Halifax July - 0.6% MOM, -0.6% YOY

JonnyBravo

abaxas wrote: »

If the valuation went down 50k over 5 years, there is no 'benefit to the landlord'.

Well even using the generous figures that I used I'd rather be the crazy landlord seeing "no benefit".

Why?
Most of my "loss" has been paid for by the tenant and I'd anticipate trying to crystallise any capital gain in a bullish market not a bearish one.

abaxas

JonnyBravo wrote: »

Well even using the generous figures that I used I'd rather be the crazy landlord seeing "no benefit".

Why?
Most of my "loss" has been paid for by the tenant and I'd anticipate trying to crystallise any capital gain in a bullish market not a bearish one.

Obviously you failed maths.

Remembering the LL has to either pay tax or interest.

the_flying_pig

Graham_Devon wrote: »

Eh? You call the previous post nonsense and then go and post that!?

Rents have risen 10% since 2008. You are simply taking a yearly figure and multiplying it by 5. Doesn't work like that.

Edit: Sorry, my bad. Rents have rose 11% since 2008. I know the percentage point will be a bit deal.

i very strongly advise you not to get into a numbers debate with H. you'll regret it.

5 yrs ago it was very difficult to get a mortgage rate as low as 5.5% [e.g. see this best buy table from the time].

for the sake of the argument assume that someone bought a £100k house [keeps the numbers simple tho quite favourable to H's case since no stamp duty involved] with zero mortgage arrangement fee [good luck with that] or other valuation fee [ditto].

let's also assume that they paid nothing at all in solicitors' fees, search fees, land registry fees, survey costs [my biases towards H's case now add up to a couple of grand, easily] or maintenance [say another grand, i.e. a couple of hundred per year?].

how much capital depreciation should we assume? H's own RMW nonsense assumptions are clearly out of the question, but as to what we should use... i'd say £10k. it's a nice round number, and lower than either of the Haliwide figures so very conservative.

so for buying to have been cheaper, even given the upward biases that i've applied [it's just about possible, with an expensive solicitor, full structural survey, & high mortgage arrangement fee {as is not uncommon with stuff from best buy tables} that these biases would together add up to £1k per year - with an expensive property picking up a couple of percentage pts in stamp duty it's a near certainty], the average rental would need to have been at least £2k per year lower than the average interest payment over the 5 years.

assuming a 100% mortgage [otherwise things get messy], on £100k debt, how much interest would have been paid?

my best buy table suggests about £6k p.a. if they'd fixed 5 yrs ago and got the best possible rate. is it plausible that they'd have paid more than £8k p.a. in rent over this period [i.e. £2k more than interest over the period, enough to compensate for the £10k capital loss]? Nope - so if they'd fixed 5 yrs ago, even getting a best buy interest rate, they'd have been worse off buying, for sure.

how much would the rent have been? £5k p.a. in rent seems like a reasonably toppy estimate to me - H's own figure of 5.5% would add up to rent today of £4950 p.a. on a £90k value house, tho it'd have been less than £4,950 p.a. in earlier years clearly if you believe H's mantra that rents have been going up. £5k p.a. it is then. do i believe that the borrowers would have paid less than £3k p.a. in interest on their £100k debt [so an average of less than 3% p.a.]? if they were on a base rate tracker, possibly, a long base rate tracker where they didn't have to remortgage at any point.

so, yeah, those people who got base rate trackers would have been better off buying, maybe. others worse off for sure. obviously we're talking about averages here. round Hamish's way you'd have been £55k better off owning but, well, i suspect that most fair-minded people know what to make of that figure.

JonnyBravo

abaxas wrote: »

Obviously you failed maths.

Remembering the LL has to either pay tax or interest.

No, no I didn't.
I do remember about tax. I pay it on the property I rent out.

If I could be bothered for a protracted discussion I'd start with pedantry over numbers. I'd start using real average rents over 5 years, real reductions in house prices, real costs for tenants as well as landlords.
But we all know you won't convince me I'd have been better off not having my rental property and I know I can't ever get you to admit to yourself, never mind anyone else, that landlords are more than happy so long as the tenant is buying the house... no matter what happens to the price of it over 5 years.

So let's both just stay happy with our opinions and see if your weight of argument causes a flight from BTL

HAMISH_MCTAVISH

the_flying_pig wrote: »

so, yeah, those people who got base rate trackers would have been better off buying

They almost certainly would have, based on average rents, average house prices, and average falls from peak on Acadametrics, Land Registry, Nationwide, ROS, etc.

On Halifax maybe not.... But Halifax is very much the odd man out as it shows prices 20K higher at peak than LR and NW, despite showing a similar price today.

others worse off for sure.

Not really.

A 2 year fix in 2007 reverting to a half decent SVR rate such as those commonly available from high street banks at the time, like the Nationwide or Lloyds base +2% SVR would also be pretty much breakeven versus renting by now.

A 5 year fix in 2007, I'll agree with you, would be slightly worse off buying than renting.

obviously we're talking about averages here. round Hamish's way you'd have been £55k better off owning but, well, i suspect that most fair-minded people know what to make of that figure.

Registers of Scotland Aberdeen Average full year house price figures: (strips out seasonality)

2011/12 = £185,797

2007/08 = £177,297

http://ros-properties.clients.civiccomputing.com/Home

Those are the full year averages, if we compare latest available data....

June 2012 = £188,391

June 2007 = £177,124

http://www.ros.gov.uk/professional/eservices/land_property_data/lpd_stats.html

Both sets of Register of Scotland data show prices in Aberdeen have increased since 2007 by around 6%.

Now take into account the fact that typical rental yields in Aberdeen are around 7%, and add in a half decent tracker/SVR from Lloyds or Nationwide, and you're around 50K better off buying instead of renting.

In my case, I've averaged around £4200 per year in interest over the last 5 years, and to rent the same house would have cost me around £14,000 per year. That's nearly 50K better off before we even look at capital appreciation or loss.

Prices actually rose 6% in that period, but they'd have needed to fall 25% for me to be better off renting rather than buying.

Generali

abaxas wrote: »

If the valuation went down 50k over 5 years, there is no 'benefit to the landlord'.

Maybe.

That's the start of a realised vs an unrealised loss argument. For valuation purposes, an unrealised loss is basically the same as a realised loss only you don't get the tax advantage.

In practical terms for how people want to manage the case side of their investments it's a lot more complex IMHO.

the_flying_pig

HAMISH_MCTAVISH wrote: »

….

There’s an awful lotof hot air & rubbish in there so I’ll keep it brief.

Re: your comments on the country average figures [which I didn’t like at all – you’re deliberately trying to obfuscateand mislead people in order to talk up the case for owning, whereas I am playing it straight down the line – my own bias is simply reflected in not attemptingto ‘fight’ unwinnable message board battles as you’re trying to do here]:

(1) Someone taking a five year fix in 2007would NOT be “slightly worse off” than buying than renting – they’d be slightly [a few grand] worse off before taking capital depreciation into account, loadsworse off once they’d taken that c. £10k hit [and possibly in negative equityetc]. Please note that my £10k hit is lower than per any of Halifax,Nationwide, or LR, so don’t accuse me of selectively picking numbers, as you did by implication]

(2) Someone buying on a 2 year fix reverting to SVR+2% would NOT have been better off – the best 2 year fix [as per my best buy table] they could possibly have got was £900 fee + 5.5% for two years [cumulativespend £900+ (2*£5500)=£11,900], then to keep it simple another three years at2.5% [cumulative spend £11,900+(3*£2,500)=£19,400], add another £10k in capital depreciation & you’ve got a net outlay of £29,400 before legal fees, survey, mortgage valuation, search costs, & maintenance. Renting for 5 years wouldonly have cost north of £30k if they’d been paying £6k per year, i.e. a gross yieldof 6.7% on the 2012 price, and paid no less than £6k per year in earlier years too. To be better off you'd need a rate that was tracking only very slightly above the base rate, i.e. a fairly unusual deal.

Re: your Aberdeen examples In an area withrising prices, yes, you’d have been better off buying, you’re absolutely right - this is basically a no-brainer but the whole pt of this thread is to talk about the national average, i.e. what affects most people, with about equal numbers being hit harder & hit less hard than this. but your example using your own house [whereby rent would amount to 3.3years of interest costs] just seems daft, with a gross yield/interest ratecombination that’s hugely atypical of national averages – unless you’re doing somethingridiculous like basing the calculation on a total amount of debt that’s onlyunattainable to someone with a massive deposit [introducing an opportunity costin lost savings interest] or many years’ worth of equity, both of which wouldbe massively missing the point of the exercise.

Jack_Johnson_the_acorn

I bought in December 2011, FTB. I'm happy for prices to drop, prefer them to rise obviously, but I don't plan on moving house EVER.... I would of paid at least £600/£650 in rent for my place, I currently pay £611 (mortgage), but then I love where I live and the advantage of being secure in my own home, not at the mercy of a landlord is of great comfort to me.

Buying a house is like no other investment, One has to have a place to live and there are more interesting points to consider than mere profit!

HAMISH_MCTAVISH

the_flying_pig wrote: »

Re: your Aberdeen examples In an area with rising prices, yes, you’d have been better off buying, you’re absolutely right - this is basically a no-brainer

Indeed.

but the whole pt of this thread is to talk about the national average, i.e. what affects most people,

OK, I'll simplify this for you.

Average rental yield is 5.5%

Average mortgage interest is 3.4%

Prices must fall more than 10.5% in 5 years, based on the averages, for the renter to end up ahead.

According to ONS, Acadametrics and ROS there is a significant loss for the renter.

According to Nationwide, there is a breakeven for the renter versus buyer.

According to Land Registry there is a sub 1% gain for the renter.

According to Halifax there is a circa 9% gain for the renter.

Spot the odd one out......

your example using your own house [whereby rent would amount to 3.3years of interest costs] just seems daft,

That's the facts though.

Identical houses in my street rent for circa £1200 a month, and sold in 2007 for circa 200K.

That's a 7.2% yield.

My neighbour, for example, has his rented while he's overseas and not only is he getting a 7% yield based on 2007 prices, he's also not had a void period of more than 3 days in the last 2 years.

unless you’re doing somethingridiculous like basing the calculation on a total amount of debt that’s onlyunattainable to someone with a massive deposit [introducing an opportunity costin lost savings interest] or many years’ worth of equity, both of which wouldbe massively missing the point of the exercise. [/FONT][/SIZE]

That made no sense whatsoever, but let me be clear.

It's a direct comparison between the scheduled interest payments on a base +0.5% 2 year tracker reverting to base +2% SVR repayment mortgage from Lloyds TSB, against what it would have cost me to rent the same house for the same time.

The result is around £50,000 better off for the buyer, on a circa 200K house.

'Round My Way', you'd have been a fool of epic proportions to have deferred purchase for the last 5 years waiting for a house price crash to come along.

the_flying_pig

HAMISH_MCTAVISH wrote: »

...OK, I'll simplify this for you.

Average rental yield is 5.5%

Average mortgage interest is 3.4%

Prices must fall more than 10.5% in 5 years, based on the averages, for the renter to end up ahead.

According to ONS, Acadametrics and ROS there is a significant loss for the renter.

According to Nationwide, there is a breakeven for the renter versus buyer.

According to Land Registry there is a sub 1% gain for the renter.

According to Halifax there is a circa 9% gain for the renter.

Spot the odd one out......

To be fair Hamish this conversation started looking at history, what actually happened, when interest rates started off a fair bit higher than 3.5% and prices did fall by more than 10% over five years.

What I think you're doing now is asking:

'what if, during 2012-17, rates stayed at 3.5% & prices fell by the same as they did for 2007-2012?'.

i suspect that your answer to this question may be about right, although I personally am not sure how much weight I would put on Acadametrics, ONS, or ROS.

i also put it to you that maintenance, mortgage arrangement/valuation, & [it's not clear whether we're talking about moving at the end of 5 years or staying put] conveyancing, survey, stamp duty, search fees, EA fees are less trivial than you are implying.