Guardian: House Prices Fall 0.9% In november

wotsthat

geneer wrote: »

If the value of a house has fallen in the period in which you are renting, the cost of the rent will be offset by the falls when you purchase.

Well looking at the last LR figures there was a 3.2% YoY fall in values.

If that 3.2% fall wasn't sufficient to cover a years rent what is the best thing to do? Start saying things like the LR (the only way to fly) is a blunt average and prices in my target area have actually fallen or maybe focus on the above average returns I've achieved on my imaginary deposit?

IronWolf

RenovationMan wrote: »

"It said the average home is now worth £161,731, down 1% compared to November 2010. "

That fact shook me, I thought the falls were far higher than that. Is it really the case that property bears have been holding off buying a house in order to pick up a bargain in the 'housing crash' and prices are down just 1% after 12 months?

They would have paid off more than 1% off the mortgage if they had bought 12 months ago and would have saved rental costs.

It's a shame that they didn't have more financial awareness classes in schools. Hopefully Martin's campaign will help to remedy that.

It all depends where you live. UK averages mean !!!!!! all, all that matters is the prices in the areas you want to buy.

RenovationMan

IronWolf wrote: »

It all depends where you live. UK averages mean !!!!!! all, all that matters is the prices in the areas you want to buy.

Yep, that's what I've been saying for a long time now, but every time there is a slight movement on one of the indices we have a 20 page thread about it. Anyone who is basing their purchasing decision on the movement of a house price index is bonkers.

paulmapp8306

These debates, or arguments, always follow the same arguments :mad:

Both sides are right - and both sides are wrong in truth.

1. IF you rent, your paying money for nothing. Totally agree. BUT you do the same with ionternet bills, phone bills etc. You pay for the service. In this case somewhere to live, and the maintenance of that. However, you are ultimately paying for someone else to own something. Ballance? bad idea omn paper.

2. If you BUY your paying lots to your lender in interest. That again is money for nothing really. You pay a little equity yes, but much more in interest. If its a BTL mortgage, your not really paying it though - your tennant is. You may have more bills to cover in maintenance, but overall a good idea.

HOWEVER look deeper. If your paying say £1000 per month as a tennant - how much of that is paying off equity? How uch would you be paying for a mortgage on a similar home? Could you invest JUST that part, and long term get a return worth more than the house your renting? This is the big question really. If you CAN then renting is a better option thatn buying. If you cant then buying is a better option.

Being a BTL landlord is slightly different, but it depends on how much deposit you paid in that home. The bigger the better really, as your interest payments to the bank are lower, so you see a bigger income from the rent. However, you still have to consider if that capital could have made more in other investments.

In truth both are win-wins. It depends on your circumstances, your ability to invest wisely, the markets (housing and stocks really). No-one can say for sure there way is best (yet so many on here do :rotfl:). Its a gamble both ways really. You take a punt and hope you made the best choice. Thing is both COULD end up providing a proffit. so both could claim they made the correct choice - but who made the BIGGER proffit? That is the real question and can only be answered over the length of the BTL mortgage, or (if the BTL was bought outright) over the period of rent. anyone claiming any different is a fool.

So - paying rent is money down the drain? depends. Only if you cant invest the difference between rent and mortgage (or a better calculation, the difference in capital payments v rent) for more than the house ends up costing. Any simplistic way of looking at things (Mr Rees and co seem good at this, though its not confined to the bulls) is being foolish really.

robmatic

wotsthat wrote: »

Well looking at the last LR figures there was a 3.2% YoY fall in values.

If that 3.2% fall wasn't sufficient to cover a years rent what is the best thing to do? Start saying things like the LR (the only way to fly) is a blunt average and prices in my target area have actually fallen or maybe focus on the above average returns I've achieved on my imaginary deposit?

It's not really clear to me how you determine that a 3.2% YoY fall has actually applied to the value of the property that you buy, given that it's simply an index value and by definition the change in values of components of the index will be more or less than this.

It certainly wasn't part of the negotiation process when I bought my place. Maybe I did it all wrong?

robmatic

paulmapp8306 wrote: »

So - paying rent is money down the drain? depends. Only if you cant invest the difference between rent and mortgage (or a better calculation, the difference in capital payments v rent) for more than the house ends up costing. Any simplistic way of looking at things (Mr Rees and co seem good at this, though its not confined to the bulls) is being foolish really.

One thing to remember is that the odds are effectively stacked in favour of mortgage repayments as opposed to investing rent savings (if there are any - what if the rental yield is higher than the equivalent mortgage rate?). Your capital repayments are a pretty tax efficient way of increasing wealth, as mortgage interest and rent both come out of your after tax income. This means that to have at least the same effect your net investment return after tax will have to be better than the mortgage rate that would apply. Of course, this is doable but only if you take on a much higher level of risk.

wotsthat

robmatic wrote: »

It's not really clear to me how you determine that a 3.2% YoY fall has actually applied to the value of the property that you buy, given that it's simply an index value and by definition the change in values of components of the index will be more or less than this.

It certainly wasn't part of the negotiation process when I bought my place. Maybe I did it all wrong?

I was just interrogating Geneer's logic. It's an interesting idea - if house prices are falling then you can consider the rental outlay as an offset mortgage in reverse.

In my own case I've paid a touch over 15% off the value of my mortgage in the last year which equates to around 4% of it's value. It would definitely cost me more to rent than the current mortgage.

If the roof stays on, for a change, this winter I might even be up on the deal.

marlonthemagnificent

wotsthat wrote: »

I was just interrogating Geneer's logic. It's an interesting idea - if house prices are falling then you can consider the rental outlay as an offset mortgage in reverse.

In my own case I've paid a touch over 15% off the value of my mortgage in the last year which equates to around 4% of it's value. It would definitely cost me more to rent than the current mortgage.

If the roof stays on, for a change, this winter I might even be up on the deal.

there's also the upside from having the capital that you would have invested in the house being invested in something else, that has a higher return

given that house prices are declining, any capital you put into a house in the form of a deposit is declining in value, and you are paying interest on the loan on top of that....i.e. 2 separate "costs".....

if you rent in a falling market, any capital you have can be invested...so as long as house prices are declining (which looks like the foreseeable future) you effectively get a double upside...i.e. your capital is not declining, plus the incremental value generated by the investment returns.

in my case, that far outweighs the cost of renting, so renting is by far the cheaper option to buying

anyone would be mad to buy a house for the next couple of years.

JonnyBravo

paulmapp8306 wrote: »

These debates, or arguments, always follow the same arguments :mad:

:rotfl:

Nice one sherlock.
You got there in the end.
You now expect this post to summarise all those arguments and jealousies, stop the endless bickering and allow peace and love to break out?

RenovationMan

JonnyBravo wrote: »

:rotfl:

Nice one sherlock.
You got there in the end.
You now expect this post to summarise all those arguments and jealousies, stop the endless bickering and allow peace and love to break out?

Will we all soon be dancing around and singing "This is the age of aquarius?"
http://www.youtube.com/watch?v=v6bocoHIPDs