Answer To 'should I Buy Now Or Rent' Questions

[Mr Nice]

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.

when did everyone get so cavalier about losing almost 100k?

I don't care how much you like the house, how much you think your family would benefit from having a "home" instead of renting, whatever.

100k and renting would give you a LOT more opportunity to better yourself and your family's position, than owning and just "getting on with it."

what's truly funny to me is that one of the main reasons that people give (and which I actually agree with) for owning versus renting is SECURITY.

how much security is there in buying into the near tops of one of the biggest financial bubbles in history?

earning and saving 100k is hard hard work even on a very good salary, don't be eager to toss it away no matter how many platitudes of

"it's not a house it's a home"

"it's a home not an investment"

"in 16 years the price will be back up surely"

that you hear.

[Dubai Property]

Prices will continue to fall by 15% and bottom out in about 18 months. I am definitely going to start the buying process again early next summer. If you are looking for a real bargain now check out the brewery sell off of pubs in the UK and theres a great blog too

[cataclysmic kitty]

So will rental prices drop too?

[Guest adp]

So will rental prices drop too?

I think for the very short term, you will see some way over priced rentals as all the people (i.e. home owners) who need to move but haven't faced reality yet think they can get a mug renter to pay their mortgage while waiting for recovery. Don't fall for it as there will be more for rent than ever as these people will be desperate to have anything coming in rather than nothing, to try and hang on for recovery. I have only been here in the UK since February and witnessed the earlier NA crash from Canada where the ripple happened sooner (America gets a cold and Canada gets the flu). And the foreclosure stock will speed the downward price spiral which will be bought up by developers sniffing "blood in the water" bargains and also can't flip them. This will add to the rental glut. And all those moneyed people who got out in time and are now renting will not flood the market either as they are the last ones who will pay a mortgage price for rent. Thee is nothing like money in the bank to make consumers (in this case renters) be empowered and fussy

[cataclysmic kitty]

I think for the very short term, you will see some way over priced rentals as all the people (i.e. home owners) who need to move but haven't faced reality yet think they can get a mug renter to pay their mortgage while waiting for recovery. Don't fall for it as there will be more for rent than ever as these people will be desperate to have anything coming in rather than nothing, to try and hang on for recovery. I have only been here in the UK since February and witnessed the earlier NA crash from Canada where the ripple happened sooner (America gets a cold and Canada gets the flu). And the foreclosure stock will speed the downward price spiral which will be bought up by developers sniffing "blood in the water" bargains and also can't flip them. This will add to the rental glut. And all those moneyed people who got out in time and are now renting will not flood the market either as they are the last ones who will pay a mortgage price for rent. Thee is nothing like money in the bank to make consumers (in this case renters) be empowered and fussy

Well my husband and I have been told we need to move by the end of next summer as our landlords are selling up their flat to move in here. We pay £750 a month, but we share that with a friend -he pays a 3rd. Soon we wont be able to rely on that as he is going abroad. We are hoping rental prices will drop by then?? What do u think?

[Guest adp]

Well, I don't know what area you are in but I would think next summer is a long time away in this volatile climate - and the operative word here is selling up, not sold. Hang tight and see what happens. By then they may be so glad of stable tenants that you can negotiate the rent down.

[SwindonCrash]

Well my husband and I have been told we need to move by the end of next summer as our landlords are selling up their flat to move in here. We pay £750 a month, but we share that with a friend -he pays a 3rd. Soon we wont be able to rely on that as he is going abroad. We are hoping rental prices will drop by then?? What do u think?

All well and good for your landlord to say get out I'm selling my place, but have they actually got a buyer for their current home. If not, I see the landlord getting a nasty surprise when they tyr to sell so you might not have to move just then.

[viva]

also renting at moment and have been for a while now as properties in the area well overpriced and simply not selling.. 2 newly renovated flats were 1st up for sale 18 months ago at 115k dropping to 105 to 95 and now at 85k ?? each still not sold! so prices are falling as sellers cant get the price now for them that they could 12-18 months ago in the height of the boom..so think i will be renting for another yr or so as think they still have some way to go before they bottom out.. my rent is £365 pcm on a 1 bed in a decent area where i want to be/live but still have substancial savings for my house purchase when the timing is right 120k in total in my mini isa account & 3 other top paying savings accounts giving me approx 5k net interest per yr.. which would cover my rent & most of my council tax if i chose to use it for that which would make me rent free in a sense.. but i dont use it for that purpose as i would be losing money in real terms etc.. so i bank the interest gathering more interest & work 5/6 days a week earning a good wage & pay the rent council tax as well as all other bills out of my wage so as to protect my capital & keep it in line with inflation! the house i desire is a 3 bed semi garage off rd parking in the same area.. current asking prices(not sold prices)are approx 135-40k my plan is that in 12-24 months hopefully i can get 1 of these for a more reasonable price & be somewhat mortgage free in my mid- thirties! the 120k is hard earned money saved up working 6/7 days a week on building sites over 11 yrs banking it wisely & not blowing it on wine & roses lol does my plan make sense ? i think & certainly hope so as houseprices wont be on the increase anytime soon

[Dubai Property]

Well my husband and I have been told we need to move by the end of next summer as our landlords are selling up their flat to move in here. We pay £750 a month, but we share that with a friend -he pays a 3rd. Soon we wont be able to rely on that as he is going abroad. We are hoping rental prices will drop by then?? What do u think?

I expect there will be a high demand for rented accommodation, and a glut of homes for sale. Sitting Tight has been a feature of this forum I notice. Perhaps your landlord wont be able to sell. It all depends on where you are.

[Scrimmers]

Hi all,

New here, first post and expect a flaming for being new and asking possbily stupid questions.

My partner and I have found a house we like.. we have a good deposit (over 10%) and no chain. Our salaries would mean that the mortgage is easily affordable, and as we are both self employed unlikely to lose our jobs in the near future (we both have a steady stream of clients).

I'm very confident of getting 30% off the asking price, having done some background checks on the seller and found that they really need to sell. If we were successful with the envisaged offer we would not be looking to move for at least 5-10 years as there is plenty of space for the planned expansion of our family.

With these things in mind, I'd like your thoughts (preferably helpful ones) on whether buying a 'home' now is unwise.

Thanks in advance, and thanks to the flamers for the newbie hazing.

Scrim

[Jim B.]

Hi all,

New here, first post and expect a flaming for being new and asking possbily stupid questions.

My partner and I have found a house we like.. we have a good deposit (over 10%) and no chain. Our salaries would mean that the mortgage is easily affordable, and as we are both self employed unlikely to lose our jobs in the near future (we both have a steady stream of clients).

I'm very confident of getting 30% off the asking price, having done some background checks on the seller and found that they really need to sell. If we were successful with the envisaged offer we would not be looking to move for at least 5-10 years as there is plenty of space for the planned expansion of our family.

With these things in mind, I'd like your thoughts (preferably helpful ones) on whether buying a 'home' now is unwise.

Thanks in advance, and thanks to the flamers for the newbie hazing.

Scrim

You don't have to be a genius to work out ot's not a good time to buy now, you are taking a riask but it's your shout but don't say you were not warned.

Have you actually got a mortgage deal in place though?

[Disillusioned]

Hi all,

New here, first post and expect a flaming for being new and asking possbily stupid questions.

My partner and I have found a house we like.. we have a good deposit (over 10%) and no chain. Our salaries would mean that the mortgage is easily affordable, and as we are both self employed unlikely to lose our jobs in the near future (we both have a steady stream of clients).

I'm very confident of getting 30% off the asking price, having done some background checks on the seller and found that they really need to sell. If we were successful with the envisaged offer we would not be looking to move for at least 5-10 years as there is plenty of space for the planned expansion of our family.

With these things in mind, I'd like your thoughts (preferably helpful ones) on whether buying a 'home' now is unwise.

Thanks in advance, and thanks to the flamers for the newbie hazing.

Scrim

Welcome Scrimmers. If you can wait a year or two to buy then I would recommend it. The planned expansion of your family will benefit from the thousands of pounds you would have saved IMO. However, everyone’s circumstances are different. Some questions:

What part of the UK are you in?

What's the mortgage multiple to your salaries? (i.e. the mortgage is 4 times both your salary)

Is the mortgage affordable on one salary? At what multiple would that be? (if you're going to have a family your lad is going to have to be off work for a bit!

Have you actually applied for your mortgage yet? (you're both self-employed and might be considered high risk)

I look forward to your answers...

[TheEA]

Hi all,

New here, first post and expect a flaming for being new and asking possbily stupid questions.

My partner and I have found a house we like.. we have a good deposit (over 10%) and no chain. Our salaries would mean that the mortgage is easily affordable, and as we are both self employed unlikely to lose our jobs in the near future (we both have a steady stream of clients).

I'm very confident of getting 30% off the asking price, having done some background checks on the seller and found that they really need to sell. If we were successful with the envisaged offer we would not be looking to move for at least 5-10 years as there is plenty of space for the planned expansion of our family.

With these things in mind, I'd like your thoughts (preferably helpful ones) on whether buying a 'home' now is unwise.

Thanks in advance, and thanks to the flamers for the newbie hazing.

Scrim

I'd go for it - It's a great time to buy - market will be flying next spring and all the doom mongers will get left behind... AGAIN!

[Scott]

I'd go for it - It's a great time to buy - market will be flying next spring and all the doom mongers will get left behind... AGAIN!

And what will you gain from this? Oh yes, talking the market up again and getting your commission!

I'd go into letting if I were you my friend. The fashion for buying houses has well and truly died for a few years yet.

It's a great time to see house prices fall further during the recession and save a tidy packet, or at very worst not be in negative equity for a long time to come.

[TheEA]

And what will you gain from this? Oh yes, talking the market up again and getting your commission!

I'd go into letting if I were you my friend. The fashion for buying houses has well and truly died for a few years yet.

It's a great time to see house prices fall further during the recession and save a tidy packet, or at very worst not be in negative equity for a long time to come.

An Englishmans home is his castle!

There is no need to talk the market up - A difficult market sorts the men out from the boys - a good EA will always sell houses and people will always want to own their home - renting is ok if you have no other choice or lack the bottle to buy - show me a wealthy person and i will show you someone who owns atleast 1 property.

Of course you can make short term losses but take a medium to long term view and you can't go wrong.

Fortune favours the brave!

[Bosh]

An Englishmans home is his castle!

There is no need to talk the market up - A difficult market sorts the men out from the boys - a good EA will always sell houses and people will always want to own their home - renting is ok if you have no other choice or lack the bottle to buy - show me a wealthy person and i will show you someone who owns atleast 1 property.

Of course you can make short term losses but take a medium to long term view and you can't go wrong.

Fortune favours the brave!

TheEA.... What a slimy git

To any lurkers, this poster is what is commonly known as a troll. He is obviously not very busy and instead of doing the right thing and trolling the jobs vacant sections of the media he seems to be getting some pleasure in offering really daft advice. Just have a look in every estate agents window in all of the uk and you will see how much people really want to buy a house today

Not long now Tarquin!! Not long......

[cockrobin]

An Englishmans home is his castle!

There is no need to talk the market up - A difficult market sorts the men out from the boys - a good EA will always sell houses and people will always want to own their home - renting is ok if you have no other choice or lack the bottle to buy - show me a wealthy person and i will show you someone who owns atleast 1 property.

Of course you can make short term losses but take a medium to long term view and you can't go wrong.

Fortune favours the brave!

If, or should I say when, this time next year the banks are still experiencing huge financial problems, are still not lending money and the amount of available mortgages is still rock bottom, how exactly will the property market start to pick up, as you seem to believe it will?

[TheEA]

If, or should I say when, this time next year the banks are still experiencing huge financial problems, are still not lending money and the amount of available mortgages is still rock bottom, how exactly will the property market start to pick up, as you seem to believe it will?

You have missed the point - there is no such thing as a good market or a bad market, just a market.

Even though the 'credit crunch' could take some time to pass, it will and in the meantime people will need to sell, buy and move - we may see prices fall further but at some point confidence will return and they will rise again beyond where they were last year.

I remember people like you saying in the early nineties that house prices would never return to the heights they reached during the boom of the late eighties and the same people have been claiming that prices could get no higher for the last 5 years - truth is they did and if these same people had bought as recently as 2 years ago they would still have made money.

If you are risk adverse, or require a high percentage mortgage and think you may need to sell again in the next year or two don't buy a property now but if you only require a smallish mortgage or have cash it makes no difference when you sell or move because everything is relative and rather than being at the mercy of a landlord with no security of tenure you will have somewhere to truly call home.

Your home is not only an investment.

I have been an EA for nearly 20 years, have my own business and was told about this sight by a long standing client who thought it was a bit of a giggle. We are obviously quieter at present (which has given me the opportunity to join the debate) but have a strong well established practice which deals in the sale and letting of resi and commercial properties and although it may surprise you, have actually had a reasonable year with sales only about 30% down on last year and have witnessed a 5%-10% fall in values since last autumn.

Although the financial markets are in turmoil at present the world will not implode and as long as we avoid a world war or world famine the banks will sort themselves out and after a short period of stability people will forget this period and confidence will return - it always does - most of us are optimists!

The EA

[Bruce Banner]

........ if you only require a smallish mortgage or have cash it makes no difference when you sell or move because everything is relative and rather than being at the mercy of a landlord with no security of tenure you will have somewhere to truly call home.

Thanks for your advice but I'll continue to rent until I decide that it makes sense to buy, which may be a few years yet.

My landlord is excellent, provides me with an excellent HOME at a price equal to half the cost of the money that would be required to buy the house, responds promptly to any problems (at his cost), pays the house insurance, I could go on.......

[Si1]

if you only require a smallish mortgage or have cash it makes no difference when you sell or move because everything is relative and rather than being at the mercy of a landlord with no security of tenure you will have somewhere to truly call home.

you will lose a fortune in this circumstance. this is indeed relative, just as poverty is a relative term, and maybe money means nothing to you.

[Disillusioned]

You have missed the point - there is no such thing as a good market or a bad market, just a market.

Tell that to the city! It is the volatility of the market that defines how bad it is, not whether it goes up or down

Even though the 'credit crunch' could take some time to pass, it will and in the meantime people will need to sell, buy and move - we may see prices fall further but at some point confidence will return and they will rise again beyond where they were last year.

Yes, they probably will hit today’s heights at some point but NO-ONE knows when, and they're falling at the moment - you haven't addressed why NOW is a good time to buy (in a falling market). IMO, renting is a much better decision for the next few years. Falling house prices, coupled with increased savings will mean you are much better off if you wait.

I remember people like you saying in the early nineties that house prices would never return to the heights they reached during the boom of the late eighties and the same people have been claiming that prices could get no higher for the last 5 years - truth is they did and if these same people had bought as recently as 2 years ago they would still have made money.

This paragraph outs you as someone who doesn't actually care about anything other than money. Then again, what else is there for an EA?

If you are risk adverse, or require a high percentage mortgage and think you may need to sell again in the next year or two don't buy a property now but if you only require a smallish mortgage or have cash it makes no difference when you sell or move because everything is relative and rather than being at the mercy of a landlord with no security of tenure you will have somewhere to truly call home.

WRONG! You might not be able to sell, or move if you're in negative equity, which is extremely likely given the current market direction.

Your home is not only an investment.

Yep, it's part of my life, so I want to get the best home I can without stuffing up the rest of it! Waiting for prices to bottom out will mean the saving I make improves my quality of life.

I have been an EA for nearly 20 years, have my own business and was told about this sight by a long standing client who thought it was a bit of a giggle. We are obviously quieter at present (which has given me the opportunity to join the debate) but have a strong well established practice which deals in the sale and letting of resi and commercial properties and although it may surprise you, have actually had a reasonable year with sales only about 30% down on last year and have witnessed a 5%-10% fall in values since last autumn.

So you saw the last crash. Again, what reasons do you have for suggesting people buy in a falling market? You have your own business? I hope you put money away for a rainy day in the 'good times', because i can't imagine you are having many sales per month. Why not tell us how your business is going. Number of sales would be a good start.

Although the financial markets are in turmoil at present the world will not implode and as long as we avoid a world war or world famine the banks will sort themselves out and after a short period of stability people will forget this period and confidence will return - it always does - most of us are optimists!

Correct, other than the 'short period' bit. You should define how long you mean because qualified economists were predicting the credit crunch would only last till the beginning of 2008!

As you say, confidence will return to the markets, eventually, but until then houses have much further to fall. Just look at the figures. You've probably got them piled up on your desk somewhere!

[TheEA]

Thanks for your advice but I'll continue to rent until I decide that it makes sense to buy, which may be a few years yet.

My landlord is excellent, provides me with an excellent HOME at a price equal to half the cost of the money that would be required to buy the house, responds promptly to any problems (at his cost), pays the house insurance, I could go on.......

Consider this....

If a landlord pays £200,000 for a property, has a 100% repayment mortgage at an average rate of 6% over 25 years the property has cost him approx £391,000.

If we presume an average annual growth of 5% over 25 years the property will be worth approx £680,000.

...and if we presume a rental income of £700 pcm increasing by a conservative 1% p.a over 25 years - the income generated would be in the region of £230,000.

So the landord will have a property worth approx £680,000 which has actually cost him approx £161,000 - I accept i have not made any allowance for letting fees or maintenance but even if you allow 2k per annum as an average the costs only rise by 50k.

On the other hand if we presume the tenant has stayed their for the whole 25 years they have spent £230,000 in rent and have nothing to show for their money - even if they had saved the additional £600 pcm that the mortgage has cost i doubt they would have been able to accumulate as much as the Landlord has.

I believe that although there will be periods during 25 years when values may fall an average growth rate of 5% is not unrealistic and probably if you take the last 25 years as an example it is very conservative and rents generally rise by more than 1% per annum.

I fail to see how anyone can argue against this but if you are determined to find the bottom of the market before buying bu all means wait a little longer, just be careful you don't miss it!

The EA

[Si1]

1% physical deprec per year = ~75000 tot

10% voids on your rental = ~20,000

capital opportunity cost of this over the period = ~ 500,000

total rough 595000, the house owning situation (but these are very broad figures) losing more money than the renting, but with investment liquidity and spread risk.

The cost of risk is very very important

Edited September 18, 2008 by Si1

[Bruce Banner]

Blather, blather, blather...............I fail to see how anyone can argue against this but if you are determined to find the bottom of the market before buying bu all means wait a little longer, just be careful you don't miss it!

The EA

Thank you for the patronising lecture.

If I were to draw £400,000 out of the bank today and buy the house that I'm currently renting for £10,000pa, I'd lose £20,000pa interest so I'd be £10,000 out of pocket, not to mention buying into a falling market.

[TheEA]

Tell that to the city! It is the volatility of the market that defines how bad it is, not whether it goes up or down

The housing market is not volatile in the same way as the stock market.

Yes, they probably will hit today’s heights at some point but NO-ONE knows when, and they're falling at the moment - you haven't addressed why NOW is a good time to buy (in a falling market). IMO, renting is a much better decision for the next few years. Falling house prices, coupled with increased savings will mean you are much better off if you wait.

If you can find the right opportunity and are able to proceed quickly it is possible to buy at well beneath market value.

This paragraph outs you as someone who doesn't actually care about anything other than money. Then again, what else is there for an EA?

We all care about money... why else would you be so desperate to find the bottom of the market - all I am saying is in the long run it will make little difference and that in a market like this there are good opportunities.

For me it's not the money it's the satisfaction of helping buyers and sellers to achieve what the want to!

WRONG! You might not be able to sell, or move if you're in negative equity, which is extremely likely given the current market direction.

difficult to find negative equity if you have little or no borrowing!

Yep, it's part of my life, so I want to get the best home I can without stuffing up the rest of it! Waiting for prices to bottom out will mean the saving I make improves my quality of life.

It won't - I have met many people over the years that have tried to do the same and have missed plenty of great opportunities.

So you saw the last crash. Again, what reasons do you have for suggesting people buy in a falling market? You have your own business? I hope you put money away for a rainy day in the 'good times', because i can't imagine you are having many sales per month. Why not tell us how your business is going. Number of sales would be a good start.

I think we will be ok - it is challenging and as i have said sales are down about 30% but we are still having 15-20 completions each month and lettings have take up some of the slack.

Correct, other than the 'short period' bit. You should define how long you mean because qualified economists were predicting the credit crunch would only last till the beginning of 2008!

I reckon the situation will probably bottom out during 09 - and that the house prices will probably end up about 20%/25% down on last autumn but after a period of stability during 2010 they will begin to grow again 2011

As you say, confidence will return to the markets, eventually, but until then houses have much further to fall. Just look at the figures. You've probably got them piled up on your desk somewhere!

if you actually read the official figures they range from approx 2% - approx 10% down on last year - the FT's perhaps the soundest which suggests about 4% as an average - we have seen about 6%/7% as an average in our area.

The EA

Edited September 18, 2008 by TheEA