Low rates mean its foolish to wait for a house price crash

mubeye

chucknorris wrote: »

I'd argue that leveraged property has easily outperformed the stock market over the long term, particularly over the last 25 years or so. But I accept that there will be certain localities where that might not apply.

I'm not against the stock market, we have over £1m currently invested in equities, and will probably invest quite a bit more as we have just sold one property, and we about to exchange on another.

Leveraged property sure. A lot of the HPC crowds problem stems from being so irrationally debt adverse.

But my problem is the OP bold claim that even a cash purchase outside the SE always makes sense.

Which is why I jumped in. As I thought, hang on, there are some exceptions in that narrow filter.

mubeye

wotsthat wrote: »

There are no extreme bulls. I don't think there's anyone who would argue buying yields a lower cost of housing in all circumstances. It's a decent enough generalisation to say that the longer the time frame the more black and white it becomes.

The OP might argue this?

wotsthat

mubeye wrote: »

Live where ever you want to live? There is plenty of good rental stock available. The higher you go the lower the yeild.

It is not the same as owning. But each to their own. For example, I love renting cars and hiring ubers. Owning a car would be a massive hassle for me. I gave away my last car for free as I realised it would be cheaper to hire whenever i need it. But even if it cost more, i think i would still prefer to hire.

For me it is less mental overhead, not more.

Not true for everyone.

All I'm saying, renting doesn't necessarily cost more. If you invest the capital well, you could even make a profit.

I happen to own a business where I can get relatively safe returns on capital if I choose. If I'm feeling cautious, investing passively closes the gap, and i can transfer in 48 hours as my risk appetite dictates. This isnt market timing as such. A rising tide lifts all boats, and all that .It's about having control of your risk and liquidity.

If you've got the Midas touch then, fair enough, you'll be better of renting so you can get a decent return on your deposit.

Buying will likely (not always) deliver lower cost housing over the long term but you choose to rent anyway for non financial reasons. Fair enough but if someone wants to buy, it's likely going to be cheaper and they don't want or feel able to invest a deposit elsewhere it shouldn't be a surprise that they buy.

wotsthat

mubeye wrote: »

The OP might argue this?

Not the way I see it. They're arguing it's pointless to await a crash because (a) there's little evidence anyone has any special insight and (b) high deposits and low interest rates mitigate against the negative consequences should a crash happen.

mubeye

wotsthat wrote: »

If you've got the Midas touch then, fair enough, you'll be better of renting so you can get a decent return on your deposit.

Buying will likely (not always) deliver lower cost housing over the long term but you choose to rent anyway for non financial reasons. Fair enough but if someone wants to buy, it's likely going to be cheaper and they don't want or feel able to invest a deposit elsewhere it shouldn't be a surprise that they buy.

I would disagree that the pros of renting are 'non financial'

Selling ,moving and buying a house has a high transaction cost. If you want to move frequently, it is a very financially influenced decision. If it were cheaper and simpler to buy (iff you are reading this amazon, please do houses next ) I would certainly have bought and sold loads of times.

Also,re the Midas touch, most investment types agree that passive investing is the way to go.

mubeye

wotsthat wrote: »

Not the way I see it. They're arguing it's pointless to await a crash because (a) there's little evidence anyone has any special insight and (b) high deposits and low interest rates mitigate against the negative consequences should a crash happen.

I'll shut up after this and let others speak, but just to note, your use of the word 'pointless' suggests precisely zero point. Which was my beef. It's not always absolutely perfectly pointless to wait. In some niche cases (certainly not all cases) it makes quite good sense. Buying a house is an active investment, which you have actively prioritised over other options. I just don't agree it should always be the default winner.

wotsthat

mubeye wrote: »

I would disagree that the pros of renting are 'non financial'

Selling ,moving and buying a house has a high transaction cost. If you want to move frequently, it is a very financially influenced decision. If it were cheaper and simpler to buy (iff you are reading this amazon, please do houses next ) I would certainly have bought and sold loads of times.

People avoid that transaction cost by not transacting much. If you need to move often clearly renting is the way forward.

There are financial benefits to both buying and renting. If it's likely cheaper over the long term to buy (which I think you agree with) then it stands to reason the financial benefits of buying trump those of renting i.e. any pros are non-financial. The feeling of the wind in your hair as you move from rental to rental maybe?

mubeye wrote: »

Also,re the Midas touch, most investment types agree that passive investing is the way to go.

There is no passive option when it comes to housing. You need somewhere to live and you have to actively decide whether you want to rent or buy.

GreatApe

Rates are so low that you need prices to crash just to break even. Using the Birmingham example of a 2 bed terrace for £130,000 vs renting it for £650 per month that is a 6% yield.

If your purchase vehicle is 20% savings 80% mortgage at 2.1% fixed for 5 years you need prices to crash almost 20% over 5 years just to break even.

Low rates make waiting pointless, even if house prices crash 20% over five years its better to buy today than to wait five years.

GreatApe

wotsthat wrote: »

If you've got the Midas touch then, fair enough

hindsight investment is a fine thing :beer:

the 10% return on stock markets picking a start date and an end date and ignoring various fees is a fine thing but if this 10% bet was such a sure thing why are are so many fund managers and investors handing the government their cash at 1% return?

mubeye

GreatApe wrote: »

hindsight investment is a fine thing :beer:

the 10% return on stock markets picking a start date and an end date and ignoring various fees is a fine thing but if this 10% bet was such a sure thing why are are so many fund managers and investors handing the government their cash at 1% return?

If property is so much better, why don't the fund managers invest their cash in REITS?

I don't argue with the 130k leveraged example. But as we are seeing in central london, the more expensive property becomes more attractive to rent in a stagnating market. There are also other examples where it is not pointless. Are you cherry picking and ignoring opportunity cost?