Is it really THAT important to own your own home?

$$$_12 · 25 October 2007 at 6:58AM

SquatNow wrote: »

No it's not, housing(land) is a unique commodity as unlike any other, NO MORE can be created.

There is no true "supply and demand" as you cant create more.

Not really true - I've seen lots of flats going up on wasteland next to dual carriageways/busy junctions. I've also seen existing low rise estates bulldozed and replaced with higher capacity high res ones.

So while I agree there must be a finite limit - there's definitely plenty of supply. I never have any problems finding an already empty place to rent (usually the landlord has had a void of at least a month).

$$$_12 · 25 October 2007 at 7:18AM

inmypocketnottheirs wrote: »

OK renters, how many of you own your own car? The fastest depreciating asset known to man. High maintenance, high running costs, servicing, repairs etc etc etc.

Do you rent your cars?

Don't have a car as I think they are a waste of money too (and certainly new ones are overpriced compared to second hand ones but I guess the risk of lemons and cheap debt for new ones keeps secondhand ones cheap).

I have tended to buy new bikes though (but only BMV ones - the last was £400 reduced from £800 - the parts were worth more than I paid). But increasingly it seems unnecessary to buy these new nowadays.

I recently found a Specialized Rockhopper dumped beside a big house's bins. Mangled chain and mech - £20 and it was back on the road. I guess people are too rich to fix things nowadays.

And so it is with renting v buying. A couple I know (on a similar household salary to the OH and me) are paying £1800/month on their mortgage costs - we're paying £600 rent. Of course the comparison isn't really a fair one - theirs is a bigger and nicer flat than mine. But I can pay more and upgrade whenever I feel like it - they don't have anything like the same flexibility as me (they also have as much credit card debt as I have in savings - around a years salary).

Who's really better off here?

HugoSP · 25 October 2007 at 7:32AM

IveSeenTheLight wrote: »

Utter bollxxks.
There are many landlords out there who provide a good quality home for tenants and only hope that they have good tenants in return to look after the property while they are renting

Thank you, someone else who sees that some BTL LL, like us do value good tenants, look after them and provide a decent home for them.

The extra money we spend on doing this is paid back via tenants' wanting to stay put. We know them and they know us and we don't have the trouble of working our way through tenants, some of whome are no good.

HugoSP · 25 October 2007 at 8:02AM

carolt wrote: »

HugoSP wrote: »

Dan,

HugoSP, you argue that interest rates are half what they were in the late 80's, therefore prices can double and property still be equally affordable. But as you admit, prices haven't doubled, in salary terms they have trebled - from an average of 3 times to an average of 9 times at present. And don't forget what happened to the UK property market after prices reached their peaks in the late 80's - hardly suggests that current prices, that much higher re income, are affordable now, does it?

You really need to read all of my post, rather than just pick out the bits that suit you. I won't repeat what I said here, as I assume you can find it again.

Also, you state that "we can't always afford the luxury of a social concience". I think there you have the crux of the matter. I, and I suspect a number if not the vast majority of those who view BTL in a negative light, feel very strongly that you can and should. For example, I have set up savings accounts for all my 3 children and save small amounts for them regularly. They all hold ethical savings accounts rather than just whatever pays the highest interest, as I felt very strongly that I did not want my children's money being used to kill or injure other people's children through investing in armaments etc etc. And that matters more to me than that they have a few quid extra. Or another example - my OH persuaded me to sell my Glaxo shares after pointing out their views on AIDS drugs (they'd been a real cash cow for me up till then; should add I got the last laugh as they promptly fell and I don't think have ever regained the price I sold them at!). And as for BTL, it's not as if it was some really secret, complicated investment scheme that only the serious professionals or an elite few knew about. It's been screaming from about a dozen prime time property !!!!!! shows for the last 7 years or so. I couldn't have afforded a BTL where I live, but it would hardly have been difficult or complicated to buy in a cheaper area so as to get my 'investment property'. BUT I chose not to.

Well done to you! You have surpassed yourself in being able to take my post out of its intended context and put it into a context that suits you. I ask the same question of you as I asked Dan regarding council houses. Again that can be found in my last post. We also invest ethically and for the good of the community. Amongst other investments we have some of our money in the local credit union. We doubt that we'll ever need a loan from the CU but it gives us all of 1% interest a year, as opposed to 5% that our ISAs give us. Why, because we do care about the local community and are willing to support projects that underpin it. However, when we can make a sound investment to protect our family's future, we have and will again in the future.

So, contrary to your rather narrow-minded viewpoint,

...and I suppose that is a central part of your arguement, and not a slur, because,from having read your posts you don't seem to indulge in unnecessary writing that is designed purely to put down the person you are answering - it would be most unlike you.

...there are actually some people out there for whom a social conscience is a necessity NOT a luxury.

You're bright enough to know as well as I do that people take ethics to different degrees. I suspect that you may make decisions that I consider to be without social concience, but, unlike you, I have made an effort to present myself to this thread, warts and all. I doubt that either you or I have the right answer, it's a quesion of what is important to the individual. Far be it from me to impose my views upon you and cast you as unclean if you don't agree with them, after all, as you have shown me the same courtesy, it's only fair.

I'd rather be a bit poorer and not exploit someone else - because at the end of the day, that is how I judge myself, not the size of my bank balance or the equity in my 'property'.....

That is your perogative, maybe I'm just not so hooked on this 'judging' thing as you are. We are all shaped by events that we witness in life and what we see, that's what makes it a fascinating world to live in. I will continue to manage whatever investments I see fit to see that my family are provided for, I'm sure you will do the same.

And can you not afford the 'luxury' of a social conscience? How poor are you?????

Poor enough to make decisions taking a number of issues into account, including social ones.

Melissa177 · 25 October 2007 at 9:32AM

SquatNow wrote: »

No it's not, housing(land) is a unique commodity as unlike any other, NO MORE can be created.

There is no true "supply and demand" as you cant create more.

Sure it can. In this country, there is an artificial ceiling on the amount of land we can build new houses on, thanks to planning laws. So whilst strictly, land cannot be created, more could be made available.

We use our land terribly inefficiently at the moment in the UK. I'd like to see the market correct this, as at the moment the market is being distorted by the government.

Can we create more gold than is currently available? No. We can find new ways to extract it from the ground. Can we create more crude oil? No, but we can find new ways to extract it (ie, the oil sands in Canada). Gold and oil are both commodities, no?

Melissa177 · 25 October 2007 at 9:37AM

HugoSP wrote: »

Thank you, someone else who sees that some BTL LL, like us do value good tenants, look after them and provide a decent home for them.

The extra money we spend on doing this is paid back via tenants' wanting to stay put. We know them and they know us and we don't have the trouble of working our way through tenants, some of whome are no good.

BTL is a value creation opportunity. Just because one side is winning (the BTL landlord -well, usually), doesn't mean the other side (the tennant) can't win as well.

Economics is not a zero sum game.

carolt · 25 October 2007 at 10:07AM

Interesting answer, HugoSP - please note I was not attacking you as a person, but what you said - you argued originally that a social conscience was an unaffordable luxury, which was what I disagreed with - clearly, from your reply, which is more measured, that is not actually what you think or practise at all - so we are not that different.

As for your question re right to buy - I don't think it is relevant as unlike some on here I have no problem with RTB - yes, they are getting a house at a discount, but it is one house, for them to live in - they are not reducing the number of houses available for other would-be homeowners to buy in the way BTL does. Yes, I appreciate some of them sell at a profit, but that is what many other homeowners do, and I have no problem with that.

BTL and RTB are very different creatures, and to treat them as one issue seems a strange attempt to muddy the waters.

lieutenant_dan · 25 October 2007 at 12:57PM

Hugo, not sure about your comparison between council tenants buying houses at knock down prices and btl, in terms of "social conscience" To start with, a council tenant is unlikely to have had a good start in life, so if they can benefit from the system that way, to "catch up" then why not? A btl investor will in the majority of cases already have their own home, and are purchasing 2nd/3rd.4th even 20th homes in some cases.

I take the point though that most of us are self serving and hypocritical, so will exploit whatever loopholes we can even at the expense of others (within reason) for our own gain. Maybe the system needs to be addressed rather than those who exploit it to their benefit, as others have suggested maybe some kind of change to the taxation for btl to make the whole scheme not worthwhile in the first place.

Current housing market may yet turn out like the stock market tech stock boom around the turn of the millenium, price earning ratios to share prices were off the chart, these stocks were trading at unrealistically inflated prices. When they reverted to more realistic levels, that's when the crash happened.

The more I think about it and the more this has been discussed on here, I'm convinced this is an extremely serious issue, which will have major implications down the line if prices don't "correct" themselves.

There's so many knock on effects. Average wage earners (including key workers) can't afford to buy anything at all. Even those with decent paying jobs are affected, they can't buy bigger properties than they would have been entitled to expect in years gone by.Which means less space for raising a family, which is vital to ensure the future prosperity of the country.

You wouldn't believe the number of families I've come across who live in a STUDIO flat. It's getting to be like a third world country at the lower end of the spectrum here.

And in general terms, standards of living are changing. The value of money is changing. A salary of £50k in the South East does not carry the same weight as it used to. Things like flying and other forms of entertainment are cheaper. Other aspects of cost of living have kept roughly in line with inflation, the most important thing though, accomodation, is off the scale. In turn "average wages" are now no such thing, they're below average. When rent is consuming in many cases 50 to 75% of the salary, and a mortgage is out of reach altogether. Average salary £20,000 = take home around £1300. Average one bed/studio flat = £600+. Before bills, before living expenses, what is the "average" person left with to save for a deposit for an unobtainable mortgage after their dead renting money has gone? It's grim.

Another interesting angle too, seems many couples feel pressurised to move in together sooner than they would under "normal" circumstances, mainly for monetary reasons. Not the best recipe for a lasting relationship. Know of couples who got joint mortgages, and quickly realised they were together for the wrong reasons, luckily they bought a year or two ago, so were able to sell up for a profit and go their seperate ways. Imagine a couple who buy now, main reason to get a property, and there is a downturn, they realise they don't really want to be together, and they're stuck in negative equity then, trapped in more ways than one.

I also don't agree with your comments about far lower interest rates than in the 80s making these prices similarly affordable to then. How do you determine what is the "right" price? Think you have to look outside the realms of what someone is prepared to pay.

Quite a simple equation before, mortgage 3 and a half times the salary, and the mortgage payments believe it or not (and read this elsewhere recently too) should desirably be around 25 to 30% of takehome pay!!

Don't know anyone who has that luxury, that concept is so outdated, we're talking more like 50 to 75% + in a lot of cases now.

Which again leads back to btl. Something is or has been driving and then propping up the market at these ridiculous levels. It can't be potential homeowners. Many people who buy now do so through perceived lack of options, and are either overextending or getting very,very poor value for money. I repeat, btl gets eradicated from the housing market, and there is no market at these prices. What determines prices will then gradually be returned to the traditional criteria, affordability.

HugoSP · 25 October 2007 at 2:25PM

Dan

I've had a quick scan of your post as I am grabbing a bit of lunch.

With regards to the RTB, some CH tenants buy the house, then sell it on after the minimum period at market value. Whilst this is perfectly legal, they are taking a property out of the social housing stock, then profiting from it.

OK I concede it is only one house per person, but the actions deprive another family who cannot afford to buy, the chance of a council house.

I'm not passing opinion here, this is fact.

If I was in a position to do this I would. At the end of the day you have to ask yourself "Would I give someone I don't know £30,000 (likely discount) if they needed it?" My answer to this question is "no". In that case I buy said house, live in it for a few years, then sell on and move or keep it as it suits me.

Dan, you're right. We are all self serving to a certain degree. And you are right. Families living in studio apartments is rediculous. Yet the population is likely to reach 70m in 10 years time, so I hear.

My mate's daughter spent some 3 years in a 1 bed flat with 2 children. She and her partner could not afford to buy at the time. They then got allocated a 3 bed house, which they then bought under the RTB scheme. I say that is justice in a way. They struggled with what was available and now they are reaping the rewards.

EDIT:

There is another factor that is propping house prices up at their current levels at the moment, and it has been staring me in the face for some time but whilst the site was down I had one of those eureka moments.

Mortgages were capped at around 3x income. When we bought our second house, Halifax gave me a mortgage of 3.25x income, meaning we could buy the house we wanted. The payments were a struggle, and in the end I ended up doing car boots etc and sharing lifts to work to save. So you're right in one respect, just over 3x salary an be a struggle, more for lower income earners who still need to spend te same on basic living needs as do the higher earners.

However, there was just me working at the time. My wife was at home looking after our two children.

There is the crux of the matter - in 1994 I could have bought the house with one income. In 2007 the house would only be affordable if the sole wage earner was on a high income or both partners were working and earning enough between them to support the mortgage payments. So when you and I talk of property prices being 9x average income, we are using only one income, not two.

Imagine Bob on £20k with a house thatcost him £150k. That is some 7.5x his income. Lets now add his partner Shelia, who earns say £15k or more. Therefore house is now less than 4x joint income.