Should I rent or buy?

pinkshoes

beingjdc wrote: »

Rent at the moment for the same property is way less than mortgage, lawyers, stamp duty, etc almost everywhere in the country. Plus if you rent you're not landed with an asset which most experts believe is currently falling in price.

Try not to generalise, as there's lots of areas where rents are extortionate, it's much cheaper to buy, but the houses rarely come onto the market... (hence keeping demand in that particular street high).

My mortgage interest is around £830, and my rent would have been £875, plus I have the security of no longer being kicked out of my own home, and each year my mortgage payments stay roughly the same, wheras my rent was going up.

i've done renting for 9 years, and I have to say I much prefer having my own home!

kissingthepink

!!!!!!? wrote: »

Absolutely :rolleyes: - They will go on rising like they have, forever and ever and everyone with property will be RICH! Rich beyond their wildest dreams. Muahahaha.


Meanwhile, in the real World, the house price boom is petering out. Maybe the government can stimulate it again like they successfully did in mid 2005 but that's unlikely. The 'best' outcome the housing market can hope for is stagnation but most likely it will decline to some extent. All in all, not the time to buy.


The only way it would make sense to buy now is if the government decides to pursue a fiscal policy that allows strong price inflation in order to stimulate growth (and assuming growth is stimulated) like they did in the 70s. In that event, I concede that buying a house even now, might make sense.

I do realise that prices cannot keep rising forever, and that every market has its peaks and troughs, but who knows exactly when the market has peaked? Is it not possible that the inflationary scenario you depict could happen. Interest rates may have peaked I keep hearing and the govt pumped £10 billion into the banking system last month. Would this not assist inflation and cause LIBOR to drop which could result in cheaper mortgages, which would help in boosting house prices further?

dannyboycey

kissingthepink wrote: »

This is a no brainer as far as I am concerned. BUY and stop wasting your money on rent. Don't wait - after all prices could go up and you could have to pay more for the same property in the future.

Either the dry sarcasm of that post has gone over my head, or you have lost your grip on reality.

tr3mor

pinkshoes wrote: »

My mortgage interest is around £830, and my rent would have been £875.

I don't want to be nosy but...

How recently have you bought? You must've put down a pretty big deposit.

kissingthepink

dannyboycey wrote: »

Either the dry sarcasm of that post has gone over my head, or you have lost your grip on reality.

Well I do believe that further price increases in the next 6-12 months are not beyond the realms of possibility. See my posts above for my reasons why. You may not agree with me, and that is fine, but are you suggesting that there is going to be an imminent housing crash?

tr3mor

kissingthepink wrote: »

but are you suggesting that there is going to be an imminent housing crash?

I think he probably is suggesting that! :T

kissingthepink

tr3mor wrote: »

I think he probably is suggesting that! :T

LOL. He should have just said so. Same old same old:beer:

MikeLondon_3

How imminent is imminent?

Today? Next Week? Next Month? is Next Year imminent?


how much of a crash are you predicting?

less than 5% Crash? less than 20% Crash? 50% Crash? 80% Crash?

I hear a lot about imminent crashes, but no one seems prepared to quantify either of those words with actual figures, just a lot of guessing which is as worth-y/less as someone saying the opposite...

Eventually someone will be right about a 'imminent' 'crash', and there's gonna be loads of people who've been saying it for 5 years or more saying I told you so, when in fact they've actually said very little.

PayPeanuts_2

Really you need to ignore all speculation about a housing crash and answer some questions:

Is your job and life fairly stable?

Can you comfortably afford all your other financial commitments ie debts, socialising, insurances, etc.

Do you have significant savings in case interest rates go up, or your boiler breaks?

Do you have your heart set on a particular house that you really, really like?

If the answer to any of these questions is no, I would seriously consider renting.

Best of luck

Jason74

The serious answer to that question is that nobody can really tell you what to do. Your first property is probably the most important financial decision you will make, and how successful that decision is will have a significant impact on your ability to move up the ladder later on. It is you who has to live with the consequences of that decision, and nobody can tell you what decision to make.

What people can do, is point out some of the issues that you have to consider. These include

1) What is your likely career path over the next few years. If you have reasonable epexctation of significant pay rises in the future (for example, if you are training in one of the professions), a larger mortgage relative to your income may be more prudent than would be the case if your earnings were likely to remain static (or even fall)

2) HOw secure is your employment ?. Job security is a key issue, for obvious reasons. If this is not as good as you would like, you need to think twice about a mortgage.Crazy though it may sound, you actually (I think, but am not 100% sure) have more of a safety net from the state if you are renting, than you do if you have a Mortgage.

3) Would the Mortgage you are taking on be affordable if rates go up a couple of percent or more. If so, and your job situation is relatively secure, you are probably in a relatively strong position to take out a Mortgage. If not, you probably need to think twice. You need to remember that even a fixed rate only delays the effect of interest rate rises, rather than making them go away completely.

Those three questions will probably give you some initial thoughts (along with many other factors) as to whether you are in a good position to buy a house. If you decide that you are, then more questions come into play. These are:

4) Would you be happy to stay in the property you can afford now for several years (5+) if need be.

5) Would you be significantly concerned by the prospect of living in a property that is worth less than you paid for it

6) What is your current housing status (for example, living with parents, renting etc.)


These questions are important, as they in effect determine your attitude to any possible future price falls. The other question is of course what you think the future direction of the Housing Market is going to be. The difficulty in answering that with any certainty is of course to some extent determined by the multitude of different opinions expressed on this board (My own view for what little it is worth is that prices are likely to drop a little, but that we probably wont see a full blown "early 90s style" crash. That said, this view is nothing more than a semi educated guess. Anyone who says they know is an arrogant fool or a liar).

If you believe that prices are going to continue to rocket, you may be of the view that these questions are not important, as 4 and 5 are of course concerned with the consequences of being in a falling market, and potential negative equity. If you are lof the view that stagnation or falls are likely, then they become very important, as this scenario involves it taking longer to build the equity needed to help with the next move.

If you believe price rises are unlikely in the very short term, you may also be more inclined to wait a bit if you are in a low cost position like living at home, although this is less of a concern if you are paying a lot of money in rent. Rent does not move you forward to full ownership in the way that a repayment mortgage (although not I/O) does, although of course it can't get you into nrgative equity !.

I know that the above is quite an exercise in fence sitting, but really it just gives you an idea as to why no one can really tell you what to do. This is especially true because the consequences of getting it wrong can be so serious. Failing to get on the ladder can cause you to get left behind if property prices rise significantly, while buying just before the market crashes can leave you stuck for years in a property unsuited to your needs.

To reduce the splinter count in my behind, I'll try and give you some thoughts (for whatever help they may be) as to where my mindset would be if I was a potential first time buyer at the moment. If I was relatively confident about my job security, and could afford a property that I felt comfortable about living in for several years, I would probably buy.

A property you buy to live in is first and foremost a home. My logic would be (and was when I bought my property) that if I felt that I was buying a property that was affordable, and that I would like to live in medium term, then it's value was almost irrlelevent. I would be making manageable payments to live in a home that I liked, and would be moving to a day when I didn't have to make payments to live there any more. If those payments turned out to be a bit higher than they would have been had I waited, I could live with that, and it would still beat renting to my mind.

What I WOULDN'T do in the current market, is buy anything I could afford wheter I truly wanted to live there or not, just to get on the ladder. The risks to the market are imho just too great at the moment, and I wouldn't be comfortable buying into a property that I didn't want to live in for an extended period. This is however largely due to my belief that prices are close to a peak in the short / medium term, and not buying would prove to be an expensive mistake in the event that this view was wrong, and there was in fact continued high property inflation.

Despite it's length (apologies if you're now in a boredom induced coma!), the above is not intended either as a comprehensive guide to the pitfalls involved in property purchase, or as advice. What it hopefully does do, is give some indication as to why only you can decide what to do (and I certainly wouldn't make decisions based onanything I have said in this post)and provides some food for thought on some (although by no means all) of the factors you need to consider in making that decision.