Thursday, May 11, 2006

Buy v Rent

TMF: Another View On Buy vs Rent

I don't own my own home. As many of you have pointed out on the discussion boards recently, it's just not cost-effective to buy right now. But is this true for all of us? When should we buy? And why must we buy? Why is it that we feel we have to own our own homes? They're not obsessed like this on the continent, are they?

Posted by cupidstunt @ 04:07 PM (905 views)
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7 Comments

1. Rickyb said...

I rented until 1995 when I was 30, at which point the "Average House Price to Earnings ratio" was around 3. It was as obvious then that it was the right time to buy, as it is obvious now that it is the wrong time to buy. With the "Average House Price to Earnings ratio" now at around six, those who decide to buy now will end up paying for it, just as those who bought during the last peak at the end of the 1980's.

Thursday, May 11, 2006 04:29PM Report Comment
 

2. Uncle Tom said...

I would not advise anyone to buy right now. Frustrating though it may be, patience will be rewarded.

Thursday, May 11, 2006 05:48PM Report Comment
 

3. Squirrrell27 said...

Judging by the article it seems that in the UK its only marginally more expensive to buy a house than rent. Is this true? If it is I think you have it good.In NZ average yields in Auckland or Wellington on any properties my ftb friends have bought recently seem to be between 4-5% - this is atrocious when you consider interest rates are at 8%. If I bought the current house I rent my outgoings on a 25 year mortgage + maint + rates + insuranace + transaction costs etc would be close to 3 times what i pay in rental and earn on my deposit.

Thursday, May 11, 2006 09:18PM Report Comment
 

4. European-bear said...

I think the article is good. In the long term buying may be best, but timing is all important. As it points out, going in now could be a bad financial decison and much more expensive then waiting a few years......
As for the attitude on the continent where "most people rent".....I live in Switzerland where 70% rent and 30% buy. I brought....The reason....the monthly bills are about 30-40% cheaper to buy (mortgage repayments, maintainance, loss of income on deposit), then renting the equivalent property. Switzerland has the lowest inflation in the world and prices never change. I am absolutely not expecting an increase in the value of my home, even if I stay here for many many years. But the monthly cost of putting a roof over my head is cheaper than renting (and I am somewhat surprised that more of the Swiss do not buy simply for this reason). I have been to the UK for job interviews....and checked out local housing conditions and it was usually much more expensive to buy than rent in present market conditions....also the standard of accomadation is crap (just as an aside).

Friday, May 12, 2006 06:43AM Report Comment
 

5. Gregzki said...

Currently, as a result of the glut of new BTL landlords, an over supply of rental property exists. This is keeping rental prices only marginally above what they were at the start of the recent boom. I hope this goes without saying buts in this market you should expect to be able to negotiate on the monthly rent - recommend at least 50 pcm off a 550pcm property and take it for at least 12 months if you like it..then sit back and relax as interest rates go up and house prices fall! Timing is key. Enjoy the freedom of renting...your time will come!

Friday, May 12, 2006 09:04AM Report Comment
 

6. uncle chris said...

After pointing out the number of unlet local properties to my landlord, I've just managed to negotiate a 10% reduction in rent reduction - and he seems happy to keep us for another 6 months. In addition, in playing around with Excel, assuming a 4.5% IR and 1000 per month spend, I've calculated that the savings in the bank will last till mid-2039 - well past retirement age. I realise life will get harder as time goes on and we would have to sell one of the cars, but I'm actually considering whether it's ever worth buying again.

Do we buy a home of our own and get trapped into a lifetime of work, or rent, work part-time and effectively semi-retire now. Still mulling it over.

Friday, May 12, 2006 10:50AM Report Comment
 

7. Ceri Shepherd said...

I owned a house until 2 years ago then i sld with a big profit. Now i rent. In the meantime in invested nearly all of the profits in Gold and Silver which has now doubled, and now i note that houses are at best staic and probably moving down in price. I agree with RickyB the time to buy is when earnings to buy ratio is about 3 to 3.5. That time will come.

Also in Britain we have this stupid obessesion with Owning !!!! lets face it you are not a homeowner with a 95% mortgage you are a just a bank tennant. Also why are we so happy when hosue prices go up, it is so bloody stupid. If you have a house now valued at 200,000 but the house you really want is 400,000 if your existing house collapsed in value to 20,000 that would be fantastic, incredible, wonderfull as the house you really want would now be 40,000. You would be attaching yourself to a 20,000 new debt as opposed to 200,000 now. we seem to love it when houses become more expensive and we must take out more and more debt to afford a roof over our head WHICH IS A BASIC HUMAN RIGHT.

This house price deflation "scare" "problem" is utter propaganda and self serving rubbish to protect greedy, immoral and stupidly incompetent bankers from negative equity where everybody hands the keys back like in the last bust. In real money terms GOLD we are already in a major crash last year it took over 700oz of Gold to buy the average house today it takes about 430oz in GOLD STANDARD terms that is a severe crash. The Pound is being destroyed in value to hold the illusion that the market is OK !!!!

Friday, May 12, 2006 02:17PM Report Comment
 

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