Pulaski

I think we both know the answer that. What you don't seem to know though is how much is a house bought in the 1980's, worth today in a mining village in South Wales or in Durham, or presumably some parts of Scotland?

Also owning a house significantly limits your scope to take a career-improving job. Buying a house before you are somewhat settled in a career, say around 30, can be a huge mistake. If you work in an industry, such as mining or steel, and the local factory/facility closes you can be left without a job, having to move, and with absolutely no chance of selling the house you own.

feelbritish

Totally agree with this. I may also add that a lot of people who sold up homes and moved back have found themselves priced out of the market and have had to either end up renting or buying something much smaller and not in their desired area. I also agree with nun that you must buy in an area where you will get good rental income and good resale.

sazzle1979

We are a victim of this sadly, we sold our UK property in 2013 and moved to NZ, and we have been hit two fold.

Not only has our old property increased in value by about 60k GBP (it is in Surrey) but we took the money from the sale of the house and transferred it to NZ where we have bought a property, trouble is we got $2 to the pound and yes the exchange rate has burst and we are now going to be lucky if it stays at $2.5. Not only have we lost out on potential equity gains if we had kept our house but the money we did have is now worth a hell of a lot less.

Not to mention we are desperate to come home and have been priced out of the south east now and are having to re-look at things and go to plan b. It is terrible hearing daily about the crashing economies in China etc and the rising house prices in the UK.

It is a mine field, some are fortunate, some are not.

nun

I disagree with this post. You should only buy a property when you can afford it and after you have a good foundation of savings and other investments. Property locks up capital and it is prudent to distribute your capital across assets. This is why I hold stocks, bonds, annuities and property. Today my equity investments decreased in value, but the bonds held up and I did some rebalancing so I sold bonds and bought equities, and of course my annuities don't depend on the markets and the property produces rental income.

Putting too much capital into property is just as dangerous as putting too much into stocks. Having some money in cash is useful, but too much and you will lose to inflation. In the UK right now having all my money in property would worry me more than having it all in stocks because what happened to stocks today will happen to UK property as well and I don't want to be holding a mortgage when the buy to let bubble bursts.

Snap Shot

I have sent you a PM.

Editha

But if you don't buy a property, you are paying rent and that is just dead money.

nun

Buying a property is probably a good thing......when done at the appropriate time. That time is when you have enough savings to pay the mortgage for a year or so if you happen to lose your job. If you are looking at buy to let don't put more than 25% of your capital into it and I would not borrow money to buy into the inflated UK market because I would not want to be holding a mortgage when the bubble bursts. If you can pay cash, or maybe only need a small mortgage, then I would consider a rental property. Make sure you understand the costs....taxes, insurance, repairs, agency fees.

Editha

That's nonsense, to be frank. It would not make sense to keep money in the bank that would pay the mortgage for a year, when you could use some of it to pay down the mortgage. Three months salary is all you need as an emergency fund, although if you pay off your credit card every month, even that is arguably unnecessary.

nun

I think we have big differences in the way we approach finances. Of course you should pay off a credit card each month...there should be no "if" about it. High interest debt is the worst thing to have.

Paying rent is preferable for lots of people because it does not require a large outlay of capital. If you buy you have to find a deposit and be prepared for the extra costs like real estate taxes and repairs associated with owning. That capital might be better invested elsewhere and you also lose flexibility of movement so it's not right for many people. However, I would encourage people to buy a home if the circumstances are right, but buying a home is very different from buying an investment rental property.

Three months is the minimum emergency fund I would have and that would be entirely in cash. Then I would want to get another six to nine months in a saving account or low risk investment like a short term bond. Once that was set I would think about property and equity investments because they are both risky, but I would want to maximize my tax deferred investment opportunities first. The key to a successful investment strategy is to plan for possibilities. Having a mortgage, no job and no emergency fund is not a place that I'd like to be.

MDiligent

Just to revive this interesting discussion. What do you all think about premium bonds?

Also, (perhaps hypothetically), if you had a spare £50k, what would you do with it investment-wise?

Cheers

Editha

As it happens, I'm expecting to have a spare £50,000 (actually more) to invest in a few months time.

Since I own my own home and have no debts, I intend to set up a five year bond cycle. I prefer ethical investments, so I'll use bonds offered by small UK building societies. I'll start by investing £10,000 in each of 5 year, 4 year, 3 year, 2 year and 1 year bonds, then as each matures, I'll invest it in more 5 year bonds.

Currently the best rate offered for a 5 year bond is 2.61% from National Counties BS. But the interest is tax free, under the new rules, and inflation is currently nil.

I don't have any strong views about premium bonds. I used to have a few thousand, given me by my parents. They did not win any prizes at all for years. I worked out that I was beating the odds - negatively. Then suddenly the prizes came flooding in, all small ones, but eventually they made up for the dry years. I sold them all when we went to Canada.

MDiligent

Ok thanks for that. I was just thinking, by 'ethical' investments do you mean careful investments like those you mentioned as opposed to those with more risk (e.g. stocks), or something else? Cheers

Editha

For me ethical investment means an investment that I can be confident is not in fossil fuels, tobacco, the arms trade, or industries which oppress their work-force.

MDiligent

Ok thanks. Sounds sensible.

Best regards

feelbritish

The proof is in the pudding, buy in the right area and you can't go wrong!

House prices rising fastest in East of England, says ONS - BBC News