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House price correction and rent correction


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22 hours ago, Aidan Ap Word said:

OK, I will summarise:

The financial risk of buying a house is not being able to pay the mortgage

if at a point when I can't pay the mortgage (and the forbearance by the bank ends) and the house price has increased (nominally) then I face limited (or 0) financial cost of renting from the bank

if at a point when I can't pay the mortgage (and the forbearance by the bank ends) and the house price has decreased (nominally) then I face limited then the financial cost to me is limited to the - in the most extreme case - the total price of the house

But let's just keep in mind:

  • not being able to pay my mortgage (assuming I haven't been dumb about affordability - is *organisational risk* - not financial risk.
  • if I can't afford my mortgage I probably wouldn't be able to afford rent anyway
  • if I can't afford my mortgage the bank has a very strong history of greater forbearance than a landlord (this is the social risk of renting)

And renting from the bank doesn't come with the social risk of the landlord getting greedy.

 

Would say one thing......if buying, meaning actually repaying both interest and principle and that is the only debt held, no car debt, new furniture debt, etc, and interest rates rise by 0.25% or even 0.50% and that creates a problem can always rent a room out to make up the difference tax free.....;)

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This thread is a excellent example of a gaggle of pigs trying to teach each other to sing, while others watch from the sidelines chuckling while egging them on occasionally.

Most management / life coach advice includes a variation on Deming's Plan/Do/Check/Act.
If any guru has ever advised "Plan/Do/Check/Act/Expend a huge amount of effort trying to convince people who have chosen a different path they are wrong because their divergence is undermining your confirmation bias"
- this has passed me by.

Edited by hotblack42
grammar
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3 hours ago, Unmoderated said:

Stop talking about owning a house as a comparison. We all accept buying a house has risks. 

Renting too has its financial risks but you are utterly stubborn in accepting you're incorrect so I'm done trying to educate you. 

Happy risk free renting. 

I can say what I like. It's a free farm and I'm a free pig.

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4 minutes ago, Captain Kirk said:

I can say what I like. It's a free farm and I'm a free pig.

Well again that's not quite true. There are some things you cannot say, even on here. Captain Wrong? 

You can of course keep making comparisons of the financial risks of renting and owning and with those comparisons attempt to prove your non-point that renting is risk free because owning a property carries more financial risks. But we're talking about renting alone now and it is not risk free (financially) because:

  • counter party risk
  • deductions from deposit at end of tenancy
  • rent increases
  • house becomes uninhabitable or falls into a state of disrepair
  • fraud
  • termination of tenancy

It makes you look silly, and it distracts from the point you've made that you can't seem to get your head around. I'm only trying to help you out here. 

Just as well you're only in charge of a star ship that hasn't yet been built, in a time that hasn't occurred and in a universe that isn't real. 

:)

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2 minutes ago, Unmoderated said:
  1. counter party risk
  2. deductions from deposit at end of tenancy
  3. rent increases
  4. house becomes uninhabitable or falls into a state of disrepair
  5. fraud
  6. termination of tenancy

 

These are all risks, but speaking as a landlord of a house is first class property and tenant of a first class property, and a trained risk manager, I feel compelled to bring risk scoring (impact 1-5 x likelihood 1-5) into play.

My landlord is a global property development and management company.  They own property all over London and more property in New York than Trump.
My tenant works in lettings so her track record as a tenant is important.

Quick score of your list from my POV (1 lowest, 25 highest)
1.  very unlikely x major impact = 4
2.  unlikely x minor impact = 4
3.  unlikely x minor impact = 4 (15 months in & not a whisper, rent is fair relative to local market, inflation rise would be unwelcome but no big deal)
4. very unlikely x severe impact = 5 (really zero, they have maintained the block to a high standard for decades as confirmed by neighbours)
5. very unlikely x severe impact = 5
6. possible x major = 12 (have to concede this one as its possible they will wish to redevelop the site are some point)

Your identified risks are real, but need to be assessed per property / landlord.

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1 hour ago, Unmoderated said:

Well again that's not quite true. There are some things you cannot say, even on here. Captain Wrong? 

You can of course keep making comparisons of the financial risks of renting and owning and with those comparisons attempt to prove your non-point that renting is risk free because owning a property carries more financial risks. But we're talking about renting alone now and it is not risk free (financially) because:

  • counter party risk
  • deductions from deposit at end of tenancy
  • rent increases
  • house becomes uninhabitable or falls into a state of disrepair
  • fraud
  • termination of tenancy

It makes you look silly, and it distracts from the point you've made that you can't seem to get your head around. I'm only trying to help you out here. 

Just as well you're only in charge of a star ship that hasn't yet been built, in a time that hasn't occurred and in a universe that isn't real. 

:)

You could go on

  • feeling inadequate at parties
  • falling out of a badly maintained 1st floor window
  • landlord not seeing you and accidentally running you over with his new range rover.

Basically, renting and buying have their pros and cons and you are confusing those with risk. If you try and quantify and assign some monetary value to them then good luck with that.

Counter party risk is the landlord's risk. Deductions from deposit are you paying for damage. It's not a risk. Rent increases are not allowed or are a matter of the contract and so you'd know about them. Plus you can move if you don't agree. You are not obliged to pay them.

And why is fraud specific to renting? Some house buyers have had their whole housing equity stolen via email scams.

Termination of tenancy is also something you agree on and is part of the contract.

Edited by Captain Kirk
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1 hour ago, Captain Kirk said:

You could go on

  • feeling inadequate at parties
  • falling out of a badly maintained 1st floor window
  • landlord not seeing you and accidentally running you over with his new range rover.

Basically, renting and buying have their pros and cons and you are confusing those with risk. If you try and quantify and assign some monetary value to them then good luck with that.

Counter party risk is the landlord's risk. Deductions from deposit are you paying for damage. It's not a risk. Rent increases are not allowed or are a matter of the contract and so you'd know about them. Plus you can move if you don't agree. You are not obliged to pay them.

And why is fraud specific to renting? Some house buyers have had their whole housing equity stolen via email scams.

Termination of tenancy is also something you agree on and is part of the contract.

No, I am not confusing these with financial risk - you seem to equate financial risk with falling out of a window? Up there with balancing your possessions when moving house.

Now you don't consider paying for damage a financial risk when earlier your basis for asserting renting was risk free was because you knew exactly what you'd be paying (which was also debunked by others). 

Fraud is not specific to renting. Good lord you fail to see the point time and time again. You're saying it is risk free, and then when a risk is identified flip it by stating that it's not a specific to renting risk. Move the goalposts, you do not have an argument. 

  • counter party risk = financial cost of being unexpectedly evicted and having to move home and pay a new deposit, new fees and different rent.
  • deductions from deposit at end of tenancy = unlimited
  • rent increases = unlimited over the longer term
  • house becomes uninhabitable or falls into a state of disrepair = 1st costs, you need to move
  • fraud = your deposit and first rent all paid to some dodgy scammer

It does not require a specific value to be assigned to be defined as a risk. 

Any more straws to clutch or are you going to beam your silly **** out of here?

  • termination of tenancy
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1 hour ago, hotblack42 said:

These are all risks, but speaking as a landlord of a house is first class property and tenant of a first class property, and a trained risk manager, I feel compelled to bring risk scoring (impact 1-5 x likelihood 1-5) into play.

My landlord is a global property development and management company.  They own property all over London and more property in New York than Trump.
My tenant works in lettings so her track record as a tenant is important.

Quick score of your list from my POV (1 lowest, 25 highest)
1.  very unlikely x major impact = 4
2.  unlikely x minor impact = 4
3.  unlikely x minor impact = 4 (15 months in & not a whisper, rent is fair relative to local market, inflation rise would be unwelcome but no big deal)
4. very unlikely x severe impact = 5 (really zero, they have maintained the block to a high standard for decades as confirmed by neighbours)
5. very unlikely x severe impact = 5
6. possible x major = 12 (have to concede this one as its possible they will wish to redevelop the site are some point)

Your identified risks are real, but need to be assessed per property / landlord.

Indeed, but that is not the point. The point is silly b0110x thinks there's no financial risk whatsoever with renting. 

I'm just making an example of him since it's a slow week. 

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1 hour ago, Captain Kirk said:

Counter party risk is the landlord's risk. Deductions from deposit are you paying for damage. It's not a risk. Rent increases are not allowed or are a matter of the contract and so you'd know about them. Plus you can move if you don't agree. You are not obliged to pay them.

If I rent on 1 year ASTs I face a transaction at the end of every year  - when a number is put on the contract.

If the number offered on the contract is not acceptable to me then I can swap housing provider to one that will price at a level acceptable to me (ignoring the assumption that such a house exists on the market). But the landlord has the benefits of barriers to exit for me. I have to provide finance (mover), bridging finance (time between deposit paid on new place and deposit being returned), and all the labour to do the administration (at least) of the move - not to mention the fact that I might just not want to move - I might actually like where I live.

If I buy ("rent from the bank"), and thus face fewer price events, that has financial and (far bigger) other benefits to me. In the case of a mortgage, such price events are based on my own choices and not the choices of a landlord - who is usually, but not always, just plain greedy.

I lived in Maidenhead and was tolerant of the rent (for a mouldy 2 bed at more than the average person's net income every month).

When Crossrail was announced (central London trains terminating in Maidenhead) rents very quickly jumped and because I faced a price event within the year I faced the risk that my rent would rise too - and hey presto! it did. The first year I sucked it up (another 100 pcm/ approx +11%). The second year I sucked it up (another 150 pcm, approx. +14%). The third year I moved (out of the area) because my work relocated that was - at least in 1 way convenient - but it was another nightmare.

To illustrate how it wasn't just my landlord who was gouging based on the crossrail-effect ... when I moved out the next tenant moved in and paid a 340 pcm premium over my most recent rent.

Those price increases cost me a further-unplanned-unpredictable 3000 GBP over those 24 months. And a lot more if I had stayed another year. Renting is not without risk ... and the announcement of a government scheme to (attempt to) improve public transport and raise land values in the area shouldn't be a risk to someone trying to earn enough to keep my rent and tax paid.

It is possible that I may have to sell the house, or worse, hand the house back - both of which will cause a price event, exposing me to financial risk. But I will not be facing price events every year when the price is risk adjusted a further time.

It is an added bonus that: I won't have all the emotional, administrative, social and security costs of all the interim moves.

In fact - and because there is more to life than money - it is these "added" benefits that sway many to buy even an overpriced asset.

 

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49 minutes ago, Unmoderated said:

No, I am not confusing these with financial risk - you seem to equate financial risk with falling out of a window? Up there with balancing your possessions when moving house.

Yeah, it's not like I was joking or anything.

The things you know you have to pay for, or have agreed to pay for, just aren't risks.

With risk, you don't know for sure how much you are going to have to pay. You hope it's one thing but it could be something a lot worse.  For example, you could be a guarantor for a friend or family member for a loan and risk having to pay some or all of it + penalties. Another example could be where interest rates go up on a credit card debt or mortgage dedt. The reason these things are a risk is because 1) you don't know whether you will need to pay it and/or 2) you don't know how much you will have to pay, and 3) you are legally obliged to pay it.

Edited by Captain Kirk
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3 minutes ago, Captain Kirk said:

Yeah, it's not like I was joking or anything.

The things you know you have to pay for, or have agreed to pay for, just aren't risks.

With risk, you don't know for sure how much you are going to have to pay. You hope it's one thing but it could be something a lot worse.  For example, you could be a guarantor for a friend or family member for a loan and risk having to pay some or all of it + penalties. Another example could be where interest rates go up on a credit card debt or mortgage dedt. The reason these things are a risk is because 1) you don't know whether you will need to pay it and/or 2) you don't know how much you will have to pay.

Sorry it's hard to get a tone or sarcasm over text on the internet. 

So you're agreeing now. Renting is not risk free?

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Just now, Captain Kirk said:

No, I don't agree. I added 3 to my reasons why of something is a financial risk, and renting isn't because it doesn't match my criteria for risk (1 or 2) and 3.

So now the criteria for a financial risk has moved from what the wider populace deem that definition to be to your three tests for what is a financial risk? While the risks are not specific to renting (though some are) they still exist in the rented sector. 

"The things you know you have to pay for, or have agreed to pay for, just aren't risks." That's the point. With renting you do not know what you might have to pay for. Not for sure. 

Risk of rent increases? If the landlord whacks up your rent and you either pay it, or move, that's not a financial risk?

Does the boiler failing and rendering the property uninhabitable because landlord is crap and you having to find alternative accommodation at additional expense count?

Unexpectedly having to move inside a fixed term tenancy agreement

 

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12 minutes ago, Timbuk3 said:

.....too little too late, people are already moving out or not moving in, businesses suffering and moving.....it is the London businesses that are ultimately the ones who are paying the employees rents......and the traffic, the congestion the reducing QofL!;)

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6 minutes ago, Unmoderated said:

"The things you know you have to pay for, or have agreed to pay for, just aren't risks." That's the point. With renting you do not know what you might have to pay for. Not for sure. 

I know what my rent is for sure.

7 minutes ago, Unmoderated said:

Risk of rent increases? If the landlord whacks up your rent and you either pay it, or move, that's not a financial risk?

It's not a risk because you are not obliged to pay it.

8 minutes ago, Unmoderated said:

Does the boiler failing and rendering the property uninhabitable because landlord is crap and you having to find alternative accommodation at additional expense count?

Not my risk. Any expense, including alternative accommodation, will have to be paid for by the landlord.

9 minutes ago, Unmoderated said:

Unexpectedly having to move inside a fixed term tenancy agreement

An inconvenience, not a risk. There would have to be a good reason for you having to move given you can't be evicted within the fixed term.

 

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19 hours ago, Captain Kirk said:
  1. I know what my rent is for sure.
  2. It's not a risk because you are not obliged to pay it.
  3. Not my risk. Any expense, including alternative accommodation, will have to be paid for by the landlord.
  4. An inconvenience, not a risk. There would have to be a good reason for you having to move given you can't be evicted within the fixed term.

 

  1. The financial risks of renting are not limited to knowing what your rent is. 
  2. You're not obliged to pay that rental increase but, firstly it is an unknown and secondly if you don't want to pay it you'd have to move which would incur other costs
  3. Good luck with that mate. Lol, you're right in theory but reality is vastly different, and ultimately the risk is counter party risk which causes an unforeseen financial impact on you. What if the landlord is insolvent? How is he going to reimburse you?
  4. Erm, you absolutely can be evicted within the fixed term. https://www.thetenantsvoice.co.uk/advice_from_us/grounds-for-eviction/#valid_grounds_for_a_possession_order

 

You are consistently wrong and insist you're right. 

As tenacious as I am I'm giving up on you. 

 

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8 minutes ago, Unmoderated said:
  1. The financial risks of renting are not limited to knowing what your rent is. 
  2. You're not obliged to pay that rental increase but, firstly it is an unknown and secondly if you don't want to pay it you'd have to move which would incur other costs
  3. Good luck with that mate. Lol, you're right in theory but reality is vastly different, and ultimately the risk is counter party risk which causes an unforeseen financial impact on you. What if the landlord is insolvent? How is he going to reimburse you?
  4. Erm, you absolutely can be evicted within the fixed term. https://www.thetenantsvoice.co.uk/advice_from_us/grounds-for-eviction/#valid_grounds_for_a_possession_order

 

You are consistently wrong and insist you're right. 

As tenacious as I am I'm giving up on you. 

 

So you agree with me now?

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21 hours ago, Captain Kirk said:

It's not a risk because you are not obliged to pay [rent increases].

Not "obliged", as such, but you have to live somewhere.

The degree to which you are driven to accept a rental increase varies on:

  1. your circumstances and
  2. the local rental market.

If you are a single person the barriers to exit from a rental arrangement at the time of transaction (usually each year) are significantly lower than if you have a family. Hard to argue that the landlord is into going to take into consideration whether or not you have young children in the family - for instance - when negotiating the rent. 

And when renting you are exposed - including financial exposure - to local events. Like the end of the Crossrail lines being defined as at your local town.

 

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1 hour ago, Aidan Ap Word said:

Not "obliged", as such, but you have to live somewhere.

The degree to which you are driven to accept a rental increase varies on:

  1. your circumstances and
  2. the local rental market.

If you are a single person the barriers to exit from a rental arrangement at the time of transaction (usually each year) are significantly lower than if you have a family. Hard to argue that the landlord is into going to take into consideration whether or not you have young children in the family - for instance - when negotiating the rent. 

And when renting you are exposed - including financial exposure - to local events. Like the end of the Crossrail lines being defined as at your local town.

Never thought it would be me saying this but....

.... don't feed the trolls. 

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On 23/01/2019 at 10:24, Unmoderated said:
  1. No they don't. They've already paid. When they bought the house they committed to paying £X for the property. Whatever happens to prices they don't pay twice do they?
  2. No, you've already paid it. You agreed to pay £x when you bough the house. You pay back every penny regardless of what happens to prices. In actually fact worst case scenario you'd pay back nothing. 
  3. No, homeowners own homes although they might have some tulips dotted about the place. Houses are nowhere near tulip mania. You need to visit the BitCoin thread.
  4. What is the shortfall? Will that show up on a mortgage statement? The bank will make you pay back everything you've borrowed, shortfall and otherwise so you're not making any sense. Your current lender has no obligation to allow you to do so but that isn't relevant. There are other companies out there who would let you do it. In addition, if you're underwater on the mortgage and need to move to get a new job would a mortgage company deem that likely to aid full repayment or not?
  5. The bad news is if you sit around renting (risk free apparently lol) for two years and then buy prices could be flat, or higher, or lower. One thing is for certain the sooner you start repaying a mortgage the sooner it will be repaid. 
  6. Whether or not is the 'right time to buy' depends on personal circumstances and is a complex question. If by 'right time to buy' you mean are prices going to go up or down then I would predict that in 5 years prices will be at least where they are today in nominal terms. In five years times you'll have paid off a chunk of your mortgage and not been evicted by some f***witt property spiv wanna be Nicholas von Hoogstraten. Will you get a lower price point to enter the market? Maybe. Maybe not. If Brexit goes badly for the economy you can all but count on more ZIRP, Q.E. or if they must support the pound there would be almost certainly some orchestrated mortgage lending scheme. I sat in 2008 saying wait for it and look what happened! If Brexit is a resounding success then the economy would crack on growing and I expect the sentiment would return to pre June 2016 levels where you couldn't get even a viewing around here (greater Reading area). Squealing wont do any good.
  7. EAs might be squealing but that has jack sh!t to do with prices and a lot more to do with legislation on the BS fees they piled on tenants, online competition reducing the amount they can charge and very low transaction levels which show no signs of abating. I predict that won't change until at least some way forward is found on the UK/EU future relationship around trade so people can start making firm plans. 

All of this is a distraction from the assertion that renting is financially risk free. Nobody is saying owning is not without its risks but you wont pay twice for your home if prices fall as you seem to be suggesting. 

All you say is misleading. 

1. It's a falsehood to claim you've already paid it. A flat out falsehood. When you get a mortgage you have not paid the drop. You've just promised to pay in the future. 

2. Another flat out falsehood.  

Etc. 

The reality is if you buy now and prices drop - you're going to be paying an inflated price. 

The Unmoderateds of this world don't want you to wait 2 years until the prices have dropped to much lower levels. 

This is the top of the market.  Buy at the bottom of the market. Its simple: Just wait. They'll be talking recession in another month. 

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