if you rent forever

Ratrace_3

I'm wondering if anyone can help me understand money and the housing market enough to properly weigh up the implications of never buying a house.

foremost, i'd like to know to what extent home ownership is a hedge against inflation, that is, that as society aims for more and more home ownership, that there might come, upon time of sale (my retirement 45 years from now) so much spare cash from sold homes chasing goods that those who have not invested might see the prices of living staples and the odd luxury goods, like a flight, priced out of their capabilities

I also ask because I do not expect to own a home for a long time and I am very keen to consider any other form of investing that, while not providing the amount a home might at the point of sale, might provide enough to safely live on in retirement.

thank you for your help

RX-78

I was wondering the same.

I do think buying the house is an emotional purchase not just financial one. Yes the mortgage is likely to be less than a rent for similar property but by the time you consider the deposit paid (which could have gone to another investment or earning interest), extra tax paid as stump duty, fee to solicitors, mortgage arrangement, life insurance etc, I think there are no great difference in terms of monthly out goings.

You will ofcourse get a house at the end of mortgage but that is counteracted by risks of loosing the property should you not be able to repay the moprtgage (on rented you could downsize or even go on housing benefit), risk of ending up with negative equity, having to maintain the property, and difficulty relocating should you need to do so.

I doubt UK will reach crisis point in terms of space - there was a recent grand design which said about something like 80% of UK's suitable land not being utilized for human residence yet. I'm sure Londoners will beg to differ....

Fire_Fox

This is a question much better suited to the Debate House Prices board.

Running_Horse

The mortgage on my modern three bed village house is half the rent of a two bed inner city Victorian terrace. Obviously I have to maintain it, but can do whatever I want with it. But yes, FF is correct.

Jowo_2

In the Observer Money section I think, a person wrote a letter explaining that many years ago, he was a subeditor and was able to buy a property in the Hampstead garden suburb (can't remember the wage/property ratio but it might have been a 1k wage and 3k property). His future partner was a junior lecturer and was able to buy a 3 bedroom house in her University town in the same period.

A contemporary wage for these roles would be around 25k and would not permit home ownership on a sole wage.

BadgerFace_2

I have seen plenty of houses that are worth £450,000 on the rental market for around £800 pcm. Nobody would argue that this is great value? Try servicing a mortgage and repairs on that house for anywhere near that!

On the other hand, I've lived in a £30k house and paid £500 a month rent...

bap98189

RX-78 wrote: »

Yes the mortgage is likely to be less than a rent for similar property

In my experience the exact opposite is true. Rents are generally a lot less than a monthly mortgage repayment.

Owain_Moneysaver

A) Land/House prices are generally increasing faster than Retail Price Index and average wages. The simple fact is that land is a fairly finite resource. The bits that aren't densely populated tend to be remote / hilly / have poor communications - of course these are inter-related, plenty of now major towns were nothing before industry or the railways.

However most other items can be manufactured, and manufacturing has been getting cheaper. If Chinese labour costs rise, then Africa will probably step in. Etc. Flights may be different, with rising fuel/carbon costs, but maybe nuclear-powered intercontinental subs will get us across the Atlantic in a few days as an acceptable substitute (with no problems from volcano ash!)

At least under current legislation, private sector tenants have no long term security of tenure or protection against rent increases. It's all right for 'young people' who don't mind moving every couple of years, but for anyone who wants to plany anything longer term private renting is very unsettling.

Nosht

Never work, don't save, own nothing, develop a long-term illness, have many children & claim every benefit you can.
At retiral age you will qualify for Pension Credit & be better off than someone who has saved & planned all their life.

Regards,

N.

SandC

When I bought my house it was about the same in monetary terms - ie. monthly rent was about the same as the mortgage on a two bed terrace. Now it's 15 years later and my house whilst it has appreciated greatly, is not based in a part of the country where house prices went completely stupid. However, my payments have gone down somewhat and rent has gone up so to rent would now cost me 2.5 times my mortgage payments.

The other consideration is that my mortgage will be paid off by the time I am 50 (hopefully well before), so I will not go into retirement wondering whether my pension will cover rental for the rest of my days.
That part is the biggie for me. It's that rental goes up and mortgage payments go down until they stop completely. You still have maintenance to consider of course.

Jowo_2

SandC wrote: »

The other consideration is that my mortgage will be paid off by the time I am 50 (hopefully well before), so I will not go into retirement wondering whether my pension will cover rental for the rest of my days.
.

No but it could be sold to fund care home costs if you become infirm.

Those on low pensions and high rent will get other state assistance to make it more affordable, such as LHA, council tax rebate and so forth.

If you lose your job, it will be 3 months before you can get some modest state assistance towards the interest part of the mortgage, if you qualify at all whereas someone without any savings/property could get their full LHA paid from day 1 (and currently they can also keep up to £15 per week if their LHA rate is higher than the rent).

It looks like it pays to either be really rich or really poor - the average diligent person who is prudent and invests in property and has a decent nest egg qualifies for either low or no support if they hit difficulties with their health or employment.