Britwizard

35% off peak would be nice, but it is more about time than % off peak. I don't think my wife wants to be renting after 2010.

Keep renting - this is not a good time to buy. Wait at least 2 years - your income will be higher and house prices will be lower. Have patience.

In 2004 my wife and I owned a large 4 bedroom detached house and I was convinced that after the sharp house price rises in 2001, 2002 and 2003 that the bubble would burst and there would be a house price crash. House prices had already gone up at least 150% from 1996. There were a number of pundits on the internet who were saying the same thing and expected that house prices would not recover from an imminent crash until the end of 2006. Some of the value of my property was an investment for retirement and I hoped to be able to downsize when we retired in 2009 and have some money left for my retirement. We weren't going to be able to do that if house prices crashed, So we put our house on the market and by January 2005 had managed to sell it for a good price. We moved into rented accommodation and with the interest earned on the capital from the house we were able to pay rent on a smaller 4 bedroom house further away from London. I expected that during 2005 that prices would begin to drop. But after staying level for a few months, prices began to go up again. Imagine my alarm - I couldn't believe it - when prices continued to rise throughout 2005, 2006 to mid 2007. Prices inflated a further 18% after we sold our home. Fortunately, I invested some of my capital in the stock market and got out of shares before the start of the credit crunch in 2007 so aswell as paying the rent we did make some profit on my investments which offset some of the losses on the house price inflation. However, since mid 2007 prices have fallen about 20%. If, as expected, they fall a further 15% this year we expect to be able to buy a downsized property in 2010 or 2011 and have that nest egg that we need for our retirement. However, savings interest rates are very low at the moment and the interest on the capital would not cover the rent if it was held in a Building Society. Share prices are very low now and and I have put some of the money into the stock market (Unit Trusts) in the expectation that it will pay dividends over a two or three year period. The rest of it is in fixed rate bonds paying at 6% for a year. We therefore hope we will not loose out on paying rent. Is it worth the hassle? There has been a downside - renting is not as good as owning your own property (although you don't have to worry about maintenance), because you are alway under threat of the rental agreement not being renewed at the end of its annual term and because you cannot change the decor to your own taste nor make alterations to the property. There has also been the continual worry about how to manage the capital from the sale of the property so that I get income for rent. When the Icelandic banks collapsed I had to quickly move my investments around to ensure that I had no more than £50K in any one bank. However, now we do not have to worry about selling my property so that we can downsize and all the time that house prices are dropping we know that the cost of my downsized property is reducing and the size of our nest egg is increasing. One of the things I have learnt over this period is that changes of direction in house prices are much slower than you expect. I expect that after going steadily up for 11 years house prices will keep dropping for at least 5 years unless general inflation starts to take off due to prolonged low bank rates. I expect the rate of house price to drop 15% this year and 10% next year, flattening off to 5% drops in 2011 and 2012. I don't expect all the efforts of the Government to get the the housing market moving again will succeed. I don't think my wife and I can wait until 2012 before we buy a property again as living in rented property is unsettling and we need to get on with our lives, but I don't expect that property will be a good investment for the next 6 or 7 years. If you own a property that you live in, I think that if you can sell it, rent and put the money into shares (UK FT Index Unit Trusts) for few years then it will probably yield greater dividends than leaving it in the property. The stock market can be expected to recover quite a lot sooner than the housing market.