What does having a house (to live in) actually 'cost'?

JimmyTheWig

henrik1971 wrote: »

1. Be aspirational in how you live, but not for frivolous material possessions. Buy the house that realistically matches your means. Stretching yourself for that overpriced new build with the shiny kitchen can be a fools errand.
2. Work hard and save hard. Every 70p saved is £1 less that you have to earn.
3. Work towards making yourself mortgage free as soon as possible.
4. Retire (or at least reduce working hours and do a less stressful job) as young as possible.

What a great post by such a new user!

silvercar

If you do trade up now, will you be looking to trade down at some point in the future? If so, when?

For a lot of people the trading down is a possible option in the future, if when the time comes, finances mean you have no need to trade down, a lot of people won't.

It may be a wish to have a big house when the children will enjoy their own bedrooms and the use of a large garden. Once they have flown the nest their may be a less pressing desire to have room for the grandchildren to come and stay and enjoy the garden, but the urgency has gone. If you need the money/ can't afford the upkeep then trading down becomes attractive. If you are well off by that time, you may prefer to stay in your home - having got used to his and her studies, the cinema room, art room and gym, or whatever else you rename bedrooms 2 to X.

JimmyTheWig

silvercar wrote: »

if when the time comes, finances mean you have no need to trade down, a lot of people won't.

I agree. And I'm not trying to plan the OP's whole life out for them.
However, without some basic assumptions it is impossible to calculate what the OP is after. I think the OP is better placed to make those assumptions than I am.

dopester

JimmyTheWig wrote: »

I agree. And I'm not trying to plan the OP's whole life out for them.
However, without some basic assumptions it is impossible to calculate what the OP is after. I think the OP is better placed to make those assumptions than I am.

The OP is minded to be looking at similar homes to this*, with the outlook that in this price range for similar homes they may represent fair value.* (*I think) Then to spend more in doing it up and extending it towards their needs.

Rightmove link

Whereas the price melts my mind for such an ugly (50s?) home - even though some maniac seems to be going for it (Sold STC). We used to have the same green sofa (there is a bigger pic in the particulars) bought from Allders in '95. The mirror to the left of the sofa looks to be hung a bit high - impractical as it looks like you'd have to be very tall to get any function out of it. In art at junior school we were taught it's a good thing to keep uniformed height lines when hanging pictures/frames on the wall... the mirror frame top should be at level with the top of the dresser imo. That is minor nitpicking. I just get the impression that whoever lives there wants to sell so as to downsize and have a savings-boost for retirement.

PasturesNew

dopester wrote: »

Rightmove link

Houses in that road sold for an average of:
£103,666 in 1995
£101,491 in 1996
£109,190 in 1997
£133,362 in 1998
£150,589 in 1999

henrik1971

Its a conundrum all right!

I'm in the same boat myself. Me, the wife and two daughters in a 3-bed semi that just a bit too small for us. I've decided I don't need 4 bedrooms, 3 beds are fine. The only extras I'm really looking for are:
A decent size 3rd bedroom. Not a 6'6"x7'6" box room like my house and many similar houses have.
A second toilet (or even shower room if possible)
A utility room

I already have decent gardens, garage, offroad parking, so would of course want to maintain those in any new property.

However, even though I only want these three modest extras in a house, I've got to step up from a 140k house to around 200k. This is purely down to supply. There is an abundance of 900sqft 3 bed semis with owners looking to trade up, but a much smaller number of say 1200 sqft 3 or 4 bed houses, which means a huge, indeed, quite absurd price differential for a very small step up the housing ladder. How can it ever be worth it?

Yet still, there is this irrational emotional tug to actually consider doing it. I feel it constantly - and, if I read between the lines, perhaps the OP feels this way too. There is an urgency as the kids grow up so fast so you'd like them to benefit from the larger place and get settled as early as possible.
On the other hand, if you stay put, think of the financial freedom and options that not having a huge mortgage will give you, less burden, less worry, less maintenance/decorating, less heating costs, less council tax, ability to reduce working hours and still afford your lifestyle, more money available for "picture postcard" memory-type things such as memorable family holidays, being able to afford all those school trips abroad that your kids are desperate to go on, etc, etc.

If I could sum up the dilemma for me its not so much about the house itself. Its more about seeing a window of opportunity that is gradually closing, and not wanting to miss the boat and regret it in future years.
Its a finely balanced thing, but for the moment, the theoretical regret I might feel if I didn't do it, is definitely outweighed by the regret I know I would feel if I did and financially burdened myself for marginal extra comfort of a slightly larger house in a nicer street.

LilacPixie

It's a difficult one. We are in a similar position but on a much smaller scale. We/I have a 2 bed flat, lovely quiet area but this place suited me when I was single now I am married with two young children and it has to go. The question is what do I replace it with?? the 3 bed semi, 3 decent bedrooms, 2 public rooms plus the large gardens and offstreet parking in a decent area motrgage 70% ish LTV with a multiple of 2.5 times joint salary or go all out and buy the 4 bed detatched in excellent area but LTV pushing 90% a 4 times joint salary (presuming bank would be daft enough to lend it).

For us the small amount of extra room gained (about 25 sq M) and the marginal diffrence in areas in the 4 bed house is not enough for us to consider the increased financial risks and possible future worries of a larger mortgage and LTV. We are considering another child and that would be impossible if we had a larger mortgage in our opinion.

OP I guess you need to think about your own family circumstances and what you would have to sacrifice for the larger house?? Does the benefits outweight the sacrifices?

I think there is no right or wrong answer, only you know your own circumstances well enough to make a meaningful decision.

JimmyTheWig

henrik1971 wrote: »

The only extras I'm really looking for are:
A decent size 3rd bedroom. Not a 6'6"x7'6" box room like my house and many similar houses have.
A second toilet (or even shower room if possible)
A utility room

I already have decent gardens, garage, offroad parking

Going slightly off-topic, could you convert your garage into a downstairs toilet and utility room? That would just leave the problem of the box room, which it sounds like you are stuck with for now.

dopester

silvercar wrote: »

For a lot of people the trading down is a possible option in the future, if when the time comes, finances mean you have no need to trade down, a lot of people won't.

It may be a wish to have a big house when the children will enjoy their own bedrooms and the use of a large garden. Once they have flown the nest their may be a less pressing desire to have room for the grandchildren to come and stay and enjoy the garden, but the urgency has gone. If you need the money/ can't afford the upkeep then trading down becomes attractive. If you are well off by that time, you may prefer to stay in your home - having got used to his and her studies, the cinema room, art room and gym, or whatever else you rename bedrooms 2 to X.

How many baby-boomers coming up to retirement with £300K-£1m homes with a lot of financial savings and solid pensions to boot? Of course quite a number will have the house with a high-market value, and the financial security... but certainly not all.

It's an asset bubble - the banks aren't flush with the financial deposit savings of baby-boomers, for the most part, imo.

Rightmove link. It is a guess, but I imagine their home is the main store of their wealth.

I know my Mum doesn't have more than £1,000 in savings. I have to pay for all the fixes around her house (including finally getting around to having about 8 replacement roof-tiles fitted last week for ones which had slipped off... the roofer showed me how thin the existing roof tiles had weathered down over time... compared to the new ones.) She is lucky to have a fair pension... which is enough to tick her over, meet the bills, a bit of fun and a few treats, but doesn't give her too much by way disposable income for a luxury spend... more than 1 holiday a year ect. If things were slightly different, I could see her wanting to downsize.

For older owners, housing has been a substitute for financial savings. Before these paper windfalls generated since the seventies can be converted to cash, however, new buyers must be found.

Most buyers will not have sufficient cash reserves to pay 50 percent down. Therefore mortgage lenders will have to absorb a growing share of the housing market for prices to remain stable. They are unlikely to do this. Losses on real estate loans will be the main cause of increasing losses in the banking system. Creditors normally react to rising losses by curtailing lending, imposing higher qualifications on borrowers, and raising loan rates higher than they would be otherwise.

As this trend becomes apparent, aging homeowners, who are depending on their homes to provide retirement security, will try to sell. Paul Hewitt estimates that "the predicted trade-up market among the Baby Boom generation (born 1946-1964) may nor fully materialise if a growing number of middle-class boomers elect to remain in housing they consider merely adequate, rather than risk their equity in larger luxury homes."

A combination of demographic trends, the deflationary fallout from the end of the Cold War, and the decay of infrastructure in urban areas could make housing perform poorly. This would hit the middle class hard, endangering the savings of millions. It could be just one of several factors contributing to the evaporation of retirement.

I reckon a load of baby-boomers have been sucked into trading up due to the strength of the boom.. and are now stretched. Many other baby-boomers who haven't continued to regularly trade up into the height of the boom, but remain in a home bought in the 70s or 80s or 90s seeing the value of it rise spectacularly - but it being the main store of their wealth, well above any financial savings.

Yes homes can be passed down to children, but IHT is a hit in many instance.. making sons and daughters unable to keep homes which significantly go over the IHT threshold (so it's not as though these better homes automatically stay off the market with the death of an owner). Previously I've given arguments for how I can see IHT tiers being lowered with deflation. More expensive homes are increasingly looking like targets to tax.

The gov wants the banks to lend (but they can't afford to lend on same boom-terms as in heights of the boom anyway), to support asset prices, but it also requires borrowers who look at their own job/financial circumstances and decide whether they can afford to take on more mortgage debt to trade up - or whether they are best electing to remain in housing which is adequate without exposing themselves to a higher debt risk. The upper tiers of the market don't look sustainable for value to me, over a 10 year view.

carolt

dopester wrote: »

How many baby-boomers coming up to retirement with £300K-£1m homes with a lot of financial savings and solid pensions to boot? Of course quite a number will have the house with a high-market value, and the financial security... but certainly not all.

It's an asset bubble - the banks aren't flush with the financial deposit savings of baby-boomers, for the most part, imo.

Rightmove link. It is a guess, but I imagine their home is the main store of their wealth.

I know my Mum doesn't have more than £1,000 in savings. I have to pay for all the fixes around her house (including finally getting around to having about 8 replacement roof-tiles fitted last week for ones which had slipped off... the roofer showed me how thin the existing roof tiles had weathered down over time... compared to the new ones.) She is lucky to have a fair pension... which is enough to tick her over, meet the bills, a bit of fun and a few treats, but doesn't give her too much by way disposable income for a luxury spend... more than 1 holiday a year ect. If things were slightly different, I could see her wanting to downsize.

I reckon a load of baby-boomers have been sucked into trading up due to the strength of the boom.. and are now stretched. Many other baby-boomers who haven't continued to regularly trade up into the height of the boom, but remain in a home bought in the 70s or 80s or 90s seeing the value of it rise spectacularly - but it being the main store of their wealth, well above any financial savings.

Yes homes can be passed down to children, but IHT is a hit in many instance.. making sons and daughters unable to keep homes which significantly go over the IHT threshold (so it's not as though these better homes automatically stay off the market with the death of an owner). Previously I've given arguments for how I can see IHT tiers being lowered with deflation. More expensive homes are increasingly looking like targets to tax.

The gov wants the banks to lend (but they can't afford to lend on same boom-terms as in heights of the boom anyway), to support asset prices, but it also requires borrowers who look at their own job/financial circumstances and decide whether they can afford to take on more mortgage debt to trade up - or whether they are best electing to remain in housing which is adequate without exposing themselves to a higher debt risk. The upper tiers of the market don't look sustainable for value to me, over a 10 year view.

But IHT levels are expected to rise under the Tories, thus removing this need.

Re the baby-boomers not trading, up, a recent article I read (can't find the link now) pointed out that large numbers of baby boomers were going to need to downsize to fund their pensions - a long way off from trading up.