Buy now vs buy in a few years?

daveyjp

Using the 'fag packet' calculation of monthly rent being 5% of property costs - £1100 month would be about £200-250k freehold price.

Exodi

https://forums.moneysavingexpert.com/discussion/comment/82019868#Comment_82019868

Yes, almost certainly a much lower value house than they plan on buying.

TroubledTarts

https://forums.moneysavingexpert.com/discussion/comment/82019868#Comment_82019868

Yet in deepest darkest Essex coast £1000-1200 rent is a 2 bed worth £85-125k.

It all depends on location of course and perhaps that's a big factor too. Buy something smaller now in the most desirable area to outstrip inflation rather than something bigger in a less desirable area.

This stuff does make the mind boggle I find trying to work out what is the best route

Exodi

https://forums.moneysavingexpert.com/discussion/comment/82019938#Comment_82019938

I didn't realise parts of Essex were so cheap (actually scratch that, I had the enjoyment of driving through Jaywick last year so I can believe it)! Here in Kent, £1,100 is a wheely bin (with a lid to stop the rain, very convenient). No in seriousness, in my area it is a 2 bed flat, a house might be around £1.3k-£1.6k. Up North, I heard it is a palace on a private estate. For looking at Rightmove, it seems Cardiff is very similar prices to my local market - £1.1k also looks to be mostly 2 bed flats:

https://www.rightmove.co.uk/property-to-rent/find.html?minBedrooms=2&sortType=6&areaSizeUnit=sqft&channel=RENT&index=0&locationIdentifier=REGION%5E281&transactionType=LETTING&displayLocationIdentifier=Cardiff.html&radius=1.0&minPrice=1100&maxPrice=1100

Agree it makes the mind boggle. It's also interesting because from a strictly financial standpoint, the best option might be renting or buying the cheapest hellhole possible and investing/saving every penny.

But as they say, life is for living and there is a compromise with comfort/enjoyment. We all know eating out or buying branded goods isn't the best financial decision.

One niggle of mine (sorry!), I think suggesting that one should 'buy something smaller now in the most desirable area to outstrip inflation' is akin to suggesting someone should just invest in the stocks that will go up the most in the future or pick the right lottery numbers.

No-one knows which areas house prices are likely to increase by more than inflation in the future, and inherently if it was the case that an area was likely to experience rapid property appreciation (e.g. upgraded transport links, new commercial centres, etc) then houses would have likely already priced this in. If only it was that easy.

Herzlos

One thing you're missing in the rent/mortgage calculation there is that over 5 years the rent will increase so that £709 surplus will shrink over time. It's also not factoring in that the 2 houses aren't of equivalent value but I think that's been covered.

With housing the only sensible time to have bought was years ago, so the sooner you hop on the ladder the better even if you witness a brief dip at some point. Worst case is that in ~30 years it's paid off and you don't need to pay rent at all. Just maintenance.

TroubledTarts

https://forums.moneysavingexpert.com/discussion/comment/82019980#Comment_82019980

Yeah even just down the road in Clacton which is where I based my prices and where we have some of our flats for rent. The rents have gone mad but even at their lowest point £1000 for a 2 bed you can easily find a freehold flat for sale from £100-£125 sometimes cheaper.

Exodi

https://forums.moneysavingexpert.com/discussion/comment/82019994#Comment_82019994

You're right it's clear the 2 houses aren't of equivalent value, this has been recognised but that's also the reason there's nuance in this particular situation.

If the OP was staying in an equivalent house, then as I said earlier:

Exodi

If you have a scenario where the hypothetical mortgage payments and rent payments are the same, then it's probably a no brainer [to buy].

I'm the last person that would suggest renting over buying, it's just in this very specific scenario, particularly where the OP is staying in a relatively cheap rental and has a relatively small deposit, I'm pointing out it's not the end of the world to not buy immediately. They can afford to save up more, potentially lowering their mortgage rate. It's just oversimplified to think everyone should always buy as much and as quickly as they can, but it can be easy to jump to that conclusion if we look backwards at the bonkers house price appreciation of the past few decades. Whether we'll continue to see bonkers house price appreciation for the next few decades is another thing entirely (I personally am not counting on it).

You're right the best time to buy was years ago. Your closing point about buying as soon as possible is the same point TroubledTarts made and I responded to, and the general arguments about buying vs renting over the long term which I don't disagree with… because I'm not anti-buying, I'm a homeowner myself… It's very frustrating because it implies I'm advising the OP not to buy at all… which I'm absolutely not…

All those points are valid about owning the house in 30 years, etc, etc, no one has said they aren't.

This is (was) strictly a conversation about the short term.

RelievedSheff

There is also the other side of this equation that people often overlook. Buying a home isn't all about the monetary value.

It is also about the value you put on living in your own home, having a space that is yours to do with as you please and turning a house into your own home.

Sometimes it isn't about making absolutely the most sensible financial decisions or making the most money.

Herzlos

There's definitely some value in being able to just fix / decorate something without waiting on a landlord to approve or finally send a handyman.

Though if it goes wrong you can't get the landlord to fix it.

saajan_12

https://forums.moneysavingexpert.com/discussion/comment/82019622#Comment_82019622

For those not on the property ladder surely the rent going to waste each month verses a repayment mortgage changes the figures somewhat.

..

House prices don't have to out pace inflation if people are going from wasting money to actually owning more and more of their property each year with a repayment mortgage.

Rent isn't wasted, its paying for the roof over your head. Its just as 'wasteful' as mortgage interest, maintenance, solicitor fees, survey costs, etc on a property you own. People often forget the latter, but your rent is covering more than just the mortgage, you also have to sort your own boiler etc.

The real comparison should be rent vs mortgage interest + maintenance costs. The rest of your mortgage payment is basically moving money from your current account to your house equity.