House prices, emotions and 'pressure'

westernpromise

economic wrote: »

isnt it always a good idea to buy a bit more house then you need (as long as its affordable), given that at some point down the line you can downsize and have more tax free gains to be able to afford a smaller property more comfortably?

Not necessarily. It makes sense to buy to meet your reasonably anticipated needs, because housing transactions are savagely taxed so you want to do as few of them as possible. So you don't buy a 1-bed then a 2-bed then a 3-bed; if possible, you just buy a 3-bed. But depending on your horizon, if you have a choice between overhousing yourself for an extra £1000 a month versus saving £1000 a month into some fund of equivalent risk to housing, you might be able to get 8 or 10% on that, it's a lot more liquid if you need cash out of it, and you'd never pay any tax on it because it's all inside the ISA / CGT threshold.

Of course at the moment you can sorta do both. My mother is getting about 5% a year in various funds, and mortgage finance can be had at 2.something per cent for 10 years. So if you've got £100k sitting around, there's an argument for borrowing £100k on a mortgage and putting your £100k out to earn, keeping the difference.

I've looked into this as a contingency - if I die there will be enough cash to pay off all the mortgages but I have considered whether the Widow Promise would be better off not paying them off and just investing the capital. It is just about worth doing on the amounts involved but the trouble with cash + debt sitting around is you can spend the cash and still have the debt. Well, it wouldn't happen to me, but you see what I'm saying I expect.

westernpromise

Herzlos wrote: »

in another 30 years it'll make little difference - I'm only viewing it as rent that'll eventually become free.

I think this is key, and often overlooked.

If you had bought in the SE in early 1989, at the top of the peak, you might have paid £100k for a property that 3 years later could have been had for about £70k (well, if the seller was in negative equity it couldn't because no sellers, obvs).

25 years later the property's probably worth £420k so while in the second case the buyer has seen a 500% price increase and the former only 320%, their positions notwithstanding are only £30k apart over 25 years and that's ignoring the rent the second buyer paid for 3 years. So it isn't even £30k.

On a now £420k house, £30k is +/- < 4% and frankly nobody knows any house's value within 4%.

the_flying_pig

martinsurrey wrote: »

Your buyer, and seller sides are conflicting.

If you are making lots of bids that are getting rejected you are offering on properties held by sellers who are wanting top dollar, and are willing to wait, so are wasting your time.

The best deals go to people who make fast, realistic offers on properties that are fresh to the market and realistically priced.

disagree.


there are some people out there, buyers & sellers alike, who for whatever reasons are prepared to very quickly say 'yes, it's a deal', even if the price isn't perhaps all that they'd hope for.

your best bet for getting the better side of a deal, as either a buyer or seller, is to find someone who's like this and seal a deal with them quickly.


you're only likely to find them if you're patient, i.e. if as a buyer you do a lot of searching & probably make a lot of bids or as a seller you wait to receive a lot of bids. both are time-consuming.

martinsurrey

the_flying_pig wrote: »

disagree.


there are some people out there, buyers & sellers alike, who for whatever reasons are prepared to very quickly say 'yes, it's a deal', even if the price isn't perhaps all that they'd hope for.


your mission as either a buyer or seller is to find someone like this and seal a deal with them quickly. you're only likely to find them if you're patient, i.e. if as a buyer you make a bids or as a seller you receive a lot of bids. both are time-consuming.

As a buyer you ONLY find these sellers if you act quickly on new properties, as by definition they sell their properties quickly, and in most markets you are not the only bargain hunter. Whats left are properties that are overvalued by vendors looking for unicorn buyers, if your bids on fresh properties that sell quickly are being rejected you don't understand the market you are looking to buy in, information is key.

the_flying_pig

I have a semi [well, fractionally]-interesting anecdote from a few years back about looking for something cheap.

c 4 years ago I was interested in buying a house in SW London, with a view to living in it for somewhere between the next 5 and 50 years, it’s hard to plan that far ahead, right?

I ‘found’ a probate sale that fit the bill. A real mess inside [looked like minimal maintenance had been done to it this side of the queen’s coronation] but it certainly fit the bill in terms of location & size. I didn’t really fancy the job of bringing it into the 21st century but might well be interested at the right price.



A middle aged daughter, who’d long since moved away was doing the selling, wanted a very quick sale & by all accounts wasn’t **that** bothered about the price she’d receive. Her preference was rather that the house would go to a ‘nice family’ that’d remind her in some way of her own childhood, which took place long before the area became gentrified [and rather characterless]. Above all she didn’t want it to go to a developer, landlord, or flipper of some kind.



So all interested buyers were invited to make a bid & also write the daughter a letter explaining why we were deserved to get the house basically.



I dutifully wrote my letter, making a bid that I judged to be about, oh, I don’t know, 3-5% below ‘market value’ for a house in that state, telling the full truth about ourselves, including that we’d lived in the area for a good while, planned to send our kids to the state school round the corner, etc.



I quite quickly got a reply back from her saying that she liked the letter very much & would be delighted to sell to us provided we upped our bid by, oh, 3-5% or so.



I politely declined.



Someone else bought the house. Every time I drove or walked past it over the next year or two it looked like it probably occupied but also under occupation by a medium-sized army of East European builders. it fairly recently sold it for the thick end of double the amount that we were asked to pay for it in 2012/2013.

Herzlos

martinsurrey wrote: »

You are ignoring the difference between the mortgage interest cost and the rent.

Really, run the calc (exclude capital paymetns on the mortgage), I'd be amazed if renting was better over 10 years.

I think you're right, even factoring in the money I wouldn't have spent if renting (new kitchen/bathroom/windows/doors/etc) then I think buying still comes out a bit ahead.

martinsurrey

Herzlos wrote: »

I think you're right, even factoring in the money I wouldn't have spent if renting (new kitchen/bathroom/windows/doors/etc) then I think buying still comes out a bit ahead.

:-)

and just think, if your land lord had done the upgrades to the house you were "renting" that you have done, your rent would have gone up as well as the house is "nicer", the tenant always ends up paying!

You've had a secure, cheaper, nicer house, than renting, even though you've lost capital.