BTL's and renters

heathcote123

Graham_Devon wrote: »

The suggestion that paying money in rent is wasting money is poor, very poor, and to be expected only from a select number of individuals.

It's akin to suggesting paying money for food is a complete waste of money, or paying for fuel to get to work or heat your home a waste of money as it's all consumed.

It's a very lazy argument for those who find arguing any finer details a little too demanding.

I just find it pretty hard to believe people can in any way think it's not wasting money. It's an asset that you have to have the use of one way or another, why on earth buy one for someone else?

You dont have a choice but to buy food & fuel, it will always be consumed. But you do have a choice with housing, it is pretty durable.

IF you have the option to buy, choosing not to is financial lunacy.

IveSeenTheLight

Let's be clear.

Renting can be a choice and at times it may be ones choice to rent for a number of reasons.
So it's not wasted money.
They are simply paying a premium to secure temporary accomodation for an agreed amount of time.

Defining rent as wasted money is something that is portrayed because financially, if you are in a position to buy, it is cheaper to buy (in the long run) and therefore there is lost disposable revenue associated with renting.

If you want to liken it to food, it's lie buying an Indiam meal for two from your local supermarket against going out for a slap up meal.
The supermarket (buy) is cheaper, however you may be willing to go to the restaurant (rent) and pay the additional funds for the ambiance, service etc.

Both have the same net outcome in that the belly's are filled.
same with property, both renting and buying provide a roof over ones head.

The difference simply is the service costs associated with renting and buying

IronWolf

the only reason BTL is still viable is the low interest rates. The rent I pay now barely covers their mortgage on the flat, they're screwed when interest rates rise.

IveSeenTheLight

IronWolf wrote: »

the only reason BTL is still viable is the low interest rates. The rent I pay now barely covers their mortgage on the flat, they're screwed when interest rates rise.

Are you absolutely certain on that?

How much rent do you pay and what is the outstanding mortgage?
Is the mortgage variable or fixed?

IronWolf

IveSeenTheLight wrote: »

Are you absolutely certain on that?

How much rent do you pay and what is the outstanding mortgage?
Is the mortgage variable or fixed?

Well I can't be certain, but i reckon theres about £250k outstanding, bought in 2010 so most likely on a fixed. I pay about £1400 a month in rent, which I reckon covers repayments up to about a 4.5% interest rate. If the mortgage went to 7% the rent wouldn't even cover the interest.

FTBFun

nembot wrote: »

We should take Europe's lead where it comes to renting, they know how to do it properly.

In fact many people from the continent, think we're a bit crazy over here - obssessing over shoe boxes, priced at hundreds of thousands of pounds.

I'd rather we did what was best for the particular circumstances of this country, tbh. No point looking to Germany and France (say) when they're less densely populated than the UK.

paulmapp8306

In general (there are exceptions - obviously) renting isnt throwing money away - purly because the renters have no choice. Its pay the rent or go homeless.

If you cannot afford to service a mortgage from you income you cant own a house. Yes renting may be more expensive but the government will pick up that tab - they wont do so if your buying.

Secondly you may be able to afford a mortgage but not able to actually get a lender. Again you cant buy your home. so you have no choice but to rent.

IF its a CHOICE to rent rather than buy - then yes, it could well be seen as wasting money BUT ther enter has the flexibility to easily move if they wish (or need) and has no unexpected maintenance bills. He pays a premium over what a mortgage would cost to give his this piece of mind. Its like any other choice - not purly a financial one.


There is one thing that WILL bring the housing market down, very very quickly. IF the government actually comes to terms with the fact there is a vast shortage of affordable accomofdation and something HAS to be done, 1000s and 1000s of new homes could be built VERy quickly in the form of "flat packed homes". Not to Hoff standards (no idea how to spell that), but the cost in materials would be much cheaper than "bricks and mortar" as would the cost in labour to build them - and you can put such a house in a matter of days.

Personally I think this has to happen at some point - but will any government acually dos o? It will affect most in power badly as there will be a suprplus of homes, the private rental market would be cut drastically, and the cost buying houses would also fall as a result. Im not holding out hope - but it COULD be done.

julieq

What strikes me these days is the lack of ambition from the bears. Macaque used to be president of the 70% (nominal drop) club and proclaimed total property meltdown, but he's now nailing his colours to a 5% drop in the hope it'll somehow send the BTL market into reverse. We have redefinitions of "crash" to fit what has already happened, and instead of the previous confident predictions of big nominal drops, real terms drops are what was meant to happen all along. Instead of telling us gleefully how the BTL vampires are going to be punished by big losses. there is a lot of whinging about how unfair rent increases are and how someone should do something about it by putting up costs.

The question about whether renting is "better" than buying depends on how you define the word really. Most people would say that "better" means lower total costs over your lifetime. And buying certainly gives you that.

A couple of years ago someone who has I think now disappeared from the board tried to argue that pushing back the date of purchase was neutral when rent was the same or less than interest payments. To do that he had to construct high mortgage rates and low and real terms reducing rent. What actually happened was low rates (and reducing rates as competition came back to an extent), and high and increasing rentals.

Renting is a service, and services are usually provided for profit, i.e. cost plus. If costs are increased, then the price of the service will increase provided there is enough demand for the service. So property rental will always tend to be more expensive than buying like for like UNLESS we take steps to reduce the supply and demand imbalance. There's really nothing else involved. And to do that you have to build more houses, and you have to be able to sell the houses you need. As previously discussed at length.

But what's actually going to happen next is that lots of people will have saved up their 20% deposits and will all enter the market for housing against a heavily constrained supply. This will happen sooner than a lot of people expect, and before we see a sharp economic upswing. Really, if you don't get falls when the Euro is going to hell on a handcart and prospects are gloomy, then what do you think will happen when we get a little more optimistic next Spring?

paulmapp8306

sound reasoning except - what makes you think were going to be more opimistic next spring Spring 2013 if you lucky.

julieq

Paul, good analysis: the other thing that could happen is conversion of industrial premises to affordable flats. I think we'll also see a rise in the provision of Condo style flats in urban settings which is the way this problem gets solved elsewhere, for example Hong Kong where space is very constrained. Your scheme needs planning restrictions to be slackened (which they definitely should be) and probably VAT relief on new build.

Part of this though is that the bears don't want to solve the actual problem. To many of them this is a moral issue and they invoke "greed" as a motive and want to see the perpetrators punished - moral indignation courses through every syllable they write. There certainly are solutions which will disadvantage landlords to a degree and put a lid on house price rises, this will involve to some extent changes in where we allow houses and homes to be built, and it'd be better for everyone if we got on with that argument rather than trying to find ways to tax landlords to oblivion or blame everything on baby boomers or immigrants.