Houses overvalued still?

outand

Hi I am new here but for years house prices have always moved with employment.If people are in employment usually house prices rise and visa versa.

GDB2222

RDB wrote: »

You like most people have just read a few things about what happened to gold and silver in 1980. But like most people you dont have your facts right.

The actual top of the spike was over $52 oz.

Yes the Hunt brothers had a lot to do with it, but how can you explain the same thing happening to gold?

Gold has already way passed its 1980 high, silver is nowhere near yet.

My recollection is that the price of silver went from around $5/oz to $50/oz over about a year or so. Whilst Gold went up at that time, the rise was nowhere near as big. Then the Bunker-Hunts were convicted...

Whilst you may well have a good point to make, the comparison with silver is tarnished :cool: by the mess the Bunker-Hunts made of the market at that time. It would be better to look at a wider basket of commodities or over a longer period.

silvercar

Sir_Humphrey wrote: »

My other consumption has been higher however (I have travelled more and bought more gadgets than I could have done for 2006-2008).

My breakdown (to within a few hundred quid) is:

Had I bought (over four years):

Loan Principal paid off: £+7100
Interest Paid: £-15650
HPI (comparing similar flats on same street): £-5000 (asking price)
Council Tax inc single occupancy allowance: £-3000
Service Charges: About £-2500
Stamp Duty (property would now be under £125k): £-1290
Depreciation of fittings etc: £-1000 (conservative estimate)
Maintenance (exc communal) : £-2000 (conservative estimate)

So the sum spent would be: £-23340

For renting:

Rent paid: £-16000
Interest earned: £+1200
Reduction in mortgage required and therefore interest over first four years of mortgage: £+1970 (and counting). This is key as this will save the same amount over 25 years in nominal terms.

So the sum spent is: £-12830

This makes me better off by £10510, or thereabouts, even with conservative assumptions for maintenance, and ignoring the fact that I have been sharing fuel/electric bills for four years (mega saving there). Of course, the saving is much greater since over the 25 years of the mortgage, I would be paying off a mortgage £10000 lower than otherwise.

Of course, I would have been better off buying in 2002, but I was not remotely in a position to do so.

The killer thing about buying over renting (particularly with flats) is paying to maintain the damn things.

EDIT: I forgot to add the extra house insurance/life insurance premiums had I bought.

EDIT 2: Had I rented the same flat, the additional rent would have been £9600 over four years (plus £400 in lost interest), so I would have still been ahead, but by a lower amount.

You've not allowed for the difference in mortgages available. In 2006 you could have got a lifetime tracker at base rate + 0.5% or similar; now you would be looking at base rate + 2.5%; so you will be paying 2% more interest over the next 25 years.

Had you bought the same flat you could have taken a lodger that would have reduced your costs of buying and put you in a similar social situation to the flat share you now have - that would make a big difference on the costs and allow you to compare like for like on the situation you have actually lived for the last 2/3 years.

Mr.Brown_4

Alpha2 wrote: »

Me thought about buying. Me did the sums and realised it be cheaper to squat.

Yeah, tbh, not much of a sum. Zero cost versus some cost.

Mr.Brown_4

Alpha2 wrote: »

The BTL landlord aint too happy, he 'aving problems paying 'is mortgages as it is.
He be in loadsa debt!

Full marks for a fairly unique posting style. Bear in mind if you get PPR'd you'll need to disguise it in some way.

Sir_Humphrey

silvercar wrote: »

You've not allowed for the difference in mortgages available. In 2006 you could have got a lifetime tracker at base rate + 0.5% or similar; now you would be looking at base rate + 2.5%; so you will be paying 2% more interest over the next 25 years.

That depends what happens to IRs with regard to whether a tracker would be a good idea.

silvercar wrote: »

Had you bought the same flat you could have taken a lodger that would have reduced your costs of buying and put you in a similar social situation to the flat share you now have - that would make a big difference on the costs and allow you to compare like for like on the situation you have actually lived for the last 2/3 years.

It was a one bedroom flat, so no lodgers. I would have only been able to hold for about 5-10 years anyway as I would be forced to moved when I eventually have a family, so I could not (and cannot) rely on riding out a crash before crystalising a loss. The flats I am aiming for are two bed, so the lodger option would be now be possible, but I would not really want to. The extra cost of a two-bed is minimal compared to overall cost of buying in the area (£20k tops). The area I am now looking at is also much nicer (the gain I plan to "cash in" mainly in extra flat rather than money).

As I have pointed out above, I would still be in the black even if I had rented an equivalent flat. The gain I gave above was on the most pessimistic assumptions for me.

And since it is most likely that prices will continue to fall, any further crash no matter how small, will only pull me further into the black.

What most greedy Bulls forget is the high cost of holding property. If we had German-style tenancies in the UK, I doubt I would ever buy (certainly not a flat). This partly because HPI and rents would be lower and also because I could make more money elsewhere - certainly use it more productively for the wider economy.

silvercar

The flats I am aiming for are two bed, so the lodger option would be now be possible, but I would not really want to.

So you wouldn't want a lodger but are happy to live in a house share

The extra cost of a two-bed is minimal compared to overall cost of buying in the area (£20k tops).

So it must have been relatively minimal 3 years ago??

Sir_Humphrey

silvercar wrote: »

So you wouldn't want a lodger but are happy to live in a house share

The difference is that the house share is very,very cheap for a large room in a newly refurbished house, with no rent rises since 2003. Even accounting for potential lodger income (which would not of course be guaranteed).

silvercar wrote: »

So it must have been relatively minimal 3 years ago??

I would have had to borrow 4x my then salary even for a not-very-good 1 bedder, so it was a bridge too far at that time.

silvercar

The difference is that the house share is very,very cheap for a large room in a newly refurbished house, with no rent rises since 2003. Even accounting for potential lodger income (which would not of course be guaranteed).

You have to be at a certain stage in your life, to happily live in a shared house rather than buy. This mainly is what has what has given you your financial gain.

Others may think it a compromise to far.

Sir_Humphrey

silvercar wrote: »

You have to be at a certain stage in your life, to happily live in a shared house rather than buy. This mainly is what has what has given you your financial gain.

Others may think it a compromise to far.

It has contributed, but as I pointed out, I would still be ahead even without having done so.

I am only talking about my own circumstances.