Wednesday, Nov 14, 2007
Uaaha hahh aahhha ahhahah
ThisWasMoney: Benefit of buying a home tumbles by 75%
And this is what a top lender says... "The financial benefit of buying a home rather than renting over a 25-year period has tumbled by 75% over the past year – with tenants better off than owners in half the UK's regions. The latest annual Rent vs Buy index compiled by High Street bank Abbey shows the 25-year saving from buying rather than renting has fallen from £24,000 last year to just £5,811 today." Am I allowed to laugh? we are taking about "benefits" not shaudenfreunde
Posted by confused76 @ 12:13 PM (1261 views) Add Comment
23 Comments
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1. seanb303 said...
where i live (telford)
you can rent a £200K house for £500 pounds a month
2. Knightma said...
Some classic comments there about rent being dead money. Just when do they think they will see their mortgage interest payments again?
3. Retiredbanker said...
Nothing like indulging in a spot of schadenfreude to cheer oneself up, but please spell it correctly in order to maintain the high standards
of this site.
4. little professor said...
____
All I can say is... huh?
5. p. doff said...
I have been a tenant and I have been a homeowner. I know which I prefer. Who wants to still be renting when they have retired!!
6. Paddya said...
'But while on a month-to-month basis in some areas it is cheaper to rent rather than buy, at the end of the 25 years a homeowner actually has a house whereas a renter has nothing"
Key Point: A RENTER HAS NOTHING
7. confused76 said...
See other link with +ve spin:
http://news.hotproperty.co.uk/Buying_still_better_than_renting_18355199.html
"Consumers in London, Yorkshire and the Midlands would "pretty much break even", according to Abbey, while east Scotland and the north offer better opportunities for buying rather than renting.
However, Nici Audhlam-Gardiner, head of mortgages at Abbey, said that while renting could come with a lower monthly cost, "at the end of the 25 years a homeowner actually has a house whereas a renter has nothing".
"at the end of the 25 years a homeowner actually has a house"????????????
whaaaaaaaaaaaaat!!!?
How about the risk of fall in house prices? why is not Abbey mention that?
Second, I doubt Abbey has included the principal repayment in the mortgage cash flow calculation ... otherwise NO WAY you can come close to break even.
You say huh? I say Ahhh hahhahh ahhaha hahahhahhaahhah ahaahahha
8. confused76 said...
"Who wants to still be renting when they have retired"
If the cost of renting is below the full cost of ownership, why would I want to own? I want to live well when I retire... own , rent is just an economic decision
9. seanb303 said...
thanks to abbeys 125% interest only morgages
you won't get to own anything
10. fahrenheit451 said...
Plus when renting, I can move wherever work or retirement takes me.
Plus that leaky tap, electicity and gas inspection, etc., are all done for me ASAP.
Plus when renting, I can put that "deposit" you know the 5% (more like 15%) of the purchase price into savings / investments that actually make money >>>> so that I can retire !!!
11. seanb303 said...
just had an idea
with all those buy to leave empty propertys on the market
we could start a new site
rentpricecrash.co.uk
12. fahrenheit451 said...
But seriously, there is a break-even point.
Only using a "rule of the thumb". (Note: not Base Rates, not properly modelled today)
Drop interest rates to 4% and allow inflation at 3% in real terms, and in a rising property market = Best to buy
Rise interest rates to 7% and allow inflation at 4 to 5% in real terms, and in a stagnant property market = Best to rent, just
Increase interest rates over 8%, inflation becomes irrelevant and property prices should drop. (The crash scenario)
But you need to really look at it over 50 years, to include retirement.
I think that from previous models, compound interest gives a 100% increase over 10 years, if you have interest at about 7 to 9 % depending on whether interest is calculated anywhere from Daily, Monthly or Annually. You just have to fudge the figures.
13. sold 2 rent 1 said...
For every 18 year house price cycle
own for 14 years
rent for 4 years
It is a no brainer.
14. p. doff said...
Dunno guys.
From my own perspective (and I have not yet retired) my only outgoings are council tax, insurance and a bit of maintenance. I now work part time so the DIY maintenance jobs are not a problem. Most importantly, I can do what I like and nobody can give me notice to quit.
Had I stayed renting, the monthly outgoings may have been less over the years but I know I would not have been disciplined enough to bank the savings (and they wouldn't have kept up with HPI anyway). I would probably also be working full time in order to pay the rent.
Still, I am one of those baby boomers that seem to be frowned upon by some on this site, and I have to admit that if I was starting out now, with the likelihood of impending HPC, I would be opting to rent for a few years (as I did before) till common sense returned to the market.
You pays yer money and makes yer choice!!
15. Letthemfall said...
p.doff sums it up really. Owning a house is fine so long as you buy it when prices are in line with the money people earn.
Buying a house now seems a financially crazy proposition, unless you believe the VIs, whose absurd arguments deserve to be called stupid.
I have owned but rent at present. There is a great deal in favour of renting. You don't have to spend time on maintenance (and that can take enormous amounts of time) or pay expensive tradesmen to do it. You don't have to worry so much about dodgy neighbours because you have no investment tied up. You can move easily. Quite a sense of freedom.
Of course, when prices rise as they have done in recent years, the benefits of owning outweighs all the above. But that argument no longer applies. And particularly if you are young wanting to be first time buyer, you can relax and let things take their course as they always have.
16. jack c said...
Purchasing a property is generally the largest financial commitment most people enter into. If you look at it as long-term arrangement the benefits of purchasing will outweigh those of renting. Individuals wishing to be more fluid with their working and retirement arrangements will benefit from renting.
17. drewster said...
I agree with s2r1, but how does that apply to Japan? Surely there it has been better to rent than to buy for the last 15 years, what with house prices falling all that time? Does anyone have figures for that?
18. Amy said...
If you haven't seen this before check it out:
http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html
Just enter numbers in pounds instead of dollars and the conclusion is the same I think.
19. the northerner living in oz said...
10. sold 2 rent 1 said...
For every 18 year house price cycle
own for 14 years
rent for 4 years
Have already sold to move to OZ
Why is the housing cycle 18 years?
Why not 14 , 16 , 20 years
20. bidin'matime said...
"While the study does not take into account potential house price inflation which would help leave homeowners better off, it also does not factor in any potential price falls for those buying now, with some experts claiming this is the peak of the market."
In other words, it's a load of tosh.
I am in no doubt that owning is best in the long run, particularly when you consider the tax free growth on the money invested in the property, compared to the taxed growth on money invested in savings by a renter. But with prices on the brink, I am in no doubt that it's best to rent for now.
When we sold our house 2 years ago, I dreamed of prices crashing and being able to afford to live in a house on the beach – what I didn’t anticipate, even in my wildest dreams, was being able to rent one in the meantime – and for less than the net interest we get on the proceeds of selling the old house on a busy main road! To buy the house at its current market value would cost more than twice as much – instead of having £400/month profit from our interest after paying the rent, we’d have had to invest the whole lot in buying the place, plus taking a mortgage of around £300k, costing around £1,500/mth in interest. Total extra cost of owning the place = £1,900/mth or £22,800pa!!
Having said that, if it were to rise in value by more than 3%pa, then we’d be out of pocket in the longer term, but that seems unlikely in the short term – going back to my original point – it all depends on where you think prices are going.
My wife has just spotted that a house round the corner from the last one we rented, that was up for sale at close to £700k earlier in the year, that went sale agreed and then came back on the market, has now come up for rent at £1,400/mth. Working backwards, if the yield was around 5%, this puts the true value at around £340k – it’s just a question now of how long it takes them to come to terms with this…
21. eyeoftheweasel said...
I love that line "at the end of the 25 years a homeowner actually has a house whereas a renter has nothing".
This is complete cr*p. At the end of 25 years a renter still has the £250,000 or whatever that the homeowner used to buy a house with in the first place.
22. sold 2 rent 1 said...
the northerner living in oz,
For 18 year cycles read
http://www.cooperativeindividualism.org/putland-gavin_review-of-boom-bust.html
http://www.moneyweek.com/file/37485/house-prices-expect-the-worst.html
HPC dates
1956 k-spring
1974 k-summer
1992 k-autumn
2010 k-winter
drewster,
Good point about Japan. Maybe this HPC will last 18 years as it is the k-winter (destruction of most debt)
23. sold 2 rent 1 said...
The HPC will last between 4 and 18 years and it all depends on how fast the debt is destroyed.