Answer To 'should I Buy Now Or Rent' Questions

[fras]

hello!

I've read this thread and do agree with the rent over buying sentiment. However I have a particular situation, my girlfriend wants to jump, but I feel cautious. The particulars are:

• I currently rent a 1 bed for £400pm
  
• I have the opportunity to buy a 2 bed maisonette for 77k. It's in a block of 6 maisonettes on a road with an average house price of 165k in the suburbs.
  
• 3 of the maisonettes were exchanged last year for between 110-115k (data from houseprices.co.uk)
  
• Me and the girlfriend want to move in together, 2 bed flats start renting at around 425pm in my area, 450 for a decent place.
  
• After my 5% deposit the mortgage would be around £460pm for a 5 yr fixed rate repayment mortgage.
  
• I am on 25k per year, my girlfriend is on 19k. I have no debts (yet!), no car and walk to work 5 mins away.
  

The 2 main risks as I see it are that prices will correct by more than 30% from peak (110 - 77k), and interest rates being substantially higher at the end of the 5 years.

I understand that the mortgage might be £50 more per month than renting, but from working out the difference between a repayment and interest only mortgage, around £50 a month should be invested in the property (of course assuming I don't go into negative equity).

I am ready for the possibility of an overshoot, and being in negative equity in the next 2-3 years, but I am happy to take an average of doom & gloom predictions and hope that in 5 years when I want to re-mortgage, the property will be worth more than 77k.

Is my thinking too simplistic?

Thanks for any help.

[Bosh]

hello!

I've read this thread and do agree with the rent over buying sentiment. However I have a particular situation, my girlfriend wants to jump, but I feel cautious. The particulars are:

• I currently rent a 1 bed for £400pm

• I have the opportunity to buy a 2 bed maisonette for 77k. It's in a block of 6 maisonettes on a road with an average house price of 165k in the suburbs.

• 3 of the maisonettes were exchanged last year for between 110-115k (data from houseprices.co.uk)

• Me and the girlfriend want to move in together, 2 bed flats start renting at around 425pm in my area, 450 for a decent place.

• After my 5% deposit the mortgage would be around £460pm for a 5 yr fixed rate repayment mortgage.

• I am on 25k per year, my girlfriend is on 19k. I have no debts (yet!), no car and walk to work 5 mins away.

The 2 main risks as I see it are that prices will correct by more than 30% from peak (110 - 77k), and interest rates being substantially higher at the end of the 5 years.

I understand that the mortgage might be £50 more per month than renting, but from working out the difference between a repayment and interest only mortgage, around £50 a month should be invested in the property (of course assuming I don't go into negative equity).

I am ready for the possibility of an overshoot, and being in negative equity in the next 2-3 years, but I am happy to take an average of doom & gloom predictions and hope that in 5 years when I want to re-mortgage, the property will be worth more than 77k.

Is my thinking too simplistic?

Thanks for any help.

Fras, welcome to the forum.

Try and get your girlfriend to read this thread and both of you should read many of the other subjects that are discussed/debated on this forum.

If this 2 bed maisonette is available today at 77k and we have not even started, just imagine where this is going. Would you not consider waiting a bit longer and get yourselves a 2/3 bed semi in a couple of years.

If she wants to jump now, why not compromise and rent a 2 bed flat instead. If available, maybe try and rent one of the maisonettes in question?

Use this opportunity to try before you buy.

[Whoslaughing?]

hello!

I've read this thread and do agree with the rent over buying sentiment. However I have a particular situation, my girlfriend wants to jump, but I feel cautious. The particulars are:

• I currently rent a 1 bed for £400pm

• I have the opportunity to buy a 2 bed maisonette for 77k. It's in a block of 6 maisonettes on a road with an average house price of 165k in the suburbs.

• 3 of the maisonettes were exchanged last year for between 110-115k (data from houseprices.co.uk)

• Me and the girlfriend want to move in together, 2 bed flats start renting at around 425pm in my area, 450 for a decent place.

• After my 5% deposit the mortgage would be around £460pm for a 5 yr fixed rate repayment mortgage.

• I am on 25k per year, my girlfriend is on 19k. I have no debts (yet!), no car and walk to work 5 mins away.

The 2 main risks as I see it are that prices will correct by more than 30% from peak (110 - 77k), and interest rates being substantially higher at the end of the 5 years.

Fras,

Please please just keep renting. If your pattern of life goes the way of the normal path, you will be in a situation where negative equity will hang over your head possibly for many years and you and your girlfriend may have also started a family. What may happen is you will be stuck in a flat with a screaming baby having paid over the odds for a very ordinary flat and looking enviously at those nice 3 bed semi's you could have afforded had you taken the advice of this forum.

Many on this forum, I would hazard a guess are in property one way or the other. Only yesterday I was talking to a very experienced surveyor friend of mine and in these off the record chats you get real anecdotal evidence of what is going on. His description of the property market can be summed up in a word he used. "Bloodbath".

Edited June 28, 2008 by Whoslaughing?

[confused08]

Evening everyone...first time I have been onto this website. Trying to do some research and gain some knowledge regarding the current housing situation!

I am an example of someone living with their boyfriend and a screaming baby in a 2 bed flat. We put an offer in on this place back in Nov 2006 and moved in Mar 2007...both very excited. During the time that we were waiting for the exchange/completion I discovered that I was pregnant so felt relieved that we had found a property and that it wouldn't be long before we would move in. We were living with my parents before this so FTB's.

It's got to the point that we now realise that the flat is just not practical as a family home and we are keen to upgrade as it were. Now due to the current situation our flat is valued at the same price it was on the market for back in Nov 06 but that's not to say we'd actually get that price if we sold.

I really need some advice as to what to do next. We want to get a proper family home but we haven't got the funds for a deposit. Would anyone else advise that we come off the market now escaping negative equity and move back with the parents?? This would enable us to save up a deposit to put towards a house when the time was right. It's not a perfect solution but I would prefer to share their home than stay in this flat for 4/5/6 years or until prices rose again giving us enough equity to move. We cannot extend our family whilst living here and I don't really want to put that on hold for more than 2 years.

Should we stay or should we go??

Would be most grateful for your advice!!

[redwing]

Hi

Boy, that's a really tricky one. Whichever route you decide on is going to be difficult. But my mate in the pub reckons you might as well stay where you are.

Why? Keep your independence. And if you want another child, then the second bedroom can be shared until the kids are about 7 or 8 (gender dependent - longer for two of the same).

If you sell now, you might find you can only sell for 10% off what you paid, wiping out your deposit and incurring selling costs.

Take a long view. If you can tough it out, you'll probably be OK by about 2016.

Good luck.

RW & PC (my mate in the pub).

[Jim B.]

hello!

I've read this thread and do agree with the rent over buying sentiment. However I have a particular situation, my girlfriend wants to jump, but I feel cautious. The particulars are:

• I currently rent a 1 bed for £400pm

• I have the opportunity to buy a 2 bed maisonette for 77k. It's in a block of 6 maisonettes on a road with an average house price of 165k in the suburbs.

• 3 of the maisonettes were exchanged last year for between 110-115k (data from houseprices.co.uk)

• Me and the girlfriend want to move in together, 2 bed flats start renting at around 425pm in my area, 450 for a decent place.

• After my 5% deposit the mortgage would be around £460pm for a 5 yr fixed rate repayment mortgage.

• I am on 25k per year, my girlfriend is on 19k. I have no debts (yet!), no car and walk to work 5 mins away.

The 2 main risks as I see it are that prices will correct by more than 30% from peak (110 - 77k), and interest rates being substantially higher at the end of the 5 years.

I understand that the mortgage might be £50 more per month than renting, but from working out the difference between a repayment and interest only mortgage, around £50 a month should be invested in the property (of course assuming I don't go into negative equity).

I am ready for the possibility of an overshoot, and being in negative equity in the next 2-3 years, but I am happy to take an average of doom & gloom predictions and hope that in 5 years when I want to re-mortgage, the property will be worth more than 77k.

Is my thinking too simplistic?

Thanks for any help.

How are you able to get it for only 77k?

My standard advice would be to carry on renting but I'm not so sure in your case. I'm renting at £395 a month at the moment for a small one bed flat. The type of property I realistically could buy are at £130k at the moment. If I got offered a two bed masionette (in a decent area) for 77k now I would jump at the chance to get on with my life to be honest.

[thomas]

I'm looking for any advice you lot have!?

I am currently in the middle of buying a house in SE7 (Charlton) in london. It's a 3 bed semi-detached 1930's house, in great condition and has a big garden. The price was originally listed at £340,000, the vendors dropped the price to £325,000 and I have negotiated to buy the house for £300,000.

I am a first time buyer, and will be buying this house with my partner and we are very keen to move out of shared living and into a home together. We should both be able to handle the mortgage repayments as I am only borrowing £130,000 to pay for the house and it will work out cheaper than what we are paying in rent. So I feel I am in a strong position as I have a large deposit and no house to sell first...but I want to make sure I am getting good value for money. What I fear is that I will buy the house now and then in a years time, it will be worth £20,000 less.

Does anyone out there think I should wait to buy a similar property next year when prices may have dropped even further or should I take advantage of the drop in prices so far and hope that it's enough of a buffer while the market drops?

Any advice would be great? I'm interested to hear if others are taking advantage of prices that have dropped already or whether you are going to wait for another year or longer?

cheers

[redwing]

I'm looking for any advice you lot have!?

I am currently in the middle of buying a house in SE7 (Charlton) in london. It's a 3 bed semi-detached 1930's house, in great condition and has a big garden. The price was originally listed at £340,000, the vendors dropped the price to £325,000 and I have negotiated to buy the house for £300,000.

I am a first time buyer, ...

What I fear is that I will buy the house now and then in a years time, it will be worth £20,000 less.

Does anyone out there think I should wait to buy a similar property next year when prices may have dropped even further or should I take advantage of the drop in prices so far and hope that it's enough of a buffer while the market drops?

Any advice would be great? I'm interested to hear if others are taking advantage of prices that have dropped already or whether you are going to wait for another year or longer?

cheers

Well mate. I shouldn't take any advice from anyone on here. But do read what the site has to say and make up your own mind. [if you couldn't make it up from just this thread alone].

I will give you some clues though...

The name of this site is housepricecrash. What do you reckon our advice would be?

I also note you're worried that a 300k house might lose 20k in a year. You're about the most bullish person I've seen in weeks. Even the very conservative IMF (International Monetary Fund) and David Miles think UK house prices are 30% speculation. 30% of 300k is 90k.

[Jim B.]

Have to agree with the above. If it's a dream house and you can easily afford the payments then go and get on with your life. But rest assured you will see comparable houses in the area selling for £200k in a few years time (and that's based on what nearly everyone is saying at the moment, from EA's to banks). The choice is yours though. I think the most sensible advice would be to rent for six months and then see what the market's doing then.

Edited July 9, 2008 by Jim B.

[hitchley]

Well mate. I shouldn't take any advice from anyone on here. But do read what the site has to say and make up your own mind. [if you couldn't make it up from just this thread alone].

I will give you some clues though...

The name of this site is housepricecrash. What do you reckon our advice would be?

I also note you're worried that a 300k house might lose 20k in a year. You're about the most bullish person I've seen in weeks. Even the very conservative IMF (International Monetary Fund) and David Miles think UK house prices are 30% speculation. 30% of 300k is 90k.

It also depends on what you plan. If you are staying in the Uk for the forseeable future then buy, and get on with living your life. If house prices then drop (as they almost certainly will) you will gain, because moving up-market will become cheaper and cheaper. If you need to sell in the future to move out of the UK market, then definitely now is not the time to buy. Wait 6-12 months and then see.

Edited July 13, 2008 by hitchley

[Guest The_Oldie]

It also depends on what you plan. If you are staying in the Uk for the forseeable future then buy, and get on with living your life. If house prices then drop 9as they almost certainly will) you will gain, because moving up-market will become cheaper and cheaper. If you need to sell in the future to move out of the UK market, then definitely now is not the time to buy. Wait 6-12 months and then see.

I find no difficulty in living my life without owning a house and I speak from experience, having owned for 30+ years and rented for the last two.

However you dress it up, if you buy now and prices drop you will lose money.

[hitchley]

I find no difficulty in living my life without owning a house and I speak from experience, having owned for 30+ years and rented for the last two.

However you dress it up, if you buy now and prices drop you will lose money.

But there is more to life than money.....i.e. home, personal development, partner, family etc.....

I also rent and have since 2002, before which I owned a large house, but to bring a family up in a rented house is not so rewarding as in your own home.

I speak also from experience. I bought my first house in 1975.

[bateman]

I'm not the only person doing the job I do; you are prime outsourcing/offshoring fodder. Sorry, but I flush jobs like yours away on a monthly basis. Ride out the forthcoming storm with no debt and you'll survive what nasty people like me throw at you

so what do you do then paddles?

[Scott]

But there is more to life than money.....i.e. home, personal development, partner, family etc.....

I also rent and have since 2002, before which I owned a large house, but to bring a family up in a rented house is not so rewarding as in your own home.

I speak also from experience. I bought my first house in 1975.

Er, don't quite agree.

There is more to life than money - I totally agree with you there. Which is why when I buy a house outright with my STR fund I will be left with a good chunk of money which will allow me to work part time if I choose. Now that's quality of life that can only be bought with money. And yes, I do rent now and have a young family, one aged 2, the other just 9 weeks. And I'm as happy as can be, safe in the knowledge I will not lose money on a depreciating asset.

[Bosh]

Er, don't quite agree.

There is more to life than money - I totally agree with you there. Which is why when I buy a house outright with my STR fund I will be left with a good chunk of money which will allow me to work part time if I choose. Now that's quality of life that can only be bought with money. And yes, I do rent now and have a young family, one aged 2, the other just 9 weeks. And I'm as happy as can be, safe in the knowledge I will not lose money on a depreciating asset.

Same here Scott, STR with the wife and 2 nippers aged 4 & 6. I also posted a few weeks ago about how much I would love to own again when it is right but for now, No debt, No stress, No DIY and plenty more free time with the family.

We are all very happy with where we are today

My rental even comes with a gardener

[Disillusioned]

It also depends on what you plan. If you are staying in the Uk for the forseeable future then buy, and get on with living your life. If house prices then drop (as they almost certainly will) you will gain, because moving up-market will become cheaper and cheaper. If you need to sell in the future to move out of the UK market, then definitely now is not the time to buy. Wait 6-12 months and then see.

Nope. You won't be able to move because you'll, most likely, be in negative equity. It is perfectly possible to be 'living your life' and not caring about money, whilst in rental accommodaion. Believe it or not, there are some fantastic rentals out there. Why not wait for the last 8 years of HPI to be reversed over quarter of the time. It's not that long in the grand scheme of things is it?

[Paddles]

so what do you do then paddles?

I broker and manage outsource contracts.

[BarryM]

Just been working with my brother on the same issue. He has a family house valued at around 600k, yet can rent similar properties for under 2000 pcm. Looks like he's going to rent, agree with his assessment - in his particular circumstances. He runs his own businesses and having an extra 500K+ liquid on deposit earning interest at the moment opens all sorts of opportunities denied to those requiring finance.

It may not be for everyone though. The fixed costs of buying and selling (stamp duty, agents fees, removal etc - perhaps around 50k total) need to be apportioned. If prices in the home counties don't go down as he (and the media?) are hoping then he may lose out if looking to buy back a similar property in 3-4 years time.

[Shao Kahn]

Hello,

I work as a "mortgage adviser" at one of the major lenders - just kind of drifted into the job when my old department was "offshored".

I have been a fully-fledged housing bear since 2004. Around here, average prices for a one-bedroom starter period flat are about £150K - about ten times the average local salary.

I cannot stand my job - I find the whole ethos of the management and overall embrace of HPI morally repugnant. I am currently signed off with work-related depression and extreme anxiety - and not for the first time either.

To remedy the malady, I am now starting retraining in my own time and eventually hope to become a psychoanalyst, to hopefully give help and solace to people rather than being a part of the parasitic lending machine.

I have been a long-time lurker on this board for over four years now, and have gained much economic knowledge from many of the posters on it. In time, I hope to be able to contribute to the debate - as I have worked in the overall "industry" for close on a decade now and it seems to grow more rotten at the core with each and every passing day. I could tell you about lending practises that make some of those mentioned on the board seem tame - all in the name of making extra profits whilst faced with being fired if we do not engage in the overall "ethos". "Liar Loans" are made dozens of times daily at the place I'm at...

Regards,

Shao Kahn.

[Jim B.]

Thanks for your honesty Shao Kahn. It still amazes me every day how the banks and government think HPI was a good thing.

[baggy192]

New to this. Owned a flat which i rented out as I'd moved in with partner. What all the BTL landlords miss is the added costs of renting. That is - voids, maintenace, insurance (house and rent), and tax on the remiainder. So on rent of £750 they only get to see £350-£500 a month. And that's without a morgage to worry about. Using the example quoted - £180k - would get a return from a bank of 6% around £10k a year. So not only do you get to keep the capital you also get interest too!

So, in short, right now stick to renting! And enjoy!

Oh yes sold up 18 months ago.

b.

[Happy Teaboy]

New to this. Owned a flat which i rented out as I'd moved in with partner. What all the BTL landlords miss is the added costs of renting. That is - voids, maintenace, insurance (house and rent), and tax on the remiainder. So on rent of £750 they only get to see £350-£500 a month.

no way..there's costs. duh

And that's without a morgage to worry about. Using the example quoted - £180k - would get a return from a bank of 6% around £10k a year. So not only do you get to keep the capital you also get interest too!

round of drink for baggy192. It's priceless the lessons he's teaching me on money. Have you thought about setting up a site to help others

[Paddles]

no way..there's costs. duh

And that's without a morgage to worry about. Using the example quoted - £180k - would get a return from a bank of 6% around £10k a year. So not only do you get to keep the capital you also get interest too!

round of drink for baggy192. It's priceless the lessons he's teaching me on money. Have you thought about setting up a site to help others

I'm loving every post you put on HPC HappyTeaboy! Keep it up!

In the meantime, care to answer the previous questions about what you invested that "hundred grand" you cleverly made out of one of your three properties bought in 2005? I'm gagging to learn what the investment vehicle of choice was.....

[Happy Teaboy]

I'm loving every post you put on HPC HappyTeaboy! Keep it up!

In the meantime, care to answer the previous questions about what you invested that "hundred grand" you cleverly made out of one of your three properties bought in 2005? I'm gagging to learn what the investment vehicle of choice was.....

I know it will only add gin to your tonic !! but the money is invested in surfboards and vineyards actually.

A very long story but its bought me freedom to pursue these things I love doing.

[Paddles]

I know it will only add gin to your tonic !! but the money is invested in surfboards and vineyards actually.

A very long story but its bought me freedom to pursue these things I love doing.

Wow, and only the other week I'm sure I heard Merryn Somerset-Lovely say that both of those asset classes were "going to the moon". P'robly.