Category: London life

My Dream Home: after the morning after 

FIRE v London12 Comments

In my last post in this occasional series about my tribulations buying my Dream Home, I left my story at 9am on Friday 24 June – The Morning After – having just received an offer for £100k less than the ‘actual’ value of my old house.  I asked for views on what I should have done next.  And I got some wonderful comments with real wisdom – a real testament to the amazing insights in the UK’s FIRE community.

The first comment came from RIT, suggesting I should have taken the money and run:

“Looks like either a very illiquid market or the price was to high to me. From where I sit I would have had their arm off and pushed for an exchange very quickly.” Retirement Investment Today

My approach wasn’t what RIT advocated, even though I think it is a very sensible perspective. I had several people giving me the same advice at the time.  In fairness to RIT, as LondonRob commented, the ‘right’ answer “partly depends on how much [I] really need the cash. It would also be good to know what the rental value could achieve.”  LondonRob said he felt a 10% discount to the asking price was too much, and so provided cash wasn’t an immediate issue he recommended turning the offer down.  This is indeed what I did.

What I hadn’t explained in my last blog is that yes I would like the cash from my old house, but no I am not desperate for it.  I have emotional ties to the property and do not want to sell it ‘under duress’.  I am pretty confident I will get a reasonable price for it at some point and can afford to wait. I also was wondering about its potential as a rental property, and felt pretty sure I could rent it out – albeit possibly at a low rental yield.  Had the rest of the market tanked between January and June I may well have been feeling more desperate for cash.  But in fact I had already made almost £1m in paper gains this year and this had boosted my resilience, so I was not in much of a mood to compromise.

Continue reading “My Dream Home: after the morning after “ →

My Dream Home: the story after

FIRE v London12 Comments

Readers earlier in the year will be aware that I found myself buying my Dream Home, on something of a whim, at very short notice in January. My plan had been to put the old house on the market last Easter. Things haven’t gone entirely to plan, as I’ll recount.

First off the old house needed a bit of TLC. Nothing major, but not something I have to bother with on my other valuable assets. This took a few weeks, and prevented me selling the house at the start of the year.

Secondly, I got quite a significant shock when I got the house valued. This being London, the first and almost only step required to value a house in a given postcode is to measure its square footage. Measuring is a very slick process these days involving lasers. But I couldn’t believe my eyes when I got the plans back : they were 500 sq ft short. Shurely shome mishtake? Alas not. I’ve been labouring under a misapprehension for about fifteen years about the size of my old house.

500 sq ft in North London is worth over half a million squids so this was quite a blow. In many ways I’m glad I hadn’t realised this when I was looking at new houses, but I’m certainly relieved I didn’t stretch myself to buy a more expensive Dream Home. Certainly it is a good reminder of one of life’s most important lessons: Check Your Assumptions.

In any case I then had a few of the local agents visit to tell me how wonderful my house is, how exorbitant expensive it will be and how rapidly they can sell it for me. My original strategy was to deploy two agents who between them covered all three of the UK’s large property portals but in the end I ended up with a ‘pile it high’ agent and a ‘classy one man band’ agent both of whom were on the same two portals (Zoopla/PrimeLocation being the one that matters in my market).

The pricing of a house to sell is a fascinating process.

Continue reading “My Dream Home: the story after” →

London’s squeezed middle

FIRE v London14 Comments

I really enjoyed two recent FT articles about the squeezed “middle” struggling on £200k household incomes.

The first FT article profiled a 45 year old married lady living south of the river with her husband and kids.  Their earnings “nudge £200,000 a year”.  The lady says:

“In theory, with our household income, we are in the top 5 per cent of the UK population and yet it does not feel that way,” she says. “If you’re earning millions of pounds, then you’re OK — and at the other end of the spectrum you get everything paid for. We are caught in the middle where we are paying for everything.”

The article lists various things squeezing couples like this:

  • School fees.  Killik & Co reckon there has been a 342% increase since 1990 in average private school day fees.
  • Childcare.  Nursery costs have risen by 69% in 10 years.
  • Loss of child benefit. This benefit, worth a maximum of £1k per child, feels more symbolic than real to me for £200k households, but the symbolism is powerful.
  • House prices.  Up 475% in 30 years.  And transaction costs have risen from less than 4% to potentially 15%. This means the old ‘upgrade every 7 years’ no longer works.

The article also cites a real issue of pension provision, as the funds required to maintain incomes of anywhere approaching £200k per year are far beyond what most ‘squeezed’ couples can dream of amassing. And more to the point the maximum tax-free pension pot of £2m per couple would not generate anything like their pre-retirement income.

In his article the following week, Janan Ganesh brings wonderful scorn and observation to the uproar that the first FT article caused.  Without even mentioning the article’s obvious omissions about lower mortgage costs and lower inflation, and with a down-to-earth groundedness that many of the FIRE community would appreciate, Ganesh reminds us of the average incomes in this country: Continue reading “London’s squeezed middle” →