The Equity Ladder

Generali

macaque wrote: »

Do you realise that the transaction costs alone (stamp duty + estate fees + legal fees + interest on these payments) for this sequence of moves over 25 years would come to over £150,000.

I'd be interested to see that broken down rather than just asserted. Sounds like rubbish to me unless you include all mortgage interest payments.

The net present value of 25 years rent would be a huge figure too.

Libra1975

macaque wrote: »

Fair enough but equities can achieve exactly the same result. You get capital growth plus the dividends pay some or all of your rent.

Erm I'm not into stocks and shares but surely you would have to large amount of money invested to get that sort of monthly return post CGT (say rent would be between 800-1000p.m) and whilst your home would then be yours after 25 years free from whatever the markets were doing, if you rented your return (and therefore your rent) would still be subject to market peaks and troughs.

macaque_2

Generali wrote: »

I'd be interested to see that broken down rather than just asserted. Sounds like rubbish to me unless you include all mortgage interest payments.

The net present value of 25 years rent would be a huge figure too.

Edit 2.
Spread sheets don't cut and paste well on this format however this is the way I did it:
I assumed the house values were:
£125K
£175K
£250K
£350K
£450K
£550K

I then calculated stamp duty at normal rates. Solicitors fees at £1500 per transaction and estate agents at 2%. I then assumed that the owner stayed in each property for 4 years and calculated the interest on the money at 6%. The total came to £151,516.60p.

macaque_2

Libra1975 wrote: »

Erm I'm not into stocks and shares but surely you would have to large amount of money invested to get that sort of monthly return post CGT (say rent would be between 800-1000p.m) and whilst your home would then be yours after 25 years free from whatever the markets were doing, if you rented your return (and therefore your rent) would still be subject to market peaks and troughs.

Equity dividends are between 3 and 4% at the moment. This is the same as rents. There is no capital gains tax on dividends.

Running_Horse

Who cares if prices are rising or falling? We bought our house to bring up our daughter in for the next 20 years. Even then, the most we will do is downsize to a slightly smaller place. You can't take it with you when you go.

Jonesya

macaque wrote: »

So why do people continue to gamble on property when there are such rich pickings in the equity markets?

Leverage!

Plus herd behaviour and that, for a while anyway, mass behaviour leads to price movements that reinforce the belief that prices always rise - if you take a fixed quantity of something and people come to believe that the price always rises then as people buy in hope of price rises they bring into effect the price rises they expect. Until something interrupts the process and prices collapse back to fundamentals - when suddenly the leverage issue becomes a negative rather than a positive.

Phirefly

macaque wrote: »

I don't feel that my rented house is less of a home because someone else owns it.

I differ from my peers in that I don't feel property ownership is a holy grail and I don't view renting as a second-rate option. However, for me personally when we were renting, I DID feel that it was less of a home because someone else owned it. Now our names are on the deeds of that same house, its home.

macaque_2

Running_Horse wrote: »

Who cares if prices are rising or falling? We bought our house to bring up our daughter in for the next 20 years. Even then, the most we will do is downsize to a slightly smaller place. You can't take it with you when you go.

My comments were really aimed at property speculation/investment. A person who buys a house for 20 years is buying a home.

Libra1975

macaque wrote: »

Equity dividends are between 3 and 4% at the moment. This is the same as rents. There is no capital gains tax on dividends.

ok thanks for correcting me on the CGT issue but still to be able to pay rent from investments surely you would have to have a rather large sum invested, an amount of money out of most peoples reach I would guess whereas mortgages are repaid over a large period of time.

Running_Horse

macaque wrote: »

My comments were really aimed at property speculation/investment.

Aye, maybe I'm just tired of seeing pro and anti HPC camps lining up for endless pointless arguments. You are probably right, in which case you can look back in a few years and say I told you so. If someone wants to make a bad investment, then that's their lookout.