House Owning vs Renting

JonnyBravo

carolt wrote: »

Great OP, Jonny - but surely a little redundant in practice, as I find it hard to believe there are any people out there (except for a few with specific lifestyle issues, like need to keep moving for work, or rent cheaply off family, or something), who see private renting as a long-term solution. (Obviously, council tenants are a whole different ball game.) I mean, how many people really make the decision whether to buy now based on a 40 year calculation? They make the decision based on the facts on the ground at this moment.

So, for example, in 2007, I stopped looking for a property to buy at all, and decided that at those (peak, as it turned out) prices, it just did not make sense for me to buy, as it was far cheaper to rent. At that point.

It didn't mean that I'd committed at that point to never, ever buying in the next 40 years - prices could fall (they did), my salary could rise (it did), I could win the lottery (I didn't), etc etc.

The reality that your beautiful piece of calculation ignores is that people's situations change during that 40 years - to look at it in reverse, the person who buys might get divorced, move abroad, or for any number of other reasons decide to sell up within that time period, just as those who decide not to buy NOW because it doesn't suit them, the monthly costs don't stack up in favour of buying at this moment, they can't get a mortgage in the current climate or with current deposit demands, etc etc etc. may change their minds.

The person who bought in 2007 at peak prices may be better off than the person who buys 3 or 4 years later, or they might not. It has a lot more to do with 2 unknowns - how far house prices fall and or rise in that time, and what interests rates both parties are able to get over the course of their mortgages.

Which are both variables that no-one can predict, will vary from person to person depending on specific property bought, personal credit rating, deposit saved, and luck, etc, and is entirely unallowed for in your interesting but ultimately enjoyably meaningless calculation.

Sorry Jonny - it was fun - but no more applies to reality than a lot of the tosh posh economists come out with.

So you didn't bother reading to find out why the discussion came about?

Ah well, that's your look out. :rotfl:


As for how it relates to your situation, well that no more applies to my theoretical calculations than a lot of the tosh posh renters come out with.

:rolleyes:


It does make me laugh we have some home owners saying "the rent should be higher" or the like and some renters saying "well I'm not going to rent for 40 years anyhow".

:rolleyes:

It really isn't the point. The calculation as I explain several times over is not designed to explain why renting never makes sense..... it does in a whole host of scenarios. It's just that it rarely makes sense to rent for financial reasons for 40 years...... which was a hypothesis that was put forward by Harry.

Does anyone still not understand??

abaxas

Just a thought.

Most people are too dim to realise that the marketed price of something might not be it's true price?

Sad to think that market is driven by stupidity.

Really2

abaxas wrote: »

Just a thought.

Most people are too dim to realise that the marketed price of something might not be it's true price?

Sad to think that market is driven by stupidity.

Thats a bit harsh after this topic today.:)
http://forums.moneysavingexpert.com/showthread.html?t=2059845

JonnyBravo

MissDBoat wrote: »

In Germany I think they often just rent forever.

Cool.

:rolleyes:

carolt

JonnyBravo wrote: »

So you didn't bother reading to find out why the discussion came about?

Ah well, that's your look out. :rotfl:


As for how it relates to your situation, well that no more applies to my theoretical calculations than a lot of the tosh posh renters come out with.

:rolleyes:


It does make me laugh we have some home owners saying "the rent should be higher" or the like and some renters saying "well I'm not going to rent for 40 years anyhow".

:rolleyes:

It really isn't the point. The calculation as I explain several times over is not designed to explain why renting never makes sense..... it does in a whole host of scenarios. It's just that it rarely makes sense to rent for financial reasons for 40 years...... which was a hypothesis that was put forward by Harry.

Does anyone still not understand??

Your :rotfl:baffles me, as I haven't read a long discussion elsewhere - I read your thread. If your thread relied on having read the whole of a previous thread, why didn't you just tack your post onto the end of the existing thread?

If Harry seriously suggested that it makes financial sense to rent for 40 years, that to my mind, is just as irrelevant as your post 'proving' the reverse. As virtually no-one does plans to do that (some may end up that way, but not usually as a long-term plan), and longer term prices and interest rates over that 40 year period are impossible to predict.

chucknorris

MissDBoat wrote: »

In Germany I think they often just rent forever.

At last the secret of immortality, I was worried I might have to cut down on my drinking, but all I have to do is move to Germany, this is good news indeed.

JonnyBravo

carolt wrote: »

Your :rotfl:baffles me, as I haven't read a long discussion elsewhere - I read your thread. If your thread relied on having read the whole of a previous thread, why didn't you just tack your post onto the end of the existing thread?

From post 1

JonnyBravo wrote: »

I'm creating a new thread to avoid moving off topic on Mr Matey's.

Post 51

JonnyBravo wrote: »

Absolutely.

This was never designed to to show that renting is a bad idea full stop. The shorter the period the more swings you can get in the figures. eg House price deflation over a couple of years changes the figures vastly for that 2 year period etc.

This was simply done to show that all things being equal and going on past historical norms you really don't want to rent for 40 or 50 years as you will, in all likelihood, be worse off.
People need to read the other thread to see why this discussion came about.

So you're sure you read the thread carolt??



Anyhow, no matter....

carolt wrote: »

longer term prices and interest rates over that 40 year period are impossible to predict.

So you're sure it's harder to predict interest rates and prices (inflation) longer term?

Eh?

Surely it's easier? You don't have to account for all the up's and down's you can pick a figure close to the historical trend and you'll be close.

I'd bet more people could get close to the average inflation figure for the next 25 years than they can for the next 3 years.
It's this statistics bit tripping you up again carolt. The larger the sample size the smaller the variation.

the_ash_and_the_oak

JonnyBravo wrote: »

Surely it's easier? You don't have to account for all the up's and down's you can pick a figure close to the historical trend and you'll be close.

I'd bet more people could get close to the average inflation figure for the next 25 years than they can for the next 3 years.
It's this statistics bit tripping you up again carolt. The larger the sample size the smaller the variation.

Simultaneously agree and disagree with this (the longer the period the more the extremes iron out but otoh hand the 80s saw pretty much a decade of double digit rates more or less and the 00s a decade of around 5% - so for example 2016-2026 would a decade of around 11% rates be possible? or a decade of around 2.5% rates?)

JonnyBravo

the_ash_and_the_oak wrote: »

Simultaneously agree and disagree with this (the longer the period the more the extremes iron out but otoh hand the 80s saw pretty much a decade of double digit rates more or less and the 00s a decade of around 5% - so for example 2016-2026 would a decade of around 11% rates be possible? or a decade of around 2.5% rates?)

Absolutely. But this is just an extension of what I've said..... what was the figure for the highest and lowest 3 years in the 80's? Obviously more "extreme" than the average......

So yes of course it is more than possible we get 10 years of 2.5%.... or 10 years of 11% but it more likely we won't and it also very likely you won't get 25 years of that. History tells us that.

chucknorris

MissDBoat wrote: »

Did I say something silly? I think in Germany they don't have the same % of people buying homes as we do in the UK. So they don't have the same kind of boom and bust, and their young people have a better life.

No you didn't say anything silly at all, Germans do tend to prefer renting (I lived over there for 2 years), it was just me making a (poor) joke based on your use of the word 'forever' that's all