I Cannot See Value

[Deleted User]

carolt wrote: »

I think those who assume that because house prices have shot up over the last 30 years, thus making it cheaper to buy than to rent over that period, it follows that it will ALWAYS be cheaper to buy than to rent, are making very dangerous and highly unlikely predictions about future house price/rental cost trends.

There's certainly nowhere I know of where Hamish's 30% assertion would work in practice now.

Obviously, if we had a time machine, it might be very handy.

I think what Hamish says will hold true even if house prices were slashed to 1% of their current value. Take the value of your house out of the equation - assume it's worth nothing and you paid £250k for it. You still save a small fortune by buying rather than renting.

Think it through carefully as I think you're missing the fact that you typically pay off a mortgage in 25 years then live rent/mortgage free whereas you have to pay rent for your whole adult life (60 years?). If you buy your house in the first 25 years of your adult life you live mortage/rent free for the last 35 years. Meanwhile, due to inflation and (possibly) house price increasese rent is going up, up, up for those that didn't buy. Just think how much money you would save if the home owner put the equivilent of 35 years of rent payments in the bank.

The sooner you buy the more you save. Whether you buy at peak or during a crash is a drop in the ocean when you consider the savings you make if you buy while you're still young.

[Deleted User]

Graham_Devon wrote: »

And with inflation, based on history, interest rates go up. So your payments will go up.

Sure, but the amount you owe doesn't.

When my dad was 40 he bought a house for £11k. I don't know exactly what he was earning but if I tell you that he really struggled to pay off the payments on his 25 year mortgage it'll give you some idea.

25 years later my dad was a retired 65 year old with a private pension of £25k a year, state pension and savings. I seem to remember that the mortgage payment was £5 a month (something silly like that).

It didn't matter how much interest rates went up - the amount he'd borrowed in the first place now seemed so insignificant that it made no difference.

As inflation goes up and salaries rise the amount you owe gradually becomes a smaller and smaller percentage of your income. Changes in interest rates fairly quickly start to not make too much difference to you.

HAMISH_MCTAVISH

Deleted_User wrote: »

The sooner you buy the more you save. Whether you buy at peak or during a crash is a drop in the ocean when you consider the savings you make if you buy while you're still young.

Absolutely correct.

DaddyBear

HAMISH_MCTAVISH wrote: »

Well that may be true...... But only because you live in LaLa Land.




Versus the cost of £120,614 for buying.

Wow, a £160k house bought for only £120,614. I'd like some of what you are smoking.

And as others have said, you fail to take into account that the renter will never have to replace a roof, boiler, electrics... etc etc.

Charterhouse

The difference is not as much as you think, as I mentioned earlier the problem i that you are not discounting values back to present day money.

Assuming the following:-

Rent is 4% rising annually by CPI which is assumed to stay at 2% for 60 years.
Mortgage is 5% for 25 years.

The present value of the interest payments is £112,751
The present value of the rent is £175,860

So your reasoning does stack up, but the difference is not as grevious as you perhaps thought.

DaddyBear

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?

Ahhh they joys of HPI..... it benefits everyone you know!!!
Problem??? Your house has increased by 24K over that peroid, unfortunately the house you want to move upto has increased by considerably more. Your best bet is a house price crash.

Charterhouse

StiflersMom wrote: »

Unluckily for these bears, the market is up 10% since then.

No it isn't. The methodology of hedonic regression that the banks use to calculate the numbers is flawed, I'm afraid. There is no way to know where prices really are til transaction levels particularly in new builds and flats start to rise to sensible levels.

Top quality period housing stock is up 10% in good areas. Not the same thing as the market in general.

DaddyBear

Deleted_User wrote: »

I think what Hamish says will hold true even if house prices were slashed to 1% of their current value. Take the value of your house out of the equation - assume it's worth nothing and you paid £250k for it. You still save a small fortune by buying rather than renting.

Think it through carefully as I think you're missing the fact that you typically pay off a mortgage in 25 years then live rent/mortgage free whereas you have to pay rent for your whole adult life (60 years?). If you buy your house in the first 25 years of your adult life you live mortage/rent free for the last 35 years. Meanwhile, due to inflation and (possibly) house price increasese rent is going up, up, up for those that didn't buy. Just think how much money you would save if the home owner put the equivilent of 35 years of rent payments in the bank.

The sooner you buy the more you save. Whether you buy at peak or during a crash is a drop in the ocean when you consider the savings you make if you buy while you're still young.

Depends on your priorities. True, renting costs more in the long term than buying. However I'm currently renting a house that costs double what I could afford to buy. My priority is quality of life. I'd much rather rent a family home in a middle class village with an excellent school than buy an ex-council house with chav neighbours and a crap school.

Charterhouse

StiflersMom wrote: »

Don't you need to update your signature ?

I'm sure that figure will soon be positive

:T

The land registry figures are probably worse than any others at the moment due to their methodology, which requires a lot of transactions to get a true reading.

You don't really understand statistics do you?

nembot

The people saying prices may drop are guessing, but at least they have a valid reasons as to why.

The people telling you to buy because prices always go up, are liars.

There is no history behind the UK's current fairy dust economy.

We could be in deep less in what 3, 6 or even 9 months from now.