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Renting Is Really Silly, It's Just Money Down The Drain.


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I don't post on here much having bought a house nearly three years ago - we STR when we moved out of London but we bought after 12 months after interest rates tanked and we wern't getting enough interest to cover our rent. Anyway, as another example to throw in the mix (obviously I've had to "guesstimate" rental value and how much our house is "worth" which isn't totally accurate as we live in a village with lots of different styles of houses):

Purchase price (Feb 2010): £360k, 4 bed detached, 3 bathroom, non estate

Costs of renovations (roof work, guttering, replacement of garage roof, new bathroom): £12k

Value of house: no idea - on right move for 400k plus (yes i know its only asking price). Only other house that's been sold in last three years was 550k but it was a big 5 bed

Rental value: £1,450 pcm

Mortgage: £130k fully offset so no interest charged, now at £100k. I think we pay £600 a month off and pay extra as we go along - bonuses and the like.

OK - we're not typical - we both bought flats in London in the 90's (when I say London I actually mean Croydon. My missus around Hayes although we did eventually end up in a poncy part of west london). We're not typical house buyers but we are typical of people buying the type of house we own. Most of the people we know have small mortgages but then most people we know are like us - savers, drive older cars, don't have flash holidays and so on). All the house price reductions round by us have largely been in the less desirable areas. My missus wanted a bigger house but we thought house prices would continue to drop and we'd move when they did. That ain't going to happen round here anytime soon so we're going to do a loft conversion and extension on back (we bought a house where this would work really well just in case). Anyway, that's our situation - thought I'd throw it in as an example.

My missus and I both feel house prices are massive and unsustainable but what do you do?

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Up here in the North (Newcastle area) it still makes sense to rent.

Prices have come down quite a lot for certain houses, but they are still too high.

I pay 735£PCM to rent a house which they last sold for 325,000£ in 2005 and could probably try to sell for 230k now.

Even at 230k it's still cheaper to rent it.

Consider the cost of maintenance et cetera and you're way better off.

I rented this for nearly 5 years now and paid some 35,000£ in rent up to now, with the house depreciating by quite a bit more than 100,000K.

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In your calculations for these comparisons you need to bear in mind that the cost of borrowing is at an artificial low that will not be the same at the end of your initial fix period. It might look cheaper on paper this month, next month, maybe even in 12 months. But beyond? You want to borrow 100s of thousands of pounds on an interest rate that could easily double or triple within the next 5 years? You're that confident about your future income?

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But he will still be spending £960/year more on rent, unless the rent also declines. Wouldn't the current rental yield on these properties be sufficient to limit further significant falls in value? He won't be the only one who has noticed that he could be spending less on a mortgage and there will be others looking at BTL given those numbers.

There are so many individual factors to take into account with regards to buying V renting, many not financial! Points that for some are minor (pets, ability to redecorate or renovate to your own spec etc) or simply the fact that often spouse are overly emotional about bricks & mortar and not buying may lead to marital issues!!

I bought in 2003 & have a 40% LTV mortgage now against the supposed current market value. The mortgage costs me less than a third of the estimated rental value & if I sold to rent & invested the cash I would struggle to bridge that gap (especially as that income would be almost entirely taxable).

That said on a £60k house with such low rent, I'd be pretty averse to wanting to buy & certainly wouldn't see it as an investment opportunity. The years rent wouldn't do much more than cover a boiler replacement & in all likelihood at that price point good tenants are going to be difficult to find & even harder to keep.

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I don't post on here much having bought a house nearly three years ago - we STR when we moved out of London but we bought after 12 months after interest rates tanked and we wern't getting enough interest to cover our rent. Anyway, as another example to throw in the mix (obviously I've had to "guesstimate" rental value and how much our house is "worth" which isn't totally accurate as we live in a village with lots of different styles of houses):

Purchase price (Feb 2010): £360k, 4 bed detached, 3 bathroom, non estate

Costs of renovations (roof work, guttering, replacement of garage roof, new bathroom): £12k

Value of house: no idea - on right move for 400k plus (yes i know its only asking price). Only other house that's been sold in last three years was 550k but it was a big 5 bed

Rental value: £1,450 pcm

Mortgage: £130k fully offset so no interest charged, now at £100k. I think we pay £600 a month off and pay extra as we go along - bonuses and the like.

OK - we're not typical - we both bought flats in London in the 90's (when I say London I actually mean Croydon. My missus around Hayes although we did eventually end up in a poncy part of west london). We're not typical house buyers but we are typical of people buying the type of house we own. Most of the people we know have small mortgages but then most people we know are like us - savers, drive older cars, don't have flash holidays and so on). All the house price reductions round by us have largely been in the less desirable areas. My missus wanted a bigger house but we thought house prices would continue to drop and we'd move when they did. That ain't going to happen round here anytime soon so we're going to do a loft conversion and extension on back (we bought a house where this would work really well just in case). Anyway, that's our situation - thought I'd throw it in as an example.

My missus and I both feel house prices are massive and unsustainable but what do you do?

In reality I doubt the costs have stopped at the 12K refurbisment and you would have had the considerable stamp duty to boot. As a seasoned owner occupier, I reckon it cranks the expenditure up in every department...furnishings is another area often forgotten. Over three years now, I think you might need 400K to be breaking even over renting.

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Taking your lower mortgage repayment figure, it is costing you £960 a year more to rent than to buy. A 2% annual fall in the price of a £60K house would mean that you would be better off renting. A 30% fall in house prices would leave you in negative equity to the tune of £18,000.

Surely, assuming he's quoting a repayment mortgage, he ends up with a house? Somewhere to live?

Or am I missing something??

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Surely, assuming he's quoting a repayment mortgage, he ends up with a house? Somewhere to live?

Or am I missing something??

nothing stopping the canny renter buying into the property market much much more cheaply.... later.

There is also a FSCS Protection issue with offset mortgages.

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I don't think you're missing anything.

We all want to end up with either a property we own outright or enough passive income from investments/cash to cover a rental cost.

How you get there is what is under discussion. If you plan to own, plainly the timing of your entry into the market is a factor in determining the cost. Personally, Im not doing it now.

You feel free to enter the market at your discretion !

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That said on a £60k house with such low rent, I'd be pretty averse to wanting to buy & certainly wouldn't see it as an investment opportunity. The years rent wouldn't do much more than cover a boiler replacement & in all likelihood at that price point good tenants are going to be difficult to find & even harder to keep.

I probably should have mentioned that the £300 rent I quoted was for my current 1 bed flat.

A 2 bed terrace like the one I linked to will probably rent for about £450-500 pcm.

Obviously everyone has to do their own homework, but I think I would much prefer to buy than rent. Especially since I would view it as a place to live, rather than an investment. Not only that but you have much more flexibility, not just just in home improvements, pets, etc. But you would also be free to bring in a lodger or two if you wanted.

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Up here in the North (Newcastle area) it still makes sense to rent.

I lived in Jesmond when I studied at newcastle Uni.

The house prices there are insane! £300k+ for a maisonette. I suppose the price reflects the popular area and the fact that you can cram 5/6 students in for £300 each p/m.

Presumably other parts of Newcastle would be much cheaper.

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I probably should have mentioned that the £300 rent I quoted was for my current 1 bed flat.

A 2 bed terrace like the one I linked to will probably rent for about £450-500 pcm.

Obviously everyone has to do their own homework, but I think I would much prefer to buy than rent.

Obviously everyone can make their own choice

Especially since I would view it as a place to live, rather than an investment.

That's the spirit, you've joined the right forum

Not only that but you have much more flexibility,

How much does it cost you to move between rentals, and how quickly can you do it ?

not just just in home improvements, pets, etc.

How much do home improvements cost you on your rental ?

But you would also be free to bring in a lodger or two if you wanted.

Ahh, turning your home into a rental

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Still think you have been better off renting,

Properties are getting cheaper throughout the country from North to South, you may yet get that 300k house for 150k cash.

Trouble is, will the UK be the place to live ?

You'll most likely need 150k cash left over after purchase just to live

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Still think you have been better off renting,

Properties are getting cheaper throughout the country from North to South, you may yet get that 300k house for 150k cash.

Trouble is, will the UK be the place to live ?

You'll most likely need 150k cash left over after purchase just to live

Are you sure? Are you seeing what you want to see or what's happening? I know things are localised but these are the last 3 Halifax

1-Dec-12, 163,845

1-Nov-12, 160,879

1-Oct-12, 158,426

The thing I don't understand is how the Halifax was £198k in 2007 when prices I look at now seem higher. This government is going for at least £180k before the next election.

Re the UK being the place to live I very much doubt it. In 2007 when the Halifax was £198k sterling was 1.50 Euros and 2 USD. If you could recreate that tomorrow you wouldn't see me for dust. HPI and sterling falling like we have now, is the roof of the escape tunnel caving in.

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Using easy access accounts in 2008 the 6.25% took £139k in the bank to pay the amount of rent I'm paying, now at 2% it would take £435k. It feels like they nicked a £300k house off me and made me pay for someone else to buy it.

I was getting nearly 7% in 2008 and about 3.5% on average now. That's an average of 4 or 5% over the last five years, which I don't think is too bad.

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Are you sure? Are you seeing what you want to see or what's happening? I know things are localised but these are the last 3 Halifax

1-Dec-12, 163,845

1-Nov-12, 160,879

1-Oct-12, 158,426

The thing I don't understand is how the Halifax was £198k in 2007 when prices I look at now seem higher. This government is going for at least £180k before the next election.

Re the UK being the place to live I very much doubt it. In 2007 when the Halifax was £198k sterling was 1.50 Euros and 2 USD. If you could recreate that tomorrow you wouldn't see me for dust. HPI and sterling falling like we have now, is the roof of the escape tunnel caving in.

The volumes are down, as you well know :lol: , that is important because many people have gone from living the dream to being stuck, this feeds into sentiment, and makes the final collapse all the more brutal. Stats based on a shrinking pool of sales are just noise, ignore them.

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Using easy access accounts in 2008 the 6.25% took £139k in the bank to pay the amount of rent I'm paying, now at 2% it would take £435k. It feels like they nicked a £300k house off me and made me pay for someone else to buy it.

Rent is not the only factor in the equation, and 2% is a bit low, I'm closer to Bruce Banner at 3.5% on investment income. Factor in stamp duty, home renovations, furniture and everything else that inflates as soon as you are a home owner and you need good solid +3% HPI annual return to break even over renting IMO. Speaking as a mortgage free homeowner myself.

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Rent is not the only factor in the equation, and 2% is a bit low, I'm closer to Bruce Banner at 3.5% on investment income. Factor in stamp duty, home renovations, furniture and everything else that inflates as soon as you are a home owner and you need good solid +3% HPI annual return to break even over renting IMO. Speaking as a mortgage free homeowner myself.

What proportion of a properties current value would the rent cost need to be less than in order for renting to be better than owning do you think?

By that I mean, if a property is on the market at 300k, and can be rented for 800 a month, I would call that 800*12 / 300k = 3.2%. Im not going to call that yield because it makes no account of costs and voids. Is that too high a rent to value ratio to be cheaper than buying?

Presumably there is a percentage figure that can be used as a rule of thumb to indicate at what point renting is cheaper than buying.

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I was getting nearly 7% in 2008 and about 3.5% on average now. That's an average of 4 or 5% over the last five years, which I don't think is too bad.

Like you I have had more in interest than what I have paid in rent. Like you the 2015 NS&I bond helps my average. Obviously there is also the opportunity cost and how successful any gambles have been.

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The volumes are down, as you well know :lol: , that is important because many people have gone from living the dream to being stuck, this feeds into sentiment, and makes the final collapse all the more brutal. Stats based on a shrinking pool of sales are just noise, ignore them.

I have you trained on these volumes now :lol:

I remember ages ago someone on here said something like sub 40k falling market but over 60k rising market. Though I suppose if it's 55k in London and 10k elsewhere it makes a difference.

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  • 415 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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