The greatest residential property conundrum of our time is upon us – to leave the city or stay put. Thousands of Londoners are voting with their feet post lockdown and trading in the big smoke for a rural idyll. But the remoteness of rural life may well bite back when the world returns to a semblance of regular operations. Cities will find a way to reinvent themselves and when they do, you’ll need – in fact, want – to be there. Can you have the best of both worlds? It’s more possible than you might think.
The question isn’t about whether a two-home strategy is best, it’s whether it can be done on a budget.
According to Rightmove, July 2020 was the busiest month for the housing market over the last decade with £37 billion of transactions taking place. Of course, there’s some pent-up demand and the changes in Stamp Duty which may have contributed. Figures from the Bank of England show that sales are up 20 per cent and the average UK property price (whatever that is) is up by £10,000. So how do you utilise the market to keep a foothold inside and outside of the city?
The answer is in a change of mindset: urban property is as much an investment as it is a convenience. When turbulence exists in equity markets and interest rates remain low, those two factors alone continue to make property a compelling place to invest your money. Buying an urban bolthole can therefore serve a dual purpose: it’s both a nest egg and a lifestyle choice. Here’s my advice for achieving the two-home strategy:
Do your sums
Work out what you can borrow and what equity you have and set your search based on the money you know you can pull together. Don’t live in a fantasy land that stretches budgets too far. Be prepared to accept that one of your properties – most likely the urban bolthole – will be a compromise rather than a home that ticks all the boxes.
Two properties means two deposits so look carefully at ways of raising the cash: is there cash your can release from existing property? Are there investments you can sell? Do you have friends or family members keen to invest in property with whom you could double up?
First time buyer mortgages and 95 per cent loan to value deals are becoming like hen’s teeth. You will therefore need to shore up a larger deposit. I’d recommend aiming for at least 10 per cent of the property value as the interest rates on those mortgage deals begin to settle down to something very affordable. According to MoneySupermarket, the average deposit for a first time buyer is just over £50,000, covering around 18 per cent of the property value.
If you are yet to buy a property, you can use this situation to your advantage. A second home will attract stamp duty (add 3 per cent to any purchase). Shared ownership and Help to Buy are only available on your first purchase and use of schemes like these can help you free up capital for a second property outside the city. Doing so requires discipline. Don’t leap towards the biggest , most stylish property you can find for your money but consider buying something smaller so that you have more resources available to invest in a rural property further down the line.
Location, location, location
Buying in an up and coming area of the city with good transport links should take priority over doorstep amenities – in London, you can travel for a good restaurant and bar. In a rural area, especially if it’s your primary residence, having good amenities on your doorstep has a greater impact on your quality of life.
Spend time researching your rural location. How close are the neighbours? Do they have young children? Or ducks? Both are noisy. Where does the sun set? Is the property under a flight path? Is it near a new development or site earmarked for building? Go on google maps and check for pylons, sewage works or anything that could decrease the value of the home or your quality of life. Many of these factors are of equal importance to the property itself. Considering them can enable you to look more closely at houses that may have otherwise passed you by.
Don’t judge the decor
If you’re going to make the two-home strategy work on a tight budget then you can’t be fussy about the decor, especially when it comes to rural properties. Resist the allure of a kitchen that’s just the right shade of duck egg blue and prioritise area over aesthetics. The cost of new decor is minimal compared to an extension, so don’t judge a book by its cover but look for potential in the space. If the floorpan offers the space you need then you should look past the fittings and see it as a blank canvas. If it’s going to be your forever home then you will have years to redecorate it to your own taste. In the current climate, a sizeable house in need of a lick of paint with a bountiful garden is like gold dust. Snap it up while you can.
Don’t take on too much
When looking for the city bolthole, opt for ease of maintenance over character. The last thing you want are two high maintenance properties that require lots of work. You’ll be buying into an investment prospect and you need to make sure that someone is going to want to buy it from you down the line. Look for new build flats that you can move straight into with amenities that will make the working week easier – a gym for instance might be more useful midweek than nearby bars, as will a supermarket. Although a great location if you can afford it will always allow a property to maintain its value.
If it all seems out of reach but the strategy appeals then get creative. Why not look into living on a houseboat? In just the last month, I’ve seen houseboats for sale in Little Venice and Chelsea to name but two – if location is important to you then it can unlock previously unaffordable parts of the city.
Another option might be to look for properties – either rural or urban – that create opportunities for rental income. For example, a rural property with an outhouse than can be letted out on Airbnb might generate income for an urban bolthole. Similarly, you could take on a lodger in a city bolthole with more than one room.
Rural living has undeniable appeal right now but, with a little forward thinking, you may well come to appreciate having an urban foothold when cities do spring back to life.
James Max is a chartered surveyor and presents The Early Breakfast every weekday morning from 5 – 6.30am on TalkRADIO.