My obsession with not buying in UK - Prove me wrong

Getting_greyer

Interesting post.  I'm glad you recognised inflation as a factor.  All else remaining equal, the impact of inflation will reduce the purchasing power of the mortgage debt AND the purchasing power of wages to pay rent so debt is helped to pay itself with inflation.  Of course, all else remaining equal rarely happens in the real world.  

I would say, with buying and time, there's plenty of people who now are owning, what many would consider, a dream home. They were only able to do this by buying "up the ladder" so to speak.  

Another factor is that bog standard homes in places like London can be sold and mean mortgage free life in the country cottage.

Low rent with significant investments is another story though.  I guess it's not all about cost, it's about consumer preference.

MobileSaver

RobHT said:

If my rent remains the same (1k), I'll pay 360k in 30y...

Ignoring inflation is one fundamental flaw in your assumptions. You can fix your mortgage payments for 2, 5, 10 or even more years so in 10 years your mortgage payment may not have increased a single penny.

On the other hand, rents have gone up by more than 30% in the last 10 years alone so it is pretty much guaranteed that the rent you pay out over your 30 year time period will be more than the cost of buying.

RobHT said:

I add the who buys an house has to consider the re-mortgage payments quite frequently, but I also need to re-consider the possibility to be kicked out many times, so I consider this as pair.

Sorry but that's an absurd comparison.

Most people these days take out a five year fixed rate mortgage and almost all the rest at least a 2 year fixed, so home-owners only have to consider re-mortgaging every few years and then it's just a case of choosing the best deal at the time based on an ever-decreasing loan amount. It's a trivial exercise you can do in the comfort of (ironically) your own home by clicking a few options on a computer screen.

How anyone can compare that with being forced many times to leave your home and having to find somewhere else to live is completely beyond me.

RobHT

[Deleted User] said:

You will be boned when you reach retirement and can't afford the rent.

I think I know what do you mean, but I also mentioned the breakdown of cost.
Plus, it won't be in that way, the economy will go ahead, the salaries need to increase, it's the way the economy works.
Obviously it's not that easy, not every single year.

I'm more concerned about if something happens to me and I can't work, but at least I don't lose the equity in my house because I need to declare bankrupcy, with rent I don't lose anything as such, reason why I pay so much for insurances, but it's the same for who pays the mortgage, that would require an additional insurance btw, the mortgage insurance.

lookstraightahead

[Deleted User] said:

You will be boned when you reach retirement and can't afford the rent.

Eloquently put 🤣

it does depend on other savings / investments though. Lots of people still have mortgages into their seventies, many want to work above 50 (I really couldn't see myself retiring so early in life but I have my own business and enjoy my job).

RobHT

Getting_greyer said:

Interesting post.  I'm glad you recognised inflation as a factor.  All else remaining equal, the impact of inflation will reduce the purchasing power of the mortgage debt AND the purchasing power of wages to pay rent so debt is helped to pay itself with inflation.  Of course, all else remaining equal rarely happens in the real world.  

I would say, with buying and time, there's plenty of people who now are owning, what many would consider, a dream home. They were only able to do this by buying "up the ladder" so to speak.  

Another factor is that bog standard homes in places like London can be sold and mean mortgage free life in the country cottage.

Low rent with significant investments is another story though.  I guess it's not all about cost, it's about consumer preference.

I also considered the inflation when I mentioned the costs for maintenance etc, I didn't mention it though, nice spot.
I noticed that I've been conservative .

Rent will increase, but also wages, that's how it works, I'll never be able to safely sustain a 3 beds house of 300 m2 for example, or 4 beds of 150 m2, but the whole point is that the wages will increase, if not, we'll all finish to live like in Japan, we are already on that road btw .

Low rent doesn't necessarily mean something if you don't mention a specific case, for example, something that I'd really like would cost me 1100 per month right now, the mortgage could cost 1200 or the same amount.
So, not even making a breakdown about it, I can already say that the cost or purchase is too high.
Then, if I think about the help to buy, it's even more than a trap, especially in the London zone .

RobHT

lookstraightahead said:

[Deleted User] said:

You will be boned when you reach retirement and can't afford the rent.

Eloquently put 🤣

it does depend on other savings / investments though. Lots of people still have mortgages into their seventies, many want to work above 50 (I really couldn't see myself retiring so early in life but I have my own business and enjoy my job).

If I succeed in my investments, I'll retire much sooner, but I know that it will not go well, so I consider to work as everyone else until I'm a crappy old man (67y).

In my situation, I have a very complex portfolio, the only reason is to create an income from it, rather than put it on an house.
Don't get me wrong though, if the house prices drop significantly, I'd evaluate a purchase, but only if I really have tons of cash, which is a bit hard to realise.
Plus, I'd prefer to invest in income funds, rather than buying house, that would be my great life insurance that no one gives you.
The only way to offset the inflation though is to invest also in a fund for growth, or re-invest a significant part of the money you get from that income fund in the same income fund, the same thing that your pension fund manager does most probably.
The difference is that you need to do the job.

Getting_greyer

RobHT said:

Getting_greyer said:

Interesting post.  I'm glad you recognised inflation as a factor.  All else remaining equal, the impact of inflation will reduce the purchasing power of the mortgage debt AND the purchasing power of wages to pay rent so debt is helped to pay itself with inflation.  Of course, all else remaining equal rarely happens in the real world.  

I would say, with buying and time, there's plenty of people who now are owning, what many would consider, a dream home. They were only able to do this by buying "up the ladder" so to speak.  

Another factor is that bog standard homes in places like London can be sold and mean mortgage free life in the country cottage.

Low rent with significant investments is another story though.  I guess it's not all about cost, it's about consumer preference.

I also considered the inflation when I mentioned the costs for maintenance etc, I didn't mention it though, nice spot.
I noticed that I've been conservative .

Rent will increase, but also wages, that's how it works, I'll never be able to safely sustain a 3 beds house of 300 m2 for example, or 4 beds of 150 m2, but the whole point is that the wages will increase, if not, we'll all finish to live like in Japan, we are already on that road btw .

Low rent doesn't necessarily mean something if you don't mention a specific case, for example, something that I'd really like would cost me 1100 per month right now, the mortgage could cost 1200 or the same amount.
So, not even making a breakdown about it, I can already say that the cost or purchase is too high.
Then, if I think about the help to buy, it's even more than a trap, especially in the London zone .

Not sure you have understood the point I made about the impact of jnflation on wages and debt. Or more likely I've explained it poorly. But I'm not sure what you mean about wages, square footage and Japan paragraph.

What I meant about low rent is that if you live with low rent, you can increase your investment into othet assets.  Which means you're not relying on mortgage free in retirement as your assets could provide that. 

onylon

Buying is a risk (as with any investment) so no one can prove that it's a good/bad idea. That's before you even consider personal circumstances, aspirations and lifestyle.

For me it was right to buy in 2009.

ProDave

About 20 years after buying my first house, I had paid off the mortgage and owned it outright.

Yes i had probably paid in total with interest, twice what the house cost, but it was then worth that much anyway.  And yes I still have to pay council tax, energy bills, insurance and maintenance.

You pay all of those, except maintenance if you are renting.

If you don't like that idea, then be my guest and carry on renting.  BUT be sure to put MORE into your pension provision than I did, so that you can continue paying rent in your retirement.  I only need enough pension to pay the other bills.

TheJP

You spend x renting

You spend y buying

At some point y will no longer be an element of expenditure apart from minimal costs.

x will pay out 0 equity

y will pay out equity