On ~100k in London and can technically buy, but struggling to justify it financially
Hello, I'm trying to think through the financial tradeoffs between buying in London versus continuing to rent and invest.
I have been diligently saving and investing for years, and honestly I keep seeing the market outperform housing, while London flat prices seem stagnant or falling in many areas. I feel stuck between continuing to save cash for a flat purchase, or just aggressively maxing out my S&S ISA and continuing to rent.
My situation:
- Early 30s
- Single
- Salary ~90k + ~10k bonus (not guaranteed)
- Plan 2 student loan
- Not retiring in UK, but staying for at least 5 more years
Monthly:
- Typical take home: ~4.7k
- Rent: ~2k
- Bills: ~300
- Saving/investing: ~1.3k
Balances:
- ~45k S&S ISA
- ~41k cash
I need to stay in London because of job opportunities and commute.
Looking at 2-bed flats around ~400k, which is realistically what I could afford, I am struggling to justify the financial tradeoff once mortgage costs, service charges and leasehold costs are factored in. I have no illusions about anything freehold that's even half decent with this budget.
I have got an agreement in principle and current 90% LTV mortgage rates are ~5%. Once mortgage + service charge costs are added up, the monthly cost is the same as my current rent.
Part of me feels like building equity earlier would make sense long term, but I am unsure whether the opportunity cost of pulling money away from ISA contributions and investments is justified in the current market.
I am willing to live further out in London, potentially up to Zone 6, if the commute into the city is reasonable. I could theoretically go for a larger 1-bed instead, although I am unsure how much that changes the long-term resale/risk side of the equation versus stretching for a 2-bed.
Interested in perspectives on the financial side of the decision, particularly from people who have weighed up buying versus continuing to rent and invest in London.