Can housing ever actually drop?

george4064

Few questions;

1. Is your LISA a cash LISA or a S&S LISA?

2. How are your other savings split between cash and investments?

Whilst it's a good idea to ensure your existing savings keep up with house prices, dont get fixed on that idea and hence limit your options.

If you can afford the flexibility (I.e. you're happy to wait a bit if the market/your investments tank just when you need it for a deposit) then you should seriously consider investing your savings.

A run of the mill/basic world equity tracker will most certainly outperform house prices over the medium/long-term, so this is a good place to park your savings to maximise returns.

dude7691

coyrls said:

dude7691 said:

Dh6 said:

You need to remember to live your life!

The decade you’re now in will most probably be the best of your life, LIVE IT!

hence why I'm saving so aggressively to try and change my circumstances so I can have a more balanced life that's actually enjoyable

It looks to me like you're trying to lock in your circumstances, rather than change them.  As others have suggested, your best investment now would be in yourself and your future career.  Try to be more flexible and don't tie yourself down with an early house purchase.  It seem crazy to me that you would move abroad for a cheaper house but tie yourself to your current location for your job search.  There is nothing wrong with renting when you are young, why the obsession with buying a house?

It's mostly focused on the fact that prices at 10% a year will become unobtainable in a hurry, even if I got a decent salary coming out of uni, so 1-2 years makes a huge difference when you have a market inflating so quickly. Rents haven't gone up yet, but landlords won't cope with falling yields forever and I could see rents going up at close to 10% a year also, and no one gets pay increases of 10% a year with a normal job. Hence, the financial side of it is getting on the ladder ASAP even if it's not the perfect time to do so. 

dude7691

Voyager2002 said:

dude7691 said:

I'd love to set my horizons further, but I've pretty much written off anywhere in England at the moment. If Wales is bad then England is another level! Renting of course is an option, but again the cost of living is so high that I find it hard to believe I'd be better off going there and getting a slightly better paid job but paying the difference away in higher rents.

You seem to be forgetting that a graduate job in parts of England (or Cardiff or similar places) would be the first rung of a ladder. Even if you had to pay two-thirds of your income in rent for a few years it would be worthwhile if you ended up able to command a salary sufficient to buy a nice house near to your workplace. Or a highly-skilled professional able to live and work somewhere like Spain (where a nice place to live can cost as little as £50K).

That is very true! I think I'd have a better shot at those type of jobs having gained some experience in areas such as Cardiff like you mentioned. Hence, buying here would be viable for me as it would keep bills very low and I could use either the proceeds from a sale or my own savings if I then found an opportunity further afield. If the job I was going for was high salary, I could possibly take on another mortgage if I wanted to also buy where I was then working, but more than likely would rent out the other property in that case, or just sell it as I mentioned. I don't think I'd feel too tied down with a house in an area close to Cardiff/Swansea.

Thanks  

dude7691

george4064 said:

Few questions;

1. Is your LISA a cash LISA or a S&S LISA?

2. How are your other savings split between cash and investments?

Whilst it's a good idea to ensure your existing savings keep up with house prices, dont get fixed on that idea and hence limit your options.

If you can afford the flexibility (I.e. you're happy to wait a bit if the market/your investments tank just when you need it for a deposit) then you should seriously consider investing your savings.

A run of the mill/basic world equity tracker will most certainly outperform house prices over the medium/long-term, so this is a good place to park your savings to maximise returns.

Hi There  

1. It's a cash LISA, getting 0.8% a year. As I'm buying in 3-4 years, I don't think stocks would be a good idea especially at their current overvalued levels. Not saying they can't go up more (I actually think they will until late 2021), calling tops isn't my thing, but historically markets with extreme valuations take their good time correcting, up to 6 years in the case of 2008 and that wasn't even especially overvalued. I'm not trying to speculate but I couldn't sleep on it personally.

2. 100% cash. I have £11k in a 2.45% fixed 3yr bond expiring in Oct 2022, some regular savers still paying out between 1.75%-2.75%, but that will change soon once they expire and they'll go where the rest of my cash sits (Al Rayan 1.02% Easy Access).

While I would agree with you, I'm in a weird timeframe where I don't know if I will be buying as early as 3-4 years from now, or it could  take a few years more, in which case investing is more than viable. 

Agree with you regarding global index funds, they are my retirement vehicle and I plan to start investing in them with a high monthly amount with immediate effect after I buy my house Hopefully during a correction, interest rates will rise between now and 2025 as inflation kicks in so there's a very good chance of a strong correction, just based on historical overvaluation metrics. 

coyrls

dude7691 said:

coyrls said:

dude7691 said:

Dh6 said:

You need to remember to live your life!

The decade you’re now in will most probably be the best of your life, LIVE IT!

hence why I'm saving so aggressively to try and change my circumstances so I can have a more balanced life that's actually enjoyable

It looks to me like you're trying to lock in your circumstances, rather than change them.  As others have suggested, your best investment now would be in yourself and your future career.  Try to be more flexible and don't tie yourself down with an early house purchase.  It seem crazy to me that you would move abroad for a cheaper house but tie yourself to your current location for your job search.  There is nothing wrong with renting when you are young, why the obsession with buying a house?

It's mostly focused on the fact that prices at 10% a year will become unobtainable in a hurry, even if I got a decent salary coming out of uni, so 1-2 years makes a huge difference when you have a market inflating so quickly. Rents haven't gone up yet, but landlords won't cope with falling yields forever and I could see rents going up at close to 10% a year also, and no one gets pay increases of 10% a year with a normal job. Hence, the financial side of it is getting on the ladder ASAP even if it's not the perfect time to do so. 

It's not about pay increases, it's about promotions and job changes, i.e. a career.  House prices will not increase at 10% a year every year.  In fact house prices have not increased in England by 10% outside London in any year for the past 5 years (https://www.gov.uk/government/statistics/uk-house-price-index-england-march-2020/uk-house-price-index-england-march-2020):

thickasabrick

dude7691 said:

coyrls said:

It looks to me like you're trying to lock in your circumstances, rather than change them.  As others have suggested, your best investment now would be in yourself and your future career.  Try to be more flexible and don't tie yourself down with an early house purchase.  It seem crazy to me that you would move abroad for a cheaper house but tie yourself to your current location for your job search.  There is nothing wrong with renting when you are young, why the obsession with buying a house?

It's mostly focused on the fact that prices at 10% a year will become unobtainable in a hurry, even if I got a decent salary coming out of uni, so 1-2 years makes a huge difference when you have a market inflating so quickly. Rents haven't gone up yet, but landlords won't cope with falling yields forever and I could see rents going up at close to 10% a year also, and no one gets pay increases of 10% a year with a normal job. Hence, the financial side of it is getting on the ladder ASAP even if it's not the perfect time to do so. 

I think you are locking yourself into a path when you need to realise there are many paths to reach your destination and your destination will change with time and experience.

You have made an amazing start on the path to financial independence ! 

I bookmarked a few articles when I reviewed my "path" a couple of years ago. I'm quite a few years older than yourself so my perspective is from the other side, as it were. The articles are definitely worth reading, if just to give a few different perspectives.

Lets start with "Renting is Throwing Money Away … Right?" by Paula Pant on affordanything.com
Next is the New York Times "Is It Better to Rent or Buy?" . Someone on here posted to a UK version but I don't have the link to hand.
Followed by "The House Hacking Strategy" by JLCollins , links through to his article "Why your house is a terrible investment" which is also a good read. American bias but the principles apply just as well in the UK.

Finally, if you can navigate their site "Millennial Revolution" have a few good articles on the path they took. Hint - the tag line is "By NOT buying a house and investing instead".

Good luck.

Amoux

I've not read the entire thread but regardless of whether house prices increase/fall in the future, I think you are getting carried away. You are fixating on buying a house way too soon in your life. It's great that you are saving and supplementing your education with an income - that will give you a head start for when the circumstances are right. But buying a house is so much more than just whether you can afford it. 

Owning a home usually requires evidence that your life has some stability. A house requires commitment. A house requires a steady (preferably full-time) permanent job with a proven regular income to meet payments. Mortgage lenders will be heavily assessing your stability as much as your affordability. 

A young graduate is not going to have their life together straight away. It takes some years to  build your career and settle down. Really working out what you want, where you want to live and being commited to it. All this requires some trial and error and soul-searching. It's not something that is easily rushed into. 

In addition, if you can achieve your goals with the help of another likeminded person (say if you were in a steady relationship) then even better as buying a house with two people involved is a million times easier than with 1 income. It massively reduces your risk in the eyes of a lender. 

Your immediate concern should be about how you are going to achieve the stability in your life in the next few years after graduation. Isolating yourself from friends and perhaps even potential partners is probably not the best way of going about it. 

dude7691

coyrls said:

dude7691 said:

coyrls said:

dude7691 said:

Dh6 said:

You need to remember to live your life!

The decade you’re now in will most probably be the best of your life, LIVE IT!

hence why I'm saving so aggressively to try and change my circumstances so I can have a more balanced life that's actually enjoyable

It looks to me like you're trying to lock in your circumstances, rather than change them.  As others have suggested, your best investment now would be in yourself and your future career.  Try to be more flexible and don't tie yourself down with an early house purchase.  It seem crazy to me that you would move abroad for a cheaper house but tie yourself to your current location for your job search.  There is nothing wrong with renting when you are young, why the obsession with buying a house?

It's mostly focused on the fact that prices at 10% a year will become unobtainable in a hurry, even if I got a decent salary coming out of uni, so 1-2 years makes a huge difference when you have a market inflating so quickly. Rents haven't gone up yet, but landlords won't cope with falling yields forever and I could see rents going up at close to 10% a year also, and no one gets pay increases of 10% a year with a normal job. Hence, the financial side of it is getting on the ladder ASAP even if it's not the perfect time to do so. 

It's not about pay increases, it's about promotions and job changes, i.e. a career.  House prices will not increase at 10% a year every year.  In fact house prices have not increased in England by 10% outside London in any year for the past 5 years (https://www.gov.uk/government/statistics/uk-house-price-index-england-march-2020/uk-house-price-index-england-march-2020):

Yeah that makes sense, I guess I'm young so I'm quite uninformed about how the whole career ladder thing works In any other time period I would agree with you that 10% yearly growth is impossible for more than a year or two, but we have everyone working in tandem to deliberately push prices higher. The government are hellbent on it, the voter base loves it and the central bank are helping them. Banks are handing out mortgages at really high LTV's so access to debt has increased. Looking at Wales, the average last year was just under 10% (9.5% thereabouts), and I wouldn't be surprised to see higher gains this year due to demographic change. London is a different story of course, but that's true of all big cities. 

dude7691

thickasabrick said:

dude7691 said:

coyrls said:

It looks to me like you're trying to lock in your circumstances, rather than change them.  As others have suggested, your best investment now would be in yourself and your future career.  Try to be more flexible and don't tie yourself down with an early house purchase.  It seem crazy to me that you would move abroad for a cheaper house but tie yourself to your current location for your job search.  There is nothing wrong with renting when you are young, why the obsession with buying a house?

It's mostly focused on the fact that prices at 10% a year will become unobtainable in a hurry, even if I got a decent salary coming out of uni, so 1-2 years makes a huge difference when you have a market inflating so quickly. Rents haven't gone up yet, but landlords won't cope with falling yields forever and I could see rents going up at close to 10% a year also, and no one gets pay increases of 10% a year with a normal job. Hence, the financial side of it is getting on the ladder ASAP even if it's not the perfect time to do so. 

I think you are locking yourself into a path when you need to realise there are many paths to reach your destination and your destination will change with time and experience.

You have made an amazing start on the path to financial independence ! 

I bookmarked a few articles when I reviewed my "path" a couple of years ago. I'm quite a few years older than yourself so my perspective is from the other side, as it were. The articles are definitely worth reading, if just to give a few different perspectives.

Lets start with "Renting is Throwing Money Away … Right?" by Paula Pant on affordanything.com
Next is the New York Times "Is It Better to Rent or Buy?" . Someone on here posted to a UK version but I don't have the link to hand.
Followed by "The House Hacking Strategy" by JLCollins , links through to his article "Why your house is a terrible investment" which is also a good read. American bias but the principles apply just as well in the UK.

Finally, if you can navigate their site "Millennial Revolution" have a few good articles on the path they took. Hint - the tag line is "By NOT buying a house and investing instead".

Good luck.

I appreciate that, I understand I am potentially being a bit closed minded when it comes to the future. I don't like uncertainty so I try and control it is as much as I can! I appreciate that, thank you  

I have seen a couple of these I think, especially regarding renting actually being a good investment as it allows you to gain employment in areas you wouldn't be able to buy a house in. It's the opportunity cost of buying a house which is the biggest thing. However, I can't get my head away from the fact that over 50 years or so, you'd be £228k worse off (in today's money) in net worth terms renting a home worth £100k with 2 beds than buying it and that includes maintenance, insurance and mortgage interest (for my specific circumstances). That's with no price appreciation, not letting out a room at 2% inflation per year. I do remember doing a calculation however that you would be about even if you were renting versus buying if you invested instead, with a 6% annual return vs 3% house price appreciation. There's no definite answer but I'd still lean more towards buying personally. 

I will take a look at those, and read them in detail to fully inform any future decisions. Thanks for your good luck wishes and contribution  

dude7691

Amoux said:

I've not read the entire thread but regardless of whether house prices increase/fall in the future, I think you are getting carried away. You are fixating on buying a house way too soon in your life. It's great that you are saving and supplementing your education with an income - that will give you a head start for when the circumstances are right. But buying a house is so much more than just whether you can afford it. 

Owning a home usually requires evidence that your life has some stability. A house requires commitment. A house requires a steady (preferably full-time) permanent job with a proven regular income to meet payments. Mortgage lenders will be heavily assessing your stability as much as your affordability. 

A young graduate is not going to have their life together straight away. It takes some years to  build your career and settle down. Really working out what you want, where you want to live and being commited to it. All this requires some trial and error and soul-searching. It's not something that is easily rushed into. 

In addition, if you can achieve your goals with the help of another likeminded person (say if you were in a steady relationship) then even better as buying a house with two people involved is a million times easier than with 1 income. It massively reduces your risk in the eyes of a lender. 

Your immediate concern should be about how you are going to achieve the stability in your life in the next few years after graduation. Isolating yourself from friends and perhaps even potential partners is probably not the best way of going about it. 

Hi

I appreciate that, and I understand where you're coming from. I've wanted to do this since I was 18 (hence the frantic saving effort) and I'm comfortable just being on an average salary for most of my life and investing everything that I save (minus emergency fund), and having a house means you're hedging against increasing rental costs, which is something I personally fear what with inflation having been so low for so long, there will be another inflationary cycle eventually. I've run the numbers and over a long period of time, it's usually better to buy a house if you can keep it for a lifetime. Plus, then not paying rent in retirement is a huge bonus. I understand that 24-25 is extremely young however, I understand that. I wouldn't mind waiting another few years if prices weren't going up at insane rates, but I have to come to terms with if I don't do it, I may never be able to. It's not ideal  

I would be comfortable working full time, and will do anything I can to secure a permanent role, even if that means I'm moderately overqualified for what I'm doing to raise my chances. Once you've got the mortgage (I'd be doing a 10 year fix), they don't care where the money comes from as far as I know, as long as it's paid. As far as I know, 6 months of payslips is enough for (some) lenders). I'm not pretending that I know everything, I've never done it, just read up a lot on it but obviously the real thing is harder.

I understand that finding where you want to live is difficult. I'm not in denial that there's no chance I'd ever want to move, but if I ended up needing to move I wouldn't hesitate to sell or rent out the property to go and pay rent somewhere else, and then save again whatever extra I needed to buy there. It's a risky strategy for sure, but with prices rising so rapidly it's hard not to be fearful of being priced out forever!

That's another factor entirely, I've had relationships before but I would rather buy alone so I have full autonomy when it comes to selling if I needed to. Plus, I'm one of those people who prefers being single. I understand of course though that it raises borrowing limits and makes you seem more stable (same with why insurance is cheaper), the stats don't lie I guess.

I understand your point. However, I maintain focus far more easily when I'm alone. Plus, the cost of relationships is always alien to me, I've never met someone who is compatible with how I save and my own personal goals (almost everyone my age has given up ever buying a house). I don't spend money on dating either, as I know the stats suggest single people actually spend more trying to find relationships, than those who pay to maintain them. I'm pretty goal driven and am entirely self motivated.

Thank you