I Cannot See Value

sarkin1

Except when prices drop by 20% in 1 year, the goverment pump 200,000,000 pounds into the economy and nail the base rate to 0.5%.

Spartacus_Mills

badrobot76 wrote: »

We are looking to take the next step on the ladder ,we bought our house for 66k back in 04 and hopfully sell for around 90k , during that time I have managed to save hard and get a deposit aroun 30k ,hopfully this will give us around 54k equity on the next house

Despite this the houses we can afford to upgrade to look slightly larger but not that much larger looking at houses between 180-200k will still mean a mortgage of around £800 despite the equity and savings, current mortgage is £460

I simply cannot see the value in some of the houses we see on rightmove etc? Is this unusual?

You are confusing value for price. Price is a function of the market and does not reflect what the underlying value of something may or may not be.

carolt

HAMISH_MCTAVISH wrote: »

Of course the trend will not go on forever.

As soon as renting for a lifetime becomes cheaper than buying, people won't buy.

But buying today is still only around 30% of the costs of renting for an adult lifetime......

That's certainly nonsense where I live.

Is there anywhere where that really applies?

I find it very hard to believe.

Please prove this assrtion with figures.

Thanks.

sabretoothtigger

Spartacus_Mills wrote: »

You are confusing value for price. Price is a function of the market and does not reflect what the underlying value of something may or may not be.

I just going to say similar. Value is much harder to see then price and where as price is a market average, value is going to vary quite considerably by the individuals own circumstances

Measure twice and cut once and dont let the consensus decide your own decisions on value, they are often wrong

lemonjelly

sabretoothtigger wrote: »

I just going to say similar. Value is much harder to see then price and where as price is a market average, value is going to vary quite considerably by the individuals own circumstances

Measure twice and cut once and dont let the consensus decide your own decisions on value, they are often wrong

Bit in bold is the absolute best piece of advice/information on this thread...Preceding paragraph is also insightful.

Graham_Devon

HAMISH_MCTAVISH wrote: »

But buying today is still only around 30% of the costs of renting for an adult lifetime...... So we have a long way to go yet.

No it isn't.

What's the betting you haven't factored in maintainance, insurance, legal fees every time you move, etc?

Something a renter does not have. Last time you litterally compared the rent amount against the mortgage amount. It seems you have done the same again, without taking into consideration anything else to make your point.

ukcarper

carolt wrote: »

That's certainly nonsense where I live.

Is there anywhere where that really applies?

I find it very hard to believe.

Please prove this assrtion with figures.

Thanks.

Over the last 40 years Hamish is definitely right over the course of a lifetime it has been much cheaper to buy than rent. I have spent a lot less on mortgage payment than I would have done it rent and will soon be living rent-free. What happens over the next forty years will depend on a lot of things.

[Deleted User]

carolt wrote: »

That's certainly nonsense where I live.

Is there anywhere where that really applies?

I find it very hard to believe.

Please prove this assrtion with figures.

Thanks.

I'd like to see someone present some figures on this. I certainly think renting is a lot more expensive in the long run but I'd love to see it all worked out on paper.

My husband bought his first flat and I bought a tiny little cottage because it was cheaper than renting. So certainly as singles we saved a little by buying rather than renting.

We bought our first house together in 1999 for £100k with a deposit of £25k (a little bit of savings, which we could aford due to the fact that our mortgage payments were less than rental, and profit from the sales of our homes). The repayment on our 25 year morgage was about £600 per month, but we had a flexible morgage and managed to pay it off in 8 years. I've no idea what we paid in total. We didn't spend anything on the house in the years that we lived there (modern house didn't need it).

So a very rough guess lets say that in order to pay off £75k in 8 years it cost us £150k (no idea if that's right - maybe someone can make a more educated guess!)

The house is doubled in value and we're living rent/mortgage free for the rest of our lives with an asset worth £200k behind us.

So I think I'm correct in saying that our house is worth more than we paid for it. We've made a profit out of buying it.

Assuming everything is frozen at today's levels then if we continued to pay £700 per month rent from age 44 to age 80 that would cost :

36 x 12 x 700 = £302,400

Add to that about £600 per month rent from age 36 to age 44

8 x 12 x 600 = £57,600

So if we'd rented since 1999 until we're 80 it would have cost us £360,000 and we wouldn't have that asset worth £200k. So in total it would have cost us £560,000 - £150,000 (£410,000) more to rent than it did to buy.

Very inaccurate calculations, I know. Which is why I'd like to see someone work out some examples properly.

[Deleted User]

Actually, I don't even need to deduct the £150,000 cost of buying as unless house prices fall we still have that money tied up in the house.

So I think it's more accurate to say that it would have cost us £560,000 (more than half a million) more to rent for life than it did to buy. Buying hasn't cost anything - we're in profit. If house prices fall in the future we stand to loose up to £150k plus moving costs/maintenance. There is no limit to how much we can gain if they rise.

Graham_Devon

There is a limit you can gain in a way, though I see where you are coming from.

You are seeing the HPI increase as real money. Personally I don't. As unless you are going to sell and live somewhere rent free, which you do not have to buy, that money is, like you say, tied up. It's not money you can spend.

You can move with it, sure, but if HPI increases, so does the cost of your next place.

Swings and roundabouts as they say!

Whether we should see the rise in the house value as "profit" which you deduct from possible rental costs is, in my mind, debatable. I don't think you can say the house has cost you nothing though.