Renting is NOT Dead Money

Procrastinator333

GHOULES_ARE_BACK_IN_TOWN wrote: »

And the ghouls over on housepricecrash have been delaying it since 2001. I'd table that they have been VERY unprofitable.

Very true. They need an unimaginable crash just to break even. But their error is not a reason to just dismiss the option of delaying purchase out of hand.

The current trend in prices is down, exactly what is going to reverse that and drive hpi over the next 6-12 months?? Anyone?

HAMISH_MCTAVISH

Procrastinator333 wrote: »

I may be wrong, but I think I started posting on here later than that. But irrespective of when I started posting I would have made the same point since I had to make a choice on buying in early to mid 2007. That was the first time my OH and I both had jobs post uni and could have in theory purchased a property.

Yes we missed that bottom in Feb 09. But by renting all this time, our deposit and wages have grown significantly. We could only have got a flat back then, 4 years of saving and wage growth and we are going to jump straigh on at a detached house.

In that time the halifax has gone from £194,362 to £162,096, the nationwide has gone from £179,110 to £166,757. And prices are again now pointing in the downward direction. We have therefore skipped the costs of several house purchases at the same time as prices have dropped. On the flipside we have missed out on the low tracker rates, but then we would likely have had to give them up when we moved up the ladder anyway.

So to date, our choices have been spot on.

Perhaps. Lets throw some definitive numbers into the mix. I'll take the LR and RoS values as they are more comprehensive than any of the other surveys.

Early to mid 2007....... Lets call it March.

Land Registry, March 2007 = £176,011

Land Registry, August 2010 = £167,423

Register of Scotland, March 2007 = 137K

Register of Scotland, August 2010 = 167K

So someone buying in England would, on average, have lost £8588 in capital value over that time frame.

Someone buying in Scotland would, on average, have gained £30,000 in capital value over that time frame.

Now, lets also look at mortgage costs and rent.

A typical good deal mortgage available to an FTB in 2007 from a high street lender was a 90% mortgage with BOEBR +0.49% for 2 years, followed by an SVR capped at base + 2% for life. (Lloyds, Nationwide)

So for the last 18 months they'd have been paying 2.5% interest, and for the 2 years before that an average of around 4.5%. (at a guess, CBA working out the monthly variances)

The average rent is right around a 5% yield. So if we assume £8800 per year in rent, times 3.5 years, that is £30,800 in rent.

Over the same timeframe, mortgage interest on a mortgage amount of £158,410 (90% of £176,011) at 4.5% for 2 years and 2.5% for 18 months is a total of £20,196 in interest.

Mortgage interest for 36 months is therefore £10,600 cheaper than rent for the same 36 months, versus a capital loss of £8500, so the buyer is ahead of the renter by roughly £2000 even from Mar 2007 until now in England.

More like £40,000 ahead for the buyer in Scotland.

Now, to be fair, I agree that everyones circumstances are different, and that is based only on the averages. Some areas the renter will still be slightly ahead. In others the buyer will be.

But on average, since early to mid 2007, AT BEST you can claim renters have broken even with buyers and even then only in England. In Scotland the renters have, on average again, lost massively compared to buyers.

Which is why I always state time is the enemy of crashaholics.

Where is the hpi going to come from over the next 6-12 months?

You said the same thing 6, 12 and 18 months ago.....

Good point that people should consider the relative risks of buying and not buying. Agree. If they really are at the absolute limit of being priced out, it may be too much of a gamble not to buy. We all need to consider it on an individual basis.

Agreed. Although it's not just those at the edge of affordability. It can change LTV ratios and thus mortgage costs at any point of the price spectrum.

Procrastinator333

Cleaver wrote: »

I wasn't using it as an accurate analogy, I was just saying that you can't tell me which is the better value purchase. You can't also tell me whether renting or buying a laptop is better value. Therefore, you can't tell me whether renting or buying is better value, because you don't know the future.

True, but please take my post in context, it was in response to the rubbish thread of Ghouly that renting is dead money. And why are you not on there making the same point?

Why not just say you don't know the future rather than going off on a tangent with Laptops?

Also, nobody knows the future, so we all have to make a decision on our own expectations. All I do in my posts is set out what I'm doing and why. I don't tell others it is the only way, the best way or anything like that. Better to have an opinion and a rational instead of just throwing your arms in the air and saying nobody knows.

It is for us all to consider our local area and make decisions for ourselves and our own circumstances. Some will buy, some won't some will be right, some wrong.

What I strongly disagree with is threads like Ghoulies where he asserts what is best for everyone when he is clearly talking out of his backside.

HAMISH_MCTAVISH

Procrastinator333 wrote: »

What I strongly disagree with is threads like Ghoulies where he asserts what is best for everyone when he is clearly talking out of his backside.

But the thing is old boy, people like you make equally invalid assertions, although I'll admit you're far more balanced and fair than the majority of bears on here.

I've just shown you that on average, even buyers in early to mid 2007 are now slightly ahead of renters for the same time. And that's WITH the biggest crash in UK housing history. Even when you play around with the numbers by a few months, it's still only breakeven for renters on average, and certainly no big gains. And thats before you include the fact that buyers now pay far more in interest than those who got mortgages pre-2007, and thats IF they can get a mortgage at all.

It's just so incredibly risky for most people to delay purchase....

Because the window of opportunity to get it right is incredibly small and totally unpredictable, and in fact does not exists for at least 14 years out of every 15 years, on average.

Procrastinator333

First off, Scotland, no offence, but I don't pay any attention to Scotland and don't really care, I'm never going to buy there.

HAMISH_MCTAVISH wrote: »

Now, lets also look at mortgage costs and rent.

A typical good deal mortgage available to an FTB in 2007 from a high street lender was a 90% mortgage with BOEBR +0.49% for 2 years, followed by an SVR capped at base + 2% for life. (Lloyds, Nationwide)

So for the last 18 months they'd have been paying 2.5% interest, and for the 2 years before that an average of around 4.5%. (at a guess, CBA working out the monthly variances)

Ok, talking about me personally, in March 2007 I had been in emploment for 18 months and my OH for 6 months. We didn't have any deposit. We could have bought in theory with a 100% mortgage. I also don't think that many people were going for trackers at that time, so selecting the lowest rate from that point in time seems rather unfair.

HAMISH_MCTAVISH wrote: »

But on average, since early to mid 2007, AT BEST you can claim renters have broken even with buyers and even then only in England. In Scotland the renters have, on average again, lost massively compared to buyers.

Not at best. We are miles ahead. We could never have got the tracker you suggest. We could only have purchased a small flat at the time. We had to move area since then and our intended purchase is going to be a detached. So we skipped minimum 1 and possibly 2 house purchases and sales by doing this as well.

Prices are lower, we have saved on the costs of moving and we have saved money on rent. If we had bought a flat in 2007, there is no way we would be contemplating buying a detached house with a 20% deposit somewhere between 6-18 months from now.

HAMISH_MCTAVISH wrote: »

Which is why I always state time is the enemy of crashaholics.

Time is the enemy if you insist on comparing the options using tracker deals from 3 years ago that have not been available for a long time.

You have a tendancy to blur 2 different arguments. On the one hand there is a question, was someone correct to delay purchasing in 2007 and a second question of what is for the best today. They are seperate questions, but you oftne blur the 2 and quote mortgage rates from 07. They don't help the FTB of today. You seriously think someone who today has a 5-10% deposit should rush out and buy a property?

HAMISH_MCTAVISH wrote: »

You said the same thing 6, 12 and 18 months ago.....

Nicely avoiding the question. Where is hpi going to come from for the next 6-12 months?

Also, this was the first thread I contributed to on this forum:

https://forums.moneysavingexpert.com/discussion/2224255

Jan 2010. Since then:

LR: £165,088 to £167,423
Hali: £169,777 to £162,022
Nationwide: £163,481 to £167,757

And prices are now pointing down again. So my suggestion of waiting to see what happens was not a bad one back then either.

Procrastinator333

HAMISH_MCTAVISH wrote: »

But the thing is old boy, people like you make equally invalid assertions, although I'll admit you're far more balanced and fair than the majority of bears on here.

I've just shown you that on average, even buyers in early to mid 2007 are now slightly ahead of renters for the same time. And that's WITH the biggest crash in UK housing history. Even when you play around with the numbers by a few months, it's still only breakeven for renters on average, and certainly no big gains. And thats before you include the fact that buyers now pay far more in interest than those who got mortgages pre-2007, and thats IF they can get a mortgage at all.

It's just so incredibly risky for most people to delay purchase....

Because the window of opportunity to get it right is incredibly small and totally unpredictable, and in fact does not exists for at least 14 years out of every 15 years, on average.

I'm not quite sure I'm a bear, maybe a small bear.

Also, you didn't just "show me" because of your selective use of the facts. As always.

What will drive hpi over the net 6-12 months?

Generali

GHOULES_ARE_BACK_IN_TOWN wrote: »

It might be simplistic but it's true and that you CANNOT dispute. Buying property pays off so it's disingenuous to try to over complicate the theory with your fancy mathematics.

Actually I can dispute and, as you can see, do.

HAMISH_MCTAVISH

Procrastinator333 wrote: »

Ok, talking about me personally, in March 2007 I had been in emploment for 18 months and my OH for 6 months. We didn't have any deposit. We could have bought in theory with a 100% mortgage.

We could never have got the tracker you suggest. .

In 2007, with the information above, and a clean credit history, you would have got a mortgage for 100% LTV at 3.5 times joint salary at base + 0.49% reverting to a lifetime SVR capped at base plus 2% from either Lloyds or Nationwide.

Anyway, my point is clear.

Based on the averages, the average renter is no longer ahead of the average buyer by delaying purchase since 2007.

Time is the enemy of crashaholics, and it's extremely difficult to get the timing right for STR or even delayed purchase and that's WITH the biggest crash in history. It's almost impossible in the other 14 out of every 15 years.

HAMISH_MCTAVISH

Procrastinator333 wrote: »

I'm not quite sure I'm a bear, maybe a small bear.

A bear cub.....:p

Or perhaps just sane.:D

Also, you didn't just "show me" because of your selective use of the facts. As always.

Whatever.

Based on the facts shown, it's accurate. Play around with the mortgage rates or months involved, and it's still close either way.

What will drive hpi over the net 6-12 months?

6 months? Not much.

12 months? Depends on the results of the CSR and whether or not they QE and otherwise intervene to alleviate the mortgage shortage that is the only thing limiting effective demand and holding back prices.

kabayiri

Let's throw in a better cliche'.

"You pays your money, you takes your choices."

Buying in late 2010/2011 may not be the right option for many people. Job security / family commitments / lifestyle changes. There is more uncertainty in the UK in the last 20+ months than the preceding 20+ years.

There is no point in spinning out old doctrine, or using past figures to extrapolate forwards to the near term future.

I can name a few towns in the North West (as an example) where job prospects are pretty dire right now. I wouldn't be in a hurry to lay down roots in those places without feeling uber confident on the work front.