If You Owned A House ...

[AThirdWay]

I bought at £X and sold at 12x £X thirty years later. So no, I don't see a problem with it and I could probably have done better in the SM anyway.

That was in a normal housing market though, and your right, nothing wrong with that. Over the last 10-12 years lax lending has seen house prices rocket. Very difficult to double your money on the SM in 2-3 years.

[Tired of Waiting]

Trying to organise your irrational post:

So you would be prepared to cash in, wait until prices fall and then try to use the profit to price a few FTBs out of the market?

How would selling at peak and buying at the bottom "price a few FTBs out of the market"?

Fair enough, but it does seem rather contrary to your anti-NIMBY

Why?

and anti-BTL views.

1) Where have I said I was against BTL?

2) Supposing one were/is - why selling at peak and buying at the bottom would be contradictory with being against BTL?

Edited July 10, 2012 by Tired of Waiting

[EmpiricalBear]

There is no generally right answer to the question about whether one should STR. It depends so much on wildly unpredictable parameters.

My own experiment with STR has been the single worst financial decision I have made in my life. I am not wingeing about this, its a fact. Hopefully other people can learn from this and avoid the dangers of this strategy. For me STR has been the difference between early retirement (I could have done that at 52) or working until 67 (which I have to now). In my case the approximate sum STR has cost me is about £300k because of my early timing in leaving the market. Quite simply when you STR you are making the bet that you are 'the only one in step in the army'. We have a country whose economy, banking system and culture in the widest sense is welded to the idea of property ownership and rising house prices. The greatest irony has been watching the interest in my STR 'fund' drop from enough to live on from 2005-7, to approximately zero since 2008. Having missed a good bit of the boom, an STR like myself, then gets to help fund keep the prices of the houses we can't afford afloat after the banking crash. As I said, I'm not sorry for myself, but let this be a warning to others contemplating this approach. Get it right you could be quids in, but I am unwilling to short UK property in future!

We are heading deeper into a depression, possibly a global depression. During a depression prices of assets fall, so that should include houses. However the UK might not experience house price falls during a depression for the same reasons prices have only fallen modestly since the financial crisis of 2008. House prices in the UK did not fall during the Great Depression of the 1930's (according to somewhat limited stats available). I think we are due for years more of the same that we have experienced since 2008. Low or negative IR's, quantitative easing, an incredibly slow housing market market by diminishing supply, falling nominal prices in 'cold areas', but stasis or mild rises in popular rises. Mild real price falls in most areas. In this scenario, owning a house is not a massive risk.

I would say that STR is a strategy for the young (which means a lucky few with capital in their houses). You need the balls to take the capital from your house and to find investments which will deliver pretty big gains, because once the housing market takes off, there is little other asset class that can compete with a housing bull.

I have had investments that would have delivered sufficient growth had I gone 'all in' with my investments when I sold my house. But you need balls of steel to do this because you are literally betting 'the farm'. Get this wrong and you will easily end up with nothing.

[Boughtin95]

No mortgage outstanding ....and its freehold ...!

just wondering .........?

No mortgage and it's freehold, not a chance I'd sell it to rent elsewhere.

Why gamble with a home we enjoy living in?

As we have enough in savings to buy it again at current prices, I don't think I'd want all of our assets in cash at the moment.

[porca misèria]

Plain and simple, no. Why should I need extra disruption in my life?

Unless of course I was moving for reasons unconnected with the economy and housing market.

[Police]

Absolutely not. I think you would have to be dumb to sell a paid-for house in this environment.

[Bruce Banner]

Absolutely not. I think you would have to be dumb to sell a paid-for house in this environment.

That's me put in my place then .

[ThePiltdownMan]

I dont have confidence in the GBP holding its purchasing power, and I also lack the confidence in my own skills as an investor, not to mention having to deal with the inevitable stress of it all. So I have to weigh that up against holding the assent and the equivalent of paying rent to myself which is a guaranteed return. The result is no, I would hang on to the property.

[notnow]

Sold my paid for house for a year ago after 33 years of owning/paying a mortgage. If I had kids in the house I would not have done so.

I was mostly concerned about being unable to sell at all further down the line. I love the flexibility. I can live where I like. Selfish neighbours also put me off house ownership.

[Tired of Waiting]

Absolutely not. I think you would have to be dumb to sell a paid-for house in this environment.

Really?! Even in the South?? Why?!

Look at this:

Thread about it: http://www.housepricecrash.co.uk/forum/index.php?showtopic=179618

I've used data from this source: http://www.communities.gov.uk/housing/housingresearch/housingstatistics/housingstatisticsby/housingmarket/livetables/affordabilitytables/

From the "Table 577: Ratio of median house price to median earnings by district, from 1997, MS Excel, 185 kb"

Sustainable?

[frenchy]

Really?! Even in the South?? Why?!

Look at this:

Sustainable?

Does the median earning include benefits/tax credit...? This is a serious question considering the fact that after child benefits, tax credit (and the rest of it) it would appear that household "earnings" are no less than 40k ish.

[manchester50]

Really?! Even in the South?? Why?!

Look at this:

Sustainable?

FWIW I don't think it's sustainable long-term. But look at your graph for London/the SE. The ratios have sat at roughly the same level for 7 years. If you'd had that graph 4 years ago you'd have said then that the ratios were unsustainable - would you I wonder have bet on them being sustained for a further 3 years?

I'd prefer not to be putting my money on the line when it comes to the property market, but unfortunately I have to bet - put my money in, or keep it out. At the moment it's out with another 6 month AST just signed. But if prices are at a similar level (within 5%) in say 2 years time I won't be surprised, just annoyed.

[Tired of Waiting]

FWIW I don't think it's sustainable long-term. But look at your graph for London/the SE. The ratios have sat at roughly the same level for 7 years. If you'd had that graph 4 years ago you'd have said then that the ratios were unsustainable - would you I wonder have bet on them being sustained for a further 3 years?

I'd prefer not to be putting my money on the line when it comes to the property market, but unfortunately I have to bet - put my money in, or keep it out. At the moment it's out with another 6 month AST just signed. But if prices are at a similar level (within 5%) in say 2 years time I won't be surprised, just annoyed.

Yes, in 2007-08-09 I (we?) did think the game was over, and I was very surprised to see that "recovereh" from 2009 to 2010, because it is a policy mistake = unsustainable. The government debt is going up, and if they keep the current deficit they will approach 100% of GDP, and gilts will go up. If they cut it, the recession will get worse, and nominal prices will fall. If the BoE keep printing they will cause inflation, high IRs, and a real price fall.

They are running out of cash credit. Pushing prices up in 2009 was a huge mistake. They should have soft landed. Now, instead, they will crash land.

If you are in Manchester, like I wrote above, it would depend on personal circumstances, as prices there are not too crazy any more, but here in the South, prices are way too bonkers still.

[manchester50]

Yes, in 2007-08-09 I (we?) did think the game was over, and I was very surprised to see that "recovereh" from 2009 to 2010, because it is a policy mistake = unsustainable. The government debt is going up, and if they keep the current deficit they will approach 100% of GDP, and gilts will go up. If they cut it, the recession will get worse, and nominal prices will fall. If the BoE keep printing they will cause inflation, high IRs, and a real price fall.

They are running out of cash credit. Pushing prices up in 2009 was a huge mistake. They should have soft landed. Now, instead, they will crash land.

If you are in Manchester, like I wrote above, it would depend on personal circumstances, as prices there are not too crazy any more, but here in the South, prices are way too bonkers still.

As I said, I agree it;s unsustainable. What I'm no longer willing to do is put a timeframe on how long it will be sustained. In two years time I can easily imagine more QE (some potentially finding it's way to lower SVRs), a quarter cut in base rates (which won't affect IRs, but would be reported as a pro for buying into housing), few forced sales, a continuing stagnant market and prices similar to today against very low transaction rates.

I hope I'm wrong as I expect to buy within that window, but don't be surprised if two years pass and your posts are saying the same thing.

Edit: Yes there's a north/south divide in this, but the better areas of the NW/Cheshire are still at 2007/2007+ asking prices generally. The sh1tier areas have fallen.

Edited July 10, 2012 by manchester50

[trevor_1977]

So would I be better off getting a bigger deposit as you guys seem confident I wont miss out if they rise I just think I have time to save more as I am living very cheap in a room and am comfortable enough with my internet and that so reckon I should save more and wait it out .I hope I do not regret it .

[manchester50]

So would I be better off getting a bigger deposit as you guys seem confident I wont miss out if they rise I just think I have time to save more as I am living very cheap in a room and am comfortable enough with my internet and that so reckon I should save more and wait it out .I hope I do not regret it .

I doubt you'll find anyone here expecting house prices to run away from you in the next few years...and by few I mean 'quite a lot'.

[Discopants]

No. Bought a nice house that we could happily stay in for the next 20+ years 7 months ago ( we have just started a family ). We have rented/travelledfor the previous 5 years which I didn't regret either. Spent 55% of our assets buying the house. Affordability needs to improve and I expect it to but we are happy and feel hedged appropriately. Late 30s/ early 40s

[Bruce Banner]

So would I be better off getting a bigger deposit as you guys seem confident I wont miss out if they rise I just think I have time to save more as I am living very cheap in a room and am comfortable enough with my internet and that so reckon I should save more and wait it out .I hope I do not regret it .

There are some who believe that renting is dead money, but many here know different.

[The Masked Tulip]

There is no generally right answer to the question about whether one should STR. It depends so much on wildly unpredictable parameters.

My own experiment with STR has been the single worst financial decision I have made in my life. I am not wingeing about this, its a fact. Hopefully other people can learn from this and avoid the dangers of this strategy. For me STR has been the difference between early retirement (I could have done that at 52) or working until 67 (which I have to now). In my case the approximate sum STR has cost me is about £300k because of my early timing in leaving the market. Quite simply when you STR you are making the bet that you are 'the only one in step in the army'. We have a country whose economy, banking system and culture in the widest sense is welded to the idea of property ownership and rising house prices. The greatest irony has been watching the interest in my STR 'fund' drop from enough to live on from 2005-7, to approximately zero since 2008. Having missed a good bit of the boom, an STR like myself, then gets to help fund keep the prices of the houses we can't afford afloat after the banking crash. As I said, I'm not sorry for myself, but let this be a warning to others contemplating this approach. Get it right you could be quids in, but I am unwilling to short UK property in future!

We are heading deeper into a depression, possibly a global depression. During a depression prices of assets fall, so that should include houses. However the UK might not experience house price falls during a depression for the same reasons prices have only fallen modestly since the financial crisis of 2008. House prices in the UK did not fall during the Great Depression of the 1930's (according to somewhat limited stats available). I think we are due for years more of the same that we have experienced since 2008. Low or negative IR's, quantitative easing, an incredibly slow housing market market by diminishing supply, falling nominal prices in 'cold areas', but stasis or mild rises in popular rises. Mild real price falls in most areas. In this scenario, owning a house is not a massive risk.

I would say that STR is a strategy for the young (which means a lucky few with capital in their houses). You need the balls to take the capital from your house and to find investments which will deliver pretty big gains, because once the housing market takes off, there is little other asset class that can compete with a housing bull.

I have had investments that would have delivered sufficient growth had I gone 'all in' with my investments when I sold my house. But you need balls of steel to do this because you are literally betting 'the farm'. Get this wrong and you will easily end up with nothing.

Excellent post.

Like you, I am worse off than if I had just bought circa 2008. Likewise, gone from interest paying rent to very little. People simply are refusing to drop their prices and, in the main, are getting away with it.

[Bruce Banner]

.......I am worse off than if I had just bought circa 2008. Likewise, gone from interest paying rent to very little. People simply are refusing to drop their prices and, in the main, are getting away with it.

If I'd bought in 2008 I'd be a lot worse off than I am today. The interest on the money I'd have to draw out of the bank to buy the house I'm renting still more than pays the rent. In 2007/8, it covered the rent with £10K PA to spare and the house has depreciated some £50K in that time.

[Lepista]

What a pointless debate. All I would like is a reasonable sized house, with a decent about of land so that I can grow a few veggies, have enough space to have a nice barbeque with a few friends, be able to have a shed or two (without having to ask anyone for "permission"), a drive and a place to keep my car so that it's protected from the elements. Even with the overcrowded nature of the UK, this should be an achievable aim for *everybody* in the UK.

Instead, here we are quibbling about whether we should sell our little two-bedroom flat on the fifth floor of a multi-owned multi-story monstrosity, or whether it's "morally right" to sell to someone if you know the market is rigged and is unsustainable.

It's pathetic. Look at the bigger picture - housing should be virtually free nowadays - how many generations does it take to be able to pay for a place to house yourself? Who are we paying this money to, over and over and over again?

Sigh.

[Drover]

I would put STR on a par with PayDayLoans. Its going to hurt.

Lets say you have a £300k house and do nothing to it, no extensions, home improvements. You just live in it and pay the mortgage. You then pay off the mortgage as quickly as possible to pay the minimum amount of interest until you are mortgage free.

You can live in that house for the rest of your life and not pay anything more, besides CTax and bills.

If you then sold that property and decided to rent, you then find yourself paying for a property again, only this time your paying for one you will never own.

Lets say IF ..

But if prices go down and the powers that be seem intent on not letting that happen to any great degree, despite 2 recessions and a global financial crash, then ok you could in theory buy back your old place at less money than you sold it for and pocket the difference. But realistically is that going to happen. No of course not.

What will mostly likely happen is you will sell up, start renting and then you wont be able to find a house you want to live in, in the area you want for the money in your pocket.

STR is not something I would do, but I guess theres one born every minute.

[Bruce Banner]

........You can live in that house for the rest of your life and not pay anything more, besides CTax and bills.

If you then sold that property and decided to rent, you then find yourself paying for a property again, only this time your paying for one you will never own........

.........I guess theres one born every minute.

On these forums there does indeed seem to be one born every minute, one who has no understanding of opportunity cost .

We all have to pay for a roof over our heads and there are three ways in which we can do it....

1, Pay rent to a landlord.

2, Buy a house with borrowed money and pay interest to a lender.

3, Buy a house outright and lose the interest that the money tied up in the house would otherwise be earning in the bank, or other investment. The opportunity cost.

In my case, the opportunity cost would be higher than the cost of paying rent.

[Vagabond]

First rule of gambling is don't gamble what you can't afford to lose. STR is a gamble, pure and simple. If you can afford to lose the cash then all good. For most people they would be gambling with literally everything they have ever managed to save. Thats insanity.

[gf3]

Quite an amazing poll result on a web site called house price crash.

With no one on here prepared to sell then I can only conclude there isn't going to be a crash.

I do think that houses above what FTB can afford will come down though I can't see how people will find the extra cash to move up market in the future.

Edited July 11, 2012 by gf3