Buying Cheaper Than Renting Everywhere except London

IveSeenTheLight

the_ash_and_the_oak wrote: »

Fair point. Any ideas what happens to the person who rents for 3 years while it is cheaper to rent and then gets a 22 year mortgage?

Is it a guarantee that the property will be the same / cheaper?
Will the mortgage payments be similar at the start of the 22 year amortization period?
Jeez, I thought you were trying to compare like for like, not throwing in different rental periods and different savings from rent to mortgage

the_ash_and_the_oak

chucky wrote: »

i agree with both of you but right now - it depends at what point in life and career that you are at.

for me personally buying now is/was (did it in Feb) a good time to buy a residential property if the price is at least 15% off peak with a good fixed rate.

i bought on a 4.69% 5 year fixed at about 20% off peak.
i was renting and waited for the right opportunity to come along, so for me it suited.

Yeah I mean, there is nothing wrong with this. A lot of talk about renting vs buying. But renting what? Buying what? Big difference between having a good deposit and buying something long term - and buying a flat, for example.

the_ash_and_the_oak

IveSeenTheLight wrote: »

Is it a guarantee that the property will be the same / cheaper?
Will the mortgage payments be similar at the start of the 22 year amortization period?
Jeez, I thought you were trying to compare like for like, not throwing in different rental periods and different savings from rent to mortgage

Its not a guarantee. But then we are back to the argument about houseprice direction - rather than whether renting is cheaper or not than buying. Like i say - if I thought prices were heading up over the next few years then I'd be tempted to buy anyway regardless of which was cheaper.

As for the differing periods - well thats thrown in the minute someone tossed in 25 yrs rent vs mortgage - but when I decide to rent a place realistically I'm only looking at the next 12 months (I'm throwing out the other options because after those 12 months are up a million different options are available - but a rent vs buy which is cheaper comparison should really only focus on NOW - or the next year anyway)

silvercar

the_ash_and_the_oak wrote: »

Yeah I mean, there is nothing wrong with this. A lot of talk about renting vs buying. But renting what? Buying what? Big difference between having a good deposit and buying something long term - and buying a flat, for example.

A good point. Majority of people tend to rent cheaper properties than they would buy, either becuase they are "waiting til I'm ready to buy" game so want to save money where possible, or their budgets are limitted. I haven't noticed people renting something more expensive than they intend buying because they want to enjoy the larger property and then "sufferr" to buy.

abaxas

silvercar wrote: »

A good point. Majority of people tend to rent cheaper properties than they would buy, either becuase they are "waiting til I'm ready to buy" game so want to save money where possible, or their budgets are limitted. I haven't noticed people renting something more expensive than they intend buying because they want to enjoy the larger property and then "sufferr" to buy.

Erm,

Larger properties are much better value, why doss in some dive when you can live like a king for very little more.

If a fiesta was £10,000 and an audi a4 £11,000, which would u buy?

the_ash_and_the_oak

Well Silvercar its not just that. Buying that house you're going to bring your kids up in? Or a one bed apartment? There are a lot of different routes to 'the dream house I'm going to retire in'. idk - this rent vs buy for 25 years thing doesn't really ring true - kinda feeling most people aren't going to be living in their next house for the next 25 years (and if you are well you prob don't need to care about any of this anyway)

nollag2006

Very flawed analysis.

It doesn’t consider the long term capital growth. Even the lunatic fringe of the HPC monkeys will concede that house prices at least double every 20 years.

So, ceteris paribus, at the end of 25 years the purchaser is left with a huge sum of equity and no further accommodation costs (maintenance and decoration excluded), while the renter is left with squat.

the_ash_and_the_oak

nollag2006 wrote: »

Very flawed analysis.

It doesn’t consider the long term capital growth. Even the lunatic fringe of the HPC monkeys will concede that house prices at least double every 20 years.

So, ceteris paribus, at the end of 25 years the purchaser is left with a huge sum of equity and no further accommodation costs (maintenance and decoration excluded), while the renter is left with squat.

Look we know about the capital growth. But this question isn't about capital growth - it is about what is cheaper right now. We're conflating two things here, what is cheaper right now, and what will happen over the next x amount of years

A thread about what is cheaper right now is really only about right now. ie for example 25 yr mortgage, or renting for a year and then get 24 (or 25) year mortgage.

Its fine to bring in capital growth there are a million other threads about it, but whether prices go up 50% in 2 years or down 50% in two years has no bearing on what is the cheaper right now - which is what this thread is about

Entertainer

IveSeenTheLight wrote: »

You are wrong, wrong, wrong .

Been trying to find the link showing the top 10 rental yields areas, all above 7% if I remember.

Found this link from last year showing Nottingham had a 10.9% rental yield, Durham at 9.23% and the average at 7.9% for university towns and an average of 6.4% for other BTL properties

http://www.propertywire.com/news/europe/rental-yields-possible-uk-cities-200808221510.html

Anyhow, with average prices dropped since 2007 and we've not factored in auction property investments (where we are told on here many times how cheap property can go for) this drives up rental yields.

For those that like graphs, this might be interesting



Ah here's one showing the top 10 rental yields, not the same link I rmembered but it has the same data

http://www.investment-properties-for-sale.co.uk/2009/07/02/the-top-ten-buy-to-let-hotspots/

Cherry picking a few BTL yield hotspots in the regions does not disguise the fact that the majority of the country by population e.g greater London, South, South West, East of England and going into the Midlands are on 6% rental yields. These are for conventional properties bought on the open market, not the wrecks/ short leases/multiple occupancy nightmares you get in auction. You show me where you can find 10% rental yields in the South of England.

And I don't know where on earth they get 8% from for London and the South East in that graph.

abaxas

nollag2006 wrote: »

Very flawed analysis.

It doesn’t consider the long term capital growth. Even the lunatic fringe of the HPC monkeys will concede that house prices at least double every 20 years.

So, ceteris paribus, at the end of 25 years the purchaser is left with a huge sum of equity and no further accommodation costs (maintenance and decoration excluded), while the renter is left with squat.

Investor error no 1,

Past performance does not mean future profit.

Also there are lots of properties that haven't doubled in the past 20 years. But also lots that are 4 or 5x their value.