House Price Crash!

rozeepozee

deemy2004 wrote:

Yeh, ...chain.

On a flip note, I love it when Deemy posts as his avatar is gorgeous! :rotfl:

John_M_Business

rozeepozee wrote:

Ho-hum, I swore I wasn't gonna get drawn into this one but I cannot help myself :rolleyes: John, are we forgetting the cost of mortgage payments here again???

My reply was to meanies' post about 'saving' £3,000. He hasn't, of course... unless the word 'save' is stretched to it's furthest extent.

As for owning a house, it's about the equivalent of shareholding in a house. So it's not fair to say that someone doesn't own any part of a house when the buy - they own the difference between the sale price and the mortgage... and as they pay off, they own more and more of the house. Obviously at 10 years they'll own far less a proportion of it than at, say, 20 years.

rozeepozee

John_M_Business wrote:

As for owning a house, it's about the equivalent of shareholding in a house. So it's not fair to say that someone doesn't own any part of a house when the buy - they own the difference between the sale price and the mortgage... and as they pay off, they own more and more of the house. Obviously at 10 years they'll own far less a proportion of it than at, say, 20 years.

I think that's probably a good analogy. And it comes down to that old cherry again, will house prices rise or fall, if the cost of housing goes down so does your shareholding, so it's not an absolute that you will own a larger share in years from now.... (Stop me now, I said I wasn't going to go there!)

Spendless

rozeepozee wrote:

I admire your passion, Ember, but I beg to differ. You do not own your house until the mortgage is paid off (and that could be in 25 to 50 years, if at all?) and for the majority of mortgages the early years are spent paying off loan interest to the bank, the money is not going towards reducing the capital owed. In a stagnant or falling market, so long as your rent is the same or less than the mortgage payments, you'd be far better off saving the difference, with your deposit money in the bank earning you interest, rather than risking it in a potentially depreciating asset. In my mind in the current economic climate, all 'buying' amounts to is renting your house from the bank.

Don't you have to put more into the equation than that. My sis bought a 3 bed semi at 20, she has no intention of moving. At 45 she has no more mortgage to pay. Assuming she lives till 75 that's 30 years mortgage free. Of course if she dies during the course of or just after her mortgage is paid possibly she would have been better off renting though you'd still have to take into account other things like cost of mortgage vs rent/repairs etc.

Are all the members who currently rent though intending to rent till the end of their days or do they one day intend to buy (when/if the houses come down in price)?- Just interested to know

meanmachine_2

I'm perfectly happy to buy (since it makes complete sense in the longer term) when/if house prices are back to their historical average.

No doubt by then, interest rates will be higher, but that will just help those with more cash to put down.

I'm bored of savers being penalised and reckless spenders being given a leg up. It's brought us to this - a huge debt mountain and an economy built on shops and services, with falling productivity.

I work in the private sector and I'm a wealth creator. I'm sick of having to support pointless jobs in the public sector, and the sooner there's a shakedown in the economy - ridding us of those bogus jobs that serve no real purpose, the better!!

Rave

John_M_Business wrote:

My reply was to meanies' post about 'saving' £3,000. He hasn't, of course... unless the word 'save' is stretched to it's furthest extent.

I'm surprised meany himself hasn't replied to this, because as a regular reader of this forum I seem to recall from his previous posts that:

a) rents in his area (and more specifically on the property that he lives in) are less than the interest on the mortgage necessary to buy an equivalent property
b) he is putting the difference (and possibly more) into a savoings account of some sort, and
c) property prices in his area are static, or going down.

So, it seems to me that in every sense of the word he will have saved money, possibly a lot more than £3000?

Ember999, rozee has already replied to you, but to say it again: in the long term, you are correct. In the short term, I.E. right now you are definately not. If it costs more in interest to 'rent' the money from the bank (in the form of a mortgage) than it does to rent the property from a landlord, then unless property prices are rising (which they're not right now) you are better off renting.

I'm in this position. The interest on the mortgage necessary to buy the flat I live in would be considerably more than the rent I'm paying- and I'd also have more expenses like ground rent and insurance. It's immaterial to me since I couldn't get a mortgage in any case- but I'm certainly not losing out.

meanmachine_2

Rave, thanks for replying on my behalf.

I'm getting so bored with property now, that I simply couldn't be naffed to respond.

I think it's the weather. And the lack of movement on interest rates. And the soggy, contradictory house price indices.

A rampant market gets my gander up, and puts fire in my blood, just as a plunging market would do. But a flat one going nowhere, chock full of stupidly overpriced tat (which is where we are heading into winter) just doesn't interest me.

I'm a massively unmotivated FTBer. The only thing that irks me is SIPPs. But I suspect that's another red herring - just like Brown's non-existent part ownership scheme.

Let's leave sellers to stew till the Spring. I'm bored now.

coolagarry

As someone who joined the property owning democracy at the age of 22, aged 61 I now have a house worth £400,000 and no morgage (and havent had a morgage for the past 10yrs) and over that period I have paid the equivalent of rent each month (apart from the past 10 yrs). I have no arguments with buying as against renting.
Incidentally often during that time I have had people arguing with me that renting was a better proposition.
Nonetheless there is another side to the argument and I think it is very well laid out herehttp://www.fool.co.uk/news/foolseyeview/2005/fev051020c.htm
In the end ' You pays your money and you makes your choice'

John_M_Business

Rave wrote:

I'm surprised meany himself hasn't replied to this, because as a regular reader of this forum I seem to recall from his previous posts that:

a) rents in his area (and more specifically on the property that he lives in) are less than the interest on the mortgage necessary to buy an equivalent property
b) he is putting the difference (and possibly more) into a savoings account of some sort, and
c) property prices in his area are static, or going down.

So, it seems to me that in every sense of the word he will have saved money, possibly a lot more than £3000?

Only b) in your list is ACTUALLY saving money and only on the basis that he would not have been able to save the equivalent were he to have a mortgage (did you know that there are some people that are actually able to save as well as pay off a mortgage - on reading this board you would have thought this akin to splitting the atom).

The other two points are perceived savings... a) is only if he buys a property of the same size - often when people buy they trade down a little on the purchase to get on the ladder. If point c) was used then, I'm afraid this is mere conjecture.

meanmachine_2

John, don't worry about my finances. Like you, I'm a money saver, so I've done the sums.

I also keep a close eye on the area where I'm ultimately looking to buy. Prices aren't going up.

If they do start to, and the rises seem sustained, then I'll buy. To not do so would be a money losing exercise.