Buy or Rent in London?
May 15, 2012 7:47 AM   Subscribe

We’ve found a decent flat in Rotherhithe, London. We’ve made an offer Monday. Owner has accepted. Yay? Suddenly we’re getting ice cold feet. Are we doing the right thing?

When we made the offer we didn’t think it would be accepted, as it was well under their asking price. When the agent called to congratulate us my first feeling was terror. But then, I hate change and am commitment-phobic. Husband ditto. We've offered 'subject to valuation, survey, and contract, so we have a little window to back out. Advices please!

-- I have an inheritance big enough that I can buy the place outright in cash, and still have a tidy sum left over
-- our rent keeps getting hiked every time our lease is up and its getting annoying
-- we´ve found a place we like that the owners are eager to sell for cash, they´ve accepted 15 grand less than the place is valued at
-- it would be a pretty easy place to rent out at a nice sum

--This is not our Forever Home as ultimately we’d like to move back to Canada.
-- we like the place we currently rent a lot
-- we don’t know how much longer we will be living in London. We keep saying 3 years; but we said 3 years 10 years ago.
-- trouble in Europe plus bank troubles equals worsening mortgage freeze thus it may be very hard to sell if we DO move in 3 years
-- stamp duty etc means the first year we pay as much in taxes and fees as we would have in rent
-- it’s just terrifying to put that much money in one thing. I would wind up with most of my assets in property as I also inherited property in Canada (brother currently inhabiting, will move at some point).


-- Currency fluctuations. Our money is in Canadian dollars, they’ve been higher against the pound. They’ve also been lower. Every fluctuation is adding or subtracting like 10,000 pounds from the equation.
-- London Housing Market. Whither? Is this a really dumb place to put our money right now?
-- Other things we could be doing with our money. We already have a lot in stock and a financial advisor. She’s well into our buying property but it’s a hobbyhorse of hers and she’s in Canada so not fully up on UK situations.
-- job situation. I freelance, sometimes I make a lot, sometimes I make a little. Husband's work either is very stable, OR he will be laid off in six months

We are in our early forties.

I know this is a nice problem to have, but it’s freaking me out.. should we buy?

Anonymised because my profile is connected to my name and I'm uncomfortable discussing money publicly..
posted by anonymous to Work & Money (10 answers total) 2 users marked this as a favorite
-- we don’t know how much longer we will be living in London. We keep saying 3 years; but we said 3 years 10 years ago.

This makes it hard. In your shoes and looking at 3 years, no, I wouldn't. 10 years maybe. With different currencies and looking to move completely out of the area, maybe not even with 10 years.

But only you know how it feels when you walk into each flat and how each affects the quality of your life in the here and now.
posted by BibiRose at 8:20 AM on May 15, 2012

Last year, we chose to move to a rented house in London (and incidentally, also to rent out the flat I own there). We haven't regretted the decision but we desperately needed more room (baby) and we have the luxury of being rooted firmly in London. I've been complaining that London house prices are too high since 2002 and I'm constantly amazed that they haven't yet dropped in real terms. My strong belief is that they WILL drop in real terms at some point but I've no clue when and this could happen in several different ways all of which will be at least somewhat painful in economic terms. If I was you I'd probably continue to rent but this advice is worth pretty much what you paid for it.
posted by Dan Brilliant at 8:33 AM on May 15, 2012

It is completely normal to feel terror and doubt at this point in the buying process.
Ask yourself, what was the original reason you decided to look for a place to buy? Is that set of conditions still true? If so, then it's just nerves at this stressful process. It's normal.
posted by Joh at 9:00 AM on May 15, 2012 [7 favorites]

Oh, and remember you have the ability to buy it outright for cash, and then rent it out as an income property if you decide to move back to Canada. What's not to like about that??
posted by Joh at 9:02 AM on May 15, 2012 [4 favorites]

I don't know much about the London housing market, but if you can buy a place outright for a reasonable price that's significantly below asking, that sounds pretty good to me.

I agree that 3 years would be less than ideal, but it sounds like chances are that it will be more than 3 years. Also, it sounds like you're saying it would be easy to rent it, if you needed to, so if you don't like how the market looks and you want to move, you've got that as an option.

Having a lot of money in property doesn't seem like necessarily a bad thing when your properties are on two different continents and probably not subject to the same market fluctuations.

The currency fluctuations won't matter once you've bought the house, and the job situation is less of an issue when you're not taking out a mortgage.
posted by treehorn+bunny at 9:05 AM on May 15, 2012 [5 favorites]

You don't have a lot to lose here, and you may end up with some gains.

If you were financing your purchase, I'd have hesitation, but since you are buying with cash I'd say move forward with it.

You like the house, you got it at a great price. Neat thing about houses is that you get to do whatever you want to the inside.

As for your money and the fluctuation, convert from Canadian dollars to pounds and you won't stress so much about it.

Definitely get it inspected, and I mean inside out, upside down and backwards. (Think Holmes on Homes.)

If the total stuff that your inspector can see will need attention and it costs 10% or more of the purchase price, walk away. It's not worth it.

I don't know if there are tax advantages to owning property in the UK (I know there aren't in Canada, there are in the US) but that might offset some of the expense.
posted by Ruthless Bunny at 9:45 AM on May 15, 2012

By your own account, you'll break even in year one (buying costs compared to existing rental expenses) and come out ahead in years two and three (living costs in your own apartment compared to rental expenses). That sounds good, on balance. It also sounds like you'll do better over three years than simply leaving your money in the bank and accruing the pitiful interest on offer these days while continuing to pay rent in your current home. The broader question then becomes how the flat as an investment performs compared to other investments, over three years or more. Is London property in a bubble that's about to burst? Maybe, but plenty of people have predicted this in the past and been proved wrong. We have no way of knowing whether London property (and specifically your Rotherhithe place) will prove a better investment than any other over any given time frame. Stock exchanges may rise and fall, individual companies too, and currencies compared to other currencies. You have to take a view. Bear in mind that property prices in London are supported by rents: when rental yields creep up because of falling prices, then buy-to-let investors step in and prop up those prices. You are unlikely to lose a big chunk of your money, which you could do with a stock investment. What is the worst that can happen? That after three years you do indeed move back to Canada, London property has fallen, the pound too, you don't want to realise the loss, so you rent the property out for a few years. So you get an income. The best? That you live there not just for three years but longer, in your own home, saving money on rent all the time (lots of psychological and emotional benefits from that, too), and when you sell up and move back to Canada you find prices have risen handily. If buying, I would be sure that your transport connections to the City and Canary Wharf are good, and maybe try not to buy in a new development, where asking prices are often pushed to the maximum and a £15,000 discount, for example, may be assumed by the developer.
posted by londongeezer at 11:20 AM on May 15, 2012

Buying a house is like marrying someone: for many people, some nervousness about the huge step you're about to take is normal, but it should always be balanced out by an equal measure of excitement for the unknown future. On the other hand, a cold pit of dread in your chest and the unspoken hope that the other party backs out before the deed is done is a huge red blinking sign that you should not be moving forward with this. Also like a wedding, there will be surrounding people (your agent, maybe your family) who for their own reasons encourage you to keep moving forward and tell you that everyone gets cold feet; however, the further you go down the road, the HARDER it becomes to back out, so it's in everyone's best interest to cut your losses early if you realize it's not right for you.

To stretch this metaphor to its breaking point, I get the feeling that you aren't really in love with this place and the opportunities it will provide in the future. Instead, maybe you ended up talking yourself into making an offer because you're starting to doubt that anything better will come along, and you're worn out and worn down by looking at so many other candidates, and you can see that this place ticks all (or most) of the boxes that you are looking for. However, putting how much you like your current flat in the "cons" column says a whole lot about your enthusiasm for the new place, as does the fact that you made a really low-ball offer you thought the seller wouldn't accept.**

Don't do it. Walk away. This is a financial investment, yes, but it's also YOUR LIFE, and you only get so many years. It's crazy to lock yourself into a living situation you aren't really happy about just to save yourself some rent. Don't try to intellectualize yourself out of what sounds like very real misgivings--that never works out very well for big life decisions.

**I am saying all this from the perspective of someone who did JUST THIS a mere 2 months ago. I put in that low-ball offer on a house that was on-paper perfect but that left me cold for some reasons that I couldn't quite articulate. However, it was the best house we had seen after 2 months of looking and we were despairing about finding anything better. I had such bad heartburn that first night I couldn't sleep. After much discussion and to the great disappointment of our agent who insisted that first-time buyers are always really nervous after making an offer, I pulled the plug and felt an immediate flood of relief. We ended up finding the PERFECT house 3 weeks later ($50k cheaper to boot), and the only nervousness I had between offer and closing was that something was going to go wrong and cause the deal to fall through. I am still thanking my lucky stars that I insisted on withdrawing the offer that wouldn't let my stomach un-knot.
posted by iminurmefi at 1:46 PM on May 15, 2012

Hi, anonymous original poster! I am you, two years from the future. I knew if I hung out on Ask.Metafilter long enough, I would meet my own doppelganger!

My wife and I are American, and we moved to London in 2002. For about eight years, we kept telling people we were going to move back to the US in three years. Then we got a chunk of money that would let us make a deposit on a flat. We shopped around for literally two years, finally found a place we liked, made an offer on it... and then had a few nights of sheer panic after the offer was accepted, for pretty much all the same reasons you list. (We have savings in dollars! The London market is overpriced! We love London now but what if one morning we wake up and we want to move back to North America and the housing market in London collapses and we're trapped and and and and...)

Obviously everybody's situation is different (even among doppelgangers) and I can't make you any promises. But I can tell you that we decided to buy the flat. That was back in 2010, and thus far, the market hasn't collapsed, we're extremely happy living here (where here= both London and our flat), and we're glad to be paying our own mortgage instead of our landlord's. With hindsight, our panic was just that-- panic, rather than a soundly reasoned reaction, or even a wise gut reaction.

I think maybe the key difference between iminurmefi's experience and mine was: we had been looking for two years, and we knew that this truly was a good flat for us. It wasn't just "Well, this isn't great, but I guess it's the best we can do."

And, anonymous OP, the difference between your experience and mine is: you can actually buy the place outright. Like many people who buy houses on a mortgage, we were scared by the thought of that monthly mortgage payment, because what if we both stopped working? But if you're buying it outright -- with some left over -- you are already a big step ahead of were we were.
posted by yankeefog at 2:31 AM on May 16, 2012

I would bear in mind that two of your concerns are fairly unlikely to BOTH be a problem: if you have to sell within three years, the market is less likely to have do anything dramatic; if you hold onto it long enough that the market tanks, then at least you've saved a ton of rent, and the stamp duty has been spread across a lot of years of those savings.
posted by lollusc at 9:25 PM on May 16, 2012

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