I Cannot See Value

HAMISH_MCTAVISH

LydiaJ wrote: »

You make it sound as though you thought all the bears were advocating life-time renting, but none of them is saying anything like that. Typical bear posts generally concern two issues..

I see your point, but it is rarely that simple with "the bears".

A) Large swathes of the population would like to buy but are currently unable to do so, and see no chance of being able to do so any time soon. This is considered undesirable.

In general terms, and as established in the "how much are FTB properties where you live" thread, in most areas of the country FTB's can find an affordable place. However, most on here seem to feel such a place is beneath them.

Having champagne tastes on a beer budget is not a house price problem. It is a reality problem.

If HP are considered likely to fall in the short term, then it becomes worth renting for a short time so as to be able to get more house for one's money when one comes to buy.

In the very short term, I would agree. We can all see that if prices fall 20% in 18 months, as they did, it makes sense to wait. Nobody is disputing that.

But......

If you have been waiting a year or two or three (or far more, in some cases) for that crash to come along, and then the 18 months for prices to fall, and then prices recover by 10% in the next 12 months, as has happened.... It becomes very difficult to get the numbers to stack up in favour of delaying purchase.

If you bought today you would, in most cases, be not far off your position if you had just bought in 2007. In some areas you'd be far better off by buying then, in some areas worse off, but in most areas it would be quite close. If you have delayed since 2006, even more areas fall in favour of buying. Since 2005, almost all areas fall in favour of buying.

If you now wait another 2 or 3 years for prices to fall back again, even if they do return to the previous low in Feb 09, it still makes no sense to wait in most areas. And if prices stagnate or rise, it makes no sense at all in any area, in fact, it could be an extremely expensive mistake.

I don't see that your "buying is cheaper than renting over a whole lifetime" argument is relevant to either of these points.

In general terms, the younger people buy, the better off they are. Anything else is a gamble that rarely pays off.

Procrastinator333

Deleted_User wrote: »

OK, take my example. Mortgage repayments at the outset were about £600. Pretty much the same as it would cost to rent. So say for example my next door neighbour rented their house.

We both start out paying £600 per month. It's all we can afford. Neither renter or buyer has cash to invest.

So much mathematical inaccuracy, so little time. Will pick this one off for now as it is just sitting there waiting to be hit out of the park.

Your start point is wrong. A FTB would pay an interest rate of over 5%, probably over 6%. So assuming a rental cost of 5% as quoted elsewhere on this thread. The renter has saved money compared to the interest element. On top of that you are then making the assumption that it is a repayment mortgage, so it would be even more for the buyer.

So either

a) the renter is living in a house with a higher value (and you are then not comparing like for like)

b) you should start with a higher number for the buyer. I can't be bothered to work it out, but it is probably more like the buyer starts of on £1k while the renter is only paying £600.

P.s Not disagreeing that long term buying is financially better. I haven't calculated it, but I find it hard to believe it is 30%. Saving your post for another time Hamish, too many holes in that one to respond to now. Until next time.

P.P.S. Maybe we should actually just get a real bear and a real bull and let them have a fight?

HAMISH_MCTAVISH

Graham_Devon wrote: »

Just gonna throw this one in for you Hamish.

And please take note, this only takes into account 3.4 moves.


That's 9 years rent at £600 a month, just in moving fee's. Based on only 3.4 moves.

Please take into account other issues.

And moving houses is more likely to happen to renters than buyers.

Just think how expensive it would over 60 years worth of AST's.....

Graham_Devon

HAMISH_MCTAVISH wrote: »

And moving houses is more likely to happen to renters than buyers.

Just think how expensive it would over 60 years worth of AST's.....

Oh come on Hamish.

Yes, renters will move more, but it will cost them a pittance compared to legal costs, stamp duty etc etc.

I can't believe you actually came back with that. Talk about ignorance.

[Deleted User]

Procrastinator333 - Actually, in my example I wasn't a first time buyer. We had a deposit of 25% - the proceeds of profit made on properties my husband and I owed separately. Our mortgage was actualy 6 hundred and something pounds a month - can't remember exactly.

I don't know for sure what rent was back then. I know my house would cost £750 - £800 a month to rent today. If I was still paying off my morgage I think it would be about £400 a month at todays rates. So regardless of what the renter started out paying 10 years ago, today they'd be paying nearly twice as much as the buyer.

I think for me I think it works out at less than 30% but we paid off our mortgage early (8 years instead of 25).

The fact that the buyer only pays out for 25 as opposed to 60 years for the renter makes a huge difference. Especially when you take account of the fact that, due to inflation, the renter is paying significantly more each month than the buyer ever did for most of their renting lives.

LydiaJ

SmartPricePrincess wrote: »

Why on earth would it cost that much to move house? what fees?:eek:

Stamp duty, mainly, especially for more expensive houses.

£250,001 house ==> stamp duty = £7,500
£350,000 house ==> stamp duty = £10,500

Also surveys (a few hundred, or more for an older/larger property, plus a bit more if the surveyor suggests an electrical inspection, or drain inspection or whatever), searches, solicitor's fees, etc. It all adds up.

Renters pay a comparatively small fee to the letting agent (if any) and a deposit that they should get back at the end of the tenancy.

Both pay removals, which are significant to the renter, and a drop in the ocean to the buyer (as GD has already pointed out).

Mr.Brown_4

Assuming the mover sold a house they have estate agents fees. Also if a woman is involved they have new carpets, curtains, cushions,. candles, furniture, decoration, appliances, blinds, lampshades, bathroom and kitchen suites....

b0rker

tomstickland wrote: »

I pay around £450 per month on my mortgage and if I could find something for £650 that was a lot better then I'd buy it. However, if it costs me £900 per month it'll curtail other activities.

The really annoying thing for me is that I don't actually want a large or flash house. I just want to be able to afford somewhere quiet.

Yeah but you have at least started at a lower rung and will at some point get the oppertunity to use the equity in your home and your savings to make the move to that quiet home.

Many on here seem to want to go straight from renting to your quiet home.

That either takes a hell of a lot of saving or a HPC

It seems that many of the bears on here would prefer the HPC option rather than the MSE option.

HAMISH_MCTAVISH

tomstickland wrote: »

I just want to know where the money comes from for people to buy £300K houses. I suppose some of it is due to buying early enough, but also 2 incomes and all that.
.

John and Jill are two young people going to Uni a decade ago.

John's parents cough up 10K for a deposit, and young John buys a flat. He then gets a flatmate to help him pay the bills for the next 4 years, and it is cheaper than renting. Jill does the same.

After graduating Uni, both John and Jill keep their flatmates for a few years, and one day they are out drinking in a bar and meet each other. John and Jill fall in love, and after a few months of embarrassingly loud lovemaking sessions, decide they want to move in together.

John asks his flat mate to move out, and Jill moves in. But Jill is a sensible lass, and decides she'll keep her flat "just in case" it doesn't work out with John. Jill rents her old room out to someone else, and her mortgage gets paid for her.

Several years later, John and Jill get married and decide they'd like a bigger house.

So they sell both the flats, which by this time, ten years after purchase, have around 65% equity through HPI and mortgage paydown.

Each flat sells for 120K, and John and Jill now have a deposit of £156,000.

They see a house they like for 300K, and buy it.

They take a mortgage out for the remaining £144,000, and on their dual salaries as 30 year old University graduates, making slightly more than the national average, at 35K each, have a loan to income of just 2 times joint income. With such a huge deposit, they also pay rock bottom mortgage rates as they have less than 50% LTV.

John and Jill live happily ever after, and thats how ordinary people afford 300K houses in their early 30's.

.

In the meantime, one of their mates from Uni, we'll call him Procrastinator, doesn't buy but rents instead. He always finds a reason not to settle down. He wants the "freedom" that renting gives him.

As the years progress, Procrastinator has a great time. Out with the lads every weekend, foot loose and fancy free, spends his money on holidays, girls and cars, and still manages to save a bit, because of course, he is paying FAR less in rent than those silly house buyers do on their mortgages.

Until one day he realises, after failing to pull for a while, that those 19 year old girls don't like 30 year old blokes with a bit of a beer belly.....

So being an intrepid sort, Procrastinator tidies up the house, washes all the dirty laundry festering under the bed, and makes an effort to find a nice girl to settle down with. After a few mis-steps, and a lucky escape from a psychotic harpie (whose name escapes me, but I think it was karen, no, maybe catriona.... Oh yes,thats right, it was Carol), our hero eventually meets Lydia, the love of his life and a fellow renter too, and they settle down together.

Now Procrastinator and Lydia, being canny renters, have managed to save a few bob over the years. They have each put away a bit of money now and again (once they got serious about saving), and have now amassed a fair deposit, once interest and a bit of return from the company share scheme is included, of around £40,000.

So they start looking at houses, but discover, of course, that HPI has eroded the value of that saving. And furthermore, that small deposit, combined with the higher interest rates that FTB's attract, means the 300K detached house they want is well out of their reach. In fact, the only proper house they can afford is a nasty ex council terrace in a dodgy area.

So they rent for a while longer, but also start researching the housing market. After a while, they start posting on MSE and HPC, and get slightly bitter about house prices. They of course feel priced out, and after talking to so many other priced out people, they form a bond, and encourage each other to hold out "until the crash comes", when houses will be cheap and the streets will flow with milk and honey.

And then, finally, the crash comes. Except then prices recover, and they still can't find a house they can afford.

So they buy a small flat, get ever more bitter and resentful, and spend the rest of their days posting on forums discouraging people from buying young, because as we all know, misery loves company.

And thats how ordinary people can't afford 300K houses in their early 30's.



And the moral of the story?

Never read a long rambling post from Hamish expecting a serious point to be made, because that's 5 minutes of your life you won't get back.....:D

HAMISH_MCTAVISH

Procrastinator333 wrote: »

P.P.S. Maybe we should actually just get a real bear and a real bull and let them have a fight?

Best idea you've come up with yet...:rotfl: