Better to buy than rent!!

the.ciscokid

Batchy wrote: »

I dont understand you will never be able to buy, BUT in 2035 when rents on your road are probably in excess of £2600pm what are you going to do... WHEN YOU RETIRE ... what pension provisions have you put in place to pay £2600pm... do you know how much of a fund you will need in place to pay for this IN 2035 FOR EXAMPLE... I have a good idea, and would expect it to be around £750,000 aged 65 ish should just about give you the net income you need, plus RPI GROWTH over the rest of your remaining life to remain there...

I would have thought erm about 14-20k per annum rising in line with RPI per annum contributions and some good growth over 25 years would just about see that achieved.

Oh then you have to worry about your actual pension fund to live on... erm... and of course the 1300 per month in rent during that time.

God I hope you earn a lot!

I am not interested in being lectured about finances, especially by someone who cannot grasp the idea that in some situations it may be better to rent than buy. I appreciate you have recently bought, and are now becoming bullish about property, since that is your preferred outcome from here on I imagine. My bet is on decreases in house prices over the next year or 2, which is why I am renting and saving in order to buy. By doing this, I expect to be financially better off.

Suffice to say, I earn enough to save up for a decent deposit, and in the meantime I am able to rent something I will never be able to afford to buy - I think this is the point of the thread? The reason for this, at least in my case, is that yield on the property I live in is pitiful. I also believe speculation in property should be discouraged, and is a moral hazard, but that is another story.

Batchy

the_flying_pig wrote: »

The main weakness of the OP is that it uses a combination of: (1) a distinctly long-term view on house prices [by saying that they won't fall when even the biggest VIs around seem to be predicting modest falls for 2011]; and (2) a distinctly short-term view on interest rates [by saying that they’ll stay low].

This is clearly a nonsense – one should take either a long- or short-term view but not cherry-pick elements of each.

My personal view/hope is that right now we’re in fairly special circumstances, namely a slowly deflating bubble that was pricked by the abrupt end to kamikaze lending practices 2-3 years ago. In these circumstances my opinion is that likely capital depreciation makes it almost always better to rent for the time being.

Just generally [e.g. if houses are neither particularly overvalued or undervalued] I’d expect scope for medium-term capital appreciation to make buying better than renting [other than in the case of someone who particularly wants the flexibility offered by the latter] provided that, well, provided that, say, rental yields were at least as high as a middling interest rate.

WHAT...

I took many views one was houseprices WONT INCREASE OVER 25 YEARS

the other scenarios where interest rates up to 9%...

MY GOD, please read the post ... or dont bother to comment...

I give up!!

Batchy

the.ciscokid wrote: »

I am not interested in being lectured about finances, especially by someone who cannot grasp the idea that in some situations it may be better to rent than buy. I appreciate you have recently bought, and are now becoming bullish about property, since that is your preferred outcome from here on I imagine. My bet is on decreases in house prices over the next year or 2, which is why I am renting and saving in order to buy. By doing this, I expect to be financially better off.

Suffice to say, I earn enough to save up for a decent deposit, and in the meantime I am able to rent something I will never be able to afford to buy - I think this is the point of the thread? The reason for this, at least in my case, is that yield on the property I live in is pitiful. I also believe speculation in property should be discouraged, and is a moral hazard, but that is another story.

Listen I can grasp anything financial my friend, this is my speciality as a chartered accountant!

I agree in some situations it may be better, but financially, IN THE LONG TERM, it doesnt matter if you save 20k in the short term plus another 30k in interest charges, since, you will be saving 400k in the long term anyway vs renting LONG TERM, at current prices. If they get cheaper, which granted, they might do over the next year or two, especially in real terms, then it works out even better for you. I hope it does. I really do.

I dont discourage you from doing what your doing... i myself have done the same... over the last 12 months which was the period I could have brought, whereas before that, it was not really an easy thing to do for me, factually.

However, just to clarify, you are speculating on property as you are not buying now, hopefully to make it cheaper in the future, as you said, your having a "MY BET". In other words your taking a punt on future savings to buy a property of 'better value for money' in the future.

Contrary to YOUR beliefs I support your decision. It will work out the same or more beneficial whenever you do decide to buy, whether you save 30k or 60k more off the capital price.

happy saving!

the_flying_pig

Batchy wrote: »

WHAT...

I took many views one was houseprices WONT INCREASE OVER 25 YEARS

the other scenarios where interest rates up to 9%...

MY GOD, please read the post ... or dont bother to comment...

I give up!!

ha.

to be honest the proportion of 'housing bulls' on here who are borderline retards and/or wind up merchants is so high [c'mon, someone deny it] that i more or less gave up reading their posts.

so guilty as charged.

i'll check yours again in due course.

THE_GHOULISH_CODPIECE

At the end of the day it has always been better more beneficial financially to pay off your own mortgage before anyone elses.

sabretoothtigger

you will be saving 400k in the long term

There are no certainties. If buying is cheaper then it depends on the finance cost I think. I do think fixed rates arent so bad at the moment?

This whole argument could be summed up quite simply with that graph of how many years rent to buy a house. I heard of some valuations showing 50 years rent to repay the cost of a house, at the peak of the boom.

That'd be the oppisite of the OP argument. Maybe its swung back the other way and we are down to 10 years rent to buy a house. Would be silly not to

Cleaver

THE_GHOULISH_CODPIECE wrote: »

it has always been better more beneficial financially

Spoken like a true economic intellectual.

ukcarper

sabretoothtigger wrote: »

There are no certainties. If buying is cheaper then it depends on the finance cost I think. I do think fixed rates arent so bad at the moment?

This whole argument could be summed up quite simply with that graph of how many years rent to buy a house. I heard of some valuations showing 50 years rent to repay the cost of a house, at the peak of the boom.

That'd be the oppisite of the OP argument. Maybe its swung back the other way and we are down to 10 years rent to buy a house. Would be silly not to

Where I am it seems to be about 17

Batchy

Finally some sense...

the.ciscokid

Batchy wrote: »

Listen I can grasp anything financial my friend, this is my speciality as a chartered accountant!

I agree in some situations it may be better, but financially, IN THE LONG TERM, it doesnt matter if you save 20k in the short term plus another 30k in interest charges, since, you will be saving 400k in the long term anyway vs renting LONG TERM, at current prices. If they get cheaper, which granted, they might do over the next year or two, especially in real terms, then it works out even better for you. I hope it does. I really do.

I dont discourage you from doing what your doing... i myself have done the same... over the last 12 months which was the period I could have brought, whereas before that, it was not really an easy thing to do for me, factually.

However, just to clarify, you are speculating on property as you are not buying now, hopefully to make it cheaper in the future, as you said, your having a "MY BET". In other words your taking a punt on future savings to buy a property of 'better value for money' in the future.

Contrary to YOUR beliefs I support your decision. It will work out the same or more beneficial whenever you do decide to buy, whether you save 30k or 60k more off the capital price.

happy saving!

Your last post started "I don't understand", you then proceeded to lecture me about pension provisions. In this post you start by saying that you understand all things financial because it is your "speciality, as a chartered accountant", then say that the short term has no significance long term on the purchase of a property. To add to my confusion, you then say you agree with what I am doing, as you recently did the same yourself.

In the short term I am able to save a larger percentage of deposit. As property that I am intending to buy is, at best, stagnating in the short term this is good. You also need to realise that my current rent is less than what I would be paying in interest to the bank, to rent "their" money if you will.

Now, what happens if I increase the amount of deposit as a percentage of the house value I am interested in buying? The answer is the interest rate that I will be charged on renting "the bank's" money will reduce. The difference between a 90% LTV and 80% LTV in terms of interest rate is between 1% and 1.5%. It also reduces the monthly repayment and thus allows me to save this extra cash, in a pension for example (which of course has the added bonus of being tax efficient) or reduce the number of years of repayment. Compounded, these things make a big difference over the life of a mortgage.

In 1 year, I can save approximately the extra 8% to 10% I require to make this difference. So you see, the short term can make a significant difference to the long term.

The "bet" I refer to is simply my belief that property is over priced, and thus will depreciate, making the savings I have talked about above even more significant. It is not "the reason" I am not buying at the moment, there are other factors.

Just to clarify, this is not speculation in property, I will eventually buy a house to live in. This is financial planning, something which I do not claim to be my speciality. If I were a specialist in this area, I might spend a while longer thinking a little more deeply about it.

As a point of reference, your post is very hard to understand financially, so you may want to work on clarity if you are working with clients. Also, just because you are a chartered accountant doesn't make you infallible, try not to believe your own hype.