House price crash-don't make me laugh

Turnbull2000

IveSeenTheLight wrote: »

It seems to me renters are hung up on what they are renting for a property worth much more.

The reason is that landlords have but much earlier when the valuation was lower and your money is still paying their mortgage regardless of the property value.

And those who bought much earlier and cheaper tend not to be clueless BTL muppets either, but highly professional landlords.

So I'm getting a cheap(er), fully furnished home with no maintenance costs. I'd only be hung-up if I was renting from a clueless jonny-come-lately (unless he was subsidising me to the tune of hundreds each month)

tr3mor

obsessed_saver wrote: »

Unless you can come up with a large deposit, your mortgage interest payment will always be bigger than the rent at this point in time.

Even if you do have a big deposit, you have to take into account the interest accruing on that if you invested elsewhere.

tr3mor

Turnbull2000 wrote: »

And those who bought much earlier and cheaper tend not to be clueless BTL muppets either, but highly professional landlords.

So I'm getting a cheap(er), fully furnished home with no maintenance costs. I'd only be hung-up if I was renting from a clueless jonny-come-lately (unless he was subsidising me to the tune of hundreds each month)

This man speaks sense. :beer:

Lavendyr

Thank you for your post, IveSeentheLight, I'm sure you didn't intend the incredibly patronising tone... :rolleyes:

IveSeenTheLight wrote: »

Hmmm......
I see how you make sense of it as paying a larger deposit and borrowing less, means you would pay less interest.
Add to this however the money you throw away each month renting while saving up for that larger profit and I think your figures will come out differently.

Please do tell me how you work this out, exactly? I posted our figures above but since I'm assuming you haven't read those, I will post them here again to save you the trouble of searching for them.

Current market value of property: £220k
Rent: £750 pm
Interest-only mortgage (at 6%) on property assuming 10% deposit paid: £900pm Repayment mortgage (at 6%) on property: nearly £1300

Money saved each month towards deposit while renting: £1000 pm plus interest (all monies in cash ISAs and market-leading high-interest savings accounts)

Not included: essential maintenance and repair costs incurred when owning your own home.

Say OH and I decided to buy a house a year from now. We could add another £12k to our already reasonable deposit in that year, thus decreasing the amount we would have to borrow a year from now by that same £12k. We spend £9000 a year on rent; by adding one year's savings of 12k to our deposit, we are effectively saving ourselves at least that £9000 in future interest, and quite possibly more.

The only problem in this scenario would be if house prices continue to increase at a rate so high above our own wage inflation that even with a substantial deposit, house prices are even more unaffordable than they are now. We don't believe this will happen, but this is a choice we are prepared to make. In return, we keep the flexibility that we desire of being able to move out if we need, and we don't have to worry about making essential repairs at our own cost.

Your situation is completely different to mine and there is simply no comparison. If I were paying more rent than I would be paying towards a mortgage, I would agree with you that we should buy. However that is simply not the case. Nor were we in a position to have bought before the boom, having both been at school and/or university at the time.

merlinthehappypig

GreyPilgrim wrote: »

I spent ages getting rid of all my debts (had a great time building them up, i admit!), and the future goal was to eventually save enough to be able to buy a house eventually. I've spent ages thinking that I'm some sort of failure because everyone around me seems to own rather than rent. But to be honest, I'm not really bothered anymore. I live in a (admittedly crappy) area, but the rent is cheap and it's letting us save. Its a housing association property, so it's slightly more secure than a private landlord.

Right now I'm happy to be ploughing as much as I can into my ISA's and saving accounts and to just 'see what happens' over the next couple of years.

If the ar*e falls out of the market, I'll buy my seven bedroom country pad for £7.50, and if it doesn't I'll still be living in my rented house for the next couple of years but with a decent pot of money in the bank.

It's kind of funny watching the homeowners denying all possibilty of a house price crash, and then watching the wannabee owners saying it's a 100%. Surely there's no way of predicting either, and everyone is just trying to convince themselves?

Exactly my feeling. I sold in April & put the money away at 6.25% (mostly tax free using my wife's allowance). I'm renting a house for £900 a month which would cost £2500 a month to buy on a 100% mortgage over 25 years, plus all the maintenance is someone else's responsibility. I only have to pay for contents insurance as well. The interest on my money pays for the rent so for the first time ever (25 years married) I have no debts at all and can actually save money. I cannot begin to explain how this feels and what a difference it makes to life. Interest rate rises and 'market problems' actually bring a smile now that they don't concern me.

I will probably buy again some day, but am watching the market with interest to see what happens. Best guess is that prices are unlikely to rise so I won't lose out over the next few years and there is a chance that they will drop.

I'm not advocating that no-one ever buys a house. After all, that is the only reason I made anything, but think carefully about getting some balance into life. It simply isn't worth being heavily in debt all your life simply to have nice things or (part) own your own home.

Apologies if this comes over as a little smug, but I'd rather wake up feeling smug than worrying about how to fund repayments on debt and I've been there.

My point is that there is no right or wrong answer about whether to buy or rent - it depends entirely on a person's own circumstances at the time and their judgement on the way the property market is going to move. I've owned a house for the last 25 years, but taking everything into account I didn't actually make any money until the last 8 years when the house I bought in 1999 doubled by 2003 and the one I moved to in 2003 went up 110% by 2007. Between 1982 and 1999 things were pretty neutral, with small price rises (big rise and big crash excepted) being cancelled out by expenditure. This shows, to me, that the last 8 years or so have been pretty exceptional and it's probably going to end soon. When I started out it made no sense at all to rent as it was actually cheaper to buy. This is not the case now, by a long way. Either rents are way too low or houses are too expensive. I'm gambling on the latter!

PasturesNew

Somewhere along the line, rents have to be in some way related to your Average Joe's salary or you end up with too many empty high-rent places.

Your average joe in the street is probably earning just £6/hour. Or £12,500/year (£6 x 40 hours x 52 weeks)

One thing I am seeing increasingly with renting is that agents/landlords are getting pickier about how much you have to earn before they will rent a property to you.

I've never known before that there was a figure, yet it seems that to rent a place your take-home pay needs to be 2.5x or 3x the rent.

This surprised me really, that they'd do that.

This would mean that somebody on, say, £6/hour, working 40 hours per week, taking home £856/month would only be able to rent something costing £285-340. And £6 isn't even the minimum wage, which is lower.

The returns just simply aren't there if LLs keep buying increased price property and you run out of people willing/able to pay high rents.