Renting v buying the figures are here

Mrs_pbradley936

Unlike others I have no idea what the housing market will do in terms of crashing, slowing, staying the same or rising. I have an interest because I own property so I just did a simple calculation to illustrate the costs between buying and renting. I am using my own property as an example. It is a two bed flat approx 12 years old within easy commuting distance to London, it would cost around £140K to buy.

It currently rents for £675 a month. It would cost £902 per month to buy.

(100 per cent mortgage and 6% interest rate over 25 years)

In addition to the mortgage the buyer would have to pay the service charges of £80 per month.

When I bought the flat it cost £60K (almost 12 years ago)

To borrow and buy at those prices would have cost £386.50 per month (conditions same as above for easy comparison).

Looking at the figures I do not think that property prices can continue to rise because most people are not happy about being strapped for cash each month to provide a roof over their head when renting is a cheaper alternative. Thoughts anyone?

lynzpower

I completely agree with you Pbradley, although there is simply no shortage of people buying.

Additionally, the vast majority of potential buyers Im working with at the moment have above 30k deposits

roswell

I have to agree with you, im not pro crash or anti crash but somewhere some how the playing field does need leveling out either by wage inflation and static house prices or house price deflation.

The gap in rents ton purchase prices seems to be widening. Im not sure how new landlords can afford to buy and let out at current prices they mustnt be seeing much if any return.

Mrs_pbradley936

Hi lynz we have not been on the same thread for a while and I've missed you.

roswell

Lynz,

a cheaky question but are those deposits from family do you know ? or that is what they actualy have saved themselves?

advent1122

Will there be a shortage of rental properties in the future?

BTman

what with the amount of new "BTL inveators", I doubt that...

Gorgeous_George

pbradley936 wrote:

It is a two bed flat approx 12 years old within easy commuting distance to London, it would cost around £140K to buy.

It currently rents for £675 a month. It would cost £902 per month to buy.

(100 per cent mortgage and 6% interest rate over 25 years)

When comparing rent against mortgage I think it is better to use interest only type mortgages. That drops the monthly repayment to £700 - somewhat closer to the current rental cost.

Buying
One day the flat will be yours. One day is 25 years and £270,606.00 away at £902.02 per month. So, assuming you buy at 25 years old, it's all yours when you are 50.

Renting
You would spend £270,606.00 over 33 years and 5 months.

Conclusion
Assuming you live beyond 58 years and 5 months it would have been better to buy and at least your kids would come to your funeral. You might even get the odd birthday card if there's hope that you will leave your children a flat in Nelson Mandela House.

More seriously, rents will increase steadily if the pressure on the housing market remains strong. The market will remain strong if the population continues to rise and if land is not freed for developement. House prices will always be controlled by affordability.

(Conveniently ignore all the additional costs associated with owning a home)



GG

fivemice

And lets not forget the cost of these deposits that don't get returned.

liz545

Gorgeous_George wrote:

When comparing rent against mortgage I think it is better to use interest only type mortgages. That drops the monthly repayment to £700 - somewhat closer to the current rental cost.

I don't have a mortgage, so I'm not really sure how this works, but why is it better to compare rent to an interest only mortgage - I didn't think these repaid the capital? So isn't it just a question of paying rent either to the landlord, or to the bank? I mean, you'll only own the property if you repay the capital, won't you?

FWIW, I'm not convinced of the logic of buying a property for the sake of providing your kids with an inheritance - surely budgeting and saving hard for a home should mean *you* feel the benefit of your hard work?

barnaby-bear

pbradley936 wrote:

Looking at the figures I do not think that property prices can continue to rise because most people are not happy about being strapped for cash each month to provide a roof over their head when renting is a cheaper alternative. Thoughts anyone?

It's not like for like though there are advantages to buying (and some for renting), for me I'd willingly pay a lot more to buy than rent because:

- security of tenure (greater than 2 months), no hassle with scummy landlords, letting agents
- can decorate, buy furniture specifically for a house rather than well that's small enough to fit
- allowed pets
- allowed children (most rentals don't in my city - prefer professionals)
- if made redundant could claim benefits because money tied up in mortgage/offset savings, sitting on savings for a house in the future would have to spend them
- if 40% tax payer you can offset against mortgage rather than pay tax on saivngs
- after 25 years don't have to think about how to pay rent

If I could rent long term with much longer than 2 months notice and decorate and have pets and kids then yes of course I'd rent. It's not owning a house it's tenure.