


Although demand in London is always strong compared with the rest of the UK, and always commands a premium price, the current situation does seem really extreme to me, and I could easily imagine house prices taking a dip, in the short to medium-term, given especially:
  • The new stamp duty levels on high-end property, which has apparently already reduced transactions considerably.

  • The cost v. years-of-salary ratio, which is extreme for all but the very highest paid (or, of course, those who buy for cash, not on a mortgage).

  • The amount of unsold new-build flats waiting to come on to the market.
Back to top Quote
cc
Posted: 28 October 2015 14:24:17(UTC)
#17

Joined: 31/03/2008(UTC)
Posts: 11
I have the impression that the person who made the original post for this topic is simply looking for a place in which to live, not a more risky investment at the high end of the market which has taken a dip recently.

Having read the property pages over the past few days it has been suggested that an £18000 increase in stamp duty could be deterring the buyers of £1m+ houses - do you really think this is likely, it is such a small percentage of the total cost of buying for wealthy buyers? However there is obviously a more limited number of buyers looking at this level and experienced wealthy buyers can afford to negotiate and be choosy, particularly if they are not in any hurry to move.

I'm also dubious about the negative impact of large scale new flat building. My personal knowledge is based on a relative who moved to Kew/Brentford (where there are a large number of new developments) in recent years. New developments sell out pretty quickly, despite the very large number of them coming onto the market in that area. The owners of older flats have benefited a great deal, with prices up by almost 50% in the past five years as the profile of the area is raised.

I do agree that the salary ratio aspect is difficult for buyers, but still think that buying is the best solution for anybody who can possibly afford to do it.
Back to top Quote
 |  Edit by user
Andrew James
Posted: 30 October 2015 20:52:34(UTC)
#18

Joined: 27/08/2013(UTC)
Posts: 43
I do not think that there is any easy answer to this question. Long term, for the increasingly few who can afford it, I think that investing directly in property in Central London will continue to do very well, but that is effectively a bet on London remaining a key global city. That market has very different drivers from other parts of the UK.

It is statistically irrelevant, but that is also my experience, having bought and sold a number of properties to live in over the last 30 years in London, as well as investing in various properties outside London. I have looked in the last year or so at investing in property in north London, but the prices are scarily high, so I have invested instead indirectly in the likes of Berkeley Homes (there are some other very interesting candidates) and I am happy with that strategy.

It reminds me of the ongoing debate as to whether it makes sense to buy so called expensive quality shares that have momentum. You always think that they are far too costly, but the price has an annoying habit of continuing to go up. The one thing I would add is that you have to take a medium/long term view, because a short term punt could easily go badly wrong. The markets tend to bounce around quite alarmingly in the short term.
Back to top Quote
Julie Davis
Posted: 15 December 2015 15:55:10(UTC)
#19

Joined: 02/04/2015(UTC)
Posts: 23
The stamp duty is going to seriously affect buy-to-lets not just in London, but across the UK. Do people see the rise sticking?
Back to top Quote
srg751
Posted: 15 December 2015 16:57:41(UTC)
#20

Joined: 10/08/2013(UTC)
Posts: 1,295
Speaking as a landlord, many variables. Usual advise is to only purchase on a ten year view.

Firstly, what would be your rental payments over 3 years ?
What is included in the rent that you would have to pay for if you purchased?


Secondly, How much are your forecast mortgage payments ove 3 years ?
Add in nominal maintenance.
Add in any payments that would be included in your rent.
Add in solicitor fees.
Add in insurance fees.
Add in stamp duty.
Add in furniture, carpets etc etc etc
Add in sale costs and conveyancing after 3 years.

What is the difference? This should tell you that if viewed solely on a 3 year term.... Rent!

If at the end of your contract you decide to leave the area and rent out the property, what provision are/would you make for the purchase of your next residence?

Would you employ a property manager (cost)?

Also, bare in mind that your mortgage lender will ask you to pay them a visit after the three years if you decide to rent out the property. Otherwise you will be in breach of the terms of your agreement. You will have to move to a BTL facility. And by then their could be even more legislation in place to deter you.

Will London property prices go up or down in the next 3 years ? I, like everyone else, don't know !
Will London property prices go up or down in the next 10 years ? I, like everyone else, don't know !
Anyone can hazard a guess based on history, and if they did, my guess would be that the majority would say yes. But that's not a business model to base a forecast on.

ATB
Back to top Quote
 |  Edit by user
Anna Danishek
Posted: 28 April 2016 10:07:15(UTC)
#23

Joined: 26/04/2016(UTC)
Posts: 11
I don't think it is a good time to buy any kind of a propety in London. In the UK home prices have gone through the roof, exceeding pre-crisis levels already long ago. A study by the OECD shows this location is overvalued and economists in Sweden have been raising the alarm since last year over the extreme risk of an imminent collapse. So you'd better to wait for several years till prices will go down
Back to top Quote
3 PagesPrevious page123Next page
+ Reply to discussion

Markets

Other markets