clever finance widgit for rent vs. buy debate?

[BERGS2]

though i'd have a go - (sparked by debate with some friends this weekend) - at creating a spreadsheet detailing the returns to opting 'in' or 'out' of the housing market in the medium term.

variables are:

cost differentials of renting & buying

Cost of borrowing £450k around £3000/month
Cost of renting said £500k house around £1500/month

Annual Interest Rate
RPI Inflation
Rent Inflation
Investment returns (for the rent model)

i got it so after 25 years the house would be worth about 700k in todays money bought outright - vs renting and saving the difference netted about £350k, so the best long term position would be to have bought.

these are based - IIRC - on 6% average interest rate, about 3% inflation and about 4% net return to savings...

given that my attempt is crude and dirty - are their online tools for said calculations to see how various scenarios pan out?

Though long term renting would obviously be trounced by homebuying from say 1992 - 2007 in terms of return - i'm not so sure that 2009-2024 will be so clear cut....

anyone got a view?

anyone got a widgit?

Anyone actually read this part of the forums these days?

BERGS.

Edited by BERGS2 on Monday 6th July 13:19

[Bluebarge]

Any such widget can only work on the basis of the situation now, since the housing market in 5-15 years time is unknowable. Best you could do is produce one of those laughably vague BoE "fan" charts which show the broad parameters of what might happen in the near/medium term.Even then, you would just be taking a wild stab in the dark. In any event, since the whole basis of renting is that it can be temporary and transaction costs are low, would it not be better just reviewing the situation every 6-12 months? In my view, it will be impossible to do any long or medium term planning until we have a general election and the full extent of the damage to the economy, and the price we'll have to pay for it, become clear.

[BERGS2]

was more a technical tool that collated the various factors -

bit like these really:

http://www.drcalculator.com/calc/savings.html

http://www.drcalculator.com/calc/smoking.html

[NoelWatson]

BERGS2 said:

RPI Inflation

Why are you using RPI rather than wage inflation?

[BERGS2]

NoelWatson said:

BERGS2 said:

RPI Inflation

Why are you using RPI rather than wage inflation?

just wanted a close proxy for the increase in cost of living, but i guess wage inflation would negate the increase... but the mortgage payments would remain fixed i suppose...

as i say, any help in modelling this would be greatly appreciated!

BERGS

[NoelWatson]

BERGS2 said:

NoelWatson said:

BERGS2 said:

RPI Inflation

Why are you using RPI rather than wage inflation?

just wanted a close proxy for the increase in cost of living, but i guess wage inflation would negate the increase... but the mortgage payments would remain fixed i suppose...

as i say, any help in modelling this would be greatly appreciated!

BERGS

Wages increase on average around 1.9% more than RPI over last 50 years.

Edited by NoelWatson on Wednesday 8th July 08:32