Buying Cheaper Than Renting Everywhere except London

dopester

HAMISH_MCTAVISH wrote: »

The ONLY way it now pays to rent versus buy, is IF we see further substantial falls.

Very risky strategy indeed, as such a thing is looking less and less likely by the day.

I'm slowly making my way through reading this thread, but was taken aback it took until post #26 for this item to be raised.. and it required Hamish to mention it.

After years of house-price hyperinflation under Labour, with catastrophic consequences to the economy and banks and financial system.... my bets are all on the crash soon resuming in full.

All the efforts Labour have tried to make to resist market adjustment, bail out banks, stop repos ect ect, only strengthens the deflationary impulse, for an even harder crash, imo.

Even ex-hardliners of the feared property-worshipping Aberdeen sort may soon become allies of mine, in expecting values to fall. (see my current sig)

julieq

BTL isn't intrinsically risky compared with most other forms of investment, for example stocks and shares. The underlying asset is basically on an upwards ramp, despite short term falls, and there is a reliable income stream. There's a relatively low risk of slight negative cashflow, but the risk of ruin is negligibly small.

Prices in the UK have not decreased massively despite the biggest financial crisis there has ever been and effective credit rationing. That demonstrates the resilience of the market here, and how keen people are to buy.

the_ash_and_the_oak

Gorgeous_George wrote: »

They are not comparing apples with apples.

Rent replaces much more than just a mortgage. It pays for some insurances, risk of non-payment, a landlord's time and energy. Most rentals come with some furnishings and ongoing repairs and refurbishment.

On the other hand, a mortgage will usually have an end date whereas renting is for life.


There are those who rent and prefer it that way. There are those who are buying (or have bought) and prefer that. There are some owners who would be happier renting and some renters who aspire to buy a home. Life's like that. Lots of different people with different needs and desires.

For me, buying is better because I tend to stay in one place for many years. And I have been lucky.

GG

tbf renting isn't really for life imo. It can be but i read about this guy this one time who after he left home he rented for 4 years and then he bought a house. imo he didnt rent for life

the_ash_and_the_oak

julieq wrote: »

The thread was about whether or not it's better to rent than buy, not to discuss various strategies for making money from property rental. And George's point is the key: renting is for life, you have to sustain rental prices for 40-50 years+, whereas a purchase will be paid off in 25 usually. You have to save a hell of a lot to pay rental into retirement, so there's a double cost there.

You could actually lose 100% of a house's value by the time the mortgage was paid off and still be better off, because you will have a place to live into retirement, which otherwise would be costing you a grand a month or so increasing by inflation, you need about 300K saved up to generate that sort of amount even without taking inflation into account, ON TOP of the rental costs. Bear in mind also that rental will tend to increase at the rate of inflation whereas the amount paid in mortgage servicing will tend to reduce in real terms.

On the other hand there are some advantages in renting, particularly that you can move around relatively easily, get some level of service from your landlord, and so on. You pays your money and you takes your choice essentially.

not really. Like when I moved into this place wasn't really planning to rent here forever - I'm kinda thinking about buying in about 4 years maybe tbh. tbf you are right that genereally over time rents increase w inflation but (in London at least) most places haven't increased in the last 6-7 years at all tbf (imo have noticed houseprices go up a little tho)

the_ash_and_the_oak

silvercar wrote: »

Renting in retirement is just scarey. Only two options really, either fund yourself from pensions/ savings (but who knows how long you will need to fund) or have no savings and have to live in properties that are within the benefit scales. Being forced to move home often in retirement is not something I would relish.

nah it can actually be pretty cool to rent in retirement imo - my gparents STR (initially w idea of buying back in) - tbh I don't think they will now - I guess it depends where you're renting (and they have had to move twice tbf - had a break from uk and rented in Malta for 6 months before returning)

julieq

Yes, but a 4 year rental followed by 25 year mortgage just pushes back the time at which you start the mortgage. The danger is that you've increase the purchase price around 12% even at modest HPI, which is 24K for a 200K house, plus 48K or so in rent. That's a fair amount to claw back, so it really makes very little sense financially to rent if you're in a position to buy.

Unless you're hoping for big falls, or you're certain there'll be stagnation, in which case you're still down the 48K but *may* have gained a little on the purchase price. But to get to price falls we have to have more forced sales due to increases in interest rates (according to the bear big book of rules) so you've lost 4 years of repayments at low rates.

I'm not saying renting is bad, most people start out by doing it and have no option while saving a deposit, for other people it's the logical option for other reasons. But it's certainly not a given that sitting out of the market is a good thing to be doing at present, far from it.

julieq

the_ash_and_the_oak wrote: »

nah it can actually be pretty cool to rent in retirement imo - my gparents STR (initially w idea of buying back in) - tbh I don't think they will now - I guess it depends where you're renting (and they have had to move twice tbf - had a break from uk and rented in Malta for 6 months before returning)

So in fact that proves the point that for your grandparents, buying a house was the best investment strategy, because it's allowed them flexibility in retirement. It wouldn't have been possible had they rented throughout their lives, because they wouldn't have been able to build up the capital.

mewbie_2

julieq wrote: »

sitting out of the market is a good thing to be doing at present...

Yes, best to be cautious. Looks like the crash will resume as property starts coming back onto the market.

the_ash_and_the_oak

julieq wrote: »

Yes, but a 4 year rental followed by 25 year mortgage just pushes back the time at which you start the mortgage. The danger is that you've increase the purchase price around 12% even at modest HPI, which is 24K for a 200K house, plus 48K or so in rent. That's a fair amount to claw back, so it really makes very little sense financially to rent if you're in a position to buy.

Unless you're hoping for big falls, or you're certain there'll be stagnation, in which case you're still down the 48K but *may* have gained a little on the purchase price. But to get to price falls we have to have more forced sales due to increases in interest rates (according to the bear big book of rules) so you've lost 4 years of repayments at low rates.

I'm not saying renting is bad, most people start out by doing it and have no option while saving a deposit, for other people it's the logical option for other reasons. But it's certainly not a given that sitting out of the market is a good thing to be doing at present, far from it.

Well tbf can't really include the rent in these figures (considering its cheaper than mortgage interest) - and as a potential ftb I'm not really eligible for the low rates that some current owners have

agree it pushes back the time it takes to start a mortgage but not so much the time it takes to end a mortgage (given that I think prices will fall) - prob looking at a 20yr then rather than a 25yr now tbh. Also what I might buy in 4-5 years prob different to what I might get now - kind of want to avoid the buying and selling costs of the '1bed flat rung' if you get me

But yea I mean I agree the plus/minus thing really hangs on your opinion of future price direction rather than current costs - which is good! we get to put our money where our mouths are

the_ash_and_the_oak

julieq wrote: »

So in fact that proves the point that for your grandparents, buying a house was the best investment strategy, because it's allowed them flexibility in retirement. It wouldn't have been possible had they rented throughout their lives, because they wouldn't have been able to build up the capital.

It was a totally brilliant strategy (they actually - literally - laughed all the way to the bank!)

tbh I don't think they were ever going to rent all their lives (not really feeling I will either). Think its pretty good to be able to do whichever seems best at the time, and not get too hung up on one particular thing.

I totally agree that buying a house was a great buying strategy at that time. And i think it will be again in the future too!