Should i put my savings into bricks and mortar?

carpy

thanks everyone for some very good replies.

i probably didn't make it clear but if i did buy it's not to make money, it's so i've got somewhere to live in the future!!

i'm happy to stay where i am for now, but like i said i'm worried about being priced out of the market. i can only just about reach the very bottom rung of the ladder now and if prices continue to rise i wont be able to afford anything in a few years time. i don't see my income rising by much more than inflation over the next few years.

my mum retires in 2010 and will be selling the house to buy somewhere smaller. i would love to be able to take the house on (i've lived here all my life!!) but i know there is no way i could afford to. i guess i could come to some sort of arrangement with my mum/family but i imagine that would be complicated and potentially stressful!! i don't know how realistic this is but i guess i could buy a share of it (enough to enable my mum to buy her new property) or i could take out the mortgage on her new property?!?

F_T_Buyer

stphnstevey wrote:

Two cents worth:

I think deciding whether to buy your first house is like deciding whether you can afford to have kids. There is never really a good time and if you sit and wait for that 'good time to buy', then it might never happen.

A bland statment like 'Now is not a good time to invest in property' is ludicrous. Not a good time for who? Him? or you? or does he mean the 300 billion people out there who are all different. Everyone's circumstances are different and what might be a bad time for someone could be the ideal for someone else.

I presume you are looking for a 'home'. Again this is a different sort of investment than buying a BTL and money only plays a small part in that decision. What might be an ideal time in your life for buying a home might not be an ideal time to invest in a BTL.

Ok, so property prices might not be the lowest they have ever been, but there not the highest they have ever been either. If your in it for the long term and can ride out the peaks and troughs, then you have nothing to worry about.

Ok, I'll expand.

The OP states "buy my own property (but i wont be living there!)". If this is the case, it is an investment property. Nothing more, nothing less. So therefore I would expect to read investment replies, hence my comment.

If you are buying a home, i'd agree with what you are saying.

If your in it for the long term and can ride out the peaks and troughs, then you have nothing to worry about.

I've heard this far too many times. You're not making a broad statement that it will always be worth it, as at some point in the future you would have made money.

So would you have been recommending property investment in 1990? Sure, you would have made money over the long time. But you would have lost money every single month due to the costs of renting it out not covering your mortgage, which is the common case today. So investing in property is not a good idea at the present.

I've also put forward arguments why interest rates will rise, living costs will increase, and house prices will fall. Which is why I say search my previous posts.

Im a little more concerned by a later comment by the OP "i probably didn't make it clear but if i did buy it's not to make money". So why buy a house you are not going to live in? You say you want to live in it in the future, but would you be happy losing money on it until you do live in it?

Again, you make an assumption you will not be able to afford it in the future. So who will? The price of property is dictated by people ability to afford it. So are you assuming everyone else will earn far more than you in the future?

I think this is the classic comments I read all over forums, and hear in the pub. In that it's a good idea to invest in property because it will go up in value. But no one here gives arguments why this will happen. They assume because it has done so to date, it always will. Because of this, it isn't investment, it is speculation - something i wouldn't be encouraging people to do (yet when it comes to property every does encourage speculation).


With regards to buying a share in your mums house... how would this work? Would your mum be happy if prices doubled? Would you be happy if prices halved? What if some major maintenance was needed? What if you wanted to throw wild parties? I think this is probably a future cause for conflict IMHO.

fattyamal

stphnstevey wrote:

"the 300 billion people out there....."

Just a pedantic point, there's actually only approximately 6billion humans on the planet and not 300billion. I simply point this out because our race is ever expanding at an awful rate and thus the land available to all is shrinking. The UK for example has a population of over 60 million, and estimates show it has increased by over 1 million people in the last 4 years alone. (based upon 2001 census)
Simply put, it is a fair bet that (over time) property prices must increase as there are not currently enough houses for all in this country - unless we really build loads more very quickly.
Admittedly the population is aging so deaths etc.. can be a factor, but I would state with confidence that in 20 years time, most homes will be more expensive than today! (unless we're all wiped out soon, that's looking likely!)

So buying a property in the UK is always a pretty good plan.
Ramble ends.

stphnstevey

Here here! fattyamal.:beer:

and one hundred other reasons....

Not everyone lost money in the 1990's - those that didn't need to sell, those that were buying and those that had fixed the rate (translated = those that were in it for the long term, those that were able to take advantage of current climates and those that were prepared for market changes).

I think a very real problem in the new millenium is that a vast majority of people are being priced out of the market (backing up fattyamal's theory below). Not entering the property market for a period of time could be said to be as risky as entering the market!

I have to say, I never looked back after buying my first house. It might not have been the best time to buy then, but if I had waited for the best time, I could still be waiting now.

People will always advise on any situation one way or the other. Just beware of the doom and gloom spreaders - in the middle ages they used to say ' the world is going to come to an end' 'the sky is going to fall on our heads' 'the world is flat and if you go to far, you'll fall off the edge'. Now they just cry 'there is going to be a house market crash just around the corner' 'interest rates are going to rise and we are all going to lose are homes'.

I don't know what going to happen, I am damn sure they don't! (if they did, why aren't they millionaires by now) They are just scared of something they don't understand and don't have the balls to do. For them, property is out of their comfort zone, so they can't understand why anybody else would want to take that risk.:rotfl:

BobProperty

stphnstevey wrote:

....Ok, so property prices might not be the lowest they have ever been, but there not the highest they have ever been either.....

Curious as to when property prices where not as high as now and by what measurement?

F_T_Buyer

stphnstevey wrote:

I think a very real problem in the new millenium is that a vast majority of people are being priced out of the market (backing up fattyamal's theory below).

For the record, I am a FTB (hence the name), I could afford to buy now. But I wouldn't be happy with what I could afford. I earn well above average for my area, I also have a very large deposit behind me. But why should I settle for a small house? If that's all I can afford, what about those how earn less than me?

Also, I rent. The rent I pay is less than an interest only mortgage on the same place. Also, I know the land lord has paid well over £1k so far this year on maintenance. The landlord bought years ago, so is not too bothered about the yield.

So who's going to buy this property when he sells, or buy other properties like it? FTBs? No. They are priced out. Families? Maybe, but most couldn't afford to trade up. Investors? Well, property always goes up in value, so yes.

So, if you bought that as an investment you would be losing money every month. But it's ok, as property is going up. But what happens when you lose your job? What happens when rates go up? What happens when you can't afford to subsidise your tenant? What happens when I move out and there's several weeks until you can find another tenant?

They are massive risks involved. But your return would be dire (probably less than a savings account). If you were coming out with several hundred pounds a month on the top of all costs (which was the case years ago), go for it. It's a sound investment.

But now? Will prices rise further? Maybe a little. But due to affordability being so bad for those supporting the market, FTBs, it seems unlikely you will have big capital gains. So who will buy if they are no (or little) capital gains to be made? FTBs? No, they haven't bought yet so what's the hurry. Investors? Why would they buy. The risks are very high, and if you're lucky enough you might make some money every month for the stress.

I don't know what going to happen, I am damn sure they don't! (if they did, why aren't they millionaires by now) They are just scared of something they don't understand and don't have the balls to do. For them, property is out of their comfort zone, so they can't understand why anybody else would want to take that risk.:rotfl:

Don't understand? It seems the vast majority don't understand finances and economics. That's why things are such a shock when it happens. What surprises me more is how they give advice others.

Yourself is an example, you said on this site you have more than one property and you think rates may go up, so you want to fix. But now you're probably realising fixed rates moved up well before you realised, leaving you with a dilemma. Do I fix now assuming rates will go up? Or do stay on a variable rate (which is currently cheaper) and hope the base rates doesn't rise?

"Don't have the balls". If an investment property made sense, I would buy. But it doesn't. I have however invested my deposit in other places, well outperforming property rises since 2004. You'll also found some people have even sold their houses as it is cheaper to rent (not that i'm encouraging that).

As you say, no one know's what's going to happen. But they are very strong indicators, just like there was in the last cycle. But it only becomes clear in hindsight.

If anyone is going to invest in property, aim for at least an 8% yield. Therefore you can buffer any rate rise, put money aside for any repairs and voids, and still have a positive cash flow every month.

Carpy, as you started this thread. If you still want to invest in property, why don't you find an example and post the figures on here. E.g. price, potential rent (i.e. comparables), other unoccupied properties in the area (to estimate voids) etc.

F_T_Buyer

F_T_Buyer

fattyamal wrote:

stphnstevey wrote:

"the 300 billion people out there....."

Just a pedantic point, there's actually only approximately 6billion humans on the planet and not 300billion. I simply point this out because our race is ever expanding at an awful rate and thus the land available to all is shrinking. The UK for example has a population of over 60 million, and estimates show it has increased by over 1 million people in the last 4 years alone. (based upon 2001 census)
Simply put, it is a fair bet that (over time) property prices must increase as there are not currently enough houses for all in this country - unless we really build loads more very quickly.
Admittedly the population is aging so deaths etc.. can be a factor, but I would state with confidence that in 20 years time, most homes will be more expensive than today! (unless we're all wiped out soon, that's looking likely!)

So buying a property in the UK is always a pretty good plan.
Ramble ends.

I would agree with you that what you mentioned is resulting in high prices today. But i'm not sure about the future.

Have a look at this: http://www.policyexchange.org.uk/images/libimages/143.pdf

With regards to the future, you have to take into account demographics and immigration.

In 20 years, there will be a far higher proportion of the population relying on their pension. If the state pension is roughly the same as it is now, the government would have to drastically increase tax to afford it (so much so it would take the majority of peoples pay packet). So there will not be much left to pay on a mortgage. (This is one reason why they are increasing the retirement age).

Also, there is not enough younger people having children to pay this increased tax. I would say one reason they are not children is because they simply can't afford it.

http://www.statistics.gov.uk/CCI/nugget.asp?ID=6

With regards to immigration, they are moving to this country as the pay is far higher than their own countries. But if you look at how these countries are becoming more industrialised, the wages are increasing (along with jobs) which is attracking them back home. I think the likes of India and China, wages increased over 10% in the last year.

Also, with such a high tax take, I can't see many people staying here.

stphnstevey

BobProperty wrote:

Curious as to when property prices where not as high as now and by what measurement?

Hi Bob,

Property prices are always rising, so I meant relative to affordability. Just a year and a bit ago interest rates were extremely low, which meant cheap money and everyone had money to buy, pushing prices sky high above the average wage.

Prices have levelled out a bit now and salaries are catching back up.

Hence, prices are not as high as they have ever been.

stphnstevey

F_T_Buyer wrote:

Yourself is an example, you said on this site you have more than one property and you think rates may go up, so you want to fix. But now you're probably realising fixed rates moved up well before you realised, leaving you with a dilemma. Do I fix now assuming rates will go up? Or do stay on a variable rate (which is currently cheaper) and hope the base rates doesn't rise?F_T_Buyer

I have fixed before fixed rates went up and I am currently fixing now. I think rates will go up in the short term, but also do not have the finances to cover myself should rates rise to much. Hence a fix is best for my personal circumstances. If rates go down, I still have won as I have the reliabilty of a a fixed rate, which suits my personal circumstances. Suggest you read Martin's article as to whether to fix or not

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1098805346,64662,

F_T_Buyer wrote:

"Don't have the balls". If an investment property made sense, I would buy. But it doesn't. I have however invested my deposit in other places, well outperforming property rises since 2004. You'll also found some people have even sold their houses as it is cheaper to rent (not that i'm encouraging that).F_T_Buyer

Please let me know if you have an investment that 'well outperforms property' (I have severe doubts), along with the figures.

One of my properties I have invested a 10K deposit and now see an average 10K rise in that property a year, the house price effectively doubling in price in ten years. So I am getting 100% return on my capital a year.

(Thats one's were I actually invest my own money, the majority I use the solely the banks money)

And you?

F_T_Buyer

stphnstevey wrote:

Please let me know if you have an investment that 'well outperforms property' (I have severe doubts), along with the figures.

One of my properties I have invested a 10K deposit and now see an average 10K rise in that property a year, the house price effectively doubling in price in ten years. So I am getting 100% return on my capital a year.

(Thats one's were I actually invest my own money, the majority I use the solely the banks money)

And you?

From your statement I would assume you have borrowed money to invest. If I had borrowed money to invest (which I haven't) I would have had a massive return.

But the risks increase when you gear up like that. If you put down 10% deposit, and prices rise by 10%, sure you've made a 100% return on your initial deposit. But what if prices fell 10%, you would lose all your initial deposit. And with housing it could lead to you losing your primary residence.

I've no doubt people have made money over the last ten years. But we're looking at today, or since 2004 as in my comment above. If you look at the figures (Land Registry Q1-04 to Q1-06) prices have risen 15.83%. I have returned far more than 15.83% in commodities and equities.

I could have borrowed money to invest, but I wouldn't want to make myself bankrupt if only a mild correction (10%) happened.

I'm not going to give details of specific investments, i'm not advocating anyone on here blindly go into such investments. They are plenty of websites/forums for this kind of stuff. But I like sticking around providing counter arguments to why property isn't a one way bet (as some make it out to be).