Jump to content
House Price Crash Forum

For Those Waiting For An Hpc


Recommended Posts

  • Replies 431
  • Created
  • Last Reply

Top Posters In This Topic

And for renting...

Unless you are happy to stay on a rolling periodic tenancy you will have to re-sign a contract every 6/12/x months and this usually comes with a £50+ 'admin fee'.

You still need contents insurance for your own stuff. For me, this was about half of what I pay for contents & building.

Unless you are renting fully furnished you still need to invest in beds, sofas, TVs, kettles, toasters, possibly even a fridge or washing machine if white goods are not included.

Rent levels can change as well. Although the rent market is just as localised and the buying market so they may go up or down depending on where you are. Over the length of a mortgage I'd bet the would go up though, particularly in the SE.

You still have to pay council tax & utilities (although some may be included in the rent).

Unless you are a good/lucky investor you will be seeing the real value of your investment pot being decreased by inflation year on year.

Swings and roundabouts.

You really would have had to be a pretty stupid investor not to have kept pace with prices since August 2007. You are looking at around 3% compound on the RPI measure 239.4 /207.6 (I think), slightly less on the CPI. Until 2008 fixed rates were up at 7% gross, including a five year deal from the then nationalised Northern Rock (Dec 2007 deal) at 7% with an ulimited capital guarantee ( since reduced to 85K for new investments). Moreover, I would expect inflation now to fall back pretty quickly. 2% might actually be doing the job now, if you are thinking in terms of where inflation is at currently rather than looking backwards over the last 12 months.

Totally agree with those that point to the indirect costs of owning, massive does not start to describe it. According to moneysaving expert you actually buy your house all over again (after allowing for inflation) every fifty years in refurb costs.

I am renting a HA property with partner at £77.75 per week, knowing fully well that I will have increased drawings when I buy mortgage free to allow for all the associated costs of owning.

Unless capital values are rising, home ownership is more than dead money it is a liability.

Edited by crashmonitor
Link to post
Share on other sites

And for renting...

Unless you are happy to stay on a rolling periodic tenancy you will have to re-sign a contract every 6/12/x months and this usually comes with a £50+ 'admin fee'.

I'm on a rolling contract, and have been for nearly three years. When the 6-month tenancy 'ran out', AST automatically goes onto a rolling contract. No admin fee required.

You still need contents insurance for your own stuff. For me, this was about half of what I pay for contents & building.

If contents insurance is common for moth, it's irrelevant. Same as food - if you're buying/renting, then why is the cost of food relevant?

Unless you are renting fully furnished you still need to invest in beds, sofas, TVs, kettles, toasters, possibly even a fridge or washing machine if white goods are not included.

See above. Except with the proviso that landlord supplied items are maintained and replaced by the landlord.

Rent levels can change as well. Although the rent market is just as localised and the buying market so they may go up or down depending on where you are. Over the length of a mortgage I'd bet the would go up though, particularly in the SE.

True, however, in the medium term, I can only see rents decreasing.

You still have to pay council tax & utilities (although some may be included in the rent).

Agreed, but irrelevant to a comparison of the differences.

Unless you are a good/lucky investor you will be seeing the real value of your investment pot being decreased by inflation year on year.

The money I'm saving by renting allows me to build up cash to buy somewhere when the price is right. At the moment, renting is far, far more sensible to buying somewhere.

Swings and roundabouts.

More like ladders and slides.

Link to post
Share on other sites

Totally agree with those that point to the indirect costs of owning, massive does start to describe it. According to moneysaving expert you actually buy your house all over again (after allowing for inflation) every fifty years in refurb costs.

It really does make you wonder why so many businesses are foolish enough to rent out properties when their money would be better off earning them interest in the bank or invested in gold, especially given what little rent they receive for the value of the house, and the high costs of maintenance.

Link to post
Share on other sites

It really does make you wonder why so many businesses are foolish enough to rent out properties when their money would be better off earning them interest in the bank or invested in gold, especially given what little rent they receive for the value of the house, and the high costs of maintenance.

I hope your tongue was firmly in cheek when you wrote that...? :P It seems so obvious that your statement is correct in todays climate, however a few years ago it certainly was not the case, and quick bucks could of been, and were, made.

Of course, for many years, it was more profitable, especially with HPI on a leveraged position. (some even managed infinite leverage, with 100% loans...)

With static, or falling, house prices, though things don't look quite so rosy. Many of these 'in it to win it' BTL'ers are going to get their fingers severely burnt.

Link to post
Share on other sites

And for renting...

Unless you are happy to stay on a rolling periodic tenancy you will have to re-sign a contract every 6/12/x months and this usually comes with a £50+ 'admin fee'.

You still need contents insurance for your own stuff. For me, this was about half of what I pay for contents & building.

Unless you are renting fully furnished you still need to invest in beds, sofas, TVs, kettles, toasters, possibly even a fridge or washing machine if white goods are not included.

Rent levels can change as well. Although the rent market is just as localised and the buying market so they may go up or down depending on where you are. Over the length of a mortgage I'd bet the would go up though, particularly in the SE.

You still have to pay council tax & utilities (although some may be included in the rent).

Unless you are a good/lucky investor you will be seeing the real value of your investment pot being decreased by inflation year on year.

Swings and roundabouts.

I've been renting the same house for over five years, my current agreement expires in eighteen months and I never pay any admin fee.

I don't have content insurance because I prefer not to, my risk.

I pay for my own TV. White goods are provided and replaced when required.

My rent has increased by 2.5% over the five year period.

I get interest on my savings whilst house prices are dropping.

Link to post
Share on other sites

It really does make you wonder why so many businesses are foolish enough to rent out properties when their money would be better off earning them interest in the bank or invested in gold, especially given what little rent they receive for the value of the house, and the high costs of maintenance.

They are in it for capital appreciation. Without it, the renting model cannot work. With the 10-20% capital depreciation since 2007 it has been a disastrous investment, and they have subsidised their tenants. Rent would have had to be in the stratosphere to cover depreciation, delapidations and use of the landlord's capital.

Edited by crashmonitor
Link to post
Share on other sites

I hope your tongue was firmly in cheek when you wrote that...? :P

Maybe... :D

I can't imagine the rental market is solely populated by amateur/reluctant landlords. It makes you wonder why the institutional landlords didn't sell up given they have large portfolios and stand to lose millions. I know some have sold up, but they do that during a boom or bust.

Link to post
Share on other sites

They are in it for capital appreciation. Without it, the renting model cannot work. With the 10-20% capital depreciation since 2007 it has been a disastrous investment, and they have subsidised their tenants. Rent would have had to be in the stratosphere to cover depreciation, delapidations and use of the landlord's capital.

and tax breaks for "Loans" they take out on the premises they take on.

Link to post
Share on other sites

Negative equity is not an issue if all house prices slump together, until you can't afford to pay the loans back. THEN, it's a serious problem.

What if you want to move up the housing ladder?

What about a stereotypical 40 year old who stretched himself to buy a 2 bed flat in 2007, bringing up two kids (say) with Wayne and Waynetta Chav for neighbours. Is his negative equity an issue for him?

Link to post
Share on other sites

The money I'm saving by renting allows me to build up cash to buy somewhere when the price is right. At the moment, renting is far, far more sensible to buying somewhere.

Funnily enough, the money I am saving on rent (mortgage interest much lower than rent for equivalent property) means I can 'save' (i.e. build up equity) quicker than I could when I was renting. And it's an offset mortgage so it's not all locked away either.

But I had to save for a long time to be able to get a big enough deposit to get a good mortgage deal.

So in my case renting is not far more sensible. Swings and roundabouts, as I said.

Link to post
Share on other sites

You really would have had to be a pretty stupid investor not to have kept pace with prices since August 2007. You are looking at around 3% compound on the RPI measure 239.4 /207.6 (I think), slightly less on the CPI. Until 2008 fixed rates were up at 7% gross, including a five year deal from the then nationalised Northern Rock (Dec 2007 deal) at 7% with an ulimited capital guarantee ( since reduced to 85K for new investments). Moreover, I would expect inflation now to fall back pretty quickly. 2% might actually be doing the job now, if you are thinking in terms of where inflation is at currently rather than looking backwards over the last 12 months.

Totally agree with those that point to the indirect costs of owning, massive does not start to describe it. According to moneysaving expert you actually buy your house all over again (after allowing for inflation) every fifty years in refurb costs.

I am renting a HA property with partner at £77.75 per week, knowing fully well that I will have increased drawings when I buy mortgage free to allow for all the associated costs of owning.

Unless capital values are rising, home ownership is more than dead money it is a liability.

Erm, how long has the reported CPI/RPI been over 3% now? And do you think that reflects the real rate of inflation in food, fuel and utilities?

7% gross, minus 20 or 40% tax, so in reality 5.6 or 4.2%. Just about squeaking past the official RPI/CPI figures - brilliant.

NS&I index-linked certificates have done well though.

I suppose the fund managers for my stakeholder pension are 'pretty stupid investors' because they have barely kept up with CPI/RPI as well.

You could have done well in the yellow shiny stuff but equally, done really badly in FTSE trackers so good luck if you're currently up on your investments.

Link to post
Share on other sites

Erm, how long has the reported CPI/RPI been over 3% now? And do you think that reflects the real rate of inflation in food, fuel and utilities?

7% gross, minus 20 or 40% tax, so in reality 5.6 or 4.2%. Just about squeaking past the official RPI/CPI figures - brilliant.

NS&I index-linked certificates have done well though.

I suppose the fund managers for my stakeholder pension are 'pretty stupid investors' because they have barely kept up with CPI/RPI as well.

You could have done well in the yellow shiny stuff but equally, done really badly in FTSE trackers so good luck if you're currently up on your investments.

To compare eggs with eggs, how would your "investment" be doing if you were in housing?

Link to post
Share on other sites

In an actual house to live in, in a BTL, or in a property-based fund?

Your argument about having a house rather than cash is that holding cash doesn't keep up with inflation.

To be truly comparable, you also need to see how the 'value' of your house is keeping up with inflation, too.

If the house inflation does not matter, then neither does your pot of money.

Link to post
Share on other sites

It makes you wonder why the institutional landlords didn't sell up given they have large portfolios and stand to lose millions.

Are there really such "institutional landlords" within the residential market?

Do the various housing associations really count? Aren't they really quasi public sector social housing providers and as such unable to sell up?

Also if they did sell up then what would happen to the highly paid directors and executives jobs?

Link to post
Share on other sites

I do not know where you live Bruce, but if you live in the south east then percentage house price falls are WAY below inflation. So capital is getting eroded.

You bang on all the time that interest from your savings pay your rent. That may be true, but do they also increase in line with inflation AFTER covering you rent. I suspect not.

The classic mistake again.

If Bruce has £350k in the bank set aside to buy a house that capital cannot be eroded by anything other than HPI. If general inflation is high it erodes the house purchasing power of people who do not have that capital because their living costs are higher.

The interest from his savings does not have to rise with general price inflation, all it has to rise with is rent inflation. Clearly his rent inflation so far is very low. Don't forget we are at a 300 year low for interest rates, yet his interest income is still paying his rent.

If house prices increased, his capital would be eroded because it would buy less house. He would need interest rates to rise so he had extra interest income to set aside to cover the rise in house prices. Or if house prices rose above interest rate income rises, he would need to make his capital work harder.

The worst scenario for Bruce is wage inflation without interest rates rises.

Link to post
Share on other sites

Are there really such "institutional landlords" within the residential market?

Yep, my mother in law is in one. If you go around the villages of the Claydons (Steeple Claydon, Botolph Claydon etc.) you'll see houses with light blue eaves and front doors, they're all owned by the same estate management company. It's not an housing association etc.

Here's a STREETVIEW of one. If you continue, you'll see another on the other side of the road.

Edited by exiges
Link to post
Share on other sites

Your argument about having a house rather than cash is that holding cash doesn't keep up with inflation.

To be truly comparable, you also need to see how the 'value' of your house is keeping up with inflation, too.

If the house inflation does not matter, then neither does your pot of money.

Yes, but 'value' is not necessarily the price it would sell for is it? All I'm trying to say is there is no absolute right or wrong answer, only it depends on your own circumstances.

Link to post
Share on other sites

Yes, but 'value' is not necessarily the price it would sell for is it? All I'm trying to say is there is no absolute right or wrong answer, only it depends on your own circumstances.

On the contrary, I think it's pretty clear cut.

I can't think of many circumstances where buying a house at the moment is going to leave you in a better financial position.

Link to post
Share on other sites

National Trust of course can't be forgotten - they are a huge (the biggest?) landord. And they get a darned good deal as the tenant is responsible for all upkeep, providing thei own kitchen appliances, floor/window coverings etc.

nah..just checked the website,...they offer box standard ASTs

Link to post
Share on other sites

On the contrary, I think it's pretty clear cut.

I can't think of many circumstances where buying a house at the moment is going to leave you in a better financial position.

I'd agree. I think for buying a house to be the 'right' decision in the current market, the main drivers need to be non-financial.

Link to post
Share on other sites

On the contrary, I think it's pretty clear cut.

I can't think of many circumstances where buying a house at the moment is going to leave you in a better financial position.

As I said (but you seem to have missed it) 'value' is not a purely financial measure. Maybe you don't value having somewhere to call your own that much but other people do and good luck trying to convince them otherwise.

Link to post
Share on other sites
Guest
This topic is now closed to further replies.
  • Recently Browsing   0 members

    No registered users viewing this page.

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.