should we buy or rent?

Cissi

Ignoring all the bickering, I think Mostlycheerful put it very well. Nobody can pinpoint the exact time when it's best to buy, but you can make the situation work for YOU. As everyone has said, very little is shifting on the market as there is a huge gap between sellers' and buyers' expectations. In some cases though, vendors will NEED to sell for whatever reason. Being chain-free you'll make attractive buyers, so you should use this to your advantage. If you're not in a desperate hurry to buy, then take your time, keep your eye on what's available and view the ones that you think you'd really like - up to an asking price of perhaps £380k. Keep your nerve, and sooner or later you may end up with a house you didn't think you'd be able to afford.

I also agree with previous posters who advised you to make things clear to yourselves and your relatives from the beginning. If you can, then stay with your relatives for a few months (maybe until Christmas depending on your relationship with them?), then look to rent for an initial 6 months. Ideally, move on to a periodic tenancy after this so that you're free to go ahead with a house purchase when the right one comes along.

I know times were different, but we STR in 2005 (at the time we could afford a lot more space by renting and our capital was earning very nice interest). We ended up renting for 4 years until we found the perfect house for us. We kept our eye on everything that was for sale, went to see the best ones and made several cheeky offers (we were always convinced the market would crash). In the meantime we were very happy in our rented house, even though there were maintenance issues - at least the LL did end up sorting them out, even if it sometimes took a long time!

Through a combination of stubbornness and luck we got our dream house in the end. It had been for sale for 18 months at a completely unrealistic price (which we couldn't afford), and we watched them chase the market down. When it got to within 10% of our budget we made an offer 20% below asking price and finally agreed a price 13.5% below asking price (25% below the original asking price). There were 3 higher offers but they went with us in the end because we were genuine cash buyers. We were able to complete the process in 3 weeks, which secured their dream home (they were downsizing to the West Country). The sellers had previously accepted an offer that was a lot higher than ours, but that fell through and that's when we got in - by now they were really keen to sell quickly as they had found a house they loved. So it can definitely be worth waiting and keeping your nerve - everyone thought we were crazy when we STR (in a rising market at the time!) but it all worked out perfectly for us in the end.

Two similar houses in the same street have since sold for way more than we paid last year, but as we're planning to stay put this is only interesting to us because it proves that we did the right thing

Out,_Vile_Jelly

MadnessOfHPC wrote: »

A home that you can be kicked out of at a moments notice.

You only start living and get real security and peace of mind for yourself and your family when you become a homeowner with a mortgage.

Right now you are mearly surviving in someone elses home.

My LL can give me two months notice, plenty of time to find a similar property in SW London.

I assure you, quite categorically, that I most certainly am "living"; I have a great social life in one of the world's great cities and am in no debt whatsoever. Paying rent allows me to live in quiet, safe, leafy, pleasant part of town with excellent shops, transport links and night buses.

My quality of life would be vastly reduced by buying; my choices would be to live in a shoebox miles out in the suburbs and face an expensive and lengthy commute into town, or to tie myself up in a shared ownership scam and "live" in an even tinier shoebox on a miserable estate somewhere in the East End.

By renting somewhere smaller than they hope to buy, the OP should save money and put themselves in a strong position to make a cheeky offer should the ideal house arise- good luck!

des_cartes

HAMISH_MCTAVISH wrote: »

Moneyweek has articles on house prices falling all the time, even when they are rising. It's the "capital economics" of the media world.

The Mirror, Indy, Telegraph and Guardian all had long articles on UK house prices falling back in February and March 2009 as well..... And we all know what happened to house prices after that.;)

Yes. Gordon Brown used taxpayers money to stop house prices falling as an election bribe. Well it failed, he's long gone and so has rising house prices.

whitesatin

MadnessOfHPC wrote: »

A home that you can be kicked out of at a moments notice.

You only start living and get real security and peace of mind for yourself and your family when you become a homeowner with a mortgage.

Right now you are mearly surviving in someone elses home.

So, living is only possible if you own your own home? Peace of mind comes from within and anyway, it is not always possible for people to buy. Some people are happy to rent and I am sure they are living quite happily.

I am glad to no longer have a mortgage, that's for sure. My friend, a high earner, has ditched her house and mortgage and has decided to rent for the rest of her days. It suits her to do that, it suits her lifestyle and she has a wonderful life.

It is, as ever, horses for courses.

Chris55_2

What you have now is some time. I suggest that you use it to research where you want to live, what kind of house you want to live in, what things are important to you (road links, rail links, schools etc). I know that when I've moved in the past the times I got it right were the times that were most successful. In one move we'd narrowed down where we wanted to be to just 2 streets - and we were lucky enough to get the best house in them! That's because when it came up we were ready, knew the market and were able to move very quickly.

Remember you don't just need to buy some random house - you have a chance to buy the best house for you, and if it's the best house for you at this moment then it's likely to be a good house to sell later. The problem in a rising market is that you can panic and just buy any house to get "on the ladder". Then you find you're stuck.

If you're not sure what you want then rent to try out different things. Rent is not necessarily dead money - an interest only mortgage is dead money (and it's a dangerous gamble).

des_cartes

whitesatin wrote: »

So, living is only possible if you own your own home? Peace of mind comes from within and anyway, it is not always possible for people to buy. Some people are happy to rent and I am sure they are living quite happily.

I am glad to no longer have a mortgage, that's for sure. My friend, a high earner, has ditched her house and mortgage and has decided to rent for the rest of her days. It suits her to do that, it suits her lifestyle and she has a wonderful life.

It is, as ever, horses for courses.

If you rent and for whatever reason yiou want to move, it is easy to do. If you have a mortgage and are in a property you can't sell then you become a prisoner to the neighbours from hell next door, the yobs vandalising your car or stuck in a job you hate with no way out. Buying a house at the right price has it's benefits but buying at the wrong price and being stuck in negative equity could make yopur life a misery.

Wobblydeb

whitesatin wrote: »

Now we are wondering if we would be better renting for a year to see what happens, knowing that the money is easily accessible should something suitable come onto the market.

Buying or renting, I expect it is a common dilema right now.

I am in a similar position, sold my own place to live (very cheaply!) in my OH's flat. Now we need to sell or rent out his flat, and in the meantime have rented a lovely detached house. It takes so much stress out of trying to live in the flat whilst getting it ready for sale. I also think prices could fall further as we live in an area with high reliance on public sector jobs.

HAMISH_MCTAVISH wrote: »

If house prices stagnate, you lose 15K, plus the negative real return on the savings.

This is untrue, as your savings would have been in property (as equity in your home) so would have stagnated too. So.... if you had bought for £300k with £100k deposit and it was still worth £300k a year later, your £100k savings have made nil.

In the meantime, a 3.0% net return on your savings (I am currently averaging this) gives you an additional £3k to offset against the £15k cost of renting.

Renting can make financial sense for a short period in a stagnant or falling market. It does not make long-term sense.

mostlycheerful wrote: »

However another idea to consider is that while it’s a buyers’ market it might be worth your while going around making lots of very low offers in the hope that someone who is desperate and can’t sell will give you a bargain. A recent report said that there’s been 760,000 sales since Jun 09 and 1.1 million people who can’t sell so it might be worth offering just £250k for several £350k and even £400k properties and someone might bite. Or if they don’t then you could do another round and offer them all £275k and again wait a bit for them to stew and someone who has to move now and can’t wait any longer may possibly decide that it’s your offer or nothing and that something’s better than nothing. A harsh approach to make to desperate sellers but all’s fair in love and war so why not. It’s not your fault that the market is down so you might as well take advantage of it if you can. Might just be a waste of time doing this if they all say no but on the other hand you might land a bargain for just a bit of hard negotiating.

Great post - I will be following this strategy next spring.

My rent minus interest on my deposit savings is c£11k. If I bought a house I like now for £335k (similar value to rental property) I would pay c£10k per year interest only on the mortgage. So for £1k actual difference in cost for the next year, I am renting (short-term only!) and hoping to get that house, or something similar, for £300k in the spring.

Yes, it could go wrong and house prices might rise. My own personal expectation is for stagnation or price falls in the area that I live. Stagnation would be sufficient as I think then there will be the occasional bargain for a buyer in a good position.

property.advert

Out,_Vile_Jelly wrote: »

My LL can give me two months notice, plenty of time to find a similar property in SW London.

I am planning to move, from a rented property to another rented property. I am not being forced by the LL to move but am moving to be in the catchment area of the best school for my child. However, the principle would be the same were I being forced to move.

I'll take a median figure of about £1500 a month rent. Now I have very rarely found a perfect handover and with working long hours and some short supply, I cannot guarantee that by letting the house I want go, another of similar quality and at the same price will be available to match my intended end of contract date on my current property. hence, I have to take an overlap.

If that overlap is a month, then I have lost £1500. I also have moving fees, which may be £500. I have to also find a deposit and advance rent of around £4500 (and there is no guarantee that I will ever see all of this again). I then have fees which agents rip tenants off for. If I needed to take time off work unpaid to house hunt or move then I would lose additional sums. All these "losses" must be factored into the rent over the apportioned over the length of time you spend in the new property. Any comparison with ownership must by definition take these considerable costs into account.

But what happens if I cannot find another property at the same price ? Being forced to move by the LL could cost me another £500 a month if that was all which was available. I may be forced to take on a short term serviced apartment or other short term and costly accommodation. All these costs must also be considered and the likelihood of incurring them computed.

Most people only consider the headline figures and conveniently forget the additional and incidental costs which they fail to include in their comparison between renting and ownership.

Now give me a lease massively in favour of the tenant and with limited rent increases and professional landlords and you can make your case but with an AST and then a periodic tenancy, you are living your life month to month at the whim of the LL.

Renting can be a means to an end and at certain times in one's life it is probably necessary and the right thing to do. However, such as people who deride those who buy Ferraris largely do so because they cannot afford one, people who deride house buyers and find arguments in favour of long term renting are often those who cannot afford to buy or who choose to not save and not to invest but rather squander their income.

Put simply, who would turn down ownership of an asset such as property and choose to buy a property for another.

I will arrange for the men in white coats to come and collect