Renting vs Buying Outright

SteveRadner

needabed wrote: »

Don't forget the costs that you won't get back - surveys, solicitors, stamp duty, van hire for your stuff, estate agent fees for selling etc.

True. I've not bought before so I don't exactly how much that will all cost. Although, estate agent fees and van hire for stuff is a killer when renting too!

JimmyTheWig

SteveRadner wrote: »

Why not worth buying unless I am staying for 5+ years though? The property would go up in value and if I moved in 2 years, I'd still have saved money on rent.

The property is not quaranteed to go up in value.
It may well go down in value.
Especially on a short term time scale like two years.
That's one of the reasons that it's not always worth doing for a short time - because there's a reasonable risk that it will go down in value.
The longer you keep it, the more chance there is of the value having increased. I.e. prices could drop for two years then go back up again for three years. So in five years time they will be higher than when you started. But if you sell after two years you may get back less than you paid.

Another reason is all the costs. Stamp duty (especially in London) is a killer. Plus solicitors fees, surveys, searches, etc. In the long run (in my experience at least) it works out much cheaper than renting, but it wouldn't do if you moved quickly at a time when prices weren't shooting up.

Then there's a not-so-financial reason which is how difficult it is to move when you own. We made the final decision to move house last Christmas (i.e. 18 months ago). We moved in November. It took 8 months of considerable stress for the whole thing to happen.
Again, that's worth it if you are going to be there a long time. But there's no way I could go through that every couple of years.

SteveRadner

JimmyTheWig wrote: »

The property is not quaranteed to go up in value.
It may well go down in value.
Especially on a short term time scale like two years.
That's one of the reasons that it's not always worth doing for a short time - because there's a reasonable risk that it will go down in value.
The longer you keep it, the more chance there is of the value having increased. I.e. prices could drop for two years then go back up again for three years. So in five years time they will be higher than when you started. But if you sell after two years you may get back less than you paid.

Another reason is all the costs. Stamp duty (especially in London) is a killer. Plus solicitors fees, surveys, searches, etc. In the long run (in my experience at least) it works out much cheaper than renting, but it wouldn't do if you moved quickly at a time when prices weren't shooting up.

Then there's a not-so-financial reason which is how difficult it is to move when you own. We made the final decision to move house last Christmas (i.e. 18 months ago). We moved in November. It took 8 months of considerable stress for the whole thing to happen.
Again, that's worth it if you are going to be there a long time. But there's no way I could go through that every couple of years.

I agree. I wouldn't plan on moving for at least 5 years. Or like I said, I'd rent it out and rent where ever I moved.. at least until house prices went up enough to justify selling..

Stamp duty in London is high. Not so bad with the money I've got to spend though (less than 200k). Renting it out in London shouldn't be too bad though so that's a plus.

SteveRadner

Thanks for all the advice. Very helpful.

[Deleted User]

Stamp duty is the same in London as everywhere else.. it's just that you get a lot less for your money it 'feels' high

JimmyTheWig

ringo_24601 wrote: »

Stamp duty is the same in London as everywhere else.. it's just that you get a lot less for your money it 'feels' high

Depends what you mean by the same.
Stamp duty on a "normal" 3 bed semi in London will be more than stamp duty on a "normal" 3 bed semi elsewhere.

booksurr

at the moment it appears all the interest from your investment is being spent on paying "half" your rent therefore your investment is actually performing very badly since the capital has zero protection from inflation as it is not being topped up by rolled over interest

if therefore all you are looking for is an assessment of financial investment opportunities go see an IFA as you can do better than that

if on the other hand you want to buy somewhere to live that is a different matter as owning a prtoperty you live in compared to renting is a bit of a no brainer in London over a 5 year period for the reasons outlined by jimmy the wig

[Deleted User]

JimmyTheWig wrote: »

Depends what you mean by the same.
Stamp duty on a "normal" 3 bed semi in London will be more than stamp duty on a "normal" 3 bed semi elsewhere.

I mean the stamp duty limits don't change the moment you enter the 'M25 zone'

You pay the same tax on a £200k house in London as a £200k house elsewhere. You just get a lot less house. I paid £9k stamp duty 2 1/2 years ago, so I know the pain. Had I spent the same money elsewhere, I could be in a 4 or 5 bed detached. BUT.. my 3 bed has risen in value a lot more than those houses elsewhere (far more than the stamp duty paid) so it's all swings and roundabouts.

SteveRadner

JimmyTheWig wrote: »

Depends what you mean by the same.
Stamp duty on a "normal" 3 bed semi in London will be more than stamp duty on a "normal" 3 bed semi elsewhere.

The percentage is the same everywhere. Houses just cost more in London. I know I could buy an actual house elsewhere in the UK!

JimmyTheWig

I agree, ringo.
As I say, it just depends on how you look at it.

Sort of my point was that the OP is looking for a small property.
In many areas of the country this would mean that they wouldn't be paying stamp duty. In London I suspect that they will be.