You'd be crazy to buy a home right now

Wrong move not Rightmove: First-time buyers will get burnt if they pile into the overheated London market

 

  

When my most conservative of friends are rushing to buy their first home in Twickenham, before the area becomes even more expensive, you know the Greater London market is overheating.

Despite various signals that the capital's core and commuter zones, which have enjoyed rampant price growth over the last two years, is starting to cool, those in their late 20s and early 30s are still talking about buying.

New findings from Knight Frank and Markit Economics show us that 6.7% of householders polled intend to move within the next year.

Undeterred by looming interest rate rises, this group has grown from 6.2% in June, is higher than the 6.5% reported in May and 5.1% in April, according to an Ipsos Mori Poll.

While such "PR" suits estates agent talking up the market, now is not the time to buy your first home.

There has been a wave of panic across Greater London as first time buyers (FTB) stretch themselves to get on the property ladder in their area before price rises shut them out of the market altogether.

This, of course, has been self-perpetuating, driving values up further, with open house viewings and sealed bid competitions common practice.

But these price hikes - 20% over the last 12 months to May, are not sustainable and not supported by wage growth.

 

 

The mainstream London market is already showing signs of cooling - as property portal Rightmove tells us today. In fact, the rate of growth, month-on-month, has started to slow earlier this year and today we see our first drop of 0.4% in Greater London. We've hit an affordability ceiling until pay packets and the economic recovery catch up.

An expensive business

It's not just the extraordinarily high house prices that should make you wince but all the associated, long term costs.

Interest rate rises are looming and now is not the time to stretch yourself, with incremental increases expected from November onwards.

With the introduction of the Mortgage Market Review in April - stricter lending guidelines designed to curb the irresponsible practices seen prior to the 2008 housing market crash - the interest-only mortgage is becoming extinct.

First-time buyers now need enough monthly income available to make full repayments - which are far higher than an interest-only commitment. Sensible in the long run as you're effectively saving, but a hefty financial burden all the same in the early fragile stages of an economic recovery.

Buying a home is expensive - not to mention stressful - and analysts tell us that a FTB needs £70,000 cash just to make the move thanks to removal costs, estate agent fees and stamp duty.

The cost of the average first-time-buyer dwelling in London is £351,783, with a 3pc stamp duty fee attached to that. In Clapham, south west London, that gets you a two-bed flat in an ex-council tower block.


 

 

http://propertyportfolioinyorkshire.blogspot.com/2014/08/youd-be-crazy-to-buy-home-right-now.html

 

How to double your money on a new-build

Matt Baker is a bit of a property addict with a portfolio spanning Spain and France but his most recent addition is a new house in Epsom. ‘I’ve always lived around here, in Cobham, Woking, Dorking,’ says Matt. ‘I hadn’t really thought about Epsom but when I saw this development, I knew it was unique.’

Thirty-three-year-old Matt owned a Surrey flat but was on the lookout for something bigger. He’d searched in vain until he discovered Crest Nicholson’s Noble Park. ‘Unlike many new homes, which are all crammed together,’ Matt explains, ‘these houses are on large plots surrounded by big trees. It makes such a difference.’

Last August, Matt paid £445,000 for a detached three-bed house, which he chose precisely because ‘it was the smallest house on the biggest plot’. He immediately extended the property to four bedrooms but he’s already called the builders back in and is now busily adding a fifth bedroom to the property. ‘I know I’ve gone against the norm,’ laughs Matt, ‘but then I generally do.’

Extending a new home is an unusual move, as plots are often too tight, but Matt’s tactic has paid off and he believes his five-bed house has already risen steeply in value. ‘I think it will be worth £750,000 by the time I’ve finished the work,’ he says. ‘You just don’t get large properties on big plots in Surrey for any less – they’re a rarity.’ When the whole development is finished in around three months’ time, Matt estimates his house could be worth £1 million.

‘I think I definitely bought at the right time,’ he says. ‘I got the right house and the right extension.’

Along with plot size, the finer details were impressive. ‘It was the little things,’ Matt says. ‘I love the sound system and the electric garage. It’s the little touches that make all the difference, they’re really cool.’

A sales director for an alcohol firm, Matt works mainly in London but sometimes travels. Noble Park’s location is perfect. It’s ten minutes to the M25, the A3 is within easy reach and Brighton is just 45 minutes away.

Matt bought his house off-plan and credits developer Crest Nicholson for being accommodating. ‘They probably won’t want me to say this,’ he says, ‘but they let me go there every week, so I could see what it was going to look like – and I changed a few things to get it exactly right.’

The Lowdown: Noble Park

Built on the site of an Edwardian hospital, only a handful of four-bedroom houses remain for sale at Noble Park. Situated near Epsom Common and Horton Country Park, Epsom’s iconic racecourse is just a short distance away. Ewell West and Epsom stations are nearby, with train journeys into London Waterloo taking around 35 minutes.

From £725,000.

http://metro.co.uk/2014/06/13/how-to-double-your-money-on-a-new-build-4759614/