I'm from the UK, I don't have any debt and have some savings that could get me a mortgage somewhere but not where I currently live in London. At the moment I pay low rent but I'm very keen to divert this rent into either a mortgage in the UK or move somewhere where the rent is a lot lower. I feel very priced out of the market regarding London mortgages. It seems that the housing market is generally in a bubble due to being distorted by the finance market. I have a friend who works as a surveyor who tells me that the majority of the cheap renovation properties have been bought up as investments. What are my options?I am looking at property both as a potential rental investment or as live-in. My goals are to invest my money wisely and to take advantage of the attributes that I have such as being relatively flexible with location. For example, I could look at renting somewhere cheaper and investing my money elsewhere other than property or I could look into buying somewhere and renting it out where the house prices are lower than london.
(I assume you are not working for a city bank getting paid “city wages” – e.g. you are one of the 99% of people in London or more “normal” income.)
House prices and rents in London and anywhere within reasonable commuting distances are now so high that couples in reasonable jobs often have to rent rooms in shared houses (HMOs). This is due to so many people wishing to live/work in London and there not being enough new homes built.
If you are looking at buying a property to rent out, you need the rent to be about double the interest payments on the mortgage – otherwise you will not be able to afford repairs, or cope when interest rates increase – (you could also get a tax bill that is more the your profit). Finding such a property is very hard in London, as the prices of homes have gone up a lot more in London then rents have. There are still some flats where the rent will cover the landlord’s costs, but not many. (Any landlord that brought more than a few years ago, is making a very nice profit in London, as the rents have gone up a lot since they brought – but are you willing to bet your life on the rents going up even more?)
Moving a short distance out of London, does not help much.
So look at somewhere like Manchester or Birmingham
- Wages are a little lower then London, but not that much lower (once you exclude city traders etc)
- Jobs are a little harder to get, but with qualifications and experience there is no real problem finding work.
- Housing is a lot cheaper
- The average house is also a lot nicer
- You can be living within 20 minutes of work without paying a lot more for doing so.
- Or you can be living in the country side and still be in work within 40 minutes
- A 3 bed detached house in a “above average” area is cheaper than a 1 bed flat in most of London
Real Estate is all local. In the United States, I can show you houses so high the rent on them is less than 1/3% of their value per month, eg. $1M House renting for less than $3500. I can also find 3 unit buildings (for say $200K) that rent for $3000/mo total rents. I might want to live in that house, but buy the triplex to rent out. You need to find what makes sense, and not buy out of impulse.
A house to live in and a house to invest have two different sets of criteria. They may overlap, but if the strict Price/Rent were universal, there would be no variation. If you clarify your goal, the answers will be far more valuable.
NB - I live in Surrey and bought my house in January 2014.
If you don't have a very social life, it does pay to stay outside London. Places outside London are cheap and you will get a better deal in relation to houses or flats as compared to London.
I feel very priced out of the market regarding London mortgages
I will strongly question you logic behind this ? Why only London ? Why not live in the commuter belt outside London. Good places to reside, good schools, nice neighbourhood and away from the hustle and bustle of London. Many of my colleagues commute from Cambridge and Oxford daily into Central London and they laugh at people who want to buy a house in London, just for the sake of buying a house.
It seems that the housing market is generally in a bubble due to being distorted by the finance market
London house market is different from the rest of UK. People from overseas tend to invest in London property market, so it is always inflated. Even the property tax hasn't deterred many.
I could look into buying somewhere and renting it out
You are trying to join the same people, because of whom you have been put out of the housing market. I strictly question this logic unless your mortgage is less than the rent you pay and what rent you get. Buy a roof over your head first, then think of profiting from property.