Terrible time to buy a house?

[sugerbear]

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.

I think you need to reconsider that low interest rates have only been available since 2008 and that they are unlikely to stay this low. Typically they have been around the 4-7% rate. I am pretty sure that if the current interest rate was upped to those rates for all buyers the market would grind to halt.

If you track the FTSE100 and house prices over 25 years (since 1990) house prices have increased by (on average) 78% where as the FTSE has increased by 270%

So based on previous years if you had bought a house in 1990 for £500,000 it will have increased to £890,000 whereas your £200,000 deposit would have increased (in an FTSE100 tracker) to £540,000 plus you would have saved £60,000 if the price differential had been £200 between mortgage and rent.

If I had retired and had £600,000 to find a property in the UK today (anywhere) I would be very pleased.

I can see your point, but there is a risk with any investment and one that requires a sizable chunk of debt isn't always the best option and certainly isn't something that I would want to risk. The idea of having a £300,000 mortgage, a recession, rising interest rates and house prices dropping reminds me of the last crash and I wouldn't want to be in that place.

[p1stonhead]

Rates stay at 0.5% surprise surprise. 8-1 in favour of this motion.

They wont be moving anywhere for a while.

http://www.bbc.co.uk/news/business-33799438

[London424]

sugerbear said:

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.

I think you need to reconsider that low interest rates have only been available since 2008 and that they are unlikely to stay this low. Typically they have been around the 4-7% rate. I am pretty sure that if the current interest rate was upped to those rates for all buyers the market would grind to halt.

If you track the FTSE100 and house prices over 25 years (since 1990) house prices have increased by (on average) 78% where as the FTSE has increased by 270%

So based on previous years if you had bought a house in 1990 for £500,000 it will have increased to £890,000 whereas your £200,000 deposit would have increased (in an FTSE100 tracker) to £540,000 plus you would have saved £60,000 if the price differential had been £200 between mortgage and rent.

If I had retired and had £600,000 to find a property in the UK today (anywhere) I would be very pleased.

I can see your point, but there is a risk with any investment and one that requires a sizable chunk of debt isn't always the best option and certainly isn't something that I would want to risk. The idea of having a £300,000 mortgage, a recession, rising interest rates and house prices dropping reminds me of the last crash and I wouldn't want to be in that place.

Aren't you missing the CGT you'd pay on your shares?

[NicD]

Not to speak the non linear rise in the FTSE. If you put all £600k in at year 2000, you would be looking at virtually no increase today


http://swanlowpark.co.uk/ftseannual.jsp

[Neil H]

sugerbear said:

I think you need to reconsider that low interest rates have only been available since 2008 and that they are unlikely to stay this low. Typically they have been around the 4-7% rate. I am pretty sure that if the current interest rate was upped to those rates for all buyers the market would grind to halt.

If you track the FTSE100 and house prices over 25 years (since 1990) house prices have increased by (on average) 78% where as the FTSE has increased by 270%

So based on previous years if you had bought a house in 1990 for £500,000 it will have increased to £890,000 whereas your £200,000 deposit would have increased (in an FTSE100 tracker) to £540,000 plus you would have saved £60,000 if the price differential had been £200 between mortgage and rent.

If I had retired and had £600,000 to find a property in the UK today (anywhere) I would be very pleased.

I can see your point, but there is a risk with any investment and one that requires a sizable chunk of debt isn't always the best option and certainly isn't something that I would want to risk. The idea of having a £300,000 mortgage, a recession, rising interest rates and house prices dropping reminds me of the last crash and I wouldn't want to be in that place.

Your example doesn’t really work given the average house price in 1990 was around 60k, so your 200,000 could have bought somewhere very nice outright, meaning no mortgage to pay.

Anyway, ideally you wouldn’t put all your eggs in one basket and have all your money tied up in property, spreading the risk makes sense. I personally wouldn’t advise renting a house and using the money to invest in the stock market though.

[youngsyr]

wiggy001 said:

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

That looks like it's on the right track, but it's still in a very busy area (Bluewater/Dartford crossing) and it's only for 950 homes and it relies on existing infrastructure, which in the case of the crossing at least, is already heavily congested at times.

There's plenty of space further out both North and South of the river for much more meaningful projects.

[menousername]

NRS said:

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).

Perhaps...but I feel PH over-exaggerates the proportion of the population that has a meaningful pension pot or inheritance to pass on.

Most children will not have a meaningful inheritance and those that do will not see it in time.

Likewise the idea that early pension release will see a huge flood of cash into BTLs...I just don't see it..I just don't believe the majority of the public have that kind of wealth stored up

There are of course other cash flows coming into the market causing these problems...but that is the clever money...and the clever money will move before any shock that may happen...however temporary

Re. Classic cars its just cheap finance and that's why things like 355s are up 15/20k. That's people stretching themselves. People with 150k cash to spend on a car aren't likely to be buying 15/18 year old 355s. Again this isn't the smart money. When the cheap finance runs out its back down to reality with a bump. My take...its part of human psyche...at this stage...to spend money. People have to spend. Its not smart money. Maybe it will carry on as is...maybe it will slow a bit...maybe worse. Its the law of unintended consequences.

Article on BBG news the other day (no link sorry) that ave household debt..credit cards.. is increasing faster than ever...think it said current household debt excluding mortages is £10k per household or something crazy like that and a small increase in rates will equate to an extra £1000 a year in monthly payments...just the payments.

Just seems there is an awful amount of debt out there...mortgage and otherwise... and nobody really knows what is going to happen.

[mondeoman]

menousername said:

NRS said:

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).

Perhaps...but I feel PH over-exaggerates the proportion of the population that has a meaningful pension pot or inheritance to pass on.

Most children will not have a meaningful inheritance and those that do will not see it in time.

Likewise the idea that early pension release will see a huge flood of cash into BTLs...I just don't see it..I just don't believe the majority of the public have that kind of wealth stored up

There are of course other cash flows coming into the market causing these problems...but that is the clever money...and the clever money will move before any shock that may happen...however temporary

Re. Classic cars its just cheap finance and that's why things like 355s are up 15/20k. That's people stretching themselves. People with 150k cash to spend on a car aren't likely to be buying 15/18 year old 355s. Again this isn't the smart money. When the cheap finance runs out its back down to reality with a bump. My take...its part of human psyche...at this stage...to spend money. People have to spend. Its not smart money. Maybe it will carry on as is...maybe it will slow a bit...maybe worse. Its the law of unintended consequences.

Article on BBG news the other day (no link sorry) that ave household debt..credit cards.. is increasing faster than ever...think it said current household debt excluding mortages is £10k per household or something crazy like that and a small increase in rates will equate to an extra £1000 a year in monthly payments...just the payments.

Just seems there is an awful amount of debt out there...mortgage and otherwise... and nobody really knows what is going to happen.

We're all going to die, thats whats going to happen...

[Welshbeef]

menousername said:

Perhaps...but I feel PH over-exaggerates the proportion of the population that has a meaningful pension pot or inheritance to pass on.

Most children will not have a meaningful inheritance and those that do will not see it in time.

Likewise the idea that early pension release will see a huge flood of cash into BTLs...I just don't see it..I just don't believe the majority of the public have that kind of wealth stored up

There are of course other cash flows coming into the market causing these problems...but that is the clever money...and the clever money will move before any shock that may happen...however temporary

Re. Classic cars its just cheap finance and that's why things like 355s are up 15/20k. That's people stretching themselves. People with 150k cash to spend on a car aren't likely to be buying 15/18 year old 355s. Again this isn't the smart money. When the cheap finance runs out its back down to reality with a bump. My take...its part of human psyche...at this stage...to spend money. People have to spend. Its not smart money. Maybe it will carry on as is...maybe it will slow a bit...maybe worse. Its the law of unintended consequences.

Article on BBG news the other day (no link sorry) that ave household debt..credit cards.. is increasing faster than ever...think it said current household debt excluding mortages is £10k per household or something crazy like that and a small increase in rates will equate to an extra £1000 a year in monthly payments...just the payments.

Just seems there is an awful amount of debt out there...mortgage and otherwise... and nobody really knows what is going to happen.

Easy fix for everyone IF the doom happens is simply extend out the term that's the only way macro level to ensure safety

The age old if you owe £100k the bank will fk you if you don't pay if 27m people all owe £300k and cannot pay the bank doesn't fk you instead the power is with those with the debt and then they can negotiate a longer term OR a lesser % if not they all walk away bank loses everything.

[Welshbeef]

So back to the original question - I really don't think so. Buy as close to the mainline station as possible BuT not next to it so short walking distance 0.25-0.5mies away then really you shouldn't lose out ever.

[pork911]

rover 623gsi said:

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

how many such renters would be willing to match obligations?

[gibbon]

Welshbeef said:

So back to the original question - I really don't think so. Buy as close to the mainline station as possible BuT not next to it so short walking distance 0.25-0.5mies away then really you shouldn't lose out ever.

Did you see my quote of your post regarding leveraged property returns?

How are you planning to balance the books with the new budget plans? I have been recently speaking to various sales, letting, and property investment people for various reasons, and im amazed at the lack of awareness of this.

[turbobloke]

gibbon said:

Welshbeef said:

So back to the original question - I really don't think so. Buy as close to the mainline station as possible BuT not next to it so short walking distance 0.25-0.5mies away then really you shouldn't lose out ever.

Did you see my quote of your post regarding leveraged property returns?

How are you planning to balance the books with the new budget plans? I have been recently speaking to various sales, letting, and property investment people for various reasons, and im amazed at the lack of awareness of this.

It's not my turf but in all honesty it doesn't surprise me that much. Within a few years out of a total of twenty with business accounts I ceased to be amazed at the lack of awareness about most things in senior people whose position of responsibility in their bank was to advise others, supposedly from a superior vantage point.