I Have A Deposit – What Now?

Thanks to the pandemic, I’ve accidentally ending up saving enough for a deposit on a flat.

Well, thanks also to living in a shared house in Harrow so therefore paying cheap rent, and also thanks to my insight 10 years ago to get into a career with a huge future demand, software engineering, which went even more in demand over the pandemic and hence means I can demand large pay rises. So, yeah, thanks to the guy/girl who in Wuhan Institute who let the bug out the building in November 2019.

The easiest way for me to buy a place is with the government’s Help To Buy scheme. Basically, I’d have a mortgage for 60% of the flat, and the government would lend me 40% – of which I would only pay interest on after 5 years – effectively they have a 40% share of the property.

Alternatively, I can buy on the normal market. I can apparently borrow £289,000, which with my deposit added is enough for a half-decent 1 bedroom place.

I’ve been looking (“looking”) mostly at Walthamstow and Acton, two areas with enough going on, and with good enough connections to the rest of London to appeal – and both in the affordable bracket.

Alas, prices have gone up since I started realising a year ago that I might end up with enough for a deposit. Walthamstow had properties on the Help To Buy scheme at around £375,000 last year – now I’d be looking at around £420,000. Acton had properties on the Help To Buy scheme at around £420,000 last year – now I’d be looking at around £450,000. The old prices are going on memory and maybe the comparisons are not exact, but anyway…

Just because I can afford it…should I?

The housing market feels frothy to me. It doesn’t feel like I’d get a good price, especially on a new build – and they do seem to be selling pretty smartly from what I can tell. I’m totally put off by the recent price rises.

But on the flip side, higher interest rates are coming. Which means the market should slow down and prices should…or maybe in this stupid fucking dumbass Boomers NIMBY-land country, could fall. Yet my mortgage would be more expensive.

So it appeals in one way to wait it out a bit. However, the government Help To Buy scheme closes in March 2023. Well, it is scheduled to. But given that it is really a Help To Sell scheme, maybe that also means prices of new builds will fall when the scheme closes? This is probably a good point to clarify that I’ve predicted house price crashes around 5 times in the last 20 years. 1 happened.

I did some sums. Some very, very basic sums with very bad assumptions. So my assumptions are that there is no inflation for the next 25 years, my savings earn 0%, my spending remains consistent to the last two years and I stay on the same wages for the next 25 years.

If I stay in a shared house until I’m 67 years old, then I’ll have £585,000. Enough to buy a decent house outright. Bear in mind I am assuming no inflation in my sums.

If I managed to wangle a Help To Buy property for £400,000 then I’d have very approximately £210,000 when I’m 67 years old. Likewise, if I bought a normal market flat, then I’d have approximately £275,400 when the mortgage is paid. Plus in both cases I’d own a flat.

Financially, my rough calculations on a back of a Excel packet, suggests all options give me broadly similar outcomes in the long term.

I do want my own place

But I do want my own place.

Then again, do I need to do it in London? Should I move to San Diego, the city I fell in love with? Or maybe could I do the Digital Nomad thing – living and working in other countries that actually have warm sunshine in April.

London does make the most sense – I need to be in a big city for my soul, and one with liberal values – even if it is a bit too leftie here. My sister lives here, I have some friends here, and it is easier to get to see my family and most friends, compared to living in another country.

Importantly, I do want to be able to play music. So maybe a new build – a decent quality new build, makes more sense in a not fucking off the neighbours sense. As a split house flat, which is probably all I can afford without Help To Buy, probably isn’t going to give me the sound-proofing – and privacy, I’d like.

I feel like I’m most tempted to wait. Shaky economic times with the cost of living crisis and interest rates going up – maybe, just maybe, house prices will go down, and my deposit level will go up.

There isn’t really a bad decision. Waiting is fine. But maybe it is time to book in a couple of bookings – there are two Help To Buy schemes in Walthamstow worth viewing. Even if they are too expensive.

Decision Made

Soooooooo since I wrote the previous 3 sections, I’ve lost £3k on the stock market and am now in the red. I refuse to sell at a loss, so I won’t be buying for a while.

Plus with the economic uncertainty and the very frothy housing market, I think I’m happy to wait and see how much money I lose on the stock market. I reckon the stock market could easily go down another 20% or more in the coming months, and will take 2-3 years to recover.

At least I thought about buying my own place. I nearly even viewed somewhere. Maybe I should have put it on black when I was in Vegas.