when does renting become cheaper?

buglawton

HAMISH_MCTAVISH wrote: »

London is, as you point out, a very different beast to most places in the UK.

But even in London it still makes more sense to buy than rent over the long term....

(see post 8 above for full thing)

Presupposing that
a) London does not do a Tokyo where about 22 years ago prices came down with a thump from a heady height and have never recovered since.
b) The UK government - even a right of center one - does not decide to put residents before investors into it's legislation and tax system, like numerous other countries have done with their capital cities.

Personally I'd not be willing to bet that in 25 years time real London prices will be higher than now, which is what post #8 is saying.

RobertoMoir

SailorSam wrote: »

Isn't renting dead money though ?

I've got to be honest, I've never liked that expression, "dead money", I mean, especially when its always tied lazily to rent.

I'd suggest that money is only "dead money" if you're forced to spend it in ways that don't advance your life. Money spent on rent isn't "dead" if the person spending it is happy to rent any more than money spent on fine dining is "dead" for someone who enjoys eating out. It's simply been exchanged for goods and/or services.

[Deleted User]

This is focused on America but this calculator provides good visualisations with the options to adjust for different factors: http://www.nytimes.com/interactive/business/buy-rent-calculator.html

HAMISH_MCTAVISH

buglawton wrote: »

Tokyo

After 20 years and an 80% fall, prime Tokyo real estate was still more expensive than prime London in 2007.

Land prices in some Tokyo areas reached almost $1,000,000 per square metre in 1989.

That's over £1,000,000 in todays money for a shower cubicle! Or three million quid for a broom cupboard.

To put in in perspective, the land under the Emperor's Palace in Tokyo was worth more than all the land in California. Or about twice as much as all the land and buildings in the UK at the time.

London prices of today don't even begin to register on the same scale as that.

When Buckingham Palace is worth more than all the land and buildings in California, then feel free to talk about a London bubble and make comparisons to Tokyo.

Until then, not so much.....;)

Personally I'd not be willing to bet that in 25 years time real London prices will be higher than now, which is what post #8 is saying.

No, it's saying that we live in an inflationary system, so real prices are irrelevant.

All that matters is that nominal debt is inflated away, and that you avoid paying ever inflating rent over 25 years, instead locking in a mortgage payment on a debt fixed in nominal terms at todays prices.

Soleil_lune

HAMISH_MCTAVISH wrote: »

London is, as you point out, a very different beast to most places in the UK.

But even in London it still makes more sense to buy than rent over the long term.

Because when you buy you're locking in the cost price of a house at a level lower than it will be in 25 years.

And even though you may pay more in mortgage payments today than you do in rent, 10 years or so from now rents will have risen to the same as mortgage payments, and by the end of the mortgage rents could be double or triple the mortgage payment.

This is where inflation is your friend.

Mortgages are inflated away over time but rents keep rising relentlessly.

And at the end of a mortgage term, even in London, the buyer will have paid out less than the renter, but will own a house free and clear at the end of it.

The renter may be able to save a bit in the first few years versus the buyer, but rising rents will end that soon enough, and then he's paying far more than the buyer in the later years eradicating all of those early gains.



It would be financially catastrophic over the long term not to buy in that situation.

Here's a comparison, using 10% deposit, 5% mortgage rate, with both prices and rents increasing at 3% a year which about right for rent but is actually significantly less than the long term average for HPI.



You'd be over £419,000 worse off renting than buying over the term of that mortgage.

People can play around with their own calculations here.....

http://www.greengem.co.uk/Rent_V_Buy/rent_v_buy.php

And change the fields for assumptions as you see fit.

That calculator is a bit simplistic, there are more complicated ones that include savings interest on deposit, maintenance, insurance, etc, but even including these things doesn't change the main result that buying is much, much cheaper than renting over the long term.

LOL, no it isn't. Not in this day and age. These charts (this one from post number 8, AND the chart from post number 11) are airy fairy nonsense.

They have been created either in cloud cuckoo land or many decades in the past. The 'look how the amount of the mortgage goes down over 25 years' list (in post number 11; ) that's as much of a load of baloney as the rent vs buying chart.

In many cases, this just doesn't happen. many many people have taken out equity and bumped the mortgage back up. The amount *and* the term. So this is nonsense in many cases.

In a perfect world, these figures would be true, but in the real world, very little of it is. Some say having a mortgage is better than renting, and it's cheaper yada yada, whilst conveniently forgetting the multiple 10s of 1000s that people spend over the years on repairs and maintenance, and extra insurances etc etc... PLUS you don't get your mortgage paid if you are long term sick or unemployed, but you do get the rent paid if you're renting. And unemployment insurance is not worth the paper it's written on!

Give me renting ANY day; although we are lucky enough to have a very lovely social housing cottage on the fringes of a small town, with a secure tenancy and low rent. Some of my mortgaged-to-the-hilt friends and colleagues may 'own' their property, but they are up to their eyeballs in debt.

The days of buying being a better option to renting are LOOOOONG gone! :cool:

And I do know what I am talking about, as I have been a mortgage owner, (for 18 years,) a private let tenant, and a social housing tenant (which I am now.) I KNOW which *I* prefer! :T

Umistboy

Soleil_lune wrote: »

LOL, no it isn't. Not in this day and age. These charts (this one from post number 8, AND the chart from post number 11) are airy fairy nonsense.

They have been created either in cloud cuckoo land or many decades in the past. The 'look how the amount of the mortgage goes down over 25 years' list (in post number 11; ) that's as much of a load of baloney as the rent vs buying chart.

In many cases, this just doesn't happen. many many people have taken out equity and bumped the mortgage back up. The amount *and* the term. So this is nonsense in many cases.

In a perfect world, these figures would be true, but in the real world, very little of it is. Some say having a mortgage is better than renting, and it's cheaper yada yada, whilst conveniently forgetting the multiple 10s of 1000s that people spend over the years on repairs and maintenance, and extra insurances etc etc... PLUS you don't get your mortgage paid if you are long term sick or unemployed, but you do get the rent paid if you're renting. And unemployment insurance is not worth the paper it's written on!

Give me renting ANY day; although we are lucky enough to have a very lovely social housing cottage on the fringes of a small town, with a secure tenancy and low rent. Some of my mortgaged-to-the-hilt friends and colleagues may 'own' their property, but they are up to their eyeballs in debt.

The days of buying being a better option to renting are LOOOOONG gone! :cool:

And I do know what I am talking about, as I have been a mortgage owner, (for 18 years,) a private let tenant, and a social housing tenant (which I am now.) I KNOW which *I* prefer! :T

So the fact that some people chose to extend their mortgage and the fact that you prefer renting is now proof enough that a previous example of a mortgage being completed in the agreed time frame is now "airy fairy nonsense".

Any other things you know are completely false/misleading because you've decided so?

sulphate

Soleil_lune wrote: »

LOL, no it isn't. Not in this day and age. These charts (this one from post number 8, AND the chart from post number 11) are airy fairy nonsense.

They have been created either in cloud cuckoo land or many decades in the past. The 'look how the amount of the mortgage goes down over 25 years' list (in post number 11; ) that's as much of a load of baloney as the rent vs buying chart.

In many cases, this just doesn't happen. many many people have taken out equity and bumped the mortgage back up. The amount *and* the term. So this is nonsense in many cases.

In a perfect world, these figures would be true, but in the real world, very little of it is. Some say having a mortgage is better than renting, and it's cheaper yada yada, whilst conveniently forgetting the multiple 10s of 1000s that people spend over the years on repairs and maintenance, and extra insurances etc etc... PLUS you don't get your mortgage paid if you are long term sick or unemployed, but you do get the rent paid if you're renting. And unemployment insurance is not worth the paper it's written on!

Give me renting ANY day; although we are lucky enough to have a very lovely social housing cottage on the fringes of a small town, with a secure tenancy and low rent. Some of my mortgaged-to-the-hilt friends and colleagues may 'own' their property, but they are up to their eyeballs in debt.

The days of buying being a better option to renting are LOOOOONG gone! :cool:

And I do know what I am talking about, as I have been a mortgage owner, (for 18 years,) a private let tenant, and a social housing tenant (which I am now.) I KNOW which *I* prefer! :T

You make it sound like living in a council house is a choice but the reality is the majority of people are not entitled to social housing.

gazter

NowRetired wrote: »

I bought my house 30 years ago, my brother is living in a council house.


We are both retired and have approx. the same income and outgoings except for one thing.


I don't pay rent and my mortgage was paid off 3 years ago.


I can go on more holidays than him.

And you have a gigantic asset that outside of magic money pensions of the public sector, would be unobtainable to the average working person.

gazter

wabbitpoo wrote: »

I shudder to think what we have spent on DIY over the years, something that renters don't have to. eg new windows, roof repairs, deco, new boilers, new kitchen, yada yada.

Just something to keep in mind!

A lot of that is to make the place you live in nicer. The problem with renting is you dont feel invested in the place. This is often different for social tenants though, with the idea that the house is theirs until they decide otherwise.

Cornucopia

Soleil_lune wrote: »

In many cases, this just doesn't happen. many many people have taken out equity and bumped the mortgage back up. The amount *and* the term. So this is nonsense in many cases.

This is not a great argument. People can use/fritter away their wealth in 1001 different ways. The buyer is at least in the position to have that additional wealth, which the renter probably doesn't have. It's part of the responsibility of being an owner to make sensible decisions and have the necessary financial discipline not to fall for the latest equity-release scheme.

In a perfect world, these figures would be true, but in the real world, very little of it is. Some say having a mortgage is better than renting, and it's cheaper yada yada, whilst conveniently forgetting the multiple 10s of 1000s that people spend over the years on repairs and maintenance, and extra insurances etc etc... PLUS you don't get your mortgage paid if you are long term sick or unemployed, but you do get the rent paid if you're renting. And unemployment insurance is not worth the paper it's written on!

You are right that one of the differences between buying and renting is the degree of responsibility you are taking on for your own housing. Which can be both a good and bad thing.

Give me renting ANY day; although we are lucky enough to have a very lovely social housing cottage on the fringes of a small town, with a secure tenancy and low rent.

This is not an option that is freely available to everyone.

And I do know what I am talking about, as I have been a mortgage owner, (for 18 years,) a private let tenant, and a social housing tenant (which I am now.) I KNOW which *I* prefer!

You're right that there are (at least) 3 alternatives, not 2. But in terms of what most people can freely opt for, there is only private renting and buying. Social housing lists are long, and many people will never have the necessary housing need to be a priority.