Forthcoming increases in rents will ...

Jon_B_2

Generali wrote: »

That's about a 45% rise. The CPI has been about 11.5% over the same period.

Why do you think rents have risen so fast in Bristol? (Looking on Rightmove I'd say your figure for rents looks more likely for semis: terraces seem to be £875-900 although I confess that I do not know Bristol at all).

90 minutes train to London
M4 for East and West road connections
M5 for North and South road connections
Growing financial sector
"Trendy"
Outspill from Bath (10ish miles away)
Airbus
Rolls Royce
MOD
Avonmouth docks
Within 20 miles of beach
Close to Wales and Cotswolds a.k.a picturesque.
Green capital of EU 2015
Has its own Mayor now

I feel like I'm pitching for Bristol, but IMO it is an incredible place to live.

mwpt

Jon_B wrote: »

90 minutes train to London
M4 for East and West road connections
M5 for North and South road connections
Growing financial sector
"Trendy"
Outspill from Bath (10ish miles away)
Airbus
Rolls Royce
MOD
Avonmouth docks
Within 20 miles of beach
Close to Wales and Cotswolds a.k.a picturesque.
Green capital of EU 2015
Has its own Mayor now

I feel like I'm pitching for Bristol, but IMO it is an incredible place to live.

You're not alone. My partner lived there for a while and loved it! She wants us to move there actually.

padington

In last quarter ...

http://gu.com/p/4g68t?CMP=Share_iOSApp_Other

padington

cells wrote: »

with a lot of goods and services, like cigarettes, the production is virtually infinite so the price is not set by the buyers but by sellers who will often try to set a price where they achieve maximum profit or in a competitive market max profit without enticing other competitors in.

for a limited good, like say art, the price is set by buyers.
a painting comes to auction with no reserve and whatever it sells for was set by buyers

When a landlord puts a property up for rent, they effectively auction it off. An estate agent might have an idea of what the buyers will bid so wont start bidding at £0 but might start it at £1,000

The principle is the same, landlords would be willing to accept close to zero (or just above the marginal cost of maybe £200/month). Anything higher is set by the buyers in a limited market. If somehow you could magic up a million homes tomorrow the rent price in London would crash towards £200 per month.

Honestly couldn't disagree more. I've had loads of insight into the workings of the art world. Auction sales are rigged by the sellers, who double up as buyers. Whilst primary market sales wholly set by galleries. Art is a great example. Often early limited editions don't get sold at all but appear sold out to set the future price.

The monopolistic seller and middleman and other franchisees and their needs and cunning abilities play a crucial role to setting the price, even more so as the edition is limited or the piece a one off.

If you want to buy Buckingham palace, the queen is going to be an important person in deciding the asking price and without her consent, there never will be a sale.

cells

padington wrote: »

Honestly couldn't disagree more. I've had loads of insight into the workings of the art world. Auction sales are rigged by the sellers, who double up as buyers. Whilst primary market sales wholly set by galleries. Art is a great example. Often early limited editions don't get sold at all but appear sold out to set the future price.

The monopolistic seller and middleman and other franchisees and their needs and cunning abilities play a crucial role to setting the price, even more so as the edition is limited or the piece a one off.

If you want to buy Buckingham palace, the queen is going to be an important person in deciding the asking price and without her consent, there never will be a sale.

nobody needs to buy a 500 year old painting for $10 million

so who sets the price? They buyers bidding against each other or the seller hoping for figure X

westernpromise

mwpt wrote: »

Even despite that, if we just fix the interest rate for the full 25 year term, it's still better to buy on high rate low multiples because you can overpay and pay it off far faster.

Here is a spreadsheet showing it, from the example I used in my earlier post:

https://docs.google.com/spreadsheets/d/153OCXcQ2Upt4EeUoOI3SdnT88wS70js9sBB2dNxItXk/edit?usp=sharing

And of course we know that interest rates didn't remain high, they came right down over the course of the 25 years, assisting even further. It's unlikely we'll see anything like that to the current 2% rates and in fact over 25 years I expect them to go up, naturally.

Unfortunately your spreadsheet uses the same salary assumption in each case, even though the house price is 3.5x higher in one case than the other.

So you've used the 1988 price but 2016 earnings levels, and you've assumed equal overpayment is possible in each case. This may surprise you, but we weren't overpaying our mortgages when rates doubled to 15%; we were in fact getting repossessed in record numbers for not being able to keep up.

Maybe try again, with some plausible assumptions. If that's how you reckon the sums then you may not be suited to homebuying.

padington

cells wrote: »

nobody needs to buy a 500 year old painting for $10 million

so who sets the price? They buyers bidding against each other or the seller hoping for figure X

Some people do. Some people are addicted. Some people crazy. Some people are driven to protect the price of their own collection.

Some people just 'have to have it !'.

mwpt

westernpromise wrote: »

Unfortunately your spreadsheet uses the same salary assumption in each case, even though the house price is 3.5x higher in one case than the other.

So you've used the 1988 price but 2016 earnings levels, and you've assumed equal overpayment is possible in each case. This may surprise you, but we weren't overpaying our mortgages when rates doubled to 15%; we were in fact getting repossessed in record numbers for not being able to keep up.

Maybe try again, with some plausible assumptions. If that's how you reckon the sums then you may not be suited to homebuying.

I viewed this post because I wanted to see how you responded. Of course you twisted, as you always do. Using the same salary but higher prices (and lower rate) was exactly the point. How do you miss this?

I am following EXACTLY the example I have in my original post responding to Simon The Jerk's article where he says he bought at 17% interest rates and 40% of salary and lied about the "over four times earnings multiple".

I am making the point that I would rather buy at low multiples but high rates, than the opposite. It makes complete sense to keep all variables the same (ie. salary) to test if my proposition is true.

It's only you who doesn't like it when stuff doesn't agree with your little pet ideas.

Now go away.

cells

mwpt wrote: »

I am making the point that I would rather buy at low multiples but high rates, than the opposite. It makes complete sense to keep all variables the same (ie. salary) to test if my proposition is true.

The UK doesnt really have long term mortgages but the USA does have and has historically had 30 year fix mortgages.

So you have these options

£200,000 house you put down £20,000 and pay £855 per month for 30 years paying 3.96% interest

£116,000 house you put down £20,000 and pay £855 per month for 30 years paying 10.16% interest

Same deposit, same monthly payment for 30 years. £200k house vs £116k house


So the interest rate does have a significant impact on what is or is not affordable. In this example a house costs significantly more (~72% more expensive) but affordability is the same

cells

However on shorter mortgages it is of course a bit different.

On 15 year fixed rates. Buying at the rate available in 1995 vs 2015 means the difference of about £200k vs £270k

That does not mean a house worth £200k in 1995 should be £270k in 2015 that would only be true if wage inflation was zero. If we take wage inflation as 3.5% it means a £200k house in 1995 should be £537k in 2015 due to wage inflation and better affordability due to lower rates