Houses overvalued still?

HAMISH_MCTAVISH

Sir_Humphrey wrote: »

What most greedy Bulls forget is the high cost of holding property. .

I'm a "greedy bull" and I have two properties.

Haven't noticed any "high costs" for holding either of them.

In my current terraced property, maintenance has cost less than £300 in the last 3 years..... And that includes the petrol for the lawnmower.

In the first one, which tbf is a large detached and would require far more maintenance than a flat or terrace, we averaged about £500 a year over 20 years.

No ground rents, no factor/association fees, insurance is a couple of hundred a year, and when it's your own and you take care of everything properly, the costs are minimal.

Owning property is cheap.

HAMISH_MCTAVISH

Sir_Humphrey wrote: »

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.

.

We bought our second place (which we live in, allowing an aging relative to live in our first rent free) in 2007.

Our options at the time were to either buy or rent another place. It was not desirable to delay. And as with most grown-ups, flat sharing with several mates or moving home to mummy and daddy's is not very practical.;)

Our cost analysis works out as follows.

From buying (over three years with a tracker):

Loan Principal paid off: £+21,000 (some overpayments thanks to tracker)
Interest Paid: £-16,500 (roughly, but within a grand or two)
HPI (comparing similar house on same street): £+7000 (actual selling price)
Council Tax inc single occupancy allowance: £-4800
Service Charges: Zero
Stamp Duty (roughly, can't remember exact amount): £-3500
Depreciation of fittings etc: Zero (150 year old house, mostly original fittings)
Maintenance : £-300 (actual)

So we have gained £28,000 in equity, versus costs of £25,100 to live there. (have left out other bills as they'd be identical with renting)



For renting the same floorplan house in the same street instead of purchasing:

Rent paid: £39,000
Interest earned: Zero
Council Tax: £4800
Additional amount required now to buy the same house: £7000 (plus the interest on that amount over 25 years, another £5000 or so).
Increase in mortgage interest over first four years of mortgage based on bank margins now being 2% higher than in 2007: £+16,000 (and counting).

So the total costs of delaying purchase and renting instead for three years is: £71,800

Costs of buying instead were £25,100.

That makes me better off by £46,700 by buying in 2007 instead of delaying purchase and renting since then.

And even if you include the capital re-payments of £21,000 as a cost rather than an investment, I'm still £25,700 better off by buying instead of renting for the same time period.

In terms of actual cash flow.... Monthly costs are broadly similar. But people often fail to see just how much it's costing them in the long term. Even for just a few years.

Sir_Humphrey

HAMISH_MCTAVISH wrote: »

We bought our second place (which we live in, allowing an aging relative to live in our first rent free) in 2007.

*snip*

In terms of actual cash flow.... Monthly costs are broadly similar. But people often fail to see just how much it's costing them in the long term. Even for just a few years.

Like with the weather, Northern Scotland has micro-climates for property. If I take your figures with good faith, you bought in an area which did not experience an HPC. I decided not to buy in an area which has had a HPC.

So we seem to both called our respective markets correctly so far.

HAMISH_MCTAVISH

Sir_Humphrey wrote: »

Like with the weather, Northern Scotland has micro-climates for property. If I take your figures with good faith, you bought in an area which did not experience an HPC. I decided not to buy in an area which has had a HPC.

We had a crash, but we recovered very quickly. Our area increased by 3% last month alone. (RoS flash figures)

A house in my street sold for 7K more than I bought mine for. That is still marginally less than the previous peak figure.

Aberdeen's crash never caused figures to drop out of 2007 prices though. The only argument was over which month in 2007 they were in.

However, it's worth noting that even if prices were now 15% lower than today, and in percentage terms that would be lower than the national average as well, the buyer would still be ahead.

By a significant margin.

So we seem to both called our respective markets correctly so far.

You seem to have included excessive amounts for mortgage interest, depreciation, and maintenance. Your other costs look high too.

But if we take your figures "in good faith", then I suppose so.;)

In general terms, it is now virtually impossible to have profited by delaying purchase versus renting a comparable property in most parts of the country.

RDB

HAMISH_MCTAVISH wrote: »

Fair enough. If you're renting a room, or living with parents, and so therefore not comparing like for like it's entirely possible.

More and more people are living in smaller places freeing up even more empty houses. And yes many are moving back in with their parents.

Also many are not getting divorced because they cant afford to live anywhere else.


So even less demand for housing , sorry Hamish.

Sir_Humphrey

RDB wrote: »

More and more people are living in smaller places freeing up even more empty houses. And yes many are moving back in with their parents.

Also many are not getting divorced because they cant afford to live anywhere else.


So even less demand for housing , sorry Hamish.

This is the demand destruction I mentioned in another thread.

macaque_2

sss555s wrote: »

To me they are on-track to where they were around 20 years ago when i purchased my house.

To you they are on track! What about someone who respects reality?

Are you aware of how many wealth creating jobs have been destroyed over the past 12 years? Have you any idea how many 'hangers on' the government has recruited (public and private sector)? Do you know how much debt the country is in? Or how much money has been committed on the 'never never'. Do you know what the level of private debt is? Have you any idea how fast and how far interest rates could rise if markets lose more confidence in the £. Are you aware that house prices are more expensive that at any other time in history and more expensive than almost any other country in the world. Did you know that property now costs more than double what a person on a normal income can realistically afford. Did you know that Japan suffered price falls for over 20 years when they got into a similar position?

Would rational analysis really lead someone to the same conclusion as you?

Dan:_4

macaque wrote: »

To you they are on track! What about someone who respects reality?

The 70% club chairman respecting reality! :rotfl::rotfl::rotfl::rotfl:

HAMISH_MCTAVISH

macaque wrote: »

Did you know that Japan suffered price falls for over 20 years when they got into a similar position?

I could argue every one of your points, but it would be too much effort.

But this one is too outrageous to let pass.

At peak, Japanese real estate was selling for $1,000,000 a square metre.

When UK prices reach those levels, come and talk to me about Japanese style deflation.

Mr.Brown_4

HAMISH_MCTAVISH wrote: »

At peak, Japanese real estate was selling for $1,000,000 a square metre.

But Hamish, if that figure is yen then it's worth about ten bob.