Better To Buy Than Rent ?

[StuffIT]

We've all been looking at the increase in sales recently and the much reported 'bull trap'.

Im convinced that for some people it might actually be a good time to buy depending upon your own circumstances, I fear that I am one of those people.

I'm an STR having sold in late 2006 following relocation to gain employment, subsequently ive been made redundant again with little or no roles that im able to apply for at present (cue violins).

I used to get over 500pcm in interest which of course offset the rent, but now this has dropped to just over 200.

I seem to be in the position at present where its better for me to buy than rent and I wonder if any other readers of this site are in this curious position.

Let me provide some info and figures:

Current Bank Balance (total cash wealth including STR): 140k

I claim JSA (contribution based), which ends in a months time at which point I cannot claim any benefits (except the NI contribution - approx £7 pw).

I am looking to buy a properdee in an area that I know well for approx 20 -> 30% off peak. Im budgeting for 110k. This wont buy a dream properdee but would buy something that 'ticks enough boxes'.

I estimate the purchase would make me £420pcm better off on a monthly costs basis than at present i.e. against a similar rental properdee minus my interest on the cash.

As much as I dont like the idea, as I do believe properdee is still overpriced, I think that I need some 'security' rather than cash in the bank which will be wittled away on someone elses mortgage etc.

Ive also worked out that an income of £800pcm after tax&NI would provide a comfortable living wage providing a bit more work flexibility.

I'd be interested in peoples opinions on this.

[SMAC67]

Buy now.

[Lepista]

I'm an STR having sold in late 2006

...Strange then that you're a newbie to this site. why would you make such a huge financial ump like selling your house, and renting for a few years, and not even pop your head into this site, gain the knowledge of the posters that were around at that time?

I call "bear turning bull" troll.

Sorry if you're not, but you'll have to try a little harder to convince people that you're not just another labour stooge spreading the good word about the mirage that is the recovery, and that everybody should just jump back into property and 'fill their boots'.

for example, you say that you'd be "better off" by putting your money into property because you're not getting any interest. Come on, you surely have enough intelligence to realise the fallacy of that statement, if the asset your buying is a depreciating asset?

Renting, yes you're paying a landlord for the priveledge, but this is just the equivalent of buying a property at an over inflated price. you're then lining the pockets of the (previous) property owner.

A poor, poor effort at trolling, trying to imply the best thing people can do with their money is store it in bricks and mortar.

[porca misèria]

...Strange then that you're a newbie to this site.

Erm, joined September 2006. I wouldn't call that a newbie. Just not a frequent poster.

And the case for buying is a reasonable one, based on our tax-and-benefits system that rewards homeowners and penalises savers. The big drawback is that it makes it much harder to move, if the Right Job comes up somewhere that's not local to the current home.

[edit to add] To the OP: put your money somewhere it gets a better rate of return than in the bloomin' bank! If you don't want the stockmarket, go for corporate bonds or PIBs!

Edited August 25, 2009 by porca misèria

[Caveat Mortgagor]

Ive also worked out that an income of £800pcm after tax&NI would provide a comfortable living wage.

Ok - No rent or mortgage, but comfortable?

Would this allow you to:-

Pay all bills (Council Tax, Gas, Electric, Water, Phone, Mobile, Insurance)

Run a car (maintain, tax, insure, mot etc) or alternative such as train/bus/taxi fares

Add to savings

Have the odd indulgence (Holiday, meal out, pub/night out, Impulse purchase such as cd/dvd etc)

My instincts tell me it would be unlikely to achieve all of this even for a single person. Am I wrong?

[Guest theboltonfury]

...Strange then that you're a newbie to this site. why would you make such a huge financial ump like selling your house, and renting for a few years, and not even pop your head into this site, gain the knowledge of the posters that were around at that time?

I call "bear turning bull" troll.

Sorry if you're not, but you'll have to try a little harder to convince people that you're not just another labour stooge spreading the good word about the mirage that is the recovery, and that everybody should just jump back into property and 'fill their boots'.

for example, you say that you'd be "better off" by putting your money into property because you're not getting any interest. Come on, you surely have enough intelligence to realise the fallacy of that statement, if the asset your buying is a depreciating asset?

Renting, yes you're paying a landlord for the priveledge, but this is just the equivalent of buying a property at an over inflated price. you're then lining the pockets of the (previous) property owner.

A poor, poor effort at trolling, trying to imply the best thing people can do with their money is store it in bricks and mortar.

There will come a time when buying is a decent option. Just not yet.

[mdman]

Why is this a troll?

IMO, what you do depends on if you believe housing has bottomed in nominal terms (like Daddy Bear) or not. I don't believe it has - there is no sign of wage inflation, and all that currency devaluation achieves is drive up food and fuel costs, cutting disposable income further. Added to which the average LTVs seem to be around 75% implying this housing rally is sucking in cash-rich buyers, but it actually needs cash-poor FTBers to be sustainable.

[Scott]

its better for me to buy than rent and I wonder if any other readers of this site are in this curious position.

Er, NO.

[scottbeard]

why would you make such a huge financial ump like selling your house, and renting for a few years, and not even pop your head into this site, gain the knowledge of the posters that were around at that time?

...

A poor, poor effort at trolling, trying to imply the best thing people can do with their money is store it in bricks and mortar.

Well I STR in 2006 due to relocation, before I had ever heard of this site!! Doesn't make him a troll.

[StuffIT]

Erm, joined September 2006. I wouldn't call that a newbie. Just not a frequent poster.

And the case for buying is a reasonable one, based on our tax-and-benefits system that rewards homeowners and penalises savers. The big drawback is that it makes it much harder to move, if the Right Job comes up somewhere that's not local to the current home.

Thankyou - yes I joined in 2006

The loss of flexibility is an issue and thats what keeps me renting at present.

However if I own outright then ive always a 'bolt hole' as it where with minium bills to pay if I need to get digs elsewhere. Ive moved quite a bit for work but that in itself causes problems, and as I get older I think a 'base' is not a bad option to have.

TBH as a single bloke with cash in the bank, I know that Gordo and his chums and any other govt would sacrifice me first before anyone else and maybe im just after a bit of 'security' as I mentioned previously.

[StuffIT]

Ok - No rent or mortgage, but comfortable?

Would this allow you to:-

Pay all bills (Council Tax, Gas, Electric, Water, Phone, Mobile, Insurance)

Run a car (maintain, tax, insure, mot etc) or alternative such as train/bus/taxi fares

Add to savings

Have the odd indulgence (Holiday, meal out, pub/night out, Impulse purchase such as cd/dvd etc)

My instincts tell me it would be unlikely to achieve all of this even for a single person. Am I wrong?

I tend to live a frugal lifestyle as it where, the following is what I was thinking of:

House Costs

Rent 0

Council Tax 106

Basics

Gas 40

Electric 40

Water 30

BT 35

Mobile 5

TV Licence 12

SKY 18

Food & Social 300

Other

Gym 30

Misc Extras 60

Car

Insurance 40

Tax 20

Maintenance 30

Commuting Costs

Petrol 40

Total 806

That provides a basic living (with the odd perk) with no contingency or money to put away. But a wage of cica 20k would then provide those sums.

As I say theres no 'yes or no' answer to this one, I was just interested to get other peoples input.

[Alibear]

Ok - No rent or mortgage, but comfortable?

Would this allow you to:-

Pay all bills (Council Tax, Gas, Electric, Water, Phone, Mobile, Insurance)

Run a car (maintain, tax, insure, mot etc) or alternative such as train/bus/taxi fares

Add to savings

Have the odd indulgence (Holiday, meal out, pub/night out, Impulse purchase such as cd/dvd etc)

My instincts tell me it would be unlikely to achieve all of this even for a single person. Am I wrong?

Quick calcs:

CT - £100

Gas - £25

Elec £35

Water £35

Phone £40

Mobile £40

insurance £50

Food etc £300

Petrol/ins - £60

Total - £685

I reckon its possible.

[La La Land]

...Strange then that you're a newbie to this site. why would you make such a huge financial ump like selling your house, and renting for a few years, and not even pop your head into this site, gain the knowledge of the posters that were around at that time?

...

A poor, poor effort at trolling, trying to imply the best thing people can do with their money is store it in bricks and mortar.

I assume by now you've realised that he's been a member longer than you have, but doesn't post much.

This doesn't sound much like a property ramp to me, more like someone who is seriously contemplating prospect of never earning enough in future to fund his life without spending his capital.

If he stays renting there is no way he will get benefits until he consumes most of his £140k, and I imagine he needs more than a £12k p.a. job to get by if he has to pay monthly housing costs. The higher paid the job, the harder it is to find.

Buying at this point in the cycle may not be the best idea, but if the other option is to whittle down the capital on food & bills to top up a low wage whilst hoping prices fall before you don't have enough left to get a home, then it is something to seriously consider.

[Bloo Loo]

where does 140K buy anything decent?

that gets a semi on a rough estate no garage round here.

[StuffIT]

where does 140K buy anything decent?

that gets a semi on a rough estate no garage round here.

It would get a below avg semi or even a link detached (very small one) in the areas im looking at (north west england).

These aren't 'rough' areas, maybe not the best but perfectly habitable.

These are 'fixer-uppers', property thats pefectly fine but needs some tlc etc.

[Guest happy?]

....you'll have to try a little harder to convince people that you're not just another labour stooge spreading the good word about the mirage that is the recovery, and that everybody should just jump back into property and 'fill their boots'....

A poor, poor effort at trolling, trying to imply the best thing people can do with their money is store it in bricks and mortar.

You live in a really strange/paranoid world.

[OnlyMe]

Classic example of central bank, gun at the head inspired decision making.

The choice - a choice between two bad outcomes.

That's what you get when these lunatics run a mock.

[swissy_fit]

We've all been looking at the increase in sales recently and the much reported 'bull trap'.

Im convinced that for some people it might actually be a good time to buy depending upon your own circumstances, I fear that I am one of those people.

I'm an STR having sold in late 2006 following relocation to gain employment, subsequently ive been made redundant again with little or no roles that im able to apply for at present (cue violins).

I used to get over 500pcm in interest which of course offset the rent, but now this has dropped to just over 200.

I seem to be in the position at present where its better for me to buy than rent and I wonder if any other readers of this site are in this curious position.

Let me provide some info and figures:

Current Bank Balance (total cash wealth including STR): 140k

I claim JSA (contribution based), which ends in a months time at which point I cannot claim any benefits (except the NI contribution - approx £7 pw).

I am looking to buy a properdee in an area that I know well for approx 20 -> 30% off peak. Im budgeting for 110k. This wont buy a dream properdee but would buy something that 'ticks enough boxes'.

I estimate the purchase would make me £420pcm better off on a monthly costs basis than at present i.e. against a similar rental properdee minus my interest on the cash.

As much as I dont like the idea, as I do believe properdee is still overpriced, I think that I need some 'security' rather than cash in the bank which will be wittled away on someone elses mortgage etc.

Ive also worked out that an income of £800pcm after tax&NI would provide a comfortable living wage providing a bit more work flexibility.

I'd be interested in peoples opinions on this.

I covered this a few months back.

Few people on here want to accept the fact that it can be a good time to buy even while prices are falling, if the falls are slow enough and you're buying with cash.

The two influencing factors are interest rates and the fact that you must live somewhere at all times(and therefore housing costs are never zero).

Assuming all STR fund cash is for a house and therefore not subject to inflation/deflation other than house prices. Monthly housing costs are either :

1. If renting - Rent minus interest income from STR fund minus depreciation in value of target house.

2. If owning - Depreciation in value(until market bottom) plus maintenance plus interest/capital payment(if mortgage required)

With interest rates so low and prices falling slowly or even rising sometimes, the total of 2 can easily be less than the total of 1 for cash-rich buyers.

FOR NOW.

If financial austerity is introduced and interest rates rise, total of 2 will be higher than total of 1, and house prices will fall faster.

If QE is continued, the IMF don't enforce austerity and rates remain low, then total of 1 will be higher than 2, and house prices will stabilise or even rise.

So in essence, buying now is a gamble that Browns policies can be continued for a long period.

[Bloo Loo]

It would get a below avg semi or even a link detached (very small one) in the areas im looking at (north west england).

These aren't 'rough' areas, maybe not the best but perfectly habitable.

These are 'fixer-uppers', property thats pefectly fine but needs some tlc etc.

IC, oop North. might come and join you.

ecky thomp.

[Guest happy?]

We've all been looking at the increase in sales recently and the much reported 'bull trap'.

Im convinced that for some people it might actually be a good time to buy depending upon your own circumstances, I fear that I am one of those people....

I think most people on this site would say that the market has yet a way to fall. In some sense QE is working - I'd have expected without it to see significant price falls as property was repossessed in increasing amounts. That fall hasn't happened - partly because banks and building societies are required now to repossess only as a last resort.

The question then remains will QE permanently lessen the impact of the correction or has it only delayed it. My gut feeling is a bit of both, but there are real inflationary pressures building-up in the economy and a general election no more than a year away. Whichever political party is elected they're faced with a significant debt and this must mean cuts in services - which will knock-on into the economy.

I now see the full correction at it's most savage in Spring 2011 - with prices falling again in 2010.

The question I guess is - must you buy now or can you postpone that decision - e.g. find a crappy job in the interim which covers basic costs?

[StuffIT]

I assume by now you've realised that he's been a member longer than you have, but doesn't post much.

This doesn't sound much like a property ramp to me, more like someone who is seriously contemplating prospect of never earning enough in future to fund his life without spending his capital.

If he stays renting there is no way he will get benefits until he consumes most of his £140k, and I imagine he needs more than a £12k p.a. job to get by if he has to pay monthly housing costs. The higher paid the job, the harder it is to find.

Buying at this point in the cycle may not be the best idea, but if the other option is to whittle down the capital on food & bills to top up a low wage whilst hoping prices fall before you don't have enough left to get a home, then it is something to seriously consider.

You've put that much better than I could have done - thanks

I am tbh 'scared' that my income stream will continue to reduce and become 'patchy' year upon year. Ive been out of work before but when it happens again you start to see your future in a different light.

I can continue to chase those jobs up and down the country for smaller salaries in more expensive areas, but there comes a time when I just think that some security and being able to put down some 'roots' could be a good way to go.

I am also only interested in property that needs some tlc where I can get at least 20% off peak.

[Bloo Loo]

TBH, if maintaining money wealth is not your bag, then buying your house a good idea...regardless of the ups and downs on the market.

Its always best to reduce your overhead where you can.

If the buy or not to buy decision involves a large loan, over 3 times salary, then I would certainly be more cautious.

If I won the lottery, Id buy. And Houses dont excite me any more. I live in a 400K house with huge garden and double gravel drive. Everybody loves it. costs me little.

to spend our fund and live in the above small semi with no garage on chavstreet just doesnt appeal.

Edited August 25, 2009 by Bloo Loo

[Markie6]

The only worry ( I have a similar situation) is parting with the savings as interest rates are just about to rise, thus raising your income and causing prices to drop.

[StuffIT]

I now see the full correction at it's most savage in Spring 2011 - with prices falling again in 2010.

The question I guess is - must you buy now or can you postpone that decision - e.g. find a crappy job in the interim which covers basic costs?

I certainly believe houses have some way to fall, I do believe that the govt will attempt to inflate itself out the mire as much as possible with inflation increasing but house prices remaining at stagnant levels.

The key question is as you say 'find a crappy job ..' which I agree with.

Im applying for anything at present nationwide where I believe my cv wont simply hit the bin but alas nothing is happening at present. The problem for me this time around has been finding the 'roles' to apply for. As the days go by I become more like Yozzer Hughes and question other peoples jobs thinking "I could do that".

I'd happily do anything that covered the bills but being from a professional background I know that the more manual/labour intensive work will in most cases go to people more experienced in those fields and rightly so.

I just think that with reduced monthly outgoings I need less to live on and hence can take more of a hit again salary wise.

[swissy_fit]

I certainly believe houses have some way to fall, I do believe that the govt will attempt to inflate itself out the mire as much as possible with inflation increasing but house prices remaining at stagnant levels.

The key question is as you say 'find a crappy job ..' which I agree with.

Im applying for anything at present nationwide where I believe my cv wont simply hit the bin but alas nothing is happening at present. The problem for me this time around has been finding the 'roles' to apply for. As the days go by I become more like Yozzer Hughes and question other peoples jobs thinking "I could do that".

I'd happily do anything that covered the bills but being from a professional background I know that the more manual/labour intensive work will in most cases go to people more experienced in those fields and rightly so.

I just think that with reduced monthly outgoings I need less to live on and hence can take more of a hit again salary wise.

It's fairly straightforward to make 100 quid a day on the net using your fund if you're not working.

Investigate.

Be wary, lots of scams.

It's very boring though, a job is better.