Terrible time to buy a house?

[menousername]

Neil H said:

but that’s why you have to work your way up the ladder. What you’re effectively doing is paying the same amount that the interest would be on a mortgage for the house, but not taking advantage of the capital appreciation.

thats the problem now though

the ladder is broken and its a long way to fall

people could work their way up before, into houses they could not really afford outright, due to capital appreciation... and more recently due to near zero interest rates

people joining the ladder now need deposits of a size existing owners never needed, or funded through capital appreciation, still leaving an eye-watering balance on mortgage against an inevitable increase in rates.

Even if prices do continue to rise, it will not be anywhere near stellar the capital appreciation enjoyed by others before now

everything is off....everything is broken...timing is off, prices are too high and appreciation likely to slow or ground to a halt... repayments likely to rise... to get on the ladder you have to max yourself out to amounts not previously seen... there is no longer the security of guaranteed appreciation so that is a huge amount of debt to service... however unlikely, there is a real risk of a fall in prices or a market shock... the old way that got us here is gone... over

[princeperch]

gibbon said:

Welshbeef said:

So for me - I don't believe they will fall nor have I so am not selling any and/have been actively looking for additions. My view is long term it's only going one way plus I really like leveraged returns.

You wont like leveraged returns on properties so much once the tax relief on the mortgage ends.

as a landlord yourself - what are you planning to do about that?

[wiggy001]

Neil H said:

It’s not just in quiet little villages though. I’m in the suburbs of SE London/ Kent and a recent proposal to replace a couple of ugly 1970s blocks of flats with 4 slightly larger blocks (effectively double the number of flats) is being met with resistance from locals. This is 5 minutes walk from a major rail station/ town centre. People become very selfish once they’ve got what they want and will resist absolutely every form of development in their locality – particularly the older generation.

I'm in the same area (between Swanley and Dartford) - interested to know which town/blocks of flats you're talking about?

[wiggy001]

youngsyr said:

What we need to do is stop shoe-horning blocks of flats and tiny houses into town centres and their fringes and start creating entirely new towns, complete with well-thought out infrastructure and room for growth.

Of course, that costs money, so no developer or politician is interested.

I give you Ebbsfleet Garden City

[gibbon]

princeperch said:

as a landlord yourself - what are you planning to do about that?

Im not highly leveraged, my mortgage is paid for from my regular monthly income, my rent 'income' goes into my pension, so im hoping as long as work is ok, then i should be ok.

I also plan to have the mortgage paid off before relief has been totally removed, hopefully.

I was considering buying another buy to let instead of paying down my existing ones mortgage, I wont now be doing this.

[Cheese Mechanic]

Neil H said:

Renting long term is financial suicide IMHO. That 15k a year is going nowhere - you are actually spending the money - whereas a mortgage is paying off an asset that you will eventually own outright. You’re right in that 15k a year will probably not get you into a 550k house unless you have a large deposit, but that’s why you have to work your way up the ladder. What you’re effectively doing is paying the same amount that the interest would be on a mortgage for the house, but not taking advantage of the capital appreciation.
If you can still afford 15k a year rent when you are 80 then it’s no problem, but most people will be far from being able to afford that kind of rent on a pension.

Thats just about how I see it. I bought my first house at 21, and had paid off the mortgage before I was 30. I then moved up market, over the years.

Much hard graft later I basically had no need to work from age 45. One of the key reasons I was able to do that, was not a penny in debt, mortgage free etc. Its a remarkable thing, of just how little you really need income wise to lead a good life if you have no mortgage or rent to pay. To say nothing of the security it gives, which is beyond price.

[avinalarf]

Cheese Mechanic said:

Thats just about how I see it. I bought my first house at 21, and had paid off the mortgage before I was 30. I then moved up market, over the years.

Much hard graft later I basically had no need to work from age 45. One of the key reasons I was able to do that, was not a penny in debt, mortgage free etc. Its a remarkable thing, of just how little you really need income wise to lead a good life if you have no mortgage or rent to pay. To say nothing of the security it gives, which is beyond price.

Well done....curious to know what figure you put on an annual income you need to lead "a good life" in the circumstances you describe.
And what do you call "a good life" as that's rather subjective.

[avinalarf]

M

Welshbeef said:

Exactly - it's all well and good preaching doom and gloom (while actually being on the merry go round) and maybe convincing some to not get on and then don't really believe what they say so don't sell up.



If you were convinced the market was really overheating in 2006/7 why not sell all bank shares and invest in betting that the prices fall hard. Not doing something you tryely believe following logical reasoned analysis means your simply following average Joe vs taking a risk and backing yourself.

So for me - I don't believe they will fall nor have I so am not selling any and/have been actively looking for additions. My view is long term it's only going one way plus I really like leveraged returns.

Conversely I'm pretty reluctant to pull the trigger on a classic car even though I really do want one as I view it too much of a bubble for my risk profile and at the end of the day they are not necessary they are a luxery hobby which when things go wrong all those buyers vanish.

It might depend how much that classic costs in proportion to your disposable income.
The pleasure the car might bring you might far outweigh its monetary value.
What's the point in hard graft if you can't treat yourself now and again.
You know what they say about knowing the price of everything and the value of nothing.
Not having a dig .....just saying.

[Neil H]

wiggy001 said:

I'm in the same area (between Swanley and Dartford) - interested to know which town/blocks of flats you're talking about?

Bromley - just up the road from Bromley South.

[Cheese Mechanic]

avinalarf said:

Cheese Mechanic said:

Thats just about how I see it. I bought my first house at 21, and had paid off the mortgage before I was 30. I then moved up market, over the years.

Much hard graft later I basically had no need to work from age 45. One of the key reasons I was able to do that, was not a penny in debt, mortgage free etc. Its a remarkable thing, of just how little you really need income wise to lead a good life if you have no mortgage or rent to pay. To say nothing of the security it gives, which is beyond price.

Well done....curious to know what figure you put on an annual income you need to lead "a good life" in the circumstances you describe.
And what do you call "a good life" as that's rather subjective.

Thats true, "a good life" ,very likely to be determined by your background. The wealtheir your origins, then potentially higher "good life" index . My origins are working class(my Dad was an insurannce agent)so perhaps I'm easily pleased. My demands are modest, but with a little effort 20k would be fine for me.

[avinalarf]

Cheese Mechanic said:

Thats true, "a good life" ,very likely to be determined by your background. The wealtheir your origins, then potentially higher "good life" index . My origins are working class(my Dad was an insurannce agent)so perhaps I'm easily pleased. My demands are modest, but with a little effort 20k would be fine for me.

Fair enough.

[sugerbear]

Neil H said:

Mobile Chicane said:

Does anyone absolutely have to buy?

Provided no dependents you could preserve the capital you'd otherwise have spent on a deposit and rent long term. Depending on the landlord of course.

I'm paying £15k a year for my house (chocolate box Surrey village), and I can stay in it until I die.

It's easily worth £550k on the open market, which if I lived until age 80 I wouldn't be able to pay off, even if I were able to raise that amount of mortgage finance, nor is it economically viable to do so.

Happy dies.

Renting long term is financial suicide IMHO. That 15k a year is going nowhere - you are actually spending the money - whereas a mortgage is paying off an asset that you will eventually own outright. You’re right in that 15k a year will probably not get you into a 550k house unless you have a large deposit, but that’s why you have to work your way up the ladder. What you’re effectively doing is paying the same amount that the interest would be on a mortgage for the house, but not taking advantage of the capital appreciation.

If you can still afford 15k a year rent when you are 80 then it’s no problem, but most people will be far from being able to afford that kind of rent on a pension.

To buy this house you would need a big deposit. Lets say £150,000. So you still need a mortgage of £350,000 which will cost £1847 per month.

But in this case the tenant still has their original deposit of £150,000 plus they have an additional £600 a month in disposable income to save over those 25 years that they can save/ pay into a pension with tax relief. They could even dump the £150,000 into a pension and get 20% added by the taxman.

Plus they now has the flexibility to move if their job changes and they wont have to contribute to the maintenance of the property.

When they get to retirement age they can either carry on paying the rent or move somewhere cheaper and use the capital to they have saved.

There are lots of factors in play but suggesting that long term renting is suicidal is wrong, it really depends on your situation.

[rover 623gsi]

long term renting can also be fine if you have a long term secure tenancy - but most renters don't have that luxury

[Neil H]

sugerbear said:

To buy this house you would need a big deposit. Lets say £150,000. So you still need a mortgage of £350,000 £400,000 which will cost £1847 per month.

But in this case the tenant still has their original deposit of £150,000 plus they have an additional £600 a month in disposable income to save over those 25 years that they can save/ pay into a pension with tax relief. They could even dump the £150,000 into a pension and get 20% added by the taxman.

Plus they now has the flexibility to move if their job changes and they wont have to contribute to the maintenance of the property.

When they get to retirement age they can either carry on paying the rent or move somewhere cheaper and use the capital to they have saved.

There are lots of factors in play but suggesting that long term renting is suicidal is wrong, it really depends on your situation.

If we adjust your figures slightly to make them a little more realistic for this type of property:-

Price £550,000.00
Deposit £200,000.00
Mortgage £350,000.00
LTV 64%
Rate 1.70%
Cost PCM £1,432.00

So you're paying £200 per month more towards an asset that in 20 years could be x2, x3 or more in value. After 10 years you would have another 120k paid off, plus any appreciation, plus you would be living in a house that was yours. I doubt any pension or investment could manage a return to match that.

I take your point (perhaps suicide was the wrong choice of word) that it does depend on circumstances, but long term renting doesn't stack up to buying once you have some equity behind you.

[Ari]

sugerbear said:

To buy this house you would need a big deposit. Lets say £150,000. So you still need a mortgage of £350,000 which will cost £1847 per month.

But in this case the tenant still has their original deposit of £150,000 plus they have an additional £600 a month in disposable income to save over those 25 years that they can save/ pay into a pension with tax relief. They could even dump the £150,000 into a pension and get 20% added by the taxman.

Plus they now has the flexibility to move if their job changes and they wont have to contribute to the maintenance of the property.

When they get to retirement age they can either carry on paying the rent or move somewhere cheaper and use the capital to they have saved.

There are lots of factors in play but suggesting that long term renting is suicidal is wrong, it really depends on your situation.

Provided that the landlord never ever puts the rent up over that quarter of a century...

[Axionknight]

Neil H said:

sugerbear said:

To buy this house you would need a big deposit. Lets say £150,000. So you still need a mortgage of £350,000 £400,000 which will cost £1847 per month.

But in this case the tenant still has their original deposit of £150,000 plus they have an additional £600 a month in disposable income to save over those 25 years that they can save/ pay into a pension with tax relief. They could even dump the £150,000 into a pension and get 20% added by the taxman.

Plus they now has the flexibility to move if their job changes and they wont have to contribute to the maintenance of the property.

When they get to retirement age they can either carry on paying the rent or move somewhere cheaper and use the capital to they have saved.

There are lots of factors in play but suggesting that long term renting is suicidal is wrong, it really depends on your situation.

If we adjust your figures slightly to make them a little more realistic for this type of property:-

Price £550,000.00
Deposit £200,000.00
Mortgage £350,000.00
LTV 64%
Rate 1.70%
Cost PCM £1,432.00

So you're paying £200 per month more towards an asset that in 20 years could be x2, x3 or more in value. After 10 years you would have another 120k paid off, plus any appreciation, plus you would be living in a house that was yours. I doubt any pension or investment could manage a return to match that.

I take your point (perhaps suicide was the wrong choice of word) that it does depend on circumstances, but long term renting doesn't stack up to buying once you have some equity behind you.

Minus any costs to keep the place in good shape, potential interest rate rises (lets face it, they almost certainly won't be going down, anyway) and of course, inflation....

I don't get the whole love in about house prices storming up, a chap at work here does it, he paid 300k for a house and yippee, it's now worth 320k, never mind the stamp duty and legal fees paid and the inflation that has eroded what the "profit" would actually buy three years on.

Still, tis' better to buy in the long run, without a doubt, IMO.

[Ari]

Axionknight said:

I don't get the whole love in about house prices storming up, a chap at work here does it, he paid 300k for a house and yippee, it's now worth 320k, never mind the stamp duty and legal fees paid and the inflation that has eroded what the "profit" would actually buy three years on.

It is bizarre isn't it? It's the only thing we have to pay for that people celebrate costing ever more money!

[Axionknight]

Oh aye, he's the first to moan when his pint goes up another few pence, but dearer houses and ever increasing amounts of debt when you realize that your two bedroom, new build flat isn't suitable any longer? YAAAAAAAAAAAY!

[okgo]

Its a bit of a fallacy that everything goes up equally I think, where I am flats and the like, i.e. anything 500k and below seems to have gone up about 30% in the last two years, but typically the homes those people would move on to haven't to the same extent, so its still an alright situation. Of course the flipside is that he might move further away or to a cheaper area in which case that would be alright too. Though £20k is hardly worth shouting about.

[NRS]

menousername said:

Neil H said:

but that’s why you have to work your way up the ladder. What you’re effectively doing is paying the same amount that the interest would be on a mortgage for the house, but not taking advantage of the capital appreciation.

thats the problem now though

the ladder is broken and its a long way to fall

people could work their way up before, into houses they could not really afford outright, due to capital appreciation... and more recently due to near zero interest rates

people joining the ladder now need deposits of a size existing owners never needed, or funded through capital appreciation, still leaving an eye-watering balance on mortgage against an inevitable increase in rates.

Even if prices do continue to rise, it will not be anywhere near stellar the capital appreciation enjoyed by others before now

everything is off....everything is broken...timing is off, prices are too high and appreciation likely to slow or ground to a halt... repayments likely to rise... to get on the ladder you have to max yourself out to amounts not previously seen... there is no longer the security of guaranteed appreciation so that is a huge amount of debt to service... however unlikely, there is a real risk of a fall in prices or a market shock... the old way that got us here is gone... over

In some ways I agree with your sentiment. The one thing that perhaps makes your assumptions wrong is inheritance. All the home owners who made a lot of money and are living mortgage free will die and pass their money onto their kids. That covers a lot of the starting costs and so although the price is greater it's still not the total amount of increase. It's also a way to avoid inheritance tax - parents pay off part of the kid's mortgage a while before they die. The people that are screwed are the kids of non-home owners. The other issue is people view it as such a good money maker in the long term they will do anything to get a house - so it keeps houses going up long term (unlike a lot of the classic cars that are increasing at the moment - can see that being a bit of a bubble once interest rates start going up).