Tonester

http://212.50.188.108/cgi-win/vebra.cgi?de...1/COVEN/15607/1 How about this one?

If you were to rent another place within the city boundaries you would only get a small 1 bedroom place for £550pcm. Have you rented for a while? Landlords don't often increase rent until next lodger moves in...

Certainly puts it in perspective. I can only assume a lot of these landlords have put on large deposits for these houses and can cover mortgage costs (currently).

Cheers for the feedback. Looks like several places have higher buying costs than renting whereas in other places (like Cambridge) it's a bit more neutral (certainly at the lower end). Perhaps this explains the stable prices seen currently in Cambridge. In places where rent is a lot cheaper than mortgage I can only assume the landlord has a big deposit and not realising the returns he could get, or that the house is vastly overpriced! The market is finding it's value in current conditions but I think the lag in supply (lots of new buildings going up and not selling), rising unemployment, high amount of debt will certainly change conditions for the worse. Interest rates is the key unknown quantity for me, and I think that will be the key.

To add a bit of backing to the 'rent is cheaper than buying' argument... Say you were to have 100% mortgage at 5% for current market on the house you own or pay rent to a landlord. Which would come out as cheaper? For me in Cambridge area, a mortgage on £150,000 house would be £876 a month repayment (£625 of which interest). Renting the same place would be probably £700. Therefore it is still cheaper to own a house than to rent IF house prices stay level. There are some additional aspects like maintenance, but what about another scenario. Say mortgage was only £110,000 on the same house (with capital growth and deposit making up the difference). Mortgage would be £655 (£455 interest) and therefore around £250 per month cheaper. Would the £40,000 lump sum be able to generate £3,000 each year after 40% tax and most of it out of an ISA? That would be hard. I think my point is, if my area's rent prices are typical then renting is still more expensive than owning, and only a house price drop of more than 4-5% a year will swing it. If house price crash does play out then 4-5% will be easily surpassed but I'm not sure I buy the argument that rent is cheaper than buying yet.

Out of curiosity what arrangements have you made for storing your stuff - at friends or storage place or left it for buyers? It's one of the things anyone has to consider when STRing.

It looks like rents are cheap now compared to mortgages but would there be any capacity for landlords to improve their yield if it becomes more acceptable to rent - maybe even a strong STR sentiment could build to further increase demand for rent pushing up it's prices. Maybe I am focusing on a minor chain of events - I'm just interested in being convinced out of my doubt! What is the motivation for German landlords then if it's so good to rent in Germany? "Remember: if an FTB can't afford to pay a mortgage to buy a place, they can't afford to pay the BTL's mortgage on it either." When I bought end of 2003 I was restricted by the mortgage income multiple. I could have afforded to rent a more expensive and better place (although at the time that wouldn't have been the best financial move). Perhaps now that income multiples are more relaxed you have a point, but there have always been some barriers to entry for mortgages that there aren't for rents.

There are a couple of nagging possibilities that are holding me back from STR-ing. Everyone says that you need FTBs to keep prices rising or stable but they have obviously been replaced by BTL landlords buying the same places as a FTB would then renting it to them. Didn't this happen in Germany and end up in a society where renting is more the norm? If the idealogy changed from 'must get on the ladder' to 'happy to rent' couldn't we then see a period of stable prices with a different housing structure? Wouldn't this reduce the scale of a crash? Sure in a worsening economy there will be forced sellers due to unemployment but while interest rates are low what is stopping the BTL still having the upper hand on the FTBs for new properties on the market? Would there then be an advantage to owning a house before BTL could turn the screws on rents?

Thanks - East Anglia only the worst then!!

I remember someone posting a link to these a while back but cannot find one now. Basically in, say, East Anglia how much did house prices fall in real terms compared to national average?

I cycle past there each day and have seen it from foundations up. Therefore out of curiosity I went into the sales office one day to have a look and there was an obscenely trendy mock up of the lounge and kitchen which were very large, but no one can pay that much and the saleswoman looked very bored. By the way I notice the ground floor is the car park so should be safe from flooding at least! What amazes me is there is another development that has just started having work done on it, a little further away from town. Surely there isn't demand?! It has a promotional picture of what the view from one of their apartments will look like, but it's all nonesense - the green area is in fact a building site with another housing development (last seen for sale not even being built on).

I'm not denying house prices are too high, but I'd like to point out first time buyers do not buy the average property. They buy the cheapest property and take it from there. Hasn't that always been the case?

Cheers for the advice! The problem I see is explaining why I'm not buying another place. Does it make much sense to move house and rent just because you haven't found a place to move into?! Also I can imagine awkward situations with talking, even if smalltalk about imaginary girlfriends, wives, and families when I am single! Some people would find that a fun game to play I guess. I may go with the work angle, how work has moved to London and I'm commuting but would prefer to rent nearer (couldn't afford to buy in London).

If you are about to go STR it's probably not a good idea to say 'because I think this house will go down in value!'. What are good alternatives that don't require too much lying, when really that is the overriding reason?

Shame about the editors.... remembering Kelvin McKenzie's reign that showed the media world how low an article could go when writing after Hillsborough "The Truth - Liverpool fans stole from the dead, beat up PCs giving kiss of life, and urinated on dead bodies". All lies and soiled the reputation of a city in a time of grieving when they could at least have saluted the heroes who saved lives that day. There's still a wide boycott of the Sun in Liverpool 17 years later. But I agree, sadly, that the Sun is still very influential.

The property news you buy has doubled in thickness with the amount of houses for sale ... and not being sold.

It's A Mad, Mad, Mad, Mad World Copyright 2004 Dow Jones Newswires A DOW JONES NEWSWIRES COLUMN May 7, 2004, Friday Allen Mattich Has the British public gone mad? Are U.K. housebuyers doing the collective St. Vitus's Dance of the financially insane? Despite warnings from the International Monetary Fund about overpriced U.K. property, stagnating incomes and fresh memories of a previous real estate crash, the U.K. market is hot. Are buyers crazy or is there some logic to their behavior? Price increases in the U.K. housing market could well be a rational - or, to be more precise, a near-rational bubble. Of course, at first blush, that's not what the numbers suggest. The Halifax house price survey shows U.K. house prices rising at a 19% annual clip this year. That follows a 15% increase in 2003, 26% in 2002 and 12% in 2001. Average U.K. house prices have doubled to GBP154,000 since the start of 1999. That would make sense if wage inflation were rocketing as well. Or if housing had been particularly cheap back in 1999. Or if debt levels had been low. But the answer to all three is no, no and no. Average earnings grew at 3%-4% a year over the past half-decade. Add in tax increases, and disposable income barely scraped higher. And houses weren't particularly cheap in 1999. Back then, the ratio of house price to disposable income was around 3.5 times, broadly the historical average. Now it's at a record 5.3 times, according to the Halifax - and higher still in London, where prices are a third more than in the rest of the country, a gap that's only partly offset by higher incomes. Personal debt levels have gone from bad to catastrophic. Average credit-card debt is up nearly 60% to GBP1,140 per person. Overall personal debt as a percentage of disposable income has jumped to 130% from under 100% in 1999. True, interest repayments as a percentage of household income is only 8%, down from a peak of 15% during the carnage of the previous house bubble, and interest rates would have to rise to 7% in order to hit that 1990 peak, according to HSBC economist John Butler. But they are already on the move - up to 4.25% Thursday from 3.50% in November. Bank of England policymakers have indicated a rate of 5.50% over the coming year. If they do rise that far, interest costs on the average-sized variable rate mortgage - around GBP80,000 - will have jumped between a fifth on normal repayment mortgages to a third on interest-only mortgages. Concurrently, if rising interest rates cause house price inflation to slow down - as the Bank of England hopes - homeowners will get squeezed in another direction. Many have been cashing in on these price rises to finance the consumption of automobiles, fridges and expensive holidays. Mortgage equity withdrawal gave householders an 8.3% boost to their disposable incomes during the fourth quarter of 2003. If house prices stop rising, so does that nice bit of cash. And yet, despite all the evidence, maybe housebuyers aren't so dumb. Anyone fearful of the house-price bubble might have exited the market two or three years ago, missing out on 70% worth of price gains. A rational bubble is one where investors expect further price rises in the future, never mind the present levels, believing they can get out in time, or ride the downdraft if they can't. It is known as the greater fool theory in the equity market, says James Montier, a strategist at Dresdner Kleinwort Wasserstein. Homeowners who bought a year or more ahead of the last housing crash in 1990 would have ridden out the downturn flat at worst, says Gavin Cameron an Oxford University don and specialist in the U.K. housing market. That's because even though prices crashed 30% in London and 10% across the whole of the U.K. from peak to trough, they had gone up by more than 30% in the previous 12 months. And there is another saving grace for U.K. homebuyers, if inflation spikes up again. Many will remember how well their parents fared during the 1970s when inflation rates of 25% knocked the value of their debts to a pittance, making borrowers much better off at the expense of savers.

What's the historical mortgage costs to disposable income ratio. Isn't that more relevant in current climate of low interest rates? Not saying I don't think there'll be a fall, just wondering why you are focusing on that 3.5 statistic?

Cheers all. I obviously want to think carefully about this decision and my eyes have only really been opened to the immediacy of it after reading this forum. If I get fed up with my indecision I may do the coin thing.... or maybe not

I bought in October 2003 and saw my 2-bed terrace go up around 10% last year. However since reading this website I think it's apparent I may not get much more than I paid for it now. It would take a fall of over 30% for me to be in negative equity, but I don't value the experience of living in a house over renting more than a loss of £30-40,000! Things putting me off going to estate agents tomorrow are: 1) Laziness - the hassle of selling, moving and renting 2) I like my house 3) Small chance there won't be a crash These really aren't enough so why am I reluctant? I think it may also not just be laziness but fear. Anyone else gone through all this?

Anyone got a graph of mortage payments as a percentage of disposable income because this is more important I feel.