The Hpc Orthodoxy Has Hit The D.T.....

[LuckyOne]

I have been travelling. Trying to use this site on a Blackberry is painful so I might have missed this if it was posted earlier ....

http://www.telegraph.co.uk/property/rentingproperty/8198613/Why-buy-when-were-happy-to-rent.html

Many of the familiar arguments in favour of renting over buying at current prices and yields have made it into the article. Slowly but surely, the fact that houses are overpriced and drain resources from the economy are making it into the mainstream.

Of course they cannot help themselves and a few of the tired old cliches enter but on balance, I think that the article is as good as I have seen for a while.

I think that the houses for rent at the end of the article are interesting. They are quite high end places with the subtle implication that renting is no longer for losers. I like it.

Monica Brown is at the forefront of the Rent Generation. She runs a highly successful press agency for restaurants such as The Fat Duck in Bray, travels frequently to Japan, Singapore and New York, and rents a swish two-bedroom flat on Battersea Park. She has absolutely no intention of buying a property.

“I have rented my whole life,” she says. “When I came down from Scotland, I never got on the property ladder. I thought I would get married and have a house. That was the big scheme. But then I set up my own business and it consumed me and has been fabulous.”

Monica pays £1,700 a month to rent a flat and puts any extra money into her business, Lotus PR. Among her clients are Sat Bains’s restaurant in Nottingham and Pied à Terre in London, both Michelin-starred.

“I would rather put money into my business than into a deposit,” she says. If she were to buy a flat similar to the one she is renting she would need a £430,000-£500,000 mortgage, which would cost a lot more in monthly repayments than the rent.

“The whole buying mentality is intrinsically British. People in New York and other parts of Northern Europe, who are successful, reckon it’s better to rent than buy. I feel an enormous amount of capital and enterprise goes into buying houses in this country, which could go into creating businesses,” Monica says.

As the flat was being decorated when she took it, she had a say over the carpet and the paint, and thinks of it as home. “I get to live exactly where I choose. In the morning I walk over the Thames to work in Chelsea Harbour, or I run in Battersea Park. I enjoy all the seasons in the park and see the tidal movements on the river. Renting means my life isn’t interrupted if my boiler goes. And any maintenance is dealt with by the agents, Douglas & Gordon. It works well,” she says.

Almost anyone you know in their twenties and many in their thirties are opting to rent rather than buy. This is a huge change in the market compared with 30 years ago, when the average couple bought their first home at the age of 27. The latest research from the National Housing Federation shows that the average age of the first-timer now is 37 and it predicts that this could rise to 43 if parental help isn’t forthcoming.

Those who are buying usually have to depend on help from their parents or grandparents. The Council of Mortgage Lenders reports that 80 per cent of first-time buyers are supported in this way. Most need £200,000 to £300,000 to start looking in favoured London areas like Bayswater, Islington and Streatham, according to agents Kinleigh Folkard & Hayward. So the rush to rent has increased through the year.

Some renters are relieved that they kept away from buying before the economic crisis. Daniel and Donna Ingram-Fletcher are renting a pretty three-bedroom house in Greenwich at around £1,600 a month and are thankful they don’t have a mortgage.

“I am so glad we didn’t do it,” Donna says. “I have friends now who are trapped in one and two-bedroom flats which are much too small to have a family in. They had babies in the hope they could trade up but they haven’t been able to.”

The major stumbling block for prospective buyers is affording the now sizeable deposit. “Friends who bought saved for a first deposit, but they have discovered that if they want to trade up they have very little equity and need to save again for a second deposit,” she says.

“We are lucky because we have enough space to start a family, a front and back garden, and we can save.”

To buy the same house would cost around £430,000 and they would need a deposit of at least £50,000. At 30, she is just paying off her student loan. “Student debt prevents you buying because you can’t start saving until you have got rid of it,” she says.

Donna works with the agents Chesterton Humberts, renewing tenancies in their 23 offices across the London area on properties renting at £900 to £16,000 per month.

“Most tenants – around 60 per cent I would say – are renewing their tenancies and have stayed put for two to four years. Renters are staying put longer,” she says.

“They want property unfurnished, as they have reached the age where they have accumulated belongings and they want a say about how it is decorated. Everyone does it. Married couples with families and nannies do it. It is now completely normal.”

No wonder the Association of Residential Letting Agents is reporting that rentals have reached an eight-year high and that demand far exceeds supply. It says there is real evidence of a generation “being forced into renting”.

Luke Anderson, 32, has been renting in and around Oxford for years while he started up a chain of hairdressers called Philosophy.

“It meant I could move from place to place without the stress of selling and buying,” he says. “It is so much simpler. As prices went up I was out of the loop anyway, and I felt that houses weren’t actually worth what people were selling them for.”

He now rents a two-bedroom flat in Jericho at £1,500 per month, which he reckons would cost £375,000 to £400,000 to buy.

Would he ever buy now? “If I had a windfall I would, but I am quite happy as I am.”

Ravishing rents

1 Designer town house

Architect-designed five-bedroom, modernist house with swimming pool, roof terrace and landscaped garden in Dulwich, south London: £2,679 p/w (it would cost £4.5 million if on the market). Savills: 020 8673 4111.

2 Period comfort

Grade II three-bedroom house Wytham village, Oxford, with terrace garden and large kitchen. £1,995 p/m (it would cost around £550,000 if for sale). John D Wood & Co: 01865 311522.

3 Country family house

The Laundry House, Malshanger, Basingstoke, Hampshire. A four-bedroom, period house overlooking the green. £2,250 p/m through Carter Jonas: 01962 876838.

4 Country seat

Dating from the late 1500s, with 12 bedrooms and a detached cottage in 50 acres of landscaped gardens and grounds in Ascot, Berkshire. £6,000 p/w. Knight Frank: 01344 299399.

5 Gothic grandeur

A Gothic Grade II house in Hampstead, north London, with sun deck, six bedroom suites, garden and gated parking. £4,500 p/w through Savills: 020 7472 5030.

[Giordano Bruno]

[quote

...]

"If she were to buy a flat similar to the one she is renting she would need a £430,000-£500,000 mortgage, which would cost a lot more in monthly repayments than the rent."

...

“I am so glad we didn’t do it,” Donna says. “I have friends now who are trapped in one and two-bedroom flats which are much too small to have a family in. They had babies in the hope they could trade up but they haven’t been able to."

I like it too. Good find, LuckyOne.

[Kyoto]

I genuinely prefer renting, but it's the security of owning a house that massively appeals.

I bet this is what drives most people, and I'm surprised that this is uniquely a 'being British' thing.

[Laughing Gnome]

It's the "cost more than the rent" thing I can't accept.

I have always found that mortgages cost less than rent, particularly now that mortgage money is dirt cheap and rents have become

unaffordable without HB for those on low wages.

Only when the masses have the option of choosing democratically accountable, not-for-profit rentals, (in the main that would be council housing), will HPI be permanently capped.

Edited December 19, 2010 by Laughing Gnome

[winkie]

It's the "cost more than the rent" thing I can't accept.

I have always found that mortgages cost less than rent, particularly now that mortgage money is dirt cheap and rents have become

unaffordable without HB for those on low wages.

Only when the masses have the option of choosing democratically accountable, not-for-profit rentals, (in the main that would be council housing), will HPI be permanently capped.

I would say most youngsters say 20s early 30s would prefer the flexibility of renting...it is only the fact that more bought because they could get-rich-quick, when this is no longer the case, more will not want to buy so readily....

Mortgages can cost less than rent, but owning a home costs more than just the mortgage.

The ones raking it in will be the low leveraged and unencumbered owners that bought in the last century they will be laughing all the way to the bank...that is why higher taxes on second home owners should be seriously considered or something else that can bring the rents down or we will find a whole generation will be paying the price of artificially inflated house prices built on the back of easy credit and low interest rates.

[Fishbone Glover]

It's the "cost more than the rent" thing I can't accept.

I have always found that mortgages cost less than rent, particularly now that mortgage money is dirt cheap and rents have become

unaffordable without HB for those on low wages.

Not for the house that I'm currently renting. I worked out that, for the total cost of a 25 year repayment mortgage at 7.5% (I think) I could rent it for 37 years, assuming no rent inflation (it was a quick back-of -a-fag -packet calculation).

Interest only, I guess, would be cheaper at the moment, but what's the point of renting from the bank and having to worry about maintenance and repairs?

[Tired of Waiting]

I genuinely prefer renting, but it's the security of owning a house that massively appeals.

I bet this is what drives most people, and I'm surprised that this is uniquely a 'being British' thing.

I agree that security is essential. But a British mortgage holder is much less secure than a German tenant.

Tenancy laws are essential. Tenants there are secure, and yet they also retain flexibility, in case of moving jobs for instance. Here tenants are less secure, and may have to move with a 2 months notice.

But mortgage holders here may be in an even worse situation, if they are overstretched, and they have less flexibility in case of needing to move, either due to negative equity (trapped), or transaction costs.

[Austin Allegro]

Since when has Streatham been a 'desirable area'?

Pay hundreds of thousands for the privelige of being mugged by someone who is paid to live there out of your taxes.

[Tired of Waiting]

It's the "cost more than the rent" thing I can't accept.

I have always found that mortgages cost less than rent, particularly now that mortgage money is dirt cheap and rents have become

unaffordable without HB for those on low wages.

Only when the masses have the option of choosing democratically accountable, not-for-profit rentals, (in the main that would be council housing), will HPI be permanently capped.

You have to compare rent with IR+maintenance+capital change. And leave out the re-payment part of it, of course.

Rates are very low now only for existing mortgages that are tracking the BoE rate. But if you try to buy now, a 10 years fixed is now at 5%/year. This alone will be more than the rent in many cases. If then you add maintenance and probable capital losses in the next few years, then renting is surely much cheaper.

[Johnny Storm]

They are quite high end places with the subtle implication that renting is no longer for losers. I like it.

Well as a renter, the big fail in this argument is concerning retirement. Are you going to work for all your life to be able to pay rent?

The ideal position is to buy, pay off as soon as possible and then have the vast majority of your income as disposable.

[Giordano Bruno]

It's the "cost more than the rent" thing I can't accept.

I have always found that mortgages cost less than rent, particularly now that mortgage money is dirt cheap and rents have become

unaffordable without HB for those on low wages.

Only when the masses have the option of choosing democratically accountable, not-for-profit rentals, (in the main that would be council housing), will HPI be permanently capped.

I'm in London, renting a nice large studio flat, in easy reach of public transport, shops, and only about 4 miles from the centre of London, for £475 per month. The landlord has given me good terms, I think, because he knows me to be a good tenant.

Would I be able to buy similar for less per month? I doubt it.

[Harry Monk]

Well as a renter, the big fail in this argument is concerning retirement. Are you going to work for all your life to be able to pay rent?

The ideal position is to buy, pay off as soon as possible and then have the vast majority of your income as disposable.

But not if the value of the house you buy was to fall by 25% over the next two years- it would make more sense to rent for two years and then buy it.

[LuckyOne]

Well as a renter, the big fail in this argument is concerning retirement. Are you going to work for all your life to be able to pay rent?

The ideal position is to buy, pay off as soon as possible and then have the vast majority of your income as disposable.

My guess is that it will be easier to reach this goal by buying in 2013 than it will be from buying in 2011.

[CrashedOutAndBurned]

This new rental paradise doesn´t exist. If you´ve been to Germany or Scandinavia and see people living in rentals they seems to cost half the price of the UK and seem much better quality.

It seems acceptable for rented places to be dire dumps in the UK, especially in the big cities... office ´brillo´carpets, damp kitchens and bathrooms,general tattyness, doors that look like they could be broken into, etc. So you´re paying twice what your '10 years older' friends pay on their mortgage but feel like you're living like a poor person. Sometimes having maintenance costs is better than putting up with ill-maintenance.

Oh and with more people renting landlords are for the first time in ages raising rents. Yes, you can challenge it, but if they're just sneaking the price up its harder to show it's not market rate with a Rent Assessment Committee - so they're just stealing your money, banking on the fact you won't move out to save a few hundred a year.

Edited December 19, 2010 by CrashedOutAndBurned

[Johnny Storm]

My guess is that it will be easier to reach this goal by buying in 2013 than it will be from buying in 2011.

But not if the value of the house you buy was to fall by 25% over the next two years- it would make more sense to rent for two years and then buy it.

But thats all well and good as a theory, but we have been saying the same for years! Even if you say it was only from 2005 that's 5 years of rent (its more like 8) So either £36k (5 years) or £57k ( 8 years) for me personally. The house I like now is £200k, 10 years ago it was £97k. Its now impossible for me to get back the money wasted in renting.

A point comes where you have to realise you were wrong and move on.

[Tired of Waiting]

But thats all well and good as a theory, but we have been saying the same for years! Even if you say it was only from 2005 that's 5 years of rent (its more like 8) So either £36k (5 years) or £57k ( 8 years) for me personally. The house I like now is £200k, 10 years ago it was £97k. Its now impossible for me to get back the money wasted in renting.

A point comes where you have to realise you were wrong and move on.

You would have wasted money on interest as well. You have to compare these 2 options. (Plus maintenance and transaction fees.)

[Stars]

But thats all well and good as a theory, but we have been saying the same for years! Even if you say it was only from 2005 that's 5 years of rent (its more like 8) So either £36k (5 years) or £57k ( 8 years) for me personally. The house I like now is £200k, 10 years ago it was £97k. Its now impossible for me to get back the money wasted in renting.

A point comes where you have to realise you were wrong and move on.

You are correct. This is one of the dynamics under a housing boom.

If renting were genuinely better, people wouldn't be scrambling over each other to buy

[LuckyOne]

You are correct. This is one of the dynamics under a housing boom.

If renting were genuinely better, people wouldn't be scrambling over each other to buy

At the moment, people aren't scrambling over each other to buy ....

[Tired of Waiting]

You are correct. This is one of the dynamics under a housing boom.

If renting were genuinely better, people wouldn't be scrambling over each other to buy

Buying seemed the best option in 2005, 06, and 07. But was it? Only in the very short term, not on the long term.

My annual rent here is just under 6% of this flat's current market value (it is back to 2005 prices, I think). Similar to the interest I would pay if I buy this. But if you consider maintenance, fees, and that this capital will fall within the next few years, then it is a "no-brainer".

As we all know, the best time to buy was around 10 years ago, and the best time to sell was 2006-7.

Buying has been the wrong choice since around 2004-5, on average.

But all that depends also on regions of the country, and on personal circumstances, of course. We are just talking averages here, and mainly the financial side.

[19 year mortgage 8itch]

A point comes where you have to realise you were wrong and move on.

Exactly, having owned somewhere not very nice, I'm taking adavantage of a STR period to rent in one of the best local areas. There's no way on earth we could afford to buy the house we're living in.

But I know that 3 years is about our limit. After that, tough decisions will have to be made. Nearly up to 1 yr

[Stars]

At the moment, people aren't scrambling over each other to buy ....

They are, but have less money to do so since the economy fell over from all the house-buying

Overall, buying has mammoth economic advantages over renting. This is why whenever there are surpluses to spend we get housing booms

Edited December 19, 2010 by Stars

[Stars]

Buying has been the wrong choice since around 2004-5, on average.

'Wrong' when compared to buying earlier, however all but the people who bought very late (the last 6-8 months of the boom) probably made a better choice than renting all the way through.

[Harry Monk]

The house I like now is £200k, 10 years ago it was £97k.

Yes, and it would have made financial sense to buy in 2000, nobody is denying that- that was the year in which I last bought a house.

But assuming it is £200,000 now, the Halifax would have put its value at around £240,000 in 2007. Therefore it would not have made sense to buy it then since you would have spent far less than £40,000 on rent in the interim.

I must admit I'm baffled as to why one of the country's top 1% of earners would aspire to live in such modest accommodation...

[Johnny Storm]

Yes, and it would have made financial sense to buy in 2000, nobody is denying that- that was the year in which I last bought a house.

But assuming it is £200,000 now, the Halifax would have put its value at around £240,000 in 2007. Therefore it would not have made sense to buy it then since you would have spent far less than £40,000 on rent in the interim.

I must admit I'm baffled as to why one of the country's top 1% of earners would aspire to live in such modest accommodation...

I live in the north, that's for a 4 bedroom detached house. As a single fella how many bedrooms do you think I need exactly? Though If I were you, id spend my time sorting out your dead end life on benefits rather than trying to make snotty comments towards me.

[Harry Monk]

Though If I were you, id spend my time sorting out your dead end life on benefits rather than trying to make snotty comments towards me.

I don't really need to "sort out my dead end life on benefits", it's no great effort to sort out, even after my holiday earlier in the year to South Africa, Botswana and Zimbabwe all I had to do was phone them up and do a rapid reclaim. But thanks for your concern.