Naive Question - 5-10% ?

IanSt

Saga wrote: »

I've saved a small but relatively decent amount for a mortgage deposit, but am also toying with the idea of putting off buying for a further 12 months.

Are there any safe saving opportunities that return between 5-10% which I can lock up most of my savings for 12 months?

Others have talked about the impossibility of getting 5-10% safely, but have you considered what may happen to house prices over the next year and whether putting off buying is the best option for you. You've not mentioned your current housing circumstances, but if renting then there's that cost which is basically dead money and how would you feel if house prices suddenly shoots up - l'm not saying they will and so you should buy the first house you see, but why not keep looking and if you find the right one then consider whether it still makes sense to be putting off a purchase for the next x months.

Saga

Fair point. Thanks.

Glen_Clark

House prices are kept high by restricting the supply with the world's most onerous planning restrictions (whilst stoking up demand with 'Help to Buy' etc) . Even if supply restrictions were lifted (due to vested interests they won't be) it would take years for the builders to catch up with the demand. So don't wait around for a house price crash

bigadaj

Glen_Clark wrote: »

House prices are kept high by restricting the supply with the world's most onerous planning restrictions (whilst stoking up demand with 'Help to Buy' etc) . Even if supply restrictions were lifted (due to vested interests they won't be) it would take years for the builders to catch up with the demand. So don't wait around for a house price crash

You're totally missing the issues around affordability.

The market has been inflated as much by near zero interest rates as it has been by an excess of demand over supply.

Government policy is now to restrict population icreases, on the back of Brexit they would arguably have more ability to do so, whether they succeed remains to be seen.

If people can't afford the prices asked for, and with little wage inflation this is becoming more the case, then even with a lack of supply house prices will stagnate and potentially fall, if people don't have the money, or actually aren't able to borrow it.

JohnRo

That or forced into renting from those who can afford them. Which is what's now increasingly happening.

Glen_Clark

bigadaj wrote: »

You're totally missing the issues around affordability.

The market has been inflated as much by near zero interest rates as it has been by an excess of demand over supply.

Government policy is now to restrict population icreases, on the back of Brexit they would arguably have more ability to do so, whether they succeed remains to be seen.

If people can't afford the prices asked for, and with little wage inflation this is becoming more the case, then even with a lack of supply house prices will stagnate and potentially fall, if people don't have the money, or actually aren't able to borrow it.

No because low interest rates hasn't inflated the price of other goods - cars, TVs, clothes, etc where production isn't being restricted by UK Government.

kidmugsy

IanSt wrote: »

if renting then there's that cost which is basically dead money

"dead money" is a daft expression. Rent is also insurance against buying a house and then finding its value tumbling, it's insurance against finding the need for expensive repairs, it's insurance against suddenly needing to move house to pursue your career, or your lover, it's insurance against tying your capital up in a geared, illiquid, indivisible investment: it's many undead things.

Buying a house to live in will often prove a fine long term investment but in the short term it can be ruinous.

bigadaj

Glen_Clark wrote: »

No because low interest rates hasn't inflated the price of other goods - cars, TVs, clothes, etc where production isn't being restricted by UK Government.

Right, so you're guaranteeing an everlasting and significant increase in house pricing even when affordability levels go from ten times earnings, to twenty times earnings etc etc

bigadaj

JohnRo wrote: »

That or forced into renting from those who can afford them. Which is what's now increasingly happening.

The market has been significantly subsidised by housing benefit, which is now reducing in most cases.

Yields are also dropping and will continue to do so, for the affordability reasons noted above, which means that in combination with taxation making btl less attractive, landlords are looking at selling.

In common with most teas of finance you can manipulate things to maintain growth for a certain length of time, by zero interest rates, quantitative easing or other measures, but the pendulum will swing back at some point, the linger it takes the harder the return to mean.

JohnRo

What mean?

Yields are a function of capital value, UK rents in aggregate are not reducing.

It's a supply and demand equation, without the supply side making significant inroads on meeting demand little is going to change. When houses are twenty times average earnings it will simply force even more people into the rent trap, be it sole or HMO, or to live in with parents who lack the means to help their struggling offspring get out and on to the 'ladder'.

House purchases will continue to be unaffordable for what now seems a well established trend for the foreseeable future, the number of potential buyers and their average age ever increasing, baring Zimbabwe style 'land reforms'

Dismantling the welfare state might cut the tax funded bonanza handed to the 'industry' but will simply spawn even more crime, homelessness and squatting.

I hope there is a significant drop in house (land) prices but just don't see it happening any time soon if ever, at least not in a structured, long term way, unless an effective land value tax solution is found.