Is it a bad time to buy a house as an investment? If so why?

Timay

I know this has probably been asked but I couldn't see anything as straight forward a question as that.

But let's say you don't need to buy a home but you want to buy a home in the uk (first time buyer) Is it a really bad time to buy a house and why?

Carl31

Bit of a broad question, how long is the investment? how is it going to be funded? for a start

Generali

Timay wrote: »

I know this has probably been asked but I couldn't see anything as straight forward a question as that.

But let's say you don't need to buy a home but you want to buy a home in the uk (first time buyer) Is it a really bad time to buy a house and why?

My opinion is that it is likely to be a bad deal if you want to increase the value of your capital after inflation but possibly a good deal in terms of generating cash.

I'm a fan of the latter anyway but housing has problems as an investment too, most notably illiquidity and a lack of diversification.

Timay

Yeah I realise that, would be funded by mortgage over say 25 years - deposit of £25000 on a £150'000 house

It's really just a general question on should you be buying a house now If you want to be using it as an investment?

Or is it odds on that you are going to be losing money and your better off investing in other options

As the way I see it you would need the house prices to rise by a significant amount year on year to beat inflation and see the real investment value grow.

Hence a bad time to by a house as an investment? In this country at least

wotsthat

If you're going to lose sleep about your house falling in value then it's probably best not to buy one or, at the very least, avoid forums like this.

chewmylegoff

it's impossible to answer your question in a meaningful way.
it is never a good or a bad time to buy a house (in the generic sense) as an investment.

it may well be a good or bad time to buy a particular house as an investment, depending on the house itself, the price you can get it for, the area it is in and the demand for rental properties in that area etc.

as with any significant investment you need to do some detailed research on whether the particular thing you are thinking of buying represents good value. buying one investment property is risky as you are not diversified, therefore you need to put more time into researching it than, say, if you were going to buy a fund which in turn invested in 100 different companies.

Carl31

Timay wrote: »

Yeah I realise that, would be funded by mortgage over say 25 years - deposit of £25000 on a £150'000 house

It's really just a general question on should you be buying a house now If you want to be using it as an investment?

Or is it odds on that you are going to be losing money and your better off investing in other options

As the way I see it you would need the house prices to rise by a significant amount year on year to beat inflation and see the real investment value grow.

Hence a bad time to by a house as an investment? In this country at least

buying a house for investment purposes only with a mortgage over that term isnt exactly a great idea anyway, any gain in value needs to be offset against the interest cost

If you were BTL however, then its a different story, and you may get torn apart admitting so on here

abaxas

As with all investments it all depends what relative to.

Remembering that to a German (priced in euros) house prices are at early 2000 levels. A japanese person (priced in yen) probably late 1990s.

No point doubling your money, but actually being much worse off.

HAMISH_MCTAVISH

Timay wrote: »

the way I see it you would need the house prices to rise by a significant amount year on year to beat inflation and see the real investment value grow.

You don't actually need that to happen for it to be a good investment.

You put down 25K, and someone else pays for you to buy a house within the term of a mortgage.

It makes not a lot of difference if the value of the house increases by more than inflation, or less than inflation. The bit you're worrying about is whether or not the investment has generated returns at the end that beat inflation on the money you actually put into it.

So lets say I buy a 150K house with a 25K deposit. Lets also say that over the next 25 years I generate 310K in rental income. (as rents tend to increase with inflation)

The cost of purchase for me was the 150K, plus interest on 125K for a total of roughly 275K. Throw in another 25K for maintenance and voids, and you have 300K.

So rent of 310K, costs of 300K, and you own a house at the end worth 150K, even with no HPI at all.

You made a 160K profit even if house prices fall in real terms for 25 years....

Graham_Devon

Come on now Hamish.

25k for maintenance, voids, insurances, legal fee's etc?

1k a year?

Lift the tint-acles off your nose. You haven't even touched on remortgaging fee's and increased interest rates etc.

JonnyBravo

Graham_Devon wrote: »

Come on now Hamish.

25k for maintenance, voids, insurances, legal fee's etc?

1k a year?

Lift the tint-acles off your nose. You haven't even touched on remortgaging fee's and increased interest rates etc.

Graham's right.
More like 50k for maintenance and £134,995 for remortgaging fees and increased interest rates.
You only make £5.




Oh no I better sell.

:rotfl:

Get a grip Graham.