4 ms·

I don't get it: she sold up and made a profit, but unless she downsized, the profit is gone on buying a new place.

by nodata 12y ago

joosters 12y ago
The article does say that she downsized, with about £200k difference in price. There's the profit!
henrik_w 12y ago
Yes. Usually when you sell one house, you buy another, so it is a bit of a zero-sum game. However, what does matter is when you entered the market. Entering the housing market today is relatively speaking much more expensive than it was 20 years ago.
makomk 12y ago
If you get lucky and don't particularly care where you live, you don't necessarily have to downsize. London house prices are a lot higher than the rest of the country and have gone up a lot more. You could get a decent-sized house with a garden in most of the UK for what she sold her flat for.
- UK-AL 12y ago
  You could buy a McMansion in most of the UK for that price.
jeffwass 12y ago
Or you upgrade to a bigger house, and roll the profits into a bigger down payment on the next property, keeping a similar sized mortgage. My friend did this, sold his old place and bought a bigger nicer house, keeping his monthly mortgage payment roughly the same, which now is well below market rent.
- onion2k 12y ago
  Except as all equivalent property prices have also gone up, and consequently the price differential between a flat and a house has probably led to a bigger gap in the prices than than the profit than the flat in 1995 and 2015. Eg £32,000 flat in 1995 -> £660,000 flat in 2015 is an increase of 2062%, or £628,000. £100,000 house in 1995 increasing at the same rate of 2062% now costs £2,062,000, up by £1,962,000. To move from the flat to the house you now need to find that additional £1,962,000. Obviously not all properties increase at the same rate, and presumably the author of the article got a quite lucky with her 2062% increase. But even if the house only increased at half the rate of her flat it still costs £1,000,000 now, so she's £300,000 short. Price increases only benefit you if the lower end moves up faster than the higher end (which is very rare) or if you're cashing out.
frobozz 12y ago
It isn't so much about the profit from sale, but about being able to buy in the first place. 10 years after graduation, she bought a two-bed flat in Herne Hill. Such a place wouldn't leave much change from £600K today. For context. Assuming a 3-year course and no gap year, that would make her 31 when she bought. Were she in the same position today, she'd need to have saved up at least £60K for a deposit (90% LTV) and have a salary of £135K (4x is a common salary multiplier). Given that that's more than a top decile _couple_ in London currently earns, that's not likely. The average salary today for her job at the time, is less than £24K, less than a fifth of what she would need. Given the high cost of private rent, and the fact that social housing is only available for existing tenants and people who _really_ need it, saving up that much in only 9 years is difficult. Meanwhile, house prices continue to rise faster than incomes, the longer you wait, hoping for a crash, the less likely it looks that you'll be able to afford a place even after the crash happens. Even as a direct response to your point, moving out of London makes your money go much further. With that money, you could get a pretty nice house even as close to London as Reading, Maidenhead or even the outer London Boroughs. Not to mention what you could do with the money if you moved away from the south east entirely. At an estimated 61 years old, she's in a position to think about retiring soon, and considering she's not from London, she might well be considering moving away when she no longer needs to be here for work. http://www.zoopla.co.uk/for-sale/property/london/dulwich-road/ http://www.zoopla.co.uk/for-sale/property/london/dulwich-roa... http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-salary-compare http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-... http://www.payscale.com/research/UK/Job=Communications_Officer/Salary http://www.payscale.com/research/UK/Job=Communications_Offic...

I don't get it: she sold up and made a profit, but unless she downsized, the profit is gone on buying a new place.

by nodata 12y ago

I don't get it: she sold up and made a profit, but unless she downsized, the profit is gone on buying a new place.

joosters 12y ago

The article does say that she downsized, with about £200k difference in price. There's the profit!

henrik_w 12y ago

Yes. Usually when you sell one house, you buy another, so it is a bit of a zero-sum game. However, what does matter is when you entered the market. Entering the housing market today is relatively speaking much more expensive than it was 20 years ago.

makomk 12y ago

If you get lucky and don't particularly care where you live, you don't necessarily have to downsize. London house prices are a lot higher than the rest of the country and have gone up a lot more. You could get a decent-sized house with a garden in most of the UK for what she sold her flat for.

UK-AL 12y ago
You could buy a McMansion in most of the UK for that price.

jeffwass 12y ago

Or you upgrade to a bigger house, and roll the profits into a bigger down payment on the next property, keeping a similar sized mortgage. My friend did this, sold his old place and bought a bigger nicer house, keeping his monthly mortgage payment roughly the same, which now is well below market rent.

onion2k 12y ago
Except as all equivalent property prices have also gone up, and consequently the price differential between a flat and a house has probably led to a bigger gap in the prices than than the profit than the flat in 1995 and 2015. Eg £32,000 flat in 1995 -> £660,000 flat in 2015 is an increase of 2062%, or £628,000. £100,000 house in 1995 increasing at the same rate of 2062% now costs £2,062,000, up by £1,962,000. To move from the flat to the house you now need to find that additional £1,962,000. Obviously not all properties increase at the same rate, and presumably the author of the article got a quite lucky with her 2062% increase. But even if the house only increased at half the rate of her flat it still costs £1,000,000 now, so she's £300,000 short. Price increases only benefit you if the lower end moves up faster than the higher end (which is very rare) or if you're cashing out.

frobozz 12y ago

It isn't so much about the profit from sale, but about being able to buy in the first place. 10 years after graduation, she bought a two-bed flat in Herne Hill. Such a place wouldn't leave much change from £600K today. For context. Assuming a 3-year course and no gap year, that would make her 31 when she bought. Were she in the same position today, she'd need to have saved up at least £60K for a deposit (90% LTV) and have a salary of £135K (4x is a common salary multiplier). Given that that's more than a top decile _couple_ in London currently earns, that's not likely. The average salary today for her job at the time, is less than £24K, less than a fifth of what she would need. Given the high cost of private rent, and the fact that social housing is only available for existing tenants and people who _really_ need it, saving up that much in only 9 years is difficult. Meanwhile, house prices continue to rise faster than incomes, the longer you wait, hoping for a crash, the less likely it looks that you'll be able to afford a place even after the crash happens. Even as a direct response to your point, moving out of London makes your money go much further. With that money, you could get a pretty nice house even as close to London as Reading, Maidenhead or even the outer London Boroughs. Not to mention what you could do with the money if you moved away from the south east entirely. At an estimated 61 years old, she's in a position to think about retiring soon, and considering she's not from London, she might well be considering moving away when she no longer needs to be here for work. http://www.zoopla.co.uk/for-sale/property/london/dulwich-road/ http://www.zoopla.co.uk/for-sale/property/london/dulwich-roa... http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-salary-compare http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-... http://www.payscale.com/research/UK/Job=Communications_Officer/Salary http://www.payscale.com/research/UK/Job=Communications_Offic...