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When Renting Is A Better Idea

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http://money.uk.msn.com/Mortgages/firsttim...cumentid=443352

When property prices are falling: your first property is as much a roof over your head as an investment, by there’s no point in chucking money down the drain

Sorry if this has been posted already, its not exactly news but it is nice to see this sort of thing. A bit of positive reporting for once :)

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When you don’t earn enough to pay off a mortgage

When you don’t have a large enough deposit and would be taking on a 100% home loan or more.

When you might be able to afford the loan but you couldn’t afford all the other aspects that go with a home purchase, including life insurance, repairs, furnishings and so on

When you your job isn’t secure

When you know you are likely to move to a different part of the world in the next year or two – why fork out all that stamp duty and then sell up months later?

When your relationship with the person you’re buying with isn’t secure

When property prices are falling: your first property is as much a roof over your head as an investment, by there’s no point in chucking money down the drain

When interest rates are rising sharply

When you’re saving up for a deposit but need a bit more time in shared accommodation to put away a bit more

When renting solves headaches (no worries being the main one) and buying creates them (what happens if…)

Nicely sums up 95% of the population of this forum.

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Guest prudence

Doesn't really consider what to do if prices are rising.

<_<

because most people are so financially illiterate that they do not understand how to benefit financially in a falling market. In a rising market even those same no-brainers do.........

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When you’re saving up for a deposit but need a bit more time in shared accommodation to put away a bit more

yup, that's me. Even the crudest most bullish HP index states that my deposit is increasing at a rate faster than house prices. And the ones I've been looking at (out of interest) have been creeping downward, if anything.

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yup, that's me. Even the crudest most bullish HP index states that my deposit is increasing at a rate faster than house prices. And the ones I've been looking at (out of interest) have been creeping downward, if anything.

Are you sure about that? What are you measuring by? HPI?

So your savings rise by 10% & HPI is 6%. You're winning yes?

But HPI meant your target property is 12,000 more & your savings went up by 1,000?

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Are you sure about that? What are you measuring by? HPI?

So your savings rise by 10% & HPI is 6%. You're winning yes?

But HPI meant your target property is 12,000 more & your savings went up by 1,000?

you possibly over-estimate my "target property" :lol:

that notional £12k could only be realised by selling the house - the transaction costs would wipe most of that out. Or one could take a long-term view... in which case I remain confident that my savings/investments will converge with purchase prices over the next couple of years. That's my call and I'm sticking by it. Thanks for your best wishes - I'm staying liquid for the time being

contrary to what you might think, this isn't a war, and I'm not "winning". I'm just carefully marshalling my finances much as you strive to do.

Something else I consider is that I currently pay rent that is less than the interest element on a mortgage for a comparable property. I do have a wonderful bargain though.

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you possibly over-estimate my "target property" :lol:

that notional £12k could only be realised by selling the house - the transaction costs would wipe most of that out. Or one could take a long-term view... in which case I remain confident that my savings/investments will converge with purchase prices over the next couple of years. That's my call and I'm sticking by it. Thanks for your best wishes - I'm staying liquid for the time being

contrary to what you might think, this isn't a war, and I'm not "winning". I'm just carefully marshalling my finances much as you strive to do.

Something else I consider is that I currently pay rent that is less than the interest element on a mortgage for a comparable property. I do have a wonderful bargain though.

I'm seriously not trying to attack your personal circumstances or whatever, but I would like to have a go at the percentage method of determining whether a deposit is doing better than an HP.

Only like for like in pounds & pence is doing better than HPI. So in my example & IMO only saving 12k a year on top of your rent (I acknowledge some room for argument there if the rent is cheaper than owning) would be a personal win when compared with 12k in HPI.

So also in my example, a 200k place rising by 1k, or 0.5% is the same as a 10k deposit rising by 10% or 1k.

I'm just keen to make sure people don't fool themselves.

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yup, that's me. Even the crudest most bullish HP index states that my deposit is increasing at a rate faster than house prices. And the ones I've been looking at (out of interest) have been creeping downward, if anything.

Snap. The only way any properdee magnet could beat the success of my investments is by gearing, which I dont know enough about to feel confident doing. Obviously at some point in the cycle it makes sense to gear up, but with rising rates I dont know if thats now.

Stagnant, fall or rise now is not the time to be in property.

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I'm seriously not trying to attack your personal circumstances or whatever, but I would like to have a go at the percentage method of determining whether a deposit is doing better than an HP.

Only like for like in pounds & pence is doing better than HPI. So in my example & IMO only saving 12k a year on top of your rent (I acknowledge some room for argument there if the rent is cheaper than owning) would be a personal win when compared with 12k in HPI.

So also in my example, a 200k place rising by 1k, or 0.5% is the same as a 10k deposit rising by 10% or 1k.

I'm just keen to make sure people don't fool themselves.

understood, and appreciated. :)

one must, of course, also factor in the cost of borrowing the money to purchase the house. And any maintenance costs, and flexibility etc etc etc. But I think I might be moving the goalposts a little there... :)

Edited by Fancypants

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There is also the convenience factor of renting, and that also is worth something.

Stuff breaks, I send an email to the landlord, and magically, elves arrive and fix it.

I don't like the new noisy family next door -- I move at a fraction of what it costs were I owning the place.[1]

I don't need to renovate either, when the place gets too grotty or I fancy a change of scenery, I just move.

I have a sudden change of plan, I move.

Housing is a fixed cost in life, you never live for free anywhere. My house, would it be mine, would cost me about 20k a year to own and run, I pay 12k to rent it -- saving 8k.

There are so many good opportunities you can invest in, housing isn't the only game in town, but certainly one of the most labour intensive and worrying investments you can pick.

[1] A family moving from an average semi-detached house to a detached property now faces fees and costs of £12,535. http://money.independent.co.uk/property/ho...ticle360088.ece

Cost for a couple of elves inna van to come to pack and shift all of my stuff: 1k max.

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There is also the convenience factor of renting, and that also is worth something.

Stuff breaks, I send an email to the landlord, and magically, elves arrive and fix it.

I don't like the new noisy family next door -- I move at a fraction of what it costs were I owning the place.[1]

I don't need to renovate either, when the place gets too grotty or I fancy a change of scenery, I just move.

I have a sudden change of plan, I move.

Housing is a fixed cost in life, you never live for free anywhere. My house, would it be mine, would cost me about 20k a year to own and run, I pay 12k to rent it -- saving 8k.

There are so many good opportunities you can invest in, housing isn't the only game in town, but certainly one of the most labour intensive and worrying investments you can pick.

[1] A family moving from an average semi-detached house to a detached property now faces fees and costs of £12,535. http://money.independent.co.uk/property/ho...ticle360088.ece

Cost for a couple of elves inna van to come to pack and shift all of my stuff: 1k max.

I think it's fair to say that home ownership costs are loaded to the front end of the investment. Renting costs are spread evenly (in real terms). But that's really the problem of renting, your money is used now & makes no contribution to your future needs & in future you won't have the same earning power as you have now.

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I think it's fair to say that home ownership costs are loaded to the front end of the investment. Renting costs are spread evenly (in real terms). But that's really the problem of renting, your money is used now & makes no contribution to your future needs & in future you won't have the same earning power as you have now.

But, if its cheaper to rent, and you dont waste the money saved, but sensibly invest it, then surely you're quids in both ways. You have an investment vehicle rising at above the rate of the property market over the longterm, and you dont have the hassle of owning and maintaining a property.

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I think it's fair to say that home ownership costs are loaded to the front end of the investment. Renting costs are spread evenly (in real terms). But that's really the problem of renting, your money is used now & makes no contribution to your future needs & in future you won't have the same earning power as you have now.

you're quite right about that. IMO the tangible benefit of ownership is only felt upon retirement/mortgage(s) paid off - when you can live for free in your own home, from which equity can be released if necessary.

Imagine for a second an only child who stood to inherit the entirety of the parental housing wealth prior to their own retirement. Would the odds of the renting gamble be more favourable for them? Would they be safe from the new feudalism?

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when you can live for free in your own home, from which equity can be released if necessary.

So long as maintenance costs and the like count as 'free'. I know when my grandmother died she hadn't been able to afford proper maintenance on her house for years and it cost a lot of money to fix up.

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I think it's fair to say that home ownership costs are loaded to the front end of the investment. Renting costs are spread evenly (in real terms). But that's really the problem of renting, your money is used now & makes no contribution to your future needs & in future you won't have the same earning power as you have now.

I have to hand it to you, Mr Rents. For a man who depends upon renters, I'm surprised at the efforts you go to to coerce people here into buying a house.

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I think it's fair to say that home ownership costs are loaded to the front end of the investment. Renting costs are spread evenly (in real terms). But that's really the problem of renting, your money is used now & makes no contribution to your future needs & in future you won't have the same earning power as you have now.

I rent for a fraction of what the mortgage would cost, so in my case your statement is wrong.

As I said, housing is a fixed cost in life, you always must pay something, even if you own the house, it isn't free at all!

Renting makes a contribution to your future by freeing you to invest in different opportunities and by giving you flexibility. Changing jobs for example -- who wants to waste their life on commuting? (time == money!!!)

It isn't 'bad' to invest in housing, just as it isn't bad to invest in (say) copper, but it is better if you chose your investments on the returns and not on sentimental reasons. The more decoupled your investments are from your personal life and ego, the better!

You may be right in the lower regions, if people can only afford cheap places, then buying might still make sense for them(although I doubt it right now). Most people don't like spending money on housing, and so they try and get it as cheap as it possible. For 700 quid you can rent toilets with inbuilt beds, so if you can buy that for 800, well, you might be onto something and if your budget is tight and you cannot save very well or don't have enough spare cash to invest meaningfully, then this is probably as good a method as the piggybank.

So, perhaps we're dicsussing two different ways of life here?

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I think it's fair to say that home ownership costs are loaded to the front end of the investment. Renting costs are spread evenly (in real terms). But that's really the problem of renting, your money is used now & makes no contribution to your future needs & in future you won't have the same earning power as you have now.

Exactly.....I don't think any of the bears in here are claiming renting is a viable long term option.....

Even if there were no HPI a buyer would be quids in after 8-10 years as his mortgage would by then

be less than rent on a similar property......as the rents go up more or less in line with wage inflation...

House prices do too but are more volatile owing to a speculative element involved in purchasing..Greed and fear come into play especially when prices are rising...and this doesn't apply to rents of course.

We can quite safely say that wage inflation of 100% over the next 20 years (3.7%pa) will cause rents and HPs to rise by more or less this amount......Bulls could argue that economic growth leading to percentage of income spent on essentials other than housing means that people will be able to spend a bigger proportion of their income on rents and mortgages so prices will outstrip income growth like they have over the past 50 years. ..It is the short term where we beg to differ....

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http://money.uk.msn.com/Mortgages/firsttim...cumentid=443352

Sorry if this has been posted already, its not exactly news but it is nice to see this sort of thing. A bit of positive reporting for once :)

Do you think this is positive reporting? I think it is a totally sh*te article. The whole tone of it is that renting is the best option if you're a complete loser and you can't afford to buy.

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Whats with you TTRTR? anybody would think you did not want to support the fact that renting can be a wise move.

Funny that you being a landlord and all, could it possibly be your biggest worry is not a declining pool of renters, but a declining asset value of your property portfolio.....to highly geared are we :D

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Exactly.....I don't think any of the bears in here are claiming renting is a viable long term option.....

Even if there were no HPI a buyer would be quids in after 8-10 years as his mortgage would by then

be less than rent on a similar property......as the rents go up more or less in line with wage inflation...

Again: buying a house does not mean you live rent-free!

Think about it that way -- if you don't live there, someone else would and pay you rent, so even if it's 'yours' it still is just a business, like any other investment, and you are your own customer and must make sure it is profitable.[1]

And, all your money will be on one horse that is running in a single race :(

The key is that people need to invest in something -- be it houses, shares or whatever, but, most people are not rich enough to invest in housing sanely -- I would say that you should never have more than 1/3rd of your potential in anything you invest in -- in other words, if your mortgage is more than 1/3 of your investable income, you're better off hunting the profit elsewhere because that way your networth grow faster and safer.

[1] Most small business owners do not cost their time, effort and resources properly, which is one of the main reasons that they go bust, despite being very good at what they actually do.

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Think about it that way -- if you don't live there, someone else would and pay you rent, so even if it's 'yours' it still is just a business, like any other investment, and you are your own customer and must make sure it is profitable.[1]

Aren't I allowed to just have a home instead of being bullied into thinking of it as a business? I find it a bit depressing to think that way - I spend enough time doing business at work...

I think for some this way of thinking is fine and dandy, but there is an emotional aspect to having a home also, for me at least.

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Aren't I allowed to just have a home instead of being bullied into thinking of it as a business? I find it a bit depressing to think that way - I spend enough time doing business at work...

I think for some this way of thinking is fine and dandy, but there is an emotional aspect to having a home also, for me at least.

Umm... the aunt didn't mean it so nastily. =)

You have the right attitude towards owning your home (as opposed to investing in housing) -- it is an optional luxury with sentimental value, in the same way that buying jewelry is always a treat, but never an investment.

Housing is slow and expensive to deal (buying and selling) and this is why traditionally property has a low but steady return.

Actually, I'm just saying this of the top of my head, since where I come from, there has never been a housing bubble. I know there has been one previously in the UK. Hmm I wonder what the history of housing bubbles is internationally, might be worthwhile to research into that one.

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  • 301 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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