Debate House Prices


In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Who won in the end?

1246

Comments

  • Prothet_of_Doom
    Prothet_of_Doom Posts: 3,267 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    I'm of the firm opinion that if you can buy your house on a repayment mortgage, then you are able to live rent free.
    Having done that, I'm now buying another to rent out. The figures ?
    £63K loan will cost £188 a month, growing to £230 a month.
    Rent will be £550 to £600.
    Costs? £string ?
    Profit will be split into 2. 1/2 to pay off mortgage and 1/2 to fund another.

    What I do know is that in 1999, these houses were selling for £45K, in 2006 selling for £110K, in 2008 £130K, in 2010 £85K and in 2015 £105K. Given an 18 year house price cycle, I'm expecting it to rise a little by 2025, and then drop, but expect to pay it off by then.

    The main point is that I want to provide a good home for a family, at a reasonable price, whilst building a small income stream to add to my crap pension, but which I can leave to my kids.
  • Prothet_of_Doom
    Prothet_of_Doom Posts: 3,267 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    wotsthat wrote: »
    It's difficult to model because much of what you're trying to model is cyclical. In my mortgage life I've paid 9% interest, 2.3% interest, I've seen inflation over 5% and 0%. Two HPI crashes and one boom.

    I doubt there's ever been a lengthy period where renting turned out to be cheaper than buying. Better to ask why that is - one reason is letting houses is a business and the consumer pays the profit.

    I did mention, tongue in cheek, that this is a game played by owners and people who want to own. You've assumed our renter has a deposit sized lump of cash earning a great return. In this game renters don't have this cash otherwise they wouldn't be renters.

    I once paid 15.5%, so when I had the opportunity to fix at 4.6% for 10 years I jumped at the chance.
  • Cornucopia
    Cornucopia Posts: 16,494 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    In the long-term, buying is usually better than renting, given a range of reasonable assumptions,

    The main benefit of renting over buying is the avoidance of a range of risks associated with ownership. Some of these risks can be mitigated by buyers, often with insurance, but this adds to costs.

    The main factor in making buying better than renting in the long-term is the action of inflation. For renters, inflation is a cost - making their rent progressively higher in cash terms. For buyers, inflation works in their favour - diminishing the cash value of their payments and providing HPI.

    There's a further benefit that people again tend to ignore (with their focus on the youthful end of the equation), which is that a typical mortgage runs for 25 years. Renting is for life. Only a buyer can achieve mortgage-free status. Given that someone might be buying their home from age 30 to age 55, that gives them potential mortgage-free living for perhaps 10 further years of employment, and then on into retirement.

    We can quibble about what rational assumptions to make about long-term inflation or interest rate trends, but in a rational range, based on what has happened before, buying wins.
  • mwpt
    mwpt Posts: 2,502 Forumite
    Sixth Anniversary Combo Breaker
    Cornucopia wrote: »
    There's a further benefit that people again tend to ignore (with their focus on the youthful end of the equation), which is that a typical mortgage runs for 25 years. Renting is for life. Only a buyer can achieve mortgage-free status.

    Technically true but is misconstruing the situation. It could be:

    1) The renter has achieved financial returns enough to cover the cost of the house price inflation and he then buys outright with no mortgage after 25 years of renting. Buyer and renter (who is now a buyer) are then in the same situation.
    2) The renters financial returns PA after 25 years might be greater than any HPI and rent, in which case he rationally continues to rent rather than buy.

    Both situations unlikely given the past evidence.
  • Cornucopia
    Cornucopia Posts: 16,494 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 12 July 2015 at 10:06AM
    I'm not sure I understand why you continue to put a positive spin on something you accept is unlikely.

    There are 2 main scenarios...

    1. Someone who buys and goes on to pay off the mortgage and live mortgage-free for the rest of their life.

    2. Someone who rents (as a matter of practicality or conviction), never buys a home and always pays rent.

    Your third scenario of someone who rents then buys is already "likelihood limited". It's also limited by those accounts we keep getting of people who have no excess income above their rent (which keeps going up).

    I'm also opposed to it on philosophical grounds - this is about buying vs. renting, so someone who rents AND buys is not really part of that analysis.

    I don't know the figures, but I would expect that the numbers of people in your scenario 3 is at or near zero, certainly over the past 25-35 years. By comparison, there are probably in excess of 5m UK house-owners who have gone on to buy other assets like Boats, Caravans and second homes on the basis of financial security stemming from being buyers. So we could call that Scenario 4.
  • mwpt
    mwpt Posts: 2,502 Forumite
    Sixth Anniversary Combo Breaker
    Cornucopia wrote: »
    I'm not sure I understand why you continue to put a positive spin on something you accept is unlikely.

    And I'm not sure why you bulls love to misrepresent others arguments. Where did I put a positive spin on it? Stop making !!!! up.
    There are 2 main scenarios...

    1. Someone who buys and goes on to pay off the mortgage and live mortgage-free for the rest of their life.

    2. Someone who rents (as a matter of practicality or conviction), never buys a home and always pays rent.

    Your third scenario of someone who rents then buys is already "likelihood limited". It's also limited by those accounts we keep getting of people who have no excess income above their rent (which keeps going up).

    I'm also opposed to it on philosophical grounds - this is about buying vs. renting, so someone who rents AND buys is not really part of that analysis.

    Huh? Who decided what the analysis was? We're discussing buying vs renting on a financial grounds. If someone decided to rent because for them it makes more financial sense, and at a later stage decided they want the other benefits of owning a home, that is part of the analysis. I'll stick with the scenarios I posted, you can do whatever you like.
  • Cornucopia
    Cornucopia Posts: 16,494 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 12 July 2015 at 11:05AM
    mwpt wrote: »
    And I'm not sure why you bulls love to misrepresent others arguments. Where did I put a positive spin on it? Stop making !!!! up.
    It's not so much misrepresentation than objecting to the flaws in your proposition, together with objecting to you presenting flawed propositions as if they were as likely as other more sensible propositions.

    Huh? Who decided what the analysis was? We're discussing buying vs renting on a financial grounds. If someone decided to rent because for them it makes more financial sense, and at a later stage decided they want the other benefits of owning a home, that is part of the analysis. I'll stick with the scenarios I posted, you can do whatever you like.
    This is the point - for whom would it make more sense?

    It's a common flaw in this kind of discussion - the assumption that because something is possible (even if remotely) it is plausible, and I'm suggesting that it isn't. You already know this, because you talked about it being unlikely.

    You also have a time-line issue. I can point to many, many successful outcomes from people who bought their own homes 20 years or more ago. I've yet to hear one case study about a "rich renter". The reason is that "basic buying" is a reasonably good bet under any circumstances, when taken over the long-term. Whereas the "rich renter" scenario depends on atypical economic metrics which you may not even be aware of at the point in time when you are making the decision.
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    In about 2004 or 2005 The Economist looked at investments over the long term in the UK to see what the best and worst were net of inflation, costs and taxes.

    Unfortunately I've never managed to find the link and would really appreciate it if someone could. The upshot was that the best investment you could make was to buy a house to live in. The next best were basically equity (share) investments of one sort or another. Then bonds, then cash in an interest earning account.

    The very worst? BTL which on average earned a net loss, the only investment to do so.

    Now there are many things to take into account and maybe their methodology was flawed but they don't have an axe to grind: this was a pretty serious piece of backward looking research that came to a very clear conclusion.
  • wotsthat
    wotsthat Posts: 11,325 Forumite
    Generali wrote: »
    In about 2004 or 2005 The Economist looked at investments over the long term in the UK to see what the best and worst were net of inflation, costs and taxes.

    Unfortunately I've never managed to find the link and would really appreciate it if someone could. The upshot was that the best investment you could make was to buy a house to live in. The next best were basically equity (share) investments of one sort or another. Then bonds, then cash in an interest earning account.

    The very worst? BTL which on average earned a net loss, the only investment to do so.

    Now there are many things to take into account and maybe their methodology was flawed but they don't have an axe to grind: this was a pretty serious piece of backward looking research that came to a very clear conclusion.

    I couldn't find the article but wouldn't be surprised if this analysis was true. Maybe it's my bias but in terms of investing priority I wouldn't touch BTL until I had my own home, had exhausted maximum pension contributions, had a couple of years spending in cash and have sufficient wealth that a BTL was a reasonably small part of it.

    The media do over-egg BTL - there's a success bias - decent data on BTL is hard to find and you don't get many people bragging about how crap they've done!
  • chucknorris
    chucknorris Posts: 10,793 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 13 July 2015 at 10:41AM
    wotsthat wrote: »
    I couldn't find the article but wouldn't be surprised if this analysis was true. Maybe it's my bias but in terms of investing priority I wouldn't touch BTL until I had my own home, had exhausted maximum pension contributions, had a couple of years spending in cash and have sufficient wealth that a BTL was a reasonably small part of it.

    The media do over-egg BTL - there's a success bias - decent data on BTL is hard to find and you don't get many people bragging about how crap they've done!

    I now put all of my cash into shares (ISA, SIPP and no wrappers), but there is no way that I would have made the money that I have done, without my portfolio being heavily property biased.

    I bought my first investment property 24 years ago, would I do it all again if I was 24 years younger? No, I think that the combination of the recent budget changes and the historical high value of London (where mine are) property has swung against property now. That's just my opinion of course. I'm not saying that it doesn't work, but IMO it is no longer a stand out investment, like it was.

    EDIT: It confirms what I have always said, nothing lasts forever (including the most important thing of course, us). I reckon the best way for us to make profit from property now, is to build our own home and repeat approx every 4 years or so, but I am having a problem convincing my wife that we should move every 4 years.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 351.3K Banking & Borrowing
  • 253.2K Reduce Debt & Boost Income
  • 453.8K Spending & Discounts
  • 244.3K Work, Benefits & Business
  • 599.5K Mortgages, Homes & Bills
  • 177.1K Life & Family
  • 257.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.2K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.