Housing market continues to slow....

Pheno

NickMidgley wrote:

I could do, but remember that each year the amount saved by the renter (compared to the buyer) gradually decreases, until year 9 when the buyer becomes the person saving money, not the renter. The gap between the two then gradually increases until year 25, whereupon the buyer's saving ALL his money while the renter still pays more every year. So, for 42 of the 50 years in the example, the buyer's the one with lower monthly outgoings. Think about the compound interest on all that!

Yep, I said at the start it all depends on the exact figures. To refuse to factor in the 2400/year investment seems very strange though - because it will make a sizeable difference to your end calculation, even if you assume 3% rental increases.

There's plenty more you could add too - including building maintenance and the fact that at the start of a mortgage you are mainly paying off interest - meaning if you want to move early it costs you a lot. In general, the longer the timeframe before selling, the more the sums add up in favour of buying. How long you can honestly commit to staying in the same place is very important to the calculation.

Sput2001

Pheno wrote:

Yep, I said at the start it all depends on the exact figures. To refuse to factor in the 2400/year investment seems very strange though - because it will make a sizeable difference to your end calculation, even if you assume 3% rental increases.

OK, let's assume a savings rate of 5% p/a. If the renter pays into a savings account everything he saves in relation to the buyer year on year, then at the end of the 8 years he'll have £14,754 in the bank. If we then allow the buyer to put the cash he saves relative to the renter over the remaining 42 years into the same account, he'll have £955,569.

Pheno wrote:

There's plenty more you could add too - including building maintenance and the fact that at the start of a mortgage you are mainly paying off interest - meaning if you want to move early it costs you a lot. In general, the longer the timeframe before selling, the more the sums add up in favour of buying. How long you can honestly commit to staying in the same place is very important to the calculation.

Sure, there are some additional costs for the buyer, but the chances of them coming even close to what the buyer saves in the long run are extremely slim.

John_M_Business

Ok. Let's cut through all the 'hypothetical' claptrap... basically, unless house prices DROP significantly, you'd do better to buy if you can afford to do so AS LONG AS YOU ARE IN A POSITION TO PAY OFF YOUR DEBT.

There are obviously loads of individual 'scenarios' that could argue the case for rental, but in most instances this is the situation we find ourselves in... after all, the rental and sales markets do tend towards the norm of being just about the same in costs when you take all costs into account.

Regarding the posting about renting only having increased £50 since the mid nineties in South London, I would be interested to know the starting point - i.e. what the original to final comparison was (I will choose to ignore the post that mentioned it has been static for two years - so what? That's totally different to a ten year period in which all prices (buying and renting) have soared).

Having rented and then bought in West London, the equivalent rent has about doubled since 1995. There are always areas that are more attractive than others...

meanmachine_2

Back in 1997ish I was paying £900 pcm for a 2 bedder in Tooting Bec.

I could easily get the equivalent for that price or maybe a wee bit higher today.

I can't think of any area where rents have doubled over that 8 year period, although I'm happy to be proven wrong.

Meanwhile the same property in 1997 would have cost around £80K. Now you'd be looking at a sale price of around £240K.

In this scenario the owner is the winner and the renter the loser.

In another 8 years, I wonder though...

Pheno

NickMidgley wrote:

Sure, there are some additional costs for the buyer, but the chances of them coming even close to what the buyer saves in the long run are extremely slim.

Correct, and the emphasis is long run. I don't know many people who've stayed in the same house for 25 years, but if that is what you plan to do then buying is almost certainly your best option, even under current market conditions. If don't own a house and you plan on moving in the next few years then you need to do the calculation quite carefully.

Pheno

Hometrack survey is out, according to TMF forum: http://boards.fool.co.uk/Message.asp?mid=9377949&sort=whole

Hometrack's Monthly National Survey: June 2005

Embargoed for Monday 27 June 2005

Enjoy!

TMFClapTrap (You ain't seen me, roight?!) ;0)


AS THE UK HEATS UP, THE PROPERTY MARKET COOLS DOWN – AGAIN!

Fall of -0.2% takes house prices back to 2003 levels

The Hometrack June survey of the national housing market reports a fall of -0.2%, following three consecutive monthly falls of -0.1% (see Graph 1 in Notes to Editors). House prices have now been falling for 12 months and show little sign of imminent recovery. The national average house price now stands at £161,600, down from a peak of £167,700 in June last year and down over 3% in the past 12 months.

Despite further house price falls this month, activity in the market is still increasing, albeit at a slower rate than last month. Sales agreed have risen just 3.5% compared with 7.6% in May's survey. This slowing increase can be explained by a fall in the number of buyers coming on to the market of -0.1% (+2.2% in May's survey). With fewer buyers and a continued increase in properties available, the resulting oversupply means that it is still a buyer's market and prices will inevitably decrease again in the coming months.

Sales price as a percentage of asking price has fallen slightly this month to 93.5% (93.6% in May's survey), indicating that buyers are negotiating larger discounts as sellers continue to set unrealistic asking prices.

The amount of time it is taking to sell a house has increased to 7.6 weeks this month (7.4 weeks in May's survey), whereas 12 months ago houses were taking just 4.2 weeks to sell. This is largely due to the simple fact that there is an oversupply of properties and buyers have a greater choice. Despite this, the average number of viewings has remained stable at 12.5.

Only one county has seen price rises this month, nine have remained static and 47 have seen price falls. The only county to report a price rise at the top end of the scale is Northumberland (0.1%). Other top performers include Hampshire (0.0%), Isle of Wight (0.0%), Kent (0.0%), and London – North (0.0%). The counties reporting the largest falls are Norfolk (-1.0%), Avon (-0.9%), North Lincolnshire (-0.7%), Wiltshire (-0.5%) and South Lincolnshire (-0.5%).

Of the cities, just 2 have seen price rises, 21 remained static and 31 have seen price falls. The top two are Southampton (0.2%) and Cambridge (0.1%), with other high performers including Blackpool (0.0%), Bournemouth (0.0%) and Bradford (0.0%). The cities reporting the worst falls are Lincoln (-2.0%), Milton Keynes (-1.7%), Swindon (-1.6%), Swansea (-1.6%), and Norwich (-1.6%).

John Wriglesworth, Hometrack's Housing Economist, comments:
“The market over the last few months has looked like it was about to come up for some fresh air, with house prices coming tantalizingly close to turning positive. However June's price fall signals a stall in the road to recovery. More worrying is the drop in new home buyers, after four months of buyer growth. Longer times to sell and higher discounts achieved from the asking price all point towards a weakening market.

“The only good news is an upwards trend in sales agreed, and a general expectation of lower interest rates before the end of the year. These should help boost confidence, and ensure price stability. We expect house prices to continue to bump along the higher plateau after the coming months. While the market is stagnating it is showing absolutely no evidence of crashing. All talk of a pending housing recession is total clap trap.”

dippy

England and wales are now down 3.6% year on year. Wow and this is during the supposedly busiest season of the year.

meanmachine_2

"Despite further house price falls this month, activity in the market is still increasing, albeit at a slower rate than last month. "

Isn't that an example of doublespeak?

Activity has been increasing, but slower than last month. So activity has actually been falling, hasn't it?

And EAs wonder why they're despised by the General Public.

Wrigglesworth is surely in training for some kind of stand up routine. The man's a joke.

dippy

Spring is almost over and everybody will soon be off for the holiday period. Buyers go away on holiday but houses up for sale do not. It will be interesting to see what will happen in the next three months.

Sput2001

Activity has been increasing, but slower than last month. So activity has actually been falling, hasn't it?

No. The level of activity is still rising, just not as quickly as it was. Going forwards less quickly isn't the same as going backwards.