dunroving

I think I smell a hint of sour grapes.

Some people undoubtedly have been "lucky" * but for many (yours truly included) it was just a case of having the balls to enter the market, with a long-term perspective instead of whining about how hard things are.

* And such people are truly irritating to other people when they crow on here about what a wonderful life they have in their lovely paradise.

dunroving

You've never heard of hindsight is 20/20?

At the time, things were similar to now - prices were ridiculously high and people had been writing about the "unsustainable house prices"" for about the previous 3 years. So it was a bloody scary prospect. But I took the plunge anyway, because I took a long term perspective. Read some of the news articles from 2005-2007 and you'll see in many ways it wasn't that much different from now. In many ways it was more difficult.

Really, you can keep chipping away at people who are "lucky" enough to buy a house but I know what my reality is and I'm glad that I had the balls in the past to take a risk.

You seem quite bitter about the housing market. If you want to blame me, that's OK, I'll still sleep at night in the house I am buying.

christmasoompa

I'm guessing this definitely wasn't aimed at me? As (a) to rent a similar house would be 3000 pcm, (b) I don't pay rent and (c) I said we bought a couple of years ago?

dunroving

Don't let the facts get in the way of a good argument!

[I can't remember anyone saying anything about a rent of 600 pcm, TBH]

dunroving

I think as someone else said, in many of the caravan parks you can't live in it for the whole 12 months a year. I am not sure what is the rationale (maybe in order for it to count as a "holiday" residence?) but it would mean finding somewhere else to live for part of the year. Even if that were just one month each year, it would be a potential PIA, especially in older age.

Now, maybe you could persuade another BE-er to buy the one next door, and then for one month of the year you could just swap caravans!

unique_boy

I am not bitter..I own property...I just feel unlucky for those feeling the need that they must buy.

Writings similar to now....it would appear as if we will never learn from our mistakes.

christmasoompa

Again, you're making generalisations.

Have you seen my post above (no. 99?)? If so, exactly how do you think it's a 'mistake' for us to have bought instead of rented?

brits1

Hi,

We had always planned to buy a home asap but rent first, we have been home since 2010 now and are still currently renting for a couple of reasons really but I am glad at the moment we did not buy straight away, we also found that more people rent than when we last lived in the UK and it seems fairly normal to do so, its also a good way for new returnees who wants to have a good look around at areas that may be "new" to them. Good luck

Flying Enterprise

Now that is thinking out of the box, I like that!!!

Pistolpete2

I'm not sure that Help to Buy is in fact a significant influence on the level of pricing in the Uk property market right now. It is positive, but not that much.

Other more important factors are at play.

There is still an acute absence of residential properties being built, in part due to planning restrictions and a shortage of available (and cheap) land to build on which puts developers off. In addition, councils are demanding that social/low-cost housing fits into the equation and the maths then doesn't seem to add up for the developer when they have to recover the 'subsidy' from the non low-cost element.

In the meantime, there is a steadily net increasing population due to a decent birthrate (unlike the rest of Europe) and inwards migration. Then there's break-up, more and more people tending to live alone......

Affordability is still there as lenders in actual fact see little chance of interest rates rising significantly (or are able to fix long-term at low rates) in part of course due to the threat that rising interest rates would have on the housing market (which the B of E is fully aware of) - sadly pretty much the only game in town for the Uk economy these days. Certainly if the tele is anything to go by .

Buy-to-let is a much larger player in the housing market these days and those players find far easier finance for their ventures than was the case ten or more years ago. Plus they can benefit from favourable tax rules.

Overseas investors, particularly from countries who's property markets are far more inflated than the Uk's are now major players well beyond the confines of London. The Uk market is also attractive for dodgy money and for property held offshore through companies which can maintain secrecy.

The boomer crowd, who have precious little reward from putting their money into conventional savings, are also major players, if only to downsize or extract equity to then buy something for their kids.

In spite of the frothy nature of the overall market, these issues will help to underpin it such that any fall off in pricing is likely to be limited.

I would tend to agree that, particularly so far as London is concerned, the fact that interest rates have had to stay so low so long with the double credit of no valid alternative investment for savings and increased affordability, and that foreign investment has been SO strong, to support prices in general, has been a matter of good luck for 'investors' who were already in the market when these conditions came into play.

That said, for some, the opportunity cost associated with continuing to 'invest' in property makes it less attractive than alternative investments. This might make renting a better option for those individuals as well as for those returning who do not CHOOSE to buy a house, such as myself, since NOT sinking much money into the roof over my head has been the only way for me to survive financially, having taken a much-needed early retirement from a profession that was 'doing me in'. Unfortunately, as per dunroving, the risks associated with the investment alternatives (particularly around 2007/2009) can mean as many sleepless nights as when 'working' for a living.

I've said before on here that in the extremities of England & Wales there are better 'returns' for the tenant than for the landlord and in recent checking as to what our renting possibilities are when we have to renew somewhere here next spring I'm encouraged in that regard.

My only concern would be a landlord's responses to maintenance issues which we would find out about after the fact.

There was mention on this thread that Dorset is expensive.

Indeed there are parts that have a particular following from retirees such as around Lyme Regis/Charmouth, in Poundbury, and in parts of Poole and Bournemouth/Christchurch but there is not much decent steady employment in these parts and elsewhere in the county property may not be particularly highly priced but is still largely unaffordable other than for incoming second-homers, as is the case throughout much of the West Country.

Thus there is a solid rental market plus property that doesn't lend itself to being a second home due to poor location can typically be much more affordable to incomers if wanting to buy.

Editha

As far as the West Country is concerned, I think prices are likely to rise. This is because of my own experience looking for a retirement property. The fact is that even if property prices are high relative to earnings, West Country prices still look like the bargain basement to retirees downsizing from properties in the Home Counties. As boomers sell up, to help out their kids, or raise money to live on, the West Country is the obvious place to go. Fears that we might leave the EU are likely to make the West Country even more attractive, because of the uncertainty over the security of a move to France or Spain.

Although this will make housing even more unaffordable for local people, the influx of the grey pound could actually be a good thing for the West Country economy, since retirees live in their properties all year round. It is the second-homers who blight communities by leaving their properties empty for most of the year.

Moses2013

Again some interesting posts here and everyone knows better. I think it's also a lifestyle choice. I'm not bothered if our house loses value or not, as long as I know I can afford the monthly payments. Every area is different and people should do their research, but we bought at a cheap price and It's not really a risk for us.

dunroving

Out of pure academic interest and boredom, I ran a very basic spreadsheet using the following parameters:

House purchase £200k (reasonable estimate for a 3-BR in basic area of the country, not anywhere posh or near to London).

Average mortgage interest rate over 25 years 5% - weighted average over the past 25 years.

Average annual inflation 1% (for rent and house value estimation). IMO, that is pretty conservative, so leans in favour of the rent increase calculations.

Assumed rent of £900 pcm
Mortgage £1,169 pcm

[so also weighted in favour of cheaper rent to start with]

Results over 25 years:
Total rental cost £305,000
Total mortgage cost £351,000
Value of (now owned) house £254,000
- so over the life of the mortage, net expenses £97,000

After that is when it gets interesting, because the renter continue paying ever-increasing rent until in the 40th year, rent is £1,400 pcm and of course the owner pays nothing.

After 40 years:
Renter total cost £610,000
Owner total gross cost still £351,000, BUT
Value of owned house is £310,000, so net ownership costs over 40 years is only £41,000 and the owner has an asset worth over £300,000 to leave to his/her kids.

Of course this is rather simplistic and for all the reasons already mentioned, renting offers a more reasonable option for many people. Even bearing in mind I haven't included maintenance costs, the very conservative figures I used for house price inflation (when have house prices only risen by 50% in a 40-year period), it gives an interesting view of the long-term perspective.

Happy to upload the Excel spreadsheet if anyone wants to use it to play around with the figures. You'd need some basic Excel skills to tweak the numbers but nothing too complicated.

Pistolpete2

Indeed!

As admitted, you haven't included maintenance (a NEW roof?, damp, subsidence, flooding*) or insurance or the fact that after 5 years you have to sell up and move to a same cost house where the job is (cost of buying and selling on top of the initial add-ons) and in what market at the time.

Suppose you have to downsize for financial reasons. And what is the house? Some realtors these days talk of contemporary houses being built so badly that they aren't going to last the lifetime of a long mortgage. Suppose you find that your new buying/renting neighbour is a neighbour from hell. Big issues and real issues, don't we all know!

The renter is initially paying less per month just in simple rent/mortgage terms and that could be just fine and dandy for him if he is using the difference to fund some big lucrative deal - i.e. what is the true opportunity cost of buying the property?

Almost nobody pays more for a house than it's worth so there could always be a risk on the downside that you sell or have to sell below proper market value and then find deficiencies that have to be remedied when to buy again at full market because that was the only property that fitted the bill.

Also, the rent you are assuming could be high in today's market where higher property prices have meant a lower %age rental return in many markets, sometimes as low as 4% gross, unless it's parts of Greater Manchester, Bolton or Blackburn, that is, where 15-20% returns are possible but with much much higher maintenance.

I'm not saying that buying isn't the way to go but it isn't always that simple, particularly right now, which is really what we should be talking to.

*The last two could blight your insurance

unique_boy

In this example I agree that ownership is beneficial, infact if you know you are going to stay put forever in one place it is beneficial.

One thing to note the value of the house is 310k in 40 years that is an NPV of roughly 208k so you have only seen a capital increase of 4% (this may not beat inflation but you did use a 1% conservative HPI).

Again this is 208k in capital the renter will not have but then again your example does not take into account maintenance and some other factors. In 40 years time your house will be 40 years old, I'd be interested in looking at future house prices as a function of depreciation based on house age.

I agree there are benefits for owning houses if you are sure you are going to stay put for at least 5 years.

Also not sure on the actual historic rental inflation but from my own experience my rent either didnt increase yoy or went up no more than 1%.

I should say I am not debating you are wrong anymore, I do htink there are a lot of good points to debate here!