My Brother Is Re Entering The Market

[Badhairday]

I know just how he feels on the rental front (i am not STR) ... I got ******ed off with it, wanted somewhere to feel at home.... bought in march this year... got a good deal (2005 price).... if it drops in value it drops in value don't really care as I'll be here ten years.... no amount of money was worth it for me to wait what five years until the market reached its bottom as theres no guarantee even then that something we liked would be available.... in any event my mortgage is less than the rent I was paying so aside from the paper capital loss that may emerge alls fine. From my perspective some people (like me) just don't enjoy renting and life too short to move forward I feel.

As long as you took out a long term fixed rate mortgage you might not be too badly off. Best thing you can do in an inflationary environment is take on debt at a fixed rate of interest. If prices halve in 5 years but interest rates double (based on historical rates of interest thats a very likely scenario) I dont see how new buyers are any better off, unless they bought with cash. Even then, if you had taken out a fixed rate of interest in 2005, and were paying 5% on your loan (as was probably the case when you bought) and your savings are generating 10%...... even as a cash buyer you are better off with a mortgage.

[Mrs Bear]

Quite a pompous little diatribe for your second post, although your first post was equally pompous .

Anyway, you are missing something sonny. I'm retired and I'm renting, but as an STR, I have sufficient cash from the sale of my mortgage free house, to generate twice the income necessary to pay the rent on the £400K house I'm living in and of course I could buy for cash if I so wished. Now piss off and find someone else to patronise!

Are you Victor Meldrew in disguise? I think we should be told

[Guest The_Oldie]

Are you Victor Meldrew in disguise? I think we should be told

Sometimes I just get fed up with the blatantly obvious trolls and sock puppets that love to post here.

[Telometer]

Sorry, but I agree with every word of Voice of Calm.

Everybody on here is a (wannabe) property speculator. They have sold property as short as they can*, with a view to going long when the prices drop.

It's your home FFS! There's a reason why most people want to own a home - to make it home rather than just a house.

Those who STR'd in 2003/04 - and if you look in the archives there are plenty of them - will probably never be able to own as good a home as the one they sold then. Some posters admit it. STRing is gambling your house.

_________________________________________

*yes, not owning a house is as close to going short on the property market as most people can manage.

[uncle_monty]

Sorry, but I agree with every word of Voice of Calm.

Everybody on here is a (wannabe) property speculator. They have sold property as short as they can*, with a view to going long when the prices drop.

It's your home FFS! There's a reason why most people want to own a home - to make it home rather than just a house.

Those who STR'd in 2003/04 - and if you look in the archives there are plenty of them - will probably never be able to own as good a home as the one they sold then. Some posters admit it. STRing is gambling your house.

_________________________________________

*yes, not owning a house is as close to going short on the property market as most people can manage.

Yes it is a gamble. One with the dice loaded considerably in your favour.

[Downtraded]

Sometimes I just get fed up with the blatantly obvious trolls and sock puppets that love to post here.

Oldie, You've dropped the ball early on this one.

There is nothing in the post that looks major troll like to me.

OR, are you annoyed with others, maybe me? (surely not )

In that case, debate - You of all people shouldn't feel the need for insults FOR THE SECOND TIME on this thread - especially when you've won the arguement for your case - spending half your interest money on rent and you're happy.

Or is renting getting to you as well?

[Guest The_Oldie]

Oldie, its a very good point. I feel closest to you in that in the end I downtraded (half way ?).

Reckon you did the right thing for you and your family we did the right thing for us.

If I was retired (over 60) with no dependants, I'd have definately rented too.

With respect, there's a higher chance that you may not experience another boom whereas we might - simply because of an age difference or different medical requirements.

Before getting angry wth opposing views, consider that people can have different requirements simply because they are at different stages of life.

I hope you can and do take advantage of the next HPI though in full rude health

Otherwise, what is the point of all this living lark?

Firstly, I'm not over 60 . With regard to waiting for another boom, if one comes along and it seems sensible to buy, I may do so, but quite honestly, I'm happy renting. After owning for 30+ years, not having to worry about decorating, maintenance, gardening, possible new developments and neighbours from hell that devalue your property by just being there, renting is a breath of fresh air.

[too soon to buy?]

Firstly, I'm not over 60 . With regard to waiting for another boom, if one comes along and it seems sensible to buy, I may do so, but quite honestly, I'm happy renting. After owning for 30+ years, not having to worry about decorating, maintenance, gardening, possible new developments and neighbours from hell that devalue your property by just being there, renting is a breath of fresh air.

fair do's

but would you have sold your house if there was a guarantee that house prices would never move up or down (and rentals always equal mortgage payments, for the sake of argument?)

[djhope]

I have to admit i have been reading many of the posts here and its amazing to see how differing views encourage "personal" retaliation from its members, this is certainly not a nice place to come and have reasoned discussion. I really do wonder why people cant just use their intelligence to come up with an educated retort rather than having to call them names its all rather childish if you ask me. I try to look at a debate from all angles and when the personal attacks are kept out of the arguments it makes for very interesting reading. Its not too difficult to respect the view of somebody else and some of the assumptions made about the tone people are using is borderline paranoia, its too hard to convey tone on a forum so, as usual, assumption really is the mother of all f**kups! Please lets keep the personal attacks out and bring back reasoned arguments

Edited May 21, 2008 by djhope

[Guest The_Oldie]

fair do's

but would you have sold your house if there was a guarantee that house prices would never move up or down (and rentals always equal mortgage payments, for the sake of argument?)

Impossible to say, that is a hypothetical situation that could never happen. Who would guarantee that a house would not fall in value even if someone started a pig farm, or built a nuclear power station next door.

[djhope]

Wasn't that the point to encourage a "hypothetical" discussion?

[Guest The_Oldie]

Did the entire staff of an EA office join yesterday?

[djhope]

Is it possible to keep the personal presumptions out of the discussion with you or has everything got to come down to that?

Edited May 21, 2008 by djhope

[Bloo Loo]

This shows how tricky STR can be.

This website was set up in 2003. No doubt some of the early posters STR. IF we see a property crash of 30%, prices (where I live at least) could be back at 2003 levels. Lets suppose a 30% crash will take 3 years to play out, by 2011 the average person that STR in 2003 will be able to buy at the level they sold at. They will have saved 8 years worth of the difference between having a mortgage and renting. But you'd have to weigh this against the fact that in 8 years, with a repayment mortgage, they'd have paid off roughly 23% of the capital.

Maybe I'm missing something here but if your ultimate goal is to own your home (and I for one would rather be living rent- and mortgage-free in my retirement) then at some point you'll have to buy. Since renting is nearly always cheaper than buying on a month to month basis, if your goal is to buy you will have to swallow that difference sooner or later. The sooner in your life you swallow that pill the sooner you'll be living rent- and mortgage-free. And the more years of benefit you'll see from that.

Eight years is nearly a third of a 25 year mortgage and about a tenth of an average life span. Since the average first time buyer in the UK is 29 years old, 8 years is well over 15% of the average property-owning life.

In Jonnybegood's example the period would be 5 years rather than 8. The shorter the period the more you can make an argument for STR but the harder it is to call the times to buy and sell. Given that very few people that STR will call the times to sell AND buy perfectly very few will get the full advantage of the drop that occurs.

This is a property speculation site and those posting opinions on it, whether bear, bull or neither, are property speculators (unless they are off topic). It's daft NOT to speculate on investment property. But when it's your own home things are a bit more complex. You need somewhere to live. And it's not just an investment.

Awful lot of assumptions made, non of which apply to me.

To be honest, who gives a cus about a buyer going back into the market at what would appear to be an innapropriate time. Its their choice.

This website is more than STR. Its about financial markets, its about a rolling news report with a financial slant, its about entertainment.

If one doesnt like it, one can go elsewhere. Unlike FIAT money and high houseprices, noone is pushing or indeed forcing you to be here.

Posters dont need advice about what sort of replies they are going to get, they already know. Its rufty tufty here and you dont get no hugs.

[Raj Shastri]

who here predicted late 07 as the 'turn'

Hi, Raj Shastri here.

Actually, it was predicted, and rather eloquently, by 'Pwoperty Guru' here:-

http://www.housepricecrash.co.uk/forum/ind...c=35336&hl=

There's one guy who doesn't wear a wig 9and neither do I)

Cheers

Raj

[djhope]

Awful lot of assumptions made, non of which apply to me.

To be honest, who gives a cus about a buyer going back into the market at what would appear to be an innapropriate time. Its their choice.

This website is more than STR. Its about financial markets, its about a rolling news report with a financial slant, its about entertainment.

If one doesnt like it, one can go elsewhere. Unlike FIAT money and high houseprices, noone is pushing or indeed forcing you to be here.

Posters dont need advice about what sort of replies they are going to get, they already know. Its rufty tufty here and you dont get no hugs.

Doesn't mean i cant complain about the quality of the arguments some intelligence would be nice and an awful lot of this forum is made up of assumptions and speculation which is fine but getting personal about peoples choices simply ain't right rufty tufty or otherwise! Live and let live

Edited May 21, 2008 by djhope

[Bloo Loo]

Doesn't mean i cant complain about the quality of the arguments some intelligence would be nice and an awful lot of this forum is made up of assumptions and speculation which is fine but getting personal about peoples choices simply ain't right rufty tufty or otherwise! Live and let live

I defend your right to complain. But people post to air their personal views. a personal response is to be expected.

Me, i try not to ever be rude, just would raise the blood pressure.

[meow]

Get rid of the wife?

[too soon to buy?]

Impossible to say, that is a hypothetical situation that could never happen. Who would guarantee that a house would not fall in value even if someone started a pig farm, or built a nuclear power station next door.

I accept entirely that the scenario I described is hypothetical - it was painted to test your reasons for selling up.

I'll put it bluntly then;

Was the driver for you selling up and renting because you realised you could "cash-in" or was it becuase of the pitfalls of home ownership you described in one of your earlier posts on this thread?

[Voice of calm]

Your argument is deeply flawed. It fails to address the issue of relative cost of renting vs. interest only repayments (let's not even talk about principal repayments for a devaluing asset). It fails to address the risk of financial hardship for the borrower (and his/her family). It fails to address the case of the poor schmucks who've bought a property in the last 3 years and who are now stuck with higher mortgage repayments than those who will buy in a couple of years time.

It's not about speculating. It's about being financially responsible.

I have to admit you've spinned it quite nicely.

I am not trying to spin. But I do think there seem to be some people on here who believe that STR is/was such a no brainer that they seem to have disengaged their brains.

To be clear I am not saying STR can't work. I am convinced that the market is falling, and I think the falls are likely to be in the 20 to 30% range not the 10 to 15% some want us to believe. STR will work for some people, just as BTL did, but it has to be assessed on a case by case basis and there are very real risks. Old Timer might be quids in (only the future will tell) but not everyone is in his shoes.

Lots of people on here seem to be **** sure on what the future will bring. I'm not, and I like to think through a range of scenarios.

Taking your points in turn:

01 Relative cost of renting vs interest only. It goes without saying that this is one of the first calculations anyone should make. And it has to be done on a case by case basis. Again your decision will be different depending on your age, where you live and the circumstances. Renting will nearly always be cheaper so if you want to buy at some point you'll have to face this difference sooner or later. There are deals to be had in my area right now where the difference is negligible (though that doesn't automatically make it worth buying – you obviously have to factor in likely capital depreciation).

02 Principal payments on a depreciating asset. Let's not forget them. If you did STR in 2003 and there's eight years to market bottom they may well be material. And, again, if you want to buy at sooner or later you'll probably be paying a mortgage over 25 years. At some point making repayments on a depreciating asset will be pretty much inevitable. That doesn't make it automatically a bad deal. It depends on the specifics. Buying now might make no sense. But having sold to buy later might not either.

03 Risk of financial hardship to borrower and family. There are risks both ways. Shorting a market is VERY risky. If you STR in a period where the market drops 30% you'll only gain that 30% if you buy and sell at absolutely the right points and the area you are buying and selling in falls at the national average. If you are 5% off the peak and 10% of the base you can nearly halve your gain. Many people that have STR in the last three years will have been way more than 5% off the peak. Buying at the bottom is really tough too. For one thing it can be the hardest time to get a mortgage and the available deals can be expensive. Not to mention the availability of decent property. Now what happens if the falls miss your target 30%? If they hit 40% you're quids in. 20% and you could be in trouble. Most people are much better placed to bear the financial burden of a mortgage when they are young and earning than when they are retired and earning less. My mother (77) couldn't care less about the property market as she owns out right. I have some other friends who are 80+ and have rented all their lives. They dread their annual rent review. If you're happy to rent forever and you're disciplined about what you do with the money you save then none of this may matter. But the younger you are the riskier that is. If you're sitting on a fat wedge of cash from a previous property sale (or from elsewhere for that matter) then you're also in a more comfortable position. But if you're spending half the interest on paying rent (and I think many people will be spending more than half) you may well be depreciating your capital sum in real terms.

04 And on the 'poor schmucks who've bought a property in the last 3 years and who are now stuck with higher mortgage repayments than those who will buy in a couple of years time.' In 2005 there was a mini slump in my area (in London) and canny purchasers could and did get great deals from keen sellers. They could also get mortgages at near all time lows fixed for ten years. This doesn't mean they'll come out on top, that depends on exactly what happens over the next few years, but the picture is not nearly as simple as you imply. Sure there are many who paid too much who will suffer. There are many STRers that will suffer too. The market is never that simple. Timing, and specifics, are everything.

05 'It's not about speculating. It's about being financially responsible.' How is STR not speculating? Avoiding buying in an over-inflated market or avoiding over-stretching yourself is certainly financially responsible. But selling to rent is speculating. Just like buying to rent.

I'm not here to spin or to ignore the downsides of buying property. At the moment getting into the market is clearly very perilous. It has been for a while. I just think there is a lot of almost religious zeal here among SOME STRers. I'm sure there are lots of STRers who will be thinking some of what I am thinking. As others here have said, it might be nice to have a debate on this without incurring the wrath of the self-appointed high priests of the church of HPC.

[Voice of calm]

Awful lot of assumptions made, non of which apply to me.

To be honest, who gives a cus about a buyer going back into the market at what would appear to be an innapropriate time. Its their choice.

This website is more than STR. Its about financial markets, its about a rolling news report with a financial slant, its about entertainment.

If one doesnt like it, one can go elsewhere. Unlike FIAT money and high houseprices, noone is pushing or indeed forcing you to be here.

Posters dont need advice about what sort of replies they are going to get, they already know. Its rufty tufty here and you dont get no hugs.

An awful lot of what I said wasn't assumption but fact. To STR is to short a market. Get the timing and your predictions wrong and you can get burned, even with large price falls. If it doesn't apply to you then good on you.

Obviously this site isn't just about STR. But this thread IS about STR as is quite a lot of this site.

Personally I don't care about insults. People have a lot on the line and they can get quite aggressive when people don't agree with them. But it would be better to argue on merit. Every speculation has a potential downside. Slamming people that disagree with you is a bad habit and can blind you to risks.

[Guest The_Oldie]

I accept entirely that the scenario I described is hypothetical - it was painted to test your reasons for selling up.

I'll put it bluntly then;

Was the driver for you selling up and renting because you realised you could "cash-in" or was it becuase of the pitfalls of home ownership you described in one of your earlier posts on this thread?

Neither actually, I sold to move area. The initial reason for not buying in the new area was purely financial, ie I could see a possible downturn in the housing market and decided to wait for a bit, but having been renting for a couple of years, I've found it to be most agreeable and now look at owning from a different perspective. I will possibly buy something in France to live in for perhaps six months of the year and travel for the remainder of the time, but the timing on that is not certain as the French housing market is looking decidedly weak too. If and when it seems sensible, I may also buy in the UK, to keep a base here. Having said all that though, I may just rent two places, one here and one in France and leave extra cash to the kids, rather than property, when I pop my clogs.

[Goat]

I am not trying to spin. But I do think there seem to be some people on here who believe that STR is/was such a no brainer that they seem to have disengaged their brains.

To be clear I am not saying STR can't work. I am convinced that the market is falling, and I think the falls are likely to be in the 20 to 30% range not the 10 to 15% some want us to believe. STR will work for some people, just as BTL did, but it has to be assessed on a case by case basis and there are very real risks. Old Timer might be quids in (only the future will tell) but not everyone is in his shoes.

Lots of people on here seem to be **** sure on what the future will bring. I'm not, and I like to think through a range of scenarios.

Taking your points in turn:

01 Relative cost of renting vs interest only. It goes without saying that this is one of the first calculations anyone should make. And it has to be done on a case by case basis. Again your decision will be different depending on your age, where you live and the circumstances. Renting will nearly always be cheaper so if you want to buy at some point you'll have to face this difference sooner or later. There are deals to be had in my area right now where the difference is negligible (though that doesn't automatically make it worth buying – you obviously have to factor in likely capital depreciation).

02 Principal payments on a depreciating asset. Let's not forget them. If you did STR in 2003 and there's eight years to market bottom they may well be material. And, again, if you want to buy at sooner or later you'll probably be paying a mortgage over 25 years. At some point making repayments on a depreciating asset will be pretty much inevitable. That doesn't make it automatically a bad deal. It depends on the specifics. Buying now might make no sense. But having sold to buy later might not either.

03 Risk of financial hardship to borrower and family. There are risks both ways. Shorting a market is VERY risky. If you STR in a period where the market drops 30% you'll only gain that 30% if you buy and sell at absolutely the right points and the area you are buying and selling in falls at the national average. If you are 5% off the peak and 10% of the base you can nearly halve your gain. Many people that have STR in the last three years will have been way more than 5% off the peak. Buying at the bottom is really tough too. For one thing it can be the hardest time to get a mortgage and the available deals can be expensive. Not to mention the availability of decent property. Now what happens if the falls miss your target 30%? If they hit 40% you're quids in. 20% and you could be in trouble. Most people are much better placed to bear the financial burden of a mortgage when they are young and earning than when they are retired and earning less. My mother (77) couldn't care less about the property market as she owns out right. I have some other friends who are 80+ and have rented all their lives. They dread their annual rent review. If you're happy to rent forever and you're disciplined about what you do with the money you save then none of this may matter. But the younger you are the riskier that is. If you're sitting on a fat wedge of cash from a previous property sale (or from elsewhere for that matter) then you're also in a more comfortable position. But if you're spending half the interest on paying rent (and I think many people will be spending more than half) you may well be depreciating your capital sum in real terms.

04 And on the 'poor schmucks who've bought a property in the last 3 years and who are now stuck with higher mortgage repayments than those who will buy in a couple of years time.' In 2005 there was a mini slump in my area (in London) and canny purchasers could and did get great deals from keen sellers. They could also get mortgages at near all time lows fixed for ten years. This doesn't mean they'll come out on top, that depends on exactly what happens over the next few years, but the picture is not nearly as simple as you imply. Sure there are many who paid too much who will suffer. There are many STRers that will suffer too. The market is never that simple. Timing, and specifics, are everything.

05 'It's not about speculating. It's about being financially responsible.' How is STR not speculating? Avoiding buying in an over-inflated market or avoiding over-stretching yourself is certainly financially responsible. But selling to rent is speculating. Just like buying to rent.

I'm not here to spin or to ignore the downsides of buying property. At the moment getting into the market is clearly very perilous. It has been for a while. I just think there is a lot of almost religious zeal here among SOME STRers. I'm sure there are lots of STRers who will be thinking some of what I am thinking. As others here have said, it might be nice to have a debate on this without incurring the wrath of the self-appointed high priests of the church of HPC.

Hmmmm... 934 words of VI cut & paste for your 4th post. Where's that avatar, the one with the orange hair?

Edited May 21, 2008 by Young Goat

[Telometer]

Again, I can only agree with voice of calm.

Let's say your house is worth £1m and prices drop 40%. You save yourself 400k if you time it right. Or do you?

However, let's say you sell the house for 10% below the peak(900k). You buy in 10% above the peak as you mis-time the bottom (660k). You pay stamp of 4% (26.4k). You pay agents' fees of 2.5% + VAT = 3%(27k).

Then you have solicitors fees and searches, surveys, HIPs etc (at 3k to sell and 5k to buy = 8k), removal fees (5k, four times as your landlords keep moving you on = 20k).

Your profit has dropped to 150k. Your marriage is on rocky grounds as your wife is fed up of moving. The children are constantly unsettled and have moved house 4 times, which has messed up their choice of schooling. Oh yes, and you spend 75k on the new house to give your wife the kitchen and bathroom and garden as nice as in the house you left.

Total profit 7.5% of total maximum value of house. Was it really worth it for the same amount of money as you spent on stamp and agents fees?

And then the complete disaster scenario. My next-door neighbour sold his London house to move to the West Country (where he also had a house). He sold under six months before I did, and I got 55% more for my house than he got for his. My neighbour the other way sold 3 months after I did and got another 10%.

I bought back in at the same time, so I didn't lose that 10%. My neighbour could have had an extra 86% profit. He'll never, ever, ever make that back.

Edited to point out that prices in some parts of London went absolutely bonkers during 2007.

Edited May 22, 2008 by Telometer

[too soon to buy?]

Neither actually, I sold to move area. The initial reason for not buying in the new area was purely financial, ie I could see a possible downturn in the housing market and decided to wait for a bit, but having been renting for a couple of years, I've found it to be most agreeable and now look at owning from a different perspective. I will possibly buy something in France to live in for perhaps six months of the year and travel for the remainder of the time, but the timing on that is not certain as the French housing market is looking decidedly weak too. If and when it seems sensible, I may also buy in the UK, to keep a base here. Having said all that though, I may just rent two places, one here and one in France and leave extra cash to the kids, rather than property, when I pop my clogs.

All eminently sensible! I must say I was a little nervous at asking you, Oldie, such a direct question. I don't think I have disagreed materially with any of the posts you have written, and judging by the number of posts you have - I felt petulent!!

I would like to live abroad one day too. I am fiercly proud of being English, but since becoming a dad and seeing how many unnecessary stabbings etc go on in London (and elsewhere) I do not rule out living abroad (I am too much of a city boy to bear living in the countryside for more than a few weeks)

Plan is to get a xfer within a multinational so they pay the board and lodgings for a 6month period, by which time I would know if that new city/country is "for us" and then take the plunge.