Is buying a house a good investment?

Stubod

...looking forward to crashy's comments on this one...always entertaining......!!!......

BikingBud

FrugaiMacDugal said:

Thinking of a move, I don't buy to make money, oh, and I'm not up market posh, as you will see with house prices.

Just need quietness, good neighbours, and no hassle over whose fence is it, when it blows down, arguments over 1 inch boundary dispute, etc.

Anyway, had a look at my previous house moves,

Bought	Price	Fees	Sold	Price	Fees	Balance	!!!!!!
14/06/83	6355	240	31/07/98	31000	943	23462	23462
08/05/98	38500	558	09/07/99	41000	1168	775	24236
09/07/99	29750	419	24/04/09	55000	1287	23545	47781
07/11/08	72222	746	28/03/18	73000	1587	-1555	46226
21/11/17	70000	840				-70840	-24614

maybe worth 75 now, so in 42 years £50k profit?

Unsure what your figures actually mean as the apparent current debit of -£70840 needs to be reflected against full cost of the asset. Although those might be purchase prices you need to include mortgage interest and other costs to really understand if you are up or down.

And you would also need to consider other avoided accommodation costs as an offset?

That aside the question is not binary.

Some have been very lucky seeing the value increase by many multiples of original purchase price and claimed it all as their hard work when the only thing they have done is service a mortgage, at an artificially low rate for an extended period, sat back and seen the HPI kick in. 

It would appear that house value increase has far exceeded increases elsewhere, eg stock and shares so appear to be a good investment. However the reality is that for most it is somewhere to live, somewhere to raise a family, somewhere to have respite from pressures of work and the outside world. For others the reality is quite different as they encounter problems with neighbours. How do you put a value on happiness and tranquility?

Bigphil1474

newsgroupmonkey_ said:

Bigphil1474 said:

It's not £50k profit. As others have said, you have to live somewhere. You've saved not having to pay rent by buying a house. But you've also had to pay mortgages (presumably) so have had that cost. You will also have paid interest on the loan plus maintenance costs on the property. Can't remember seeing a house that was cheaper to rent than an equivalent house would be to buy - usually the owner has a mortgage, adds something on top for any costs and some profit and that's your rent value, and even if they don't have a mortgage, market rate is usually more than a mortgage alone. It's not like you can take the money you pay for a mortgage and invest it in stocks and shares to make more money, because you still have to live somewhere. So yes, if you need somewhere to live, buying a house is a good investment, especially if you retire and the mortgage is paid off.

We bought our house in '96 for £45k, and sold it last year for £180k. Paid about £100k in mortgage over 25 years (with a little re-mortgage in the middle), so still well ahead. We'll never see that profit obviously.

Whilst I'm not anywhere near the Crashy school of thought in terms of renting somewhere then investing some additional money and then not actually owning anything......

For logistical and financial reasons, we decided to buy rather than rent from 2013 to 2019 in Beds/Bucks/Herts area.

We were the first people to move in and the house had cost the landlord had just bought the house for £227,000 cash.

Now had we bought it ourselves in 2013 with a 95% mortgage, the best we could have hoped for was around 4% (yes, base rates were 0.5%, but mortgage rates weren't) on a 5 year fixed.

The monthly mortgage payments would have been around £1150.
As it was, we rented initially for £900. By the time we moved out 5 years later, it was £1050.

That's not clever mathing though. Your rent was 100% money spent paying for somewhere for you to live. All other things being equal, the mortgage payment will have been partly paying into the property equity, and partly paying the interest, as well as giving you somewhere to live. In your example, compare the rent being paid against the interest payment ('lost' money), not the total mortgage payment. You would make some back saving £250 a month initially, but not much at that time given the low interest rates.

In my example, all the money we paid out, we basically got back. We wouldn't have got any of the rent we could have paid,  back. We might have made more investing it, but we had to live somewhere.

Dustyevsky

I can look back on almost 50 years of 'ownership' (in inverted commas because you don't own it until it's paid for.)

The first house cost a shade over 9k. The one I'm in now is worth around £650-700k.

Could I have achieved that growth in wealth some other way? Possibly. Gold was £100 an ounce in 1977, so if I'd bought 90 ounces instead of a house and buried it, my investment would be worth not quite £212k now. That's what I'd call totally 'passive investment.' Someone would have no difficulty improving on that!

But hang-on, I didn't have £9k, I had £2k deposit and a nice building society lent me the rest. I also required somewhere to live, and otherwise I'd have continued to pay rent in an increasingly popular location.

Rightmove tells me if I'd remained in the same 'starter' house, it would now be worth about £550k. That beats gold hands-down, but ownership wasn't passive. We (i bought before marriage) made a lot of improvements. We also loved the location.

After 10 years, our first house was too small for a family, so we upsized. That second house is now worth about £680k, but again, many improvements were made, and an extension was built. We loved the location even more.

It was only when we moved to our current property that we could pay outright. This is a 'lifestyle' property. As we were unsure if it would suit us, a large wodge of cash was retained. Then, after 5 years, major refurbishment and extension followed. In other words, we invested in the way of life as well as in the property. This is our favourite place to date, especially now we're a bit grey!

Obviously, if we'd just stayed in the city, the wealth, represented by the value of our house, would have remained roughly the same, without all the work we've put in. However, we've enjoyed, and continue to enjoy, the work and lifestyle.

So I think it's possible to see a house as a form of investment, and it can be a reasonable one with canny buying, particularly that first house. However, to see that investment turned into cash, one has to sell, and either downsize, or move to a less desirable area. We've never done that. A house is not the most liquid asset. Above all else, if one doesn't enjoy living in it, then whatever 'return' it achieves, simply isn't worth it. 

horsewithnoname

You buy a house because you want a secure home that you will own in time and no one can throw you out on a whim. 

It’s not an “investment”, and if you think that way then that’s what’s wrong with housing in this country. 

jimbog

horsewithnoname said:

You buy a house because you want a secure home that you will own in time and no one can throw you out on a whim. 

It’s not an “investment”

This ^^.  A poster recently was asking for advice regarding an 80 year old being asked to leave by a landlord and had nowhere to go. You really don’t want to find yourself in that situation 

RelievedSheff

newsgroupmonkey_ said:

Bigphil1474 said:

It's not £50k profit. As others have said, you have to live somewhere. You've saved not having to pay rent by buying a house. But you've also had to pay mortgages (presumably) so have had that cost. You will also have paid interest on the loan plus maintenance costs on the property. Can't remember seeing a house that was cheaper to rent than an equivalent house would be to buy - usually the owner has a mortgage, adds something on top for any costs and some profit and that's your rent value, and even if they don't have a mortgage, market rate is usually more than a mortgage alone. It's not like you can take the money you pay for a mortgage and invest it in stocks and shares to make more money, because you still have to live somewhere. So yes, if you need somewhere to live, buying a house is a good investment, especially if you retire and the mortgage is paid off.

We bought our house in '96 for £45k, and sold it last year for £180k. Paid about £100k in mortgage over 25 years (with a little re-mortgage in the middle), so still well ahead. We'll never see that profit obviously.

Whilst I'm not anywhere near the Crashy school of thought in terms of renting somewhere then investing some additional money and then not actually owning anything......

For logistical and financial reasons, we decided to buy rather than rent from 2013 to 2019 in Beds/Bucks/Herts area.

We were the first people to move in and the house had cost the landlord had just bought the house for £227,000 cash.

Now had we bought it ourselves in 2013 with a 95% mortgage, the best we could have hoped for was around 4% (yes, base rates were 0.5%, but mortgage rates weren't) on a 5 year fixed.

The monthly mortgage payments would have been around £1150.
As it was, we rented initially for £900. By the time we moved out 5 years later, it was £1050.

You are not quite comparing apples with apples though. Had you bought the house you would have been gaining some equity with each repayment.

Our neighbours house is exactly the same as ours but rented.

The same couple have been in the house since it was built so for 6 years the same as us. Their rent started at £1100pcm and is now £1300pcm so call it £1200pcm on average. so in the six years they have been there they have paid £86400 in rent to their landlord.

In that same six years we have gone from having 10% equity to 55% equity in our property for paying a similar amount to the bank. In a further six years we will be mortgage free, the neighbours will still be paying the landlord their rent, most likely at a higher amount.

newsgroupmonkey_

RelievedSheff said:

newsgroupmonkey_ said:

Bigphil1474 said:

It's not £50k profit. As others have said, you have to live somewhere. You've saved not having to pay rent by buying a house. But you've also had to pay mortgages (presumably) so have had that cost. You will also have paid interest on the loan plus maintenance costs on the property. Can't remember seeing a house that was cheaper to rent than an equivalent house would be to buy - usually the owner has a mortgage, adds something on top for any costs and some profit and that's your rent value, and even if they don't have a mortgage, market rate is usually more than a mortgage alone. It's not like you can take the money you pay for a mortgage and invest it in stocks and shares to make more money, because you still have to live somewhere. So yes, if you need somewhere to live, buying a house is a good investment, especially if you retire and the mortgage is paid off.

We bought our house in '96 for £45k, and sold it last year for £180k. Paid about £100k in mortgage over 25 years (with a little re-mortgage in the middle), so still well ahead. We'll never see that profit obviously.

Whilst I'm not anywhere near the Crashy school of thought in terms of renting somewhere then investing some additional money and then not actually owning anything......

For logistical and financial reasons, we decided to buy rather than rent from 2013 to 2019 in Beds/Bucks/Herts area.

We were the first people to move in and the house had cost the landlord had just bought the house for £227,000 cash.

Now had we bought it ourselves in 2013 with a 95% mortgage, the best we could have hoped for was around 4% (yes, base rates were 0.5%, but mortgage rates weren't) on a 5 year fixed.

The monthly mortgage payments would have been around £1150.
As it was, we rented initially for £900. By the time we moved out 5 years later, it was £1050.

You are not quite comparing apples with apples though. Had you bought the house you would have been gaining some equity with each repayment.

Our neighbours house is exactly the same as ours but rented.

The same couple have been in the house since it was built so for 6 years the same as us. Their rent started at £1100pcm and is now £1300pcm so call it £1200pcm on average. so in the six years they have been there they have paid £86400 in rent to their landlord.

In that same six years we have gone from having 10% equity to 55% equity in our property for paying a similar amount to the bank. In a further six years we will be mortgage free, the neighbours will still be paying the landlord their rent, most likely at a higher amount.

I completely agree about gaining equity and eventually not having any "rent" to pay.
I was replying to someone who said that rent was always more expensive than the monthly mortgage cost.

Let's not get on our high horses and pretend that everyone can save £29,000 on a whim, whilst trying to balance finances, family and any other financial strains. After all, it's less than their take-home salary for an entire year*

*Based on 10% deposit on an average priced house bought by someone on the mean average UK wage.

Stubod

https://www.youtube.com/watch?v=OtB4gmSi35k

theartfullodger

Sometimes.

Don't believe the myth that property prices always go up.. especially from the red tops.  Sometimes does, sometimes doesn't.

Also depends what you buy, where & for how much.  Plus what happens to your circumstances - if things had gone badly wrong (sickness, loss of job..) I would likely have gone bust at various times.

Are you a gambler?? Do the lottery??