Can you imagine the destruction in the UK if the property market crashed

chucknorris

phillw wrote: »

You need to compare rent against the interest on the mortgage, the lost opportunity on the capital & buildings insurance.

If he was renting a place that freed up capital to invest and he made a decent return, then it may have been a reasonable choice. Although from the way he talks he wants the prices to crash, because maybe it didn't quite work out.

He has posted in many threads discussing various benefits and debt, so I think that it is very unlikely that he has much in the way of investments.

There was no mortgage or building insurance, I do not believe that insurance is value (as long as you can comfortably cover the downside). The only insurance that I have now is car insurance (obviously), third party liability for my dog (via the Dog's Trust membership) and property insurance for our current home (because my wife owns half of it, and she wanted it insured).

The opportunity cost would probably be mainly corporate bonds, because I have so much already invested in property and equities, and bonds are the next obvious (mayor) mainstream asset class. I wouldn't go for high risk bonds, so they wouldn't have paid that much, and of course the interest would be taxed at 40%. Although I must admit that bonds don't particularly appeal, so I am still deciding, where to invest the equity.

phillw

chucknorris wrote: »

The opportunity cost would probably be mainly corporate bonds, because I have so much already invested in property and equities,

I'm not sure any experience you have would be relevant to him then as you require vastly different risk models.

phillw

lisyloo wrote: »

I wouldn’t say not having savings or insurwnce is a failure of the benefits system.

Neither would I. Having to go to a food bank is a failure of the benefits system as it clearly isn't the safety net that people are told they have when they pay their tax and NI

lisyloo wrote: »

If someone has a home then surely it’s their personal resposibility to make sure their family are ok if they die, get sick, lose their job or have an accident.

You're saying we should only provide a safety net for people who don't "have a home"?

lisyloo wrote: »

The state is there as a safety net but not to keep people in the lifestyle they’ve become accustomed to.

How is being able to eat "keeping people in the lifestyle they've become accustomed to"?

lisyloo wrote: »

This is very basic personal finance and maybe that’s the problem that the education around this is largely missing.

No, it's basic prejudice against people who dare to take responsibility for their own housing but fall on hard times.

chucknorris

phillw wrote: »

I'm not sure any experience you have would be relevant to him then as you require vastly different risk models.

I was talking about my opportunity cost (he is not in a position to invest in anything). Although in reality I just can't see myself investing over £500k in bonds, I don't particularly like them. So it my well end up mainly in equities (despite what I said).

Especially if I end up selling an investment property this year, which may happen.

phillw

chucknorris wrote: »

I was talking about my opportunity cost (he is not in a position to invest in anything). Although in reality I just can't see myself investing over £500k in bonds, I don't particularly like them. So it my well end up mainly in equities (despite what I said).

You still have an opportunity cost, even if you decide to leave it stuffed under your mattress because you are too bored to invest it as you're so rich.

Having so much money that you don't even need to consider insurance certainly makes it pointless to compare your decisions.

I still think he's wrong.

chucknorris

phillw wrote: »

You still have an opportunity cost, even if you decide to leave it stuffed under your mattress because you are too bored to invest it as you're so rich.

Having so much money that you don't even need to consider insurance certainly makes it pointless to compare your decisions.

I still think he's wrong.

There is always a point in comparing options. I never said that there was not an opportunity cost, of course there is.

lisyloo

No, it's basic prejudice against people who dare to take responsibility for their own housing but fall on hard times.

I disagree strongly with that and would ask for your evidence.
There are benefits for people with homes and a great deal of forebearnace from lenders,

Can you provide and evidence for this prejudice or explain what you mean!

lisyloo

phillw wrote: »

You still have an opportunity cost

For the unsophisticated investor with a mortagage then housing provides a great opportunity because it’s CGT free and geared on and of course there’s the old “you can’t live in a share certificate”.

For the vast majority who cannot safely manage their own investments the only possible competition would be a pension, however they would still need somewhere to live.

My experience is the vast majority of people that didn’t buy, did NOT successfully invest and self manage any savings they made.

GreatApe

chucknorris wrote: »

I was talking about my opportunity cost (he is not in a position to invest in anything). Although in reality I just can't see myself investing over £500k in bonds, I don't particularly like them. So it my well end up mainly in equities (despite what I said).

Especially if I end up selling an investment property this year, which may happen.

Extend & improve your properties

Adds to jobs
Adds to taxes
Adds to GDP

And in theory the return should exceed bonds and corporate paper and bank accounts.
I'm sure there must be companies who will offer a service where they do the bulk of the work so you wont need to worry much about the day to day aspects

phillw

lisyloo wrote: »

I disagree strongly with that and would ask for your evidence.
There are benefits for people with homes and a great deal of forebearnace from lenders,

You can get a loan from the government to cover the interest, if you can persuade the lender to let you pay only the interest. I don't know how long that takes to arrange that, but once done it's irrelevant that you own a house as the rest of your finances should be roughly equivalent to someone in rented accommodation who receives housing benefit (potentially you're still worse off due to buildings insurance and maintenance, although the housing benefit may not cover the entire rent).

Therefore if you have to visit a food bank then it's because the universal credit is either too low or takes too long to be paid. A lot of people who visit food banks are actually in employment, but universal credit is also failing them.

lisyloo wrote: »

Can you provide and evidence for this prejudice or explain what you mean!

The evidence is when you said "not to keep people in the lifestyle they’ve become accustomed to."

You appear to have no empathy for people who bought a house and then lost their job, food banks exist because the benefits system is not providing enough of a safety net. Everyone is entitled to benefits payments whether they own a house or not, while you appear to want to punish people and then talk down to them.

Some people make poor financial decisions, so there is an argument that foodbanks are therefore better because they can't waste the money that should be spent on food. However then you can't use the "people forced to use foodbanks" argument & the government should then fund them.

lisyloo wrote: »

My experience is the vast majority of people that didn’t buy, did NOT successfully invest and self manage any savings they made.

I accept that, but comparisons should still be made on a like for like basis. We know that if you have a lot of money then you can take risks and make huge gains, but my house value hasn't increased as much and I had to borrow the money & so I have to pay interest, I've had to spend money on the house and I can't afford not to pay insurance. Once that has all been taken into account then the gap between renting and investing and buying a house is smaller.

I know an IFA that rented a property which lost more value than the rent he paid while he lived there. I couldn't do that, but then I would never be able to afford either the rent or the mortgage on that place. Unless you make honest comparisons then you can't determine whether you were better off or not.