Rent vs buy

helloyouu

I'm speculating (as we all do), but in the long term, I can't see the house price and rent increase. Here's why:


In all developed country, population tend to decrease instead of increasing. I like to use japan because it's the country that suffer the most this problem. See the population projection:
l

So yes, for now the house price still increase and crisis bring a lot of people to london to find job and other try to secure their funds in london equity.

But in the long term, as we loose population, I predict that house value will decrease. To what extend, I can't say. I'm trying to find property price trends from other capital

HAMISH_MCTAVISH

helloyouu wrote: »

loose population,

Sounds fun.:)

HAMISH_MCTAVISH

helloyouu wrote: »

I'm speculating

Yes, we know.

Japan has a declining population. It's not surprising house prices have fallen in real terms for many years.

Anyway, here's some facts that may interest you regarding the rapidly rising UK population, and the dire shortage of housing.

Between 1971 and 2000 the population rose by about 100,000 a year on average. But we built more than 200,000 homes a year.

No wonder our aspirations regarding homes and home ownership and second home ownership rose.

And no wonder houses used to be cheaper in those days.....

Anyway, if it's primarily a supply/demand issue, then something should have changed after 2000 when prices exploded....

But in the years 2001 to 2010 we built fewer than 200,000 homes a year on average when the population was rising at more than 300,000 a year. .

Ah....

Like that perhaps.

Supply and demand in action.... It really is that simple.

So what happens next?

, in this coming decade if the population estimates prove in any way accurate, we will see the percentage increase in the population outstrip the percentage increase in the housing stock and by some margin.

That means a big change, as we will have to squeeze more people on average into each home. And that reverses a trend set more than a century ago of ever decreasing household sizes.

On the basis of these latest figures, just to keep the average ratio of 2.3 people per home steady the stock of homes in the UK would need to rise by more than 2 million between 2010 and 2020.

http://brickonomics.building.co.uk/2011/10/this-decade-will-be-the-first-in-more-than-a-century-when-britain%E2%80%99s-homes-become-more-crowded/

Oh dear.

Looks like the next few years will be a very bad time to be a housing bear....;)

HAMISH_MCTAVISH

And here's what that looks like in pictures.







Oh, and for the record, falling housebuilding and rising population are not a recipe for long term house price falls.

helloyouu

Hmm.. I'm quite surprised by these stats. I was expecting UK population to decrease over time lol.

I'll try to find some other trends on the estate market from other country/main city to see how it perform

ukcarper

Thrugelmir wrote: »

Wage inflation isn't growing at 2% after tax. So rent payable is unlikely to reach this level.

FTSE 100 yields 3.5% currently. With potential for dividends to grow.

So the figures are far closer than your assumptions suggest.

Past performance is no guarantee of future performance. Wise words to consider in these different times.

The risks are just as big in shares , I've allowed for no real growth in house prices and used the high maintenance charges of other poster.

Not to mention that after that 25 year period the renter will still be paying rent while the buyer will be paying nothing.

bowlhead99

Point 1
Long term the landlord will be seeking a profit on his funds, over and above the cost of maintaining the property. The return he looks for is one which would equal other suitable opportunities (risk/reward) in the market.

If you buy a property you don't have to pay this profit and so effectively you earn it for yourself. But every pound committed into buying it will reduce your ability to have got a return elsewhere (and I use 'return' broadly to include spending the pounds on investment, pension, education, building up general savings, raising a family; and if you don't have a financial commitment to a house you can move across country for a job which might be lucrative in terms of pay rises or avoiding pay cuts and unemployment)

It could be argued that long term these things (alternative returns sacrificed when buying a house vs profit paid to landlord when renting a house) will wash out, so it's down to preference and an anonymous user on a website can't tell you with any credibility that you're right or wrong to favour one or the other.

Point 2
Mortgage interest and general inflation and the return on stock markets are all priced nationally as you don't need to move your entire life to borrow money, buy a fridge off the internet or make an investment. Rents and house prices are set locally because people are not very mobile. They don't often flip themselves between Devon and Dundee, or between renting and owning.

So from time to time, buying a property or renting a property in a particular part of the town or the county or the nation or globally may be more advantgeous and over time the balance will swing. If you have lots of cash and are mobile you can try and time these things and buy 'at the right time' which the average person would only be averagely successful at.

If you don't have the cash it is harder because it takes a long time to go from 0% equity to 100% equity in a house and what you end up with (a house of X size in Y location) might not be what you thought you wanted when you started buying it. If you need to change your mind part way through you suffer transaction costs and market swings.

Conclusion
The solution is not to buy until you are very sure it is the best option for you, which to my mind is more about the trade-offs and 'opportunity costs' in Point 1, and less about the house price graphs and market direction that you'll receive a range of views on. Timing the market direction is a gamble so choosing to continue to rent for now, or choosing to buy, are both risky choices which might make you financially worse off in the end. So it comes down to a lifestyle choice about being a homeowner or being a renter with other investments and other opportunities.

JimmyTheWig

helloyouu wrote: »

And what is insightful on the chart is that after the bubble the properties value returned to their original value from 1985.....

Now, think about how much money you would loose when your house will return to his value from 1985??? You could die before the money from rent pay off the money lost!

Out of interest, do you know what happened to rent prices? Did they drop to 1985 levels?

ruggedtoast

katmcleod wrote: »

At the moment my husband and myself rent a 2 bedroom house with our two children and two dogs. Although it was fine when we moved in 5 years ago with one child and one dog things are feeling a bit cramped.

We've been planning on buying a house for a long time now, but we're still another 5 years away from being able to buy a house the same size as the one we're already in, much much further from being able to buy one as big as we'd like. So we could have children at the end of high school before we have a big enough house.

It seems to be drilled in that when you grow up you by a house, you don't rent a house. But I don't know how it would affect things later in life. We wouldn't have a house to sell to pay for care home bills, and we'd never have a paid off mortgage, we'd always pay rent.

But at the same time, we can afford to rent a nice four bedroom house in our area without stretching ourselves. I don't know if we should keep going with the no holidays, skrimping and saving to buy something the same that we're already renting. The mortgage would cost roughly £130 a month more than our rent at the moment. We wouldn't need to save as hard so the costs would probably cancel out, but then there's extra insurance and maintenance costs.

I've just no idea. I don't want to go down the renting route then find out in 30 years I'll be retiring into poverty! But at the same time, we'd have a much better standard of living for the next 5-10 years if we rented. I can figure out past that.

I'm mid twneties, my husband is mid thirties and we're both in okay paid jobs. Not enough to afford the big house anytime soon, but too much to qualify for any help schemes.

My head really is spinning trying to figure out how the decision will effect us 30 or 40 years down the line.

Thanks to anyone who managed to read all that and can help :rotfl:

Mostly what I took from this is that your mortgage would be £130 more than your current rent and you think that this would affect your quality of life unacceptably.

Road_Hog

helloyouu wrote: »

Hmm.. I'm quite surprised by these stats. I was expecting UK population to decrease over time lol.

I'll try to find some other trends on the estate market from other country/main city to see how it perform

Until about 1997 when NuLabour got in, the population was decreasing. It was only when they opened the floodgates to mass unfettered immigration that the population began to increase.

The government ONS figures recently released, state that the population will grow by 4.5 million over the next 10 years. So the Tories are continuing NuLabour's work, despite Cameron's promises.

That's almost 5 new cities the size of Birmingham that will be required.

Where we are going to fit these people in, house them, provide jobs for them (we've already got 3 million unemployed) and infrastructure to support them, I don't know. I hope they build some massive high rise estates right next to Cameron and every other politician's house who are responsible for it.