Why do we want to own a house?

woohoo_postingid

"not having a landlord"

Yes and having to pay for all repairs, new boilers etc etc.

There are pros and cons to both arguments. I must admit, I really hope house prices crash so that I can afford to buy my first house.

meanmachine_2

KK, how lovely for you that your property has QUADrupled in value.

Now how do you expect me or anyone to be able to afford to buy it now?

I couldn't and I earn above average.

I wish homeowners would wake up to the fact that, yes, OK, over the last 8 years they have done well. But they were starting from a very low point. After the crash, houses were around 20% undervalued. Now, according to the OECD, they're 30% OVERvalued.

And yet some people think that isn't enough and prices are going to keep going up.

Not possible. And certainly not desirable. It would kill the economy stone dead.

catkins

I am renting because having lived abroad for nearly 10 years house prices here have gone up so much I cannot afford to buy. Having said that, I pay £800 a month for a three bed terraced house. I am hoping to buy next year.

I personally would be happy to rent all my life if rents were reasonable and there was some security in a rented property. Unless you are lucky enough to get a council or housing association house (and very few people are) private landlords charge the earth. I don't know if I have been unlucky but the first landlord put the rent up by £100 a month after six months then after 12 decided to sell the house. The second landlord would only let us have a 6 month tenancy agreement and when the 6 months were up he also wanted to put the rent up by £75 a month. Refused and moved again!!!

In other countries far more people rent than do here but it is because on the whole renting is cheaper than having a mortgage and they do seem to have more security.

kinster_2

meanmachine wrote:

KK, how lovely for you that your property has QUADrupled in value.

Now how do you expect me or anyone to be able to afford to buy it now?

I couldn't and I earn above average.

I wish homeowners would wake up to the fact that, yes, OK, over the last 8 years they have done well. But they were starting from a very low point. After the crash, houses were around 20% undervalued. Now, according to the OECD, they're 30% OVERvalued.

And yet some people think that isn't enough and prices are going to keep going up.

Not possible. And certainly not desirable. It would kill the economy stone dead.

So what are you going to do about it? Prices are based on whatever someone is prepared to pay for them.

westernpromise

If you rely on historical data to guide you, buying is always going to outstrip renting. Several things that have happened in the last 50 years have caused the nominal price of houses to go up substantially, eg:-

- hyperinflation of the early and mid 1970s, at one point reaching 26%. House prices did not go up by 26%, they went up by less, so in fact they fell compared to the price of everything else. Nonetheless, in going up by 15% or so a year, what was actually a bust felt like a boom.

- introduction of the right to buy for council tenants caused a once-off increase in the number of owner-occupiers. I forget how big it was but it ISTR it was of the order of 20%, so we went from 50% owner-occupation to 70%.

- globally higher interest rates meant that the price of everything grew fast relative to now. Stock markets, interest rates, bond returns, and house price inflation were all higher than today.

- the emergence of BTL players, which has pushed prices up because BTL landlords can afford to buy up FTB-type properties and then rent them to FTBers who can't afford to pay what the BTL landlord can.

These were all structural factors driving houses up, which look unlikely to repeat. Looking at what are the structural factors today, thay all look negative:-

- returns on every form of investment have declined, so those on housing will follow

- reductions in interest rates have encouraged many into record consumer debt totalling of a trillion pounds, which will have to be repaid somehow

- in the aftermath of the endowment problem, many people will find their capital gains eroded by their mortgage shortfall, meaning they can't afford to pay as much when they move as they used to

- increasing numbers of younger people are being steered towards doing university degrees of doubtful commercial value, but which result in a large debt at the start of their working lives

- because of this and other factors, such as the pensions crisis, they are likely to defer buying property, so there may be a one-off downward move in owner-occupation

- structural propensity among governments of all political persuasions to increase personal taxes, which again reduced people's ability to pay high prices. It has been 20 years since we had a government which actually reduced the tax burden.

Offhand, I can't think of any long-term trends evident at the moment which are bullish for house prices. The only possibility is that as London secures its position as the financial capital of Europe, this and the fact that we speak English will continue to lure foreign workers here, which will drive housing demand upwards. This, however, assumes that those people will all buy. The poorer ones cannot afford to and the richer ones will tend to buy in the high end, so we could see Londoners suffer the same fate as the inhabitants of picturesque Cornish villages, i.e. crowded out by incomers.

The stock market has always been a better long term bet than housing. That said, you can live in a house but you can't live in a portfolio.

nearlyrich

The semi rural area where I live is now too expensive for FTB in local jobs where the pay is less than the national average by a long way. We are about 20 miles from Manchester with a good inexpensive bus sevice so there are lots of escapees from the city willing to pay more for property.

We have been reasonably fortunate to have been able to buy this house for about a third of it's current value, we have paid up the mortgage so as long as we need a roof we have one which helps me feel secure. If I look back to the first property which I bought in 1982 the investment was a very large part of two very low incomes. If my income was pro-rata in line with inflation I would not be able to afford the current value of that house. In fact I think I would struggle with my above average earnings and it's a tiny 2 bed terrace.

I feel sorry for my children who will probably not be able to afford to buy in this area, and for other young people who don't earn enough to get a mortgage that works out less than the market rate of rent payable ( because all the landlords are paying mortgages on over priced houses too).

On the other hand I have a friend who's parents bought a house in 1962 for £525, the slightly smaller house next door has just sold for over £200,000 in need of a lot of work, their investment must have been a good one?

chugalug

This is a really difficult one because it all depends on your circumstances. I consider myself very fortunate to have a HA property - low rent, no maintenance and I can't ever be evicted (as long as I stick to the tenancy conditions!!!) I honestly think buying isnt for everyone but there isnt really much choice in the UK. If you rent privately you are likely to have to move regularly, not good if you have children. But buying is expensive and, as has already been said, good social housing is in short supply. I've always worked but only part time as I had my first child very young and have always relied on my partner to bring in a decent income. Not good if/when your relationship breaks down and you can't afford the mortgage. I used to yearn for my own house where I could do what I want to it and move if I wanted to but as I hurtle towards retirement I realise I'll be better off in rented. I wont have to worry about maintenance on a property - so many elderly people have problems trying to keep up a property on their own on a limited income. On the other hand, I still think years of paying inflated rent for little security is money down the pan - thats what I tell my children. Academic really as they won't be able to buy anything here in sunny Brighton but they won't get social housing either!!

BobProperty

westernpromise "- returns on every form of investment have declined, so those on housing will follow"
I think it's already down there. Anyone buying recently on BTL will be lucky to get a 7% return and more like 5%. In my mind why bother. I can get 5% sticking it in a bank. I used to look for 15% return when buying property to rent. (Yes, seriously, back in the 80's, I did). House prices will stay flat or fall slightly in the near future. I think we could be heading for a repeat of the period 1989-1999 but with a slightly less sharp correction at the start.

meanmachine - you actually mean you can't afford to buy a house where you would like to live. That is not the same as not being able to afford to buy a house, which you obviously could. (http://www.fish4.co.uk/iad/homes/advert?adId=7449867&sid=80222B8BD06E129503&pos=1&src=search&tot=31)
Why not work your way up to where you want to be by a series of moves?

Woby_Tide

BobProperty wrote:

meanmachine - you actually mean you can't afford to buy a house where you would like to live. That is not the same as not being able to afford to buy a house, which you obviously could. (http://www.fish4.co.uk/iad/homes/advert?adId=7449867&sid=80222B8BD06E129503&pos=1&src=search&tot=31)
Why not work your way up to where you want to be by a series of moves?

*pulls up chair, makes self comfy*

nelly_2

Woby_Tide wrote:

*pulls up chair, makes self comfy*

*Sits next to Woby and offers some popcorn*