Comparing cost of buying vs renting over the next 5 years

obsessed_saver

Found this link on the HPC site that compares the cost of buying vs renting over the next 5 years using various scenarios: house price the same, increase, decrease, etc.

http://www.marketoracle.co.uk/Article2649.html

I found it rather enlightening, but they haven't factored in the costs of maintaining a bought property.

The monthly repayment amount (including interest) used in their calculation is £1312.50 for a mortgage of £160k, is about right according to my rule of thumb of £160 per month per £20k mortgage. In 2004, my rule of thumb in estimating monthly repayments is £100 per £20k mortgage. Just goes to show how much of an impact the interest rate increases have been!

tr3mor

They set the rental at 5% of the property's value?

We pay 3.84% judging against the asking price of the house 2 doors down. :j

kingkano

To balance that, I see no mention of the associated costs of renting. Ie its unlikely you'd get 1 place for 5 years so we must say 3 or 4 lots of removals costs. At the very least you'd be looking at a load of 'renewal costs' for renewing the tenancy every 12mths. Rent would probably increase in the 5yrs (mortgage interest might as well). There is also the lost deposit every 12mths from a rental (decent chance of losing some money in these)...

Just another bogus comparison really.

merlinthehappypig

tr3mor wrote: »

They set the rental at 5% of the property's value?

We pay 3.84% judging against the asking price of the house 2 doors down. :j

Around 2.7% for us;)

Generali

It's virtually impossible to compare rental costs with purchase costs. It's not as simple as comparing interest with rent.

tr3mor

kingkano wrote: »

To balance that, I see no mention of the associated costs of renting. Ie its unlikely you'd get 1 place for 5 years so we must say 3 or 4 lots of removals costs. At the very least you'd be looking at a load of 'renewal costs' for renewing the tenancy every 12mths. Rent would probably increase in the 5yrs (mortgage interest might as well). There is also the lost deposit every 12mths from a rental (decent chance of losing some money in these)...

Just another bogus comparison really.

Aye. If I want to move then I can do. I don't have to put my house on the market, or wait for an offer, or wait for chains, or suffer estate agents. :rotfl:

And most of the problems you've mentioned can be avoided by going with a good local LA and a decent landlord like we have.

merlinthehappypig

tr3mor wrote: »

Aye. If I want to move then I can do. I don't have to put my house on the market, or wait for an offer, or wait for chains, or suffer estate agents. :rotfl:

And most of the problems you've mentioned can be avoided by going with a good local LA and a decent landlord like we have.

Exactly. We had an initial 12 months AST which switches to monthly shortly. Big landlord (think National Trust, but not them). Many tenants have been in their houses for 20 years plus. As long as we pay the rent we can stay as long as we want - haven't seen anyone from the LL or LA in the 8 months we have been here!

kunekune

"if I want to move then I can do" - That's not the case with many tenancies, assuming there is another property to rent (not guaranteed if you want a house with three or more bedrooms and a garden in the catchment for a particular school) . Yes, you can move fairly quickly once the AST ends and you are on periodic, but if you want the safety of an AST, then there is only one time a year when you can give notice and know you're not going to be stung for several months rent.

Similarly, "as long as we pay the rent we can stay as long as we want" wouldn't be true with most smaller landlords. There are all sorts of reasons they may want to sell up or have to sell up.

And as for not seeing anyone from the LL or LA in 8 months: can I come to where you live????? Three months is the norm.

Romani_Ite_Domum

I did some recent comparisons with rent v buy in my local area with places would like to live in the 300K -350K price range.

Bottom line was that I would be better off renting at current prices unless HPI was greater than 3% yoy.

Biggles

I'm rather bemused by the fact that, in scenarios where house prices drop over the five years, the cost of renting is assumed to drop by the same amount.

I've never known downwards rent reviews - does this happen?

pcwilkins

kingkano wrote: »

To balance that, I see no mention of the associated costs of renting. Ie its unlikely you'd get 1 place for 5 years so we must say 3 or 4 lots of removals costs.

Not at all. The only reason this might happen is if LL wants to sell, and that doesn't happen 3/4 times in 5 years. Maybe once, but we've been in our current house for 2.5 years and have just signed for another 6 months.

At the very least you'd be looking at a load of 'renewal costs' for renewing the tenancy every 12mths.

Our LA charges us £25 a time. Even if we renew every 6 months that's still only £250 over five years --- not enough to make a huge difference.

Rent would probably increase in the 5yrs (mortgage interest might as well).

Yes, but there is a difference. If you don't like a rent increase, you can move out. If your mortgage rises, it's a lot more trouble :-)

There is also the lost deposit every 12mths from a rental (decent chance of losing some money in these)...

Not so. Post 5th April all deposits must be protected in an independant scheme. LL cannot make deductions without T's agreement. In the event of a deadlock, independant arbitration must be used.

Just another bogus comparison really.

Agree, to some extent. Just wanted to point out that some of the factors you mention aren't that much of a big deal.

Peter