Is renting really more expensive than buying?

IronWolf

You make it sound like a house is a guaranteed investment, but lets look at what shes comparing. Interest only mortgage, so you are not actually buying the house, you are relying on inflation to depreciate the value of the loan, and on the housing market not to devalue the house.

What if you bought a £200k house in 2006, paid interest only and in 10 years you need to move and its now worth £180k?

Not only have you been paying more in mortgage, you now owe the bank £20k because your house price has fallen.

chucky

IronWolf wrote: »

You make it sound like a house is a guaranteed investment, but lets look at what shes comparing. Interest only mortgage, so you are not actually buying the house, you are relying on inflation to depreciate the value of the loan, and on the housing market not to devalue the house.

What if you bought a £200k house in 2006, paid interest only and in 10 years you need to move and its now worth £180k?

Not only have you been paying more in mortgage, you now owe the bank £20k because your house price has fallen.

do you think that in 10 years property won't be at least what it was purchased for?

that's the worst case scenario - what's the better scenario?

wotsthat

wotsthat wrote: »

Don't start showing off yet. There'll be someone along in a minute to tell you that your tenant is the clever one.

Tell a lie. Two minutes.

IveSeenTheLight

wotsthat wrote: »

Don't start showing off yet. There'll be someone along in a minute to tell you that your tenant is the clever one.

I'm certainly not intending to show off and certainly I'm benefitting currently by the low interest rates.

The thing is about the rental market is that it offers something that benefits both parties.

Landlords get a good return on their investment over the natural term of the investment and the tenants get the option to rent over a shorter term to suit their specific needs.

wotsthat

IveSeenTheLight wrote: »

I'm certainly not intending to show off and certainly I'm benefitting currently by the low interest rates.

The thing is about the rental market is that it offers something that benefits both parties.

Landlords get a good return on their investment over the natural term of the investment and the tenants get the option to rent over a shorter term to suit their specific needs.

I know you weren't showing off my comment was tongue in cheek - maybe you didn't see the bulge.

phil_b_2

Hank_Rearden wrote: »

Cottage "in the country" - £650/month. On market for £300k.

You should have stayed there. a cottage in the country with a genuine value of £300k is a bargain at £650 a month rent.

Batchy

Hank_Rearden wrote: »

I'm not talking about the investment side of it, but just the cashflow.
Lots of people on here seem to suggest that it's always cheaper to buy.

Last three properties I've been in:
Cottage "in the country" - £650/month. On market for £300k. At 4% that's £1000 on an interest-only mortgage.
3 Bedroom house in NE London - £1500/month. On market for £600k. At 4% that's £2000 on an interest-only mortgage.
2 Bedroom flat in W London - £1350/month. Very similar flat on market for £450k. At 4% that's £1500 on an interest-only mortgage.

Note that I've stacked the deck in favour of buying in at least a couple of ways:
low interest rate.
interest only (which isn't really the cash consideration)
ignoring the maintenance costs etc, etc.

Have I just been very lucky?

But according to Landregistry prices have rose 3% ish throughout England...

On a 600k property thats 18000 per annum or £1500 pm
on a 300k property thats 9000 per annum or £750 pm
on a 450k property thats 13500 per annum or £1125 pm

BTLs view them very differently.
Plus they are probably on trackers plus 1.5% which they have had for a few years, so it enables them to rent out cheaper cash flow wise they are breaking even then, so dont have to pass on ocsts that dont exist, voids would be a bad result of carrying this out.

BTLs of old, are in it for the long term, so in the years, they were making 100k per annum, they can ride out the years of losing a few k here and there.

Its the ones who never went in with equity, who have no cash flow, who are now struggling.

A friend of mine had a detached cottage in newquay, paid the rent every month £1000. He had a letter off the bank saying it had been repossessed as the landlord hadnt made payments for 9 months! Thats 9k deposit on his next BTL. He is now in another place, lot cheaper, not as nice, as he still couldnt afford to buy, as he was a spender, when he should of been renting for 600pm for last 3-4 years he was in a 4 bed house on his OWN costing him lots of his monthly wages. WHY??? now he has no money... his head gasket has gone on his hyabusa... life sometimes just isnt fair.

Out,_Vile_Jelly

There are regional variations; it is almost always cheaper to rent than buy in London. And surely it's only valid to compare monthly rental and mortgage costs if you could actually afford the upfront costs of a mortgage in the first place? I would need to double my deposit and double my salary to buy the place I currently rent, so it's a non-starter to start comparing.

Batchy

IronWolf wrote: »

You make it sound like a house is a guaranteed investment, but lets look at what shes comparing. Interest only mortgage, so you are not actually buying the house, you are relying on inflation to depreciate the value of the loan, and on the housing market not to devalue the house.

What if you bought a £200k house in 2006, paid interest only and in 10 years you need to move and its now worth £180k?

Not only have you been paying more in mortgage, you now owe the bank £20k because your house price has fallen.

10 years...

lets look back 10 years to NOW following falls in 2009...

Still virtually double 2000 prices mate... your talking rubbish.

Long term... and I mean LONG TERM average on property is about 2.9%... which is around the long run inflation figure.

Unless your banking on deflation for the next 10 years... Have no idea, how your example would actually become reality.

With 0.5% base rates and trackers like 0.5% to 3%... what would be the comparable rent... 4%??

So you would rather pay 400 per month interest only or 850 per month rent? even if lost value... Dont sell it then! lol rent it out, cover your costs, and buy another place at a discounted value... this is what people WILL DO!

IveSeenTheLight

Out,_Vile_Jelly wrote: »

There are regional variations; it is almost always cheaper to rent than buy in London. And surely it's only valid to compare monthly rental and mortgage costs if you could actually afford the upfront costs of a mortgage in the first place? I would need to double my deposit and double my salary to buy the place I currently rent, so it's a non-starter to start comparing.

Is your intention to always rent whilst in London then?
Do you have intentions ever to buy?