To buy now or not? A reminder of how to compare cost of buying vs renting using a spreadsheet

MobileSaver

AdrianC said:

After 2008, there was a lot of people who wished they weren't tied to a property in heavy negative equity, often because their employment situation had changed massively.

While that is true, the number of people who might be affected in 2020 is likely to be much lower than 2008 due to generally much bigger deposits having been required since then.

At the end of the day people can go through life being scared about the worst that can happen or they can just get on with life and take the rough with the smooth. Just look at one poster on MSE who has been renting a bedsit in an undesirable area of Edinburgh for around fifteen years because he was constantly worried house prices were about to fall... I don't think that's worked out too well for him so far.

SouthLondonUser

 Mixed messages??

I bought before the virus, for a combination of financial and non-financial reasons. Now, with the virus, I dare think it would be very prudent to consider very carefully what would happen if house prices were to fall and we were to lose our jobs. Now, with the virus, I would not buy, not even if I had a 50% deposit and savings, after buying, to keep me afloat for a year. Again, that's me. To each their own. 

I have explained why. You seem to disagree. We have each shared our views. Forum users can compare our different opinions and make up their own minds. To be clear, I don't mind sharing what I think but I have zero interest in convincing anyone of anything.

I am not sure how any of this is scaremongering, and I am not sure what "solutions" there are. Yes, there exist very long term fixed rate mortgages which would limit the risk of remortgaging while in negative equity. But they also mean that moving before the fixed rate period is very hard, probably impossible if house prices are down in 5 years. I have no idea what I'll be doing work wise in 5 years, let alone 10, and would find it crazy to commit for such a long period. If it works for other people, good for them.

It is true that if you struggle to repay your mortgage you will typically struggle to repay rent, too. Which is exactly why, if you don't buy a house, rent and lose your job then those savings you haven't used for a house deposit will come in very handy. Again, I am not saying that we are all going to lose our jobs and that no one should ever buy, I am simply saying: keep this in mind.

As for "solutions", I would simply like to remind you that this is a historically unique and unprecedented situation. I don't know about you, but I don't have experience of many other global pandemics which cause most of the planet to go on lockdown for prolonged periods of time, paralising the economy. 

Finally, I also fail to understand how worrying about the effects of an unprecedented global catastrophe would in any way be similar to the attitude of someone who refuses to buy for decades. 

Again, I'm not saying never ever ever buy, I am saying: the virus is an unprecedented global catastrophe which causes a number of significant issues. On the balance of probabilities, I would find it more prudent to wait and see what the impact of the virus is. Those who do so might maybe miss out a bit if the economy and house prices recover much faster than I fear, but can instead save quite a bit if that doesn't happen. Again, that's my view, to each their own. If this is scaremongering then you and I don't speak the same language. 

Thrugelmir

I'd let this crisis pass first. None of us know what the future holds in the short term. 

SouthLondonUser

MobileSaver said:

[...] while at the same time admitting you yourself bought a home mainly for non-financial reasons

I bought for a mix of financial and non-financial reasons; the first time, after the financial crisis, when house prices were going up like there was no tomorrow and the fear they might plummet was not a consideration at all.

The second time, with May as PM, I was worried about Brexit. In the end I decided to sell, rent (to break the chain) and buy again because it was impossible to predict when Brexit would really start to bite, and by how much. I rationalised the decision with the very approximate and high-level calculation that, in my very specific circumstances (there is no one-size-fits all rule of thumb), prices would have had to be about 10-12% down after 4-5 years for renting to be cheaper than buying over that time period. That was a calculated risk I was willing to take.

For colour, regardless of budget, i.e. even if I had won a £10m lottery ticket, after the Brexit referendum I would have never bought the kind of London properties which, in my very humble and very subjective opinion, were more at risk from a hard Brexit, i.e.:

• new, mostly riverside, "luxury" flats (overpriced, insane management charges, too many of them, and tend to be liked less by the locals and more by those foreigners who are more likely to leave with a hard Brexit), and
• "prime" properties in areas like Notting Hill, Chelsea, etc

Again, the situation now is very different - we are facing an unprecedented global pandemic. If your crystal ball is better than mine, good for you.