I Cannot See Value

HAMISH_MCTAVISH

Graham_Devon wrote: »

Certainly happened on this graph, roughly 11.5 years, between 1990 and 2001.

Look again Graham.

It was 6 years of falls, followed by HPI.

The moment prices start rising, the renter starts losing.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Look again Graham.

It was 6 years of falls, followed by HPI.

The moment prices start rising, the renter starts losing.

Sorry, yes, was slightly out there. Was following the trend line. But I'm not sure how you get 6. 6 years of falls, yes, but not 6 years of HPI.

Q4 1990 - Q2 1999.

Q2 1999 = break even point if you had bought in Q4 1990.

= 8.5 years.

Procrastinator333

HAMISH_MCTAVISH wrote: »

*sigh*

No, he doesn't.

Do you really think we will go 10 years with no HPI?????

And you are assuming no rental increase for 10 years, also highly improbable.....

And you are assuming that interest rates for buyers will stay at 25% deposit needed to get the best rates, whilst ignoring the constant lowering of rates for higher LTV's we have seen for the last year.

And you are assuming the gap between mortgage and rent allows the saver to continue saving the balance, whcih from the above points seems improbable.

And you are using the most favorable start point for your calculations, whereas in some areas rent is already more than a full repayment mortgage.

But other than that........ :rolleyes:

In the real world, renting for a year or two makes little difference. Especially if prices are stagnant or falling. Even I concede that.

But if we get 10% annualised HPI (as we are about to have) the renter is deeply screwed.

If we have 5% annualised HPI (the mainstream forecast average for the next few years) the renter is deeply screwed.

If we have HPI and Rent increases in line with inflation, the renter is screwed.

IF prices fall, and IF this fall takes place in a very short timeframe, the renter can come out ahead. But prolonged periods of even very mild inflation totally stuff the renter.

Blimey, I start to reply and then come back and the post has grown!

I know there are loads of assumptions in there. But they cut both ways.

The model has no hpi, so no rent increase.

If there is a 10% fall, the buyer is screwed (to use your terminology).

Yes rates may come in for the FTB soon. If they do, this quickly dissapears, but today, the advantage is there. I know you believe they will come in further, but they can also go back the other way.

If rent is more expensive in the area a FTB lives, they should consider that when weighing up their decision to buy.

Imo...
We are basically agreeing (ish) - under certain circumstances you are better off renting for a short period.

We disagree that I think this short term period has a little while left to run, while you believe the falls are basically done.

HAMISH_MCTAVISH

Procrastinator333 wrote: »

Blimey, I start to reply and then come back and the post has grown!

:rotfl:

Never underestimate the power of my sneakiness.......

And a virtual £5 to anyone who gets the movie reference.;)

Imo...
We are basically agreeing (ish) - under certain circumstances you are better off renting for a short period.

Agreed.

We disagree that I think this short term period has a little while left to run, while you believe the falls are basically done.

I think the 10% rise in the last 12 months means that period ended a year ago...... Stagnation won't get you that 10% back.

ukcarper

Isn’t it a gamble either way but the consequences of being wrong are greater if you rent?
What I mean is if prices go down and you buy you end up paying a bit more for your house than you could have. But if they go up and you rent you might not be able to buy at all.

Procrastinator333

HAMISH_MCTAVISH wrote: »

:rotfl:

Never underestimate the power of my sneakiness.......

And a virtual £5 to anyone who gets the movie reference.;)



Agreed.

A bull and a bear agree on something. :beer: to us.

I even tried typing your quote in to google. No joy. No virtual £5 to me.

HAMISH_MCTAVISH

Procrastinator333 wrote: »

I even tried typing your quote in to google. No joy. No virtual £5 to me.

That's because I am very very sneaky......

http://www.youtube.com/watch?v=LCA0Lpy671g

Procrastinator333

ukcarper wrote: »

Isn’t it a gamble either way but the consequences of being wrong are greater if you rent?
What I mean is if prices go down and you buy you end up paying a bit more for your house than you could have. But if they go up and you rent you might not be able to buy at all.

Agree. If house prices rises or falls had the same demonstrateable probabilty, I would buy. But it is not possible to quantify the chance of an increase or fall. Imo, prices are more likely to stagnate or fall rather than go up. We are also in the fortunate position that my better half and I are in a strong financial position, so we would not be blowing our only shot at a family home or anything. If I have read it wrong I apologise, but the thrust of this thread seemed to be purely on how the numbers stacked up.

I appreciate it isn't quite this simple, but I really see it as gambling an extra room or 2 on the house. The amount we spend will likely not change. Today, we could get around a 4 bed semi, maybe 3 bed detached. If prices go up, we will be in a smaller 3 bed semi. They go down we may be in a 4 bed detached.

Imo, stagnation or falls are coming, so I'm happy to take this gamble. I'm really just keen to see how the next 6 months pans out post election.

ukcarper

Procrastinator333 wrote: »

Agree. If house prices rises or falls had the same demonstrateable probabilty, I would buy. But it is not possible to quantify the chance of an increase or fall. Imo, prices are more likely to stagnate or fall rather than go up. We are also in the fortunate position that my better half and I are in a strong financial position, so we would not be blowing our only shot at a family home or anything. If I have read it wrong I apologise, but the thrust of this thread seemed to be purely on how the numbers stacked up.

I appreciate it isn't quite this simple, but I really see it as gambling an extra room or 2 on the house. The amount we spend will likely not change. Today, we could get around a 4 bed semi, maybe 3 bed detached. If prices go up, we will be in a smaller 3 bed semi. They go down we may be in a 4 bed detached.

Imo, stagnation or falls are coming, so I'm happy to take this gamble. I'm really just keen to see how the next 6 months pans out post election.

I think we agree and if you are right you will be better off and it's your money after all.

Charterhouse

HAMISH_MCTAVISH wrote: »

Agreed. It is worth less, due to inflation.



Yes, but only if you actually have the £96 to put away today and earn interest on. Otherwise it will cost you the full £100 in a year.



Hold on..... You didn't just do that, did you???

You based your whole argument on discounting rental costs against how much cheaper it would be IF you had a lifetime of rent to put away in a savings account TODAY, to earn compound interest on for 60 years.

This is brilliant. You are now saying that money must have a different value to different people? Amazing.

It's not to do with a lifetime of rent or having the money upfront necessarily, it's working out what the future value of money today is, I assume you have SOME money today? It doesn't matter whether it's £100 or £1, the theory holds. If you work out what the future value of money today is, you can by definition back out the present value of money in the future.

Ok, let's put it this way Hamish. I'll give you £50,000 in 35 years, if you give me £50,000 now? No? Doesn't seem such a good deal any more does it?

It''s irrelevant whether you have the money or not, it's working out the relationship between money today and in the future which is key. If you ignore that you are effectively saying that you are indifferent between receiving 50k tomorrow and 50k in 35 years, a deal that I will do with you ALL DAY LONG.