House prices..
- Thread starter fendi
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Renting at the moment in Harrogate is much cheaper than buying.
We're in a 3 bed semi with garden and garage and pay £650 a month. The same house to buy would be about £220K, so say after putting down a deposit the mortgage would be about £1200 a month, about double. Coupled with prices going down (this house would have lost about £5k this month, and looking at how prices are going down in the paper I think its probably more) we'd be mad to buy a house at the moment, which is typical as we've just got our deposit together hah. We'll hang fire another 6 months or so and see what happens.
We're in a 3 bed semi with garden and garage and pay £650 a month. The same house to buy would be about £220K, so say after putting down a deposit the mortgage would be about £1200 a month, about double. Coupled with prices going down (this house would have lost about £5k this month, and looking at how prices are going down in the paper I think its probably more) we'd be mad to buy a house at the moment, which is typical as we've just got our deposit together hah. We'll hang fire another 6 months or so and see what happens.
I plan (and am budgeting) to wait until I have a 35-40% deposit, and then I will start to look for a house to buy, in the £250-£300k price range - unless I leave Cambridge in which case I would (depending where I moved) be able to afford more for less.
Currently renting is the best option for me. Of course things change. If I were to get married (gah), or consider buying with someone else, I have enough for a good deposit now, on a joint mortgage.
Renting is no more dead money than the interest on the mortgage. If renting is less than mortgage it's cheaper, allowing you to save more than you would otherwise be paying off in capital. It most of the country you can now rent for less than interest, costing you less, allowing larger savings and increasing your networth.
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Soldato
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Being a home owner is fanatically beneficial in the long term providing house prices rise, which historically they have. That's why many people deem it essential to be a home owner. There are also many other benefits including piece of mind over your place of residence as you can't be evicted providing you keep up your mortgage repayments. This is very important if you have a family. It also gives you a lot more flexibility over modifications and improvements to property which is reliant on the landlord if you rent. You also have something to fall back on in retirement or have something to pass on to kids should you wish.
Also people from middle class home owning families find themselves priced out of the housing market through no fault of their own apart from the date they were born. This leads to feeling of failure because they can't afford what their parents could despite earning comparative salaries and living in similar areas.
I know it makes financial sense, and I would want to have a house before considering starting a family. It is currently out of my scope sadly.
Just FYI but under the old "prudent" mortgage lending arrangements, the rule of thumb was you could borrow 3.5x a single salary or 2.5 times a combined salary with your wife (as people didn't live in sin back then
) So your example breaks the prudent rules by the same amount I did 
Also, I did have a £40k deposit lol. Nice to see that being eaten away...
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What do you define as a crash?
And even if there is one, my prediction about it not happening without an outside influence (the credit crunch caused by mistrading of debts by banks) is still true
The HPI only occurred because of an abundance of cheap credit. The credit is gone, so the market WILL crash. All this rubbish about sound fundamentals, immigrants boosting demand etc. is now being seen for what it is - utter tosh!
I rest my case
Stinky I believe you are an EA? So I imagine you are somewhat biased? How can you deny the above example does not equate to renting being better value than buying?!
Soldato
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One interesting thought I’ve had relating to house prices is very similar to what’s happening now with pensions. I like to think of it as the house price time bomb.
Many of the baby boomers are home owners, and many (like parents) are divorced and own a house each. In 15-20 years time when the baby boom generation reach that enviable time in their life, the vast majority of houses will be sold. This will release a large number of big family homes on to the market which I can only see having a negative impact on house prices. I think this could cause the historic long term rise in house prices to subside and eventually plateau (even slowly drop) as the demographic stabilises.
Many of the baby boomers are home owners, and many (like parents) are divorced and own a house each. In 15-20 years time when the baby boom generation reach that enviable time in their life, the vast majority of houses will be sold. This will release a large number of big family homes on to the market which I can only see having a negative impact on house prices. I think this could cause the historic long term rise in house prices to subside and eventually plateau (even slowly drop) as the demographic stabilises.
Sure, this is something I've touched on when similar threads were around a couple of years ago. I've never disputed the fact that are additional benefits to owning your own home - I just don't think it is the be-all and end-all.
You could say this about many things though... you just have to put up with the benefits and disadvantages of the year you were born into (life expectancy, suffrage, benefits system, conscription, student grants... e.g. my sister got at least £5k more in grants than I did in spite of the fact that by definition we come from the same family background, simply because she was 3 academic years ahead of me).
In any case, in essence this merely serves to drive home my point about the mental nature of the problem - if people feel a failure because they can't afford a posh 4 bed semi at the same age as their parents, this is all just serving to prove how this attitude has taken hold in society. We are basing our goals based on what happened to people in a different generation, not on the current facts and financial climate of the present.
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I rest my case
Stinky I believe you are an EA? So I imagine you are somewhat biased? How can you deny the above example does not equate to renting being better value than buying?!
sorry but not at all. but again it totally depends where you are buying or renting lol
Looks like you've been one of the unlucky ones, apologies if you thought I was jumping on you.
Just had a decko at rental prices in the area we're looking to move to. Seems to be around £1000-1400/month for the type of properties we are considering, which would cost around £220-270k to buy. Although that was only a very brief comparison.
One of the troubles with moving of course is the cost/hassle of the actual moving and selling your existing property. I can see why people looking for their first home would consider renting for a bit, ride out the storm and then look to snap up a bargain following a fall in prices. But it's not quite so simple for existing homeowners and with a large emount of savings and equity in our current home I still feel like shovelling the majority of our cash into a new home is the way forward, rather than trying to seek out some sort of investment pot alongside renting.
One of the troubles with moving of course is the cost/hassle of the actual moving and selling your existing property. I can see why people looking for their first home would consider renting for a bit, ride out the storm and then look to snap up a bargain following a fall in prices. But it's not quite so simple for existing homeowners and with a large emount of savings and equity in our current home I still feel like shovelling the majority of our cash into a new home is the way forward, rather than trying to seek out some sort of investment pot alongside renting.
Soldato
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So what would you consider the be-all and end-all? Where I live happens to be very important to me.
It's a very fundamental change to deal with over a single generation. It's not about affording a "posh 4 bed semi". A one bed flat is beyond the realms of possibilities, and I wouldn't consider myself a low earner.
Me too, I wouldn't start a family in a rented accommodation. Luckily my gf owns two properties, but she's five years older than me, which kind of proves my point.
None of this really maters anyway, because house prices will fall.
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I went into this with my eyes wide open. I knew it would be a long time before I saw that equity again. Currently my mortgage provider is offering a 5.39% mortgage fixed for 2 years with a 10% deposit, so it's not all doom and glood. As long as I stay employed I'll be alright - I bought my home to live in it, not as an investment.
Like I said, it's up to the banks how bad this crisis is - if they force people onto SVR mortgages at the end of their fixed term rates then they'll make things worse for everyone, themselves included.
Health of myself and family, long-term security, overall quality of life/happiness, stuff like that.
My view is that that is achievable without owning one's own home. For example given then choice between
1) Owning my own home, but really struggling to pay the bills and put food on the table, working really long hours, constantly stressed, never having any free time etc; and
2) Not owning my own home, but having an overall good quality of life with plenty of luxuries and free time
...I'd probably go for the latter. That's what I mean by it not being the 'be-all and end-all'.
You've missed perhaps the largest factor is that there is virtually no inflation. Unless you have an uncapped variable rate mortgage then you won't suffer the price increases that landlords can and invariably do tack on to rent renewals. You also have equity which can lead to lower cost loans and remortgage at a later stage should you wish to go down that route. At the moment more than 1/2 my monthly mortage payment goes towards the balance. I look at the interest as a kind of rental, a rental which reduces each month.
I didn't buy my house because the value might go up and this is where the UK makes a mistake. You buy a house to live in it, you shouldn't see it as merely an investment.
Yup, problem is that if you get a 200k mortgage on fixed rate then it gets reviewed after 2 years and the value of your property is now 175k expect the bank to up your rate as you now have effectively a 25k unsecured loan with them.