BBC: Homes 'May rise in value in 2009'

Harry_Powell

Thrugelmir wrote: »

Quick points.

Your basic assumption is that rent = interest. Unless you have at least a 25% deposit. Then its reasonable to expect interest costs to be higher bearing in mind that product fees are payable to on the mortgage.

The renter incurs none of the other costs of home ownership. Maintenance, decoration, roof repairs etc.

Overpaying is unlikely to be option for those first starting on the ladder.

Locally I would estimate gross rental yields to be around 4.5% to 7%. There's a lot of similar property, 2/3 bed. So easy to compare.

So with regards to prices locally. There's no room for significant increases in house prices. As rental yields should be higher than this level. I'm putting my investor hat on when I make that comment.

I'm buying investment trusts with 5% to 7% yields and corporate bond funds yielding around 8.75% through tax efficent wrappers. So property holds no attraction currently.

In my example I stated that both renter and owner occupier were paying the same in rent and in interest only mortgage payments, therefore the rent v interest part of your discussion is moot.

I'm not so sure about the comparison in living costs because repairing central heating boilers and leaky roofs is not a regular event, so the normal running costs for someone renting and someone owning will be the same. The OO will have to pay for Building & contents insurance but often you get cheaper contents, car and other insurances when you're an OO than as a renter so this will mitigate this expense somewhat. As far as decorating, etc. We rent but have decorated our place to our taste (with agreement from LL) and whether you buy now or buy in 5 years, you will renovate/decorate and furnish to your own taste, so renters are just deferring this expense while they rent.

With your overpaying comment, in the example the renter had the same disposible income as the OO after rent/mortgage had been paid. If it is unlikely that the OO could make overpayments in the first years of owning his house, then does it not follow that the Renter could not afford to put money away either due to the cost of his rent and living expenses?

I'm not sure what you're getting at with the rental yields and investment details, I was talking about people buying or renting homes, not investment properties.

Thrugelmir

Harry_Powell wrote: »

In my example I stated that both renter and owner occupier were paying the same in rent and in interest only mortgage payments, therefore the rent v interest part of your discussion is moot.

As you say that would negate the whole point we are discussing. My point is that that isn't the necessarily the case.

With regards to property yields. With the abundance of property to rent in the market now. Its a way to compare the relative merits of renting vs ownership on a local level.

Graham_Devon

Harry, can I ask (and feel free to decline to answer). Did you ever buy a house? Just your stance on this whole situation seems to have changed quite a bit.....just wondering is related to buying a house recently?