OH MY GOODNESS - the house price crash hits home!

1984ReturnsForReal_2

Spartacus_Mills wrote: »

Just been to Sainsbury's to get my lunch. Sorry if it feeds into your rabid paranoia old chap.

lol......... :rotfl:

Batchy

julieq wrote: »

There's lots of reasons not to buy a house of which one good one is maintaining mobility. But Carol is suggesting (nay gloating) that she escaped financial loss by not buying, and that's not clear at all, for specific (house trashing) and general (cost of rental) reasons.

From a purely financial point of view, buying in 2006 or even 2007 is likely to have been a good decision from the 2011 context if you take all costs into account. Unless five years of rent are less than any decrease in value.

and [sigh] right back at you. Why do bears not understand that rental costs are not savings, they are overhead? Maybe I need a nearlynew style of sig.

Interest on a mortgage is a OVERHEAD... full stop.
Capital repayments are the SAME as savings, except in some cases interest can differ.
The only difference is asset value, and being tied in, and capital maintenance, buildings insurance ALSO OVERHEADS.

I said for a very long time, houseprice's were not necessarily INCREASING like people used to boast about... most people who owned houses, did new kitchens bathrooms extensions landscape the gardens new driveways, rewiring, new heating, new windows. etc etc... are these capital improvements or repairs and renewals... if so are they overheads, or capital expenditure. To a renter, it doesnt make any difference. as they don't pay out for these at all.

Were they done through CASH or MEWing... if so did people really GAIN EQUITY? or just enjoy their house more with INCREASED DEBT... its obviously a bit of both.

My father brought a house for 156k and sold it a year or so later for 165k... house price increased by 5.5% great...NO it didn't as he spent excessively on new concrete fencing, on a new kitchen, a new bathroom, new windows, insultation, cleaning redecorating landscaping knocking down walls making seperate dining rooms, with a new boiler. had spent well in excess of 16k all together, and whilst doing it all he never worked for 18 months looking forward to making a handsome profit instead. And lived in a buiilding site for most of it... IE... never really enjoyed it. so it cost him say 30k in lost salary for doing all the work

SO in fact...

take the 165k ultimate selling price
Assuming rental costs are the same as the cost of servicing the interest on the mortgage
take off the salary 30k lost (opportunity cost)
take off the 16k in direct costs (paid out on house)
take off the 1k in additional insurances (paid in excess of simlar rented property where you dont pay the building insurance)
your left with £118k
Your left with a loss on the project from end of 2005 to the middle of 2007 of 156-118 = £38k LOSS... how much simpler do i need to put it

If he never did the work, would he have got the 156k on the same property NO... he would have stuggled to sell it ...full stop. The house was like a show home and immaculate.

He was relieved to be able to sell it in the end... and has now brought a new house, which he admits is worth nothing like what he payed for it. But he is happy, its in the right area for school for my little sister. THATS whats important, but he has stopped thinking about the imaginary money he was making on houses at long last and is making a HOME AGAIN.

Really2

carolt wrote: »

So for you it makes sense. For now, at least.

Indeed I am knocking out £1K of the mortgage each month. By August this year I will have knocked out nearly 15% in 2 years.

Offset should make it work for the future also.

julieq

carolt wrote: »

If I had bought it, I'd be desperately trying to sell it now, in NE, just so I could move.

As it is, I have the flexibility to move where I want. When I want.

And fear not - I'll try to avoid properties with damp. It's not on my 'things to go for' list.

Renting or buying.

But you don't want to move until 2011, or that's what you said.

And it's doubtful you'd have trashed it anyway. You'd certainly be 3 years closer to having no costs at all.

Anyway there's no shame in taking a decision for reasons of mobility. But it's certainly not clear you're financially better off.

Really2

Spartacus_Mills wrote: »

What is more interesting would be a comparison in terms of what it would cost to buy now with a mortgage versus rental.

No, what would be more interesting is how much it cost 18 months ago and how much the last two have sold for.

But people know my purchase price they can work it out on 18 months ago.

Spartacus_Mills

HAMISH_MCTAVISH wrote: »

I'll pick the easiest of your myths to debunk, as I can't be bothered with the rest.

It was harder to get a mortgage a year ago than today. The number of mortgage approvals is up over 100% since then.

Prices are not stable, they have risen by 10% in the last 10 months. They are forecast to rise another 15% by 2012.

Rent is an additional cost. If you've been renting since 2005, you need to see, on average, price falls of 25% from 2005 levels to make it worthwhile renting in the meantime. I don't know of anywhere on the mainland UK where that has happened.

You are right about mortgage availability. No argument.

For the sake of balance it is important to note that someone may have predicted house prices to rise by 15% in the next 3 years, however there are other forecasts that have lower growth and also decreases in that timescale. YMMV. Presenting one forecast as gospel (most people here tend to treat them as interesting diversions) is wrong.

With respect to renting versus buying you are ignoring the additional costs of home ownership that renters would not have to pay. Maintainence, decoration, replacement of white goods, boilers etc etc. I say that as someone who is a homeowner with a minute mortgage as I believe the benefits of home ownership outweigh the disadvantages but there are disadvantages too.

carolt

HAMISH_MCTAVISH wrote: »

I'll pick the easiest of your myths to debunk, as I can't be bothered with the rest.

It was harder to get a mortgage a year ago than today. The number of mortgage approvals is up over 100% since then.

Prices are not stable, they have risen by 10% in the last 10 months. They are forecast to rise another 15% by 2012.

Rent is an additional cost. If you've been renting since 2005, you need to see, on average, price falls of 25% from 2005 levels to make it worthwhile renting in the meantime. I don't know of anywhere on the mainland UK where that has happened.

Sorry - but that post is nonsense from start to finish. House prices have certainly not risen by 10% in the last 10 months - in my area, they've actually fallen. What they may or may not have done in Aberdeen or even nationally is rather irrelevant. And please bear in mind I wouldn't have bought this house 10 months ago - I would have bought it 2-3 years ago, which - you appear to forget - was just at the point the market overheated and promptly crashed.

If the mortgage interest costs were greater than the rent, how can I possibly have lost money if the house price has also fallen?

The money I would have paid so far towards paying off the mortgage would have been no more than a few thousand so far - less than 10K. Certainly nowhere near the minimum 35K I would have lost. And it would have come out of my income - it's not magic 'free' money. That same money is instead sitting happily in my savings account - it's not disappeared.

Your understanding of maths in relation to house prices suffers from the basic flaw that it works brilliantly - when you're talking about a house where (a) the mortgage interest is lower than the rent and (b) where the house price is rising.

When that is not the case, it's just WRONG.

I don't know how else to explain it to you.

If you don't get it now, you never will.

As I said to julie, really, really hope you don't work in a financial or mathematical discipline, if this last post demonstrates your understanding of the rather basic maths involved.

carolt

julieq wrote: »

But you don't want to move until 2011, or that's what you said.

And it's doubtful you'd have trashed it anyway. You'd certainly be 3 years closer to having no costs at all.

Anyway there's no shame in taking a decision for reasons of mobility. But it's certainly not clear you're financially better off.

See above.

Frankly, julie, I'm disappointed in you.

You're a clever girl.

You can do better than that.

Hamish, I don't know.

But you know you're talking nonsense.

NB I needn't have trashed it - untrashed examples in the same street that sold this year sold at the asking price of this one (well, slightly less, actually). That's why I said the selling price of this one is going to be much lower.

julieq

Interest on a mortgage is a payment for accomodation costs with a fixed term, Batchy. It will tend to remain constant over the term, depending on interest rates obviously, but not increasing with inflation.

Rental is payment for accomodation costs without a fixed terms. On normal lifetime estimates you'll be paying it for 50 years plus, and it will be compounding over that period by something like the rate of inflation, say 2-3%.

But on a mortgage, you get the likelihood of capital growth, so you can't say that mortgage payments are purely overhead. In fact you're paying a slight premium to have no costs at all in 25 years and the possibility of capital growth.

I'll maybe knock up a spreadsheet to illustrate the point later. Even with very conservative assumptions on rental and HPI (in fact even with real terms HP deflation) it's pretty clear that rental is the expensive option. Which is what you'd expect, because it's run commercially for gain.

HAMISH_MCTAVISH

Spartacus_Mills wrote: »

IO my mortgage would be £48.25 pcm as I have paid it down to less than £10K. Should I rent my house it would be £650/£700 PCM.

What is more interesting would be a comparison in terms of what it would cost to buy now with a mortgage versus rental.

Obviously that depends on how much of a deposit you have, and therefore how low your rate is.

The best rates are sub 3%. A more typical rate is 4.5%. The best fixes start around 5%.

Average rental yields were around 5.5% or so at peak, and are now north of 6% as prices fell more than rents. They are closer to 8% up here, but they can be below 4% for really big/expensive houses in some parts of the South East..

Difficult to make the sums add up for renting versus buying, based on the averages, even in the short term. And of course the longer the rental term is, the harder it gets.