Wednesday, August 5, 2009

Prices up 1.1% in July

House prices rising, says Halifax

House prices are now rising, according to the latest survey from the Halifax mortgage lender. The cost of the average house went up by 1.1% in July to £159,623. Prices in the three months to July were 0.8% higher than in the previous three months, the first increase in the underlying trend since October 2007.

Posted by wdbeast @ 08:02 AM (2983 views)
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55 thoughts on “Prices up 1.1% in July

  • tyrellcorporation says:

    Excellent news!

    This will just be even more deflating for property bulls when the downward trend continues this Autumn.

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  • Shouldn’t we raise interest rates now?

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  • little professor says:

    bouncy bouncy

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  • Based on the figures this month from Halifax & Nationwide I think it will now be October before we see both these indexes turn negative again.

    If there is any good news to be drawn from these recent rises its that prices are heading back to silly highs. When the correction resumes I’m expecting the confidence to finally be kicked out of the market and the positive sentiment destroyed (for a long time).

    The time to buy a house will be when everyone else is too afraid to touch one, just like the time to get out was when everyone thought the daft prices could only get dafter. We are still in the daft region if you ask me.

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  • mrflibble – Wise words, I agree with your sentiment whole heartedly.

    LP – The graph is taking the unmistakable shape of the first half of a W methinks.

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  • So much for our HPC. How many hundreds of thousands will read this article and conclude that there is no way they will lower their asking price now (I’m including reluctant landlords and other properties withdrawn from the market). I suspect that the market will be gridlocked for quite a while. My only criticism of the report is that I see no sign of a “stark shortage of property” in my local paper.

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  • but activity is VERY low, buyers are cash buyers and FTBs are well locked out. Even the Times’ headline shows the real fear.

    We’re looking at normal market activity – the sort of people who move because they need to. This will probably be the norm in a few years and lead to a redefining of seasonal adjustment.

    Read Bloomberg. There are some significant headwinds coming for about 2-3 years. I’ve saved so much when I sold in June 07 that I (and lots of people like me) can well afford to watch. Once people see that the market is not on a new one-way line – we’ll see despair as MRFlibble says…

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  • Go Gordon Go! How much higher can he pump up average house prices before the election? Has he over egged the cake? Will it go pop before the election next June? Tune in next quarter for the next exciting installment.

    The guy’s a fool. I hate to think how much longer he is going to drag this correction out for and the damage it will do to the wider economy. The likes of Germany must be looking at this with horror and amazement that a government could be so irresponsible.

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  • paranoia blue says:

    The bottom line remains unchanged – affordability!

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  • @6 quite guy… Be patient. As long as you don’t need to buy in the next couple of years, it will be well worth the wait.

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  • paranoia blue has it in One – I have declined 5 mortgage enquiries this week based upon affordability alone. There is a definite resurgence in interest but borrowers must have the means to be able to repay the loan – getting the deposit and salary multiple to fit is VERY difficult these days simply because lending criteria has tightened and house prices are generally way too high.

    I have used this measure before and will state it again – how many people if statrting out again could afford to buy the property that they are currently living in? – in my experience the majority are priced out and hence house prices are too high.

    The downward trend will soon resume due to the dire economic situation UK Plc is in.

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  • I am rather sad to hear this news. I am a property owner but I wanted the prices to go down so that the cost of housing can be lower means more disposal income for other rising cost (like Energy, Food etc.). Also this in turn means that the increases in wages cost for businesses could be controlled and and it would make us more competitive in the home and world market. But alas that is not the consideration in the quarters of power. Shame really. The confidence in the property market is good for me and I might even get more for my property than I thought. Ideal when I decide to emigrate to the cheaper parts of the world.

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  • @11 jack c
    I am pleased that you are being very frank in your comments. Generally most people in similar business appear to paint a fantastic picture by saying that there is no turning back. If you are right then where are the funds coming from at present to provide the current stimulus. Surely it cannot just cash buyers. I cannot for the life of me accept that considering we are experiencing a credit crunch. I have had enough of this rubbish in the media.
    Your comments will be appreciated.

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  • A local agent to me has just sent out a newsletter to people saying prices are now rising.

    As I’ve said on here before the market in South Hampshire has been red hot. This agent confirmed in their news letter that March was the third best month they’ve ever had.

    It does suggest to me that savers have had to pay too higher price and that interest rates should be raised.

    I don’t believe they will be until after an election.

    I conclude therefore that it is still possible to see prices creap up close to that of 2007 peak before coming off the rails again.

    All things being equal there should be a fall this Autumn, I am wondering if that will get delyed ’til Autumn 2010.

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  • charlie brooker says:

    @titaniccaptain . . . get well soon dude.

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  • jack c,

    Most people have been priced out since about 1998 – 2001 onwards, but prices kept rising and mortgages were given out.

    I am beginning to think that there is much much more to this than even our discussions on this blog go into. Normal rules are not being followed at all, and more and more money is being sucked out of the taxpayer and the consumer (essential items, fuel and food), it didn’t happen in 2005 when it should have, it looked like 2008 was the year and for a while it was.

    The greed and moneygrabbing is going on right in front of our noses, look at the banks, nothing has changed, the system is well and truly rigged.

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  • I know most of the EAs in your area: JW, WW, MD…

    And remember the words of an employee of one of them when I sold in June 07. “You will be very glad you sold years from now. Don’t buy”. It’s quite revealing to note the difference between what is written in magazines and what is inside the trade. The reality is more like this. “God I hope Marchs limp recovery lasts, if it doesn’t, I’m scr**ed”

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  • TC I’ve heard BCC skin cancer very low risk and easy to treat – is that your info?

    STR2007 how you doing? Finally swithched over to spread betting when realised that I had spent thousands on commision with cfd and there is no commission on spread betting. The commision on the CFD was £35 once you had bought and sold something and crushed any profitabilty.

    As paranoia blue says it is an issue of affordabilty and if houses were not affordable in 2006/2007 they are certainly not affordable now with unemployment rising and income reducing. It is intresting to ponder whether the UK will go down the hyper inflationary route in its attempts to resolve this. There was an article from Crispin Odey yesterday which touched on this.

    I have swapped some of my savings into us dollars and canadian dollars and will continue to do this as sterling rises through this rally. Everyone is writing and worrying about the dollar but it is the UK with its completely undeflated property bubble that needs to be watched.

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  • @19 bellweather … So what’s the better way to deposit savings into dollars?

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  • @18. growler

    Interesting comment about the reality of the situation. Our Estate Agent friends will come to the rescue once the crash resumes again, as if they don’t they will be out of business. Having first hand experience of their guidance over the last ten months I can confirm the attitude at the start of this year was very different to the attitude once the Spring bounce took hold – talking of the order of 20% on the asking price here (no joke).

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  • best wishes titaniccaptain

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  • News like this is naturally irritating, as it prolongs the wait for the day of reckoning.

    The cause of the current up-tick is not hard to see – a relatively small number of people are moving house, but without selling the property they are moving from, as they believe they can get more if they wait another year. This is starving the supply side of the market, with the result that the gap between asking prices and offer prices has narrowed.

    This is of course, totally unsustainable; and when the market dips again, these double mortgaged people will be in a panic to sell – the more so if interest rates take off in the near term.

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  • People’s imagination resumes to buying property only. It feels like the money no longer have value and it has to be invested.
    I am affraid that we are taking to US year 2006 and the next government to deal with the mess.

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  • Uncle Tom makes a very valid point. There is no money around, so the only people moving are those with lots of cash, and they tend to live in nice houses.

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  • timmy t,

    It’s not just the cash rich with nice houses.

    Anyone with more than 50% equity can quite easily get a mortgage on the home they want to move to, plus a BTL mortgage on their old home. If they resisted the temptation to MEW, most people who entered the market before 2000 have that level of equity

    What they will discover is that when the market dips another 25%, their accumulated wealth in property will have completely evaporated.

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  • @27, UT

    And to add…

    Those people who have accumulated such equity will therefore lose the money they thought they’d have for retirement. I think this factor – “If I buy in my 50s, will I see my money when I retire?” is not to be understated in all those who currently have equity. It’s a helluva risk for them

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  • Indeed growler – a hell of a risk; but it’s happening.

    I can think of two homes close to me that have been vacated this summer – no sale boards or ‘To Let’ signs; and not, as far as I’m aware, repo’s.

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  • stillthinking says:

    What growler said, “I’ve saved so much when I sold in June 07 that I (and lots of people like me) can well afford to watch.” is interesting, I usually tend to think that the continuous whittling down due to rent must be a psychological push element to getting back into the market, but I suppose there must be many that just plain don’t care if they wait for 3 years or 8 years. Of necessity to turn the market around the cash buyers will need to enter first but they are the extremist element in the buyer community.

    If the cash buyers don’t re-enter -first- then the banks cannot allow mortgage buyers back, as a cash buyer against a mortgaged property has the effect of improving the banks financial exposure and a necessary step to freeing up funding for additional lending. There seems to be another issue now which is that some of the cash buyers see an advantage in distancing themselves from sterling altogether. So it would seem from that, that although sterling is affected by a number of things, sterling weakness is going to correlate with future housing falls. By sterling weakness I don’t mean fluctuations by the dollar, I am talking about being below purchasing power parity in the euro area, which can only be due to ongoing attempts to fleece sterling escapists i.e. sterling is currently weak irrespective of improvements against the dollar and housing will continue to fall.
    I think a kind of equilibrium has been reached, the market is essentially frozen and the figures are without meaning because they don’t represent any normal kind of transaction volume, and the equilibrium will be broken when the government can’t extend debt any further, and we don’t know what the government response will be. Suppose they just issue a law giving a legal right to mortgage holders to switch to interest only? Suppose they override free market prices and set mortgage rates centrally? They could do any kind of stupid thing.

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  • The question is, what is going to increase the supply of houses on the market and cause sellers to lower their asking prices ?

    I can see the problems on the demand side with FTBs and lending restrictions but I can’t see anything that is going to put pressure on sellers. Unemployment will have a small effect but not enough to influence the vast majority of sellers. Forced sales through death and divorce are fairly constant – not gonna change. Developers aren’t going to start building large numbers anytime soon. I can’t see anything changing.

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  • Stillthinking: Exacty.

    The issue with rent is that what I currently pay equals interest on capital – very roughly. The upshot for me (and I can’t be alone) is not only have I avoided a loss of 20% from peak value June 07, I have no mortgage and due to having to pay rent, no investment income. So essentially a free house to live in where someone else sorts the things that need fixing. So very easy for me to watch Haliwide, interest rates (now growing for savings) and wait…

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  • luckyjim
    – It only takes a small number to be forced to sell – this is the margins of which economists speak – the typical example being that if the price of scrub land increases, so does agricultural land. Price discovery is made at the margins.

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  • vacuouspolitician says:

    What uncle tom said…
    “It’s not just the cash rich with nice houses.
    Anyone with more than 50% equity can quite easily get a mortgage on the home they want to move to, plus a BTL mortgage on their old home. If they resisted the temptation to MEW, most people who entered the market before 2000 have that level of equity
    What they will discover is that when the market dips another 25%, their accumulated wealth in property will have completely evaporated.”

    The big question that I just can’t get my head around is why would anyone want to do this when HPs are quite clearly over-inflated. Surely anyone with half a brain cell can see they are still unaffordable and even with the small correction down (which has been doctored by this worthless government) they are still massively over-inflated. It just seems so strange why anyone would risk their position and happiness to pay people with a vested interest (EA, leech fees and greedy vendors etc) 10s and 100s of 1000s more than what some grotty place is worth. What I’d really like to know is what the age range are these people are? Surely they can’t be young people…?

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  • 5ick-6-51x

    I’m not sure if that works in the housing market where this a huge resistence to house prices dropping. If there is a one forced sale in a street the rest of the sellers just wait for that house to be sold before selling their own at a the ‘normal’ price. Sellers tend to think their house is the exception.

    Last year we saw thousands of new build flats and houses slashed in price but that didn’t encourage home owners to lower their prices by similar amounts. Now some of those ‘stubborn’ home owners are selling at prices close to their asking price. I can’t see anybody dropping their prices for another few months at least.

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  • paranoia blue says:

    The trouble is that people – even very intelligent ones – don’t think! They are very financially naïve, and they are totally influenced by the popular Press or the Beeb. Just one example – and I have numerous – many of my friends still think that renting is simply money down the drain. And quite frankly it is a waste of time, even attempting to explain, otherwise. Oh, well.

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  • luckyjim
    – I totally agree that most sellers are under the disillusion that their castle is an island in the market, but this is not a barrier to the discovery, only an inertia. It is a direct result of it being a market of inhomogeneous assets 🙂
    As PB points out people are generally financially naïve. When the press starts reporting horror stories of repossessions ( which they started to do during the first down leg we witnessed ) it will make some think ( the ones who are nearest that situation ), and the market will feedback on itself.

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  • vacuouspolitician says:

    paranoia blue

    Yes I keep hearing the same thing…”money down the drain”. It seems such a stupid thing to say. How can paying mortgage finance companies between 5-15% over the years be anything less than throwing money down the drain…
    What makes me laugh is when I hear the word “owner”…unless the person owns outright they don’t “own” the thing at all…its just a % of it if they’re lucky. In this climate they probably “own” 5% of 150K which then carries huge burdens…
    My problem with all of this is who does this merry-go-round really serve? I suspect it is a certain generation (50+) who have a vested interest that the status quo is maintained.

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  • vp,

    Not everyone has done the maths on affordability, and even well educated people can be quite delusional about the true value of property.

    It seems that people who want to move can sometimes talk themselves into believing that this is the smart thing to do..

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  • @36 Paranoia

    It’s pretty easy to say to people that you have to look at “service”, “investment” and “intangibles”.
    Service: Monthly rent versus Interest only payments + average monthly costs of ownership additional to renting.
    Investment: Look at HP predictions over say 3-5 years versus equities and any other investment – or currency
    Intangibles: The right to dig the garden, show friends around ?!

    Multiply the above by a weighting – how important it is to you – and you have a formula

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  • bellwether
    out & about this afternoon, but will come back later when I can use password to post instantly. btw re margins spread betting is tax free cfd’s aren’t.

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  • All the best Titanic Captain, wishing you a full recovery.

    The housing market imho will commence its downward spiral this Autumn i am sure.
    The upturn is being driven by a shortage of properties,due partly to the developers stopping any new builds, but also i reckon that many people who couldn’t sell last year have rented out their properties for a year. Once they start to flood back onto the market the supply issue will be allieviated, and then it will be business as usual, Downwards.
    Also How long can the loss making banks Llyods (HBOS) and Northern Crock keep holding off mass repo’s? not long methinks.

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  • Paranoia Blue says:

    growler @ 40 Thanks.
    Let me just note, that in our latest property, they even provide a gardener.
    I was quite happy with the rent that was asked, and didn’t even realise that a gardener was included, until this guy arrives one day with his lawnmower [NB The house sits in about 2/3 of an acre] 🙂 ATB

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  • (Post 17) andrew – I totally agree, I think that there is definitely something afoot in this country that is going on behind the scenes, because all common sense has gone out of the window with houseprices. Taxpayers are being taken for a complete ride we are being totally screwed! I would love to know just exactly who is pulling the strings?

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  • paranoia blue says:

    Growler @ 40 Thanks
    Let me just note, that in our latest property – they even provide a gardener.
    I was quite happy with the rent that was asked, and didn’t even realise that a gardener was included, until this guy arrives one day with his lawnmower [NB The house sits in about 2/3 of an acre] 🙂 ATB
    Sorry re: 2x post – forgot my password :{

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  • @31 wrote: “I can see the problems on the demand side with FTBs and lending restrictions but I can’t see anything that is going to put pressure on sellers. Unemployment will have a small effect but not enough to influence the vast majority of sellers. Forced sales through death and divorce are fairly constant – not gonna change. Developers aren’t going to start building large numbers anytime soon. I can’t see anything changing.”

    But according to http://news.bbc.co.uk/1/hi/business/8047383.stm: “At a conference on the future of the industry, a senior FSA official pointed out that by 2007, at the height of the lending boom, 45% of all mortgages were being granted without the lenders checking if the borrower’s stated income was correct.”

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  • Vacuouspolitician says:

    mystie010

    I would suspect the 50+ aged group…

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  • nathan,

    A slowdown on the construction front may be offset by reverse migration – during the last recesion, an estimated 200,000 left these shores, and that was long before we had half of Poland working here..

    Not so very long ago it was pretty much the norm for graduates to set up home on their own as soon as their studies were completed – now that is becoming the exception. If kids leave home a year later than before, over 300,000 houses are effectively liberated.

    My broad impression is that young people are looking at the property market with bemusement, and few are making any serious plans to buy. If FTB’s remain inactive, the market will soon head south again.

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  • [email protected], I think you meant to direct your comments to [email protected], to whom I was replying (see the second paragraph of my post).

    The market is heading south as soon as people on liar loans are forced to sell — if not much sooner.

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  • [email protected], I think you meant to direct your comments to [email protected], to whom I was replying (see the second paragraph of my post).

    The market is heading south as soon as people on liar loans are forced to sell — if not well before that point.

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  • paranoia blue says:

    Re: Liar loans.
    Yes, very interesting point!
    I don’t think that this whole “liar loan” outrage, is anywhere close to revealing its “iceberg potential,” – or better – “hideous underbelly.”
    Within the circles that I move – albeit anecdotal – this practice was rife, in fact, it was the rule rather than the exception!
    It was forcibly encouraged by the “middle financial guys!” on the more naïve! These sad, financial wreckages are slowly lining up outside the breaker’s yard!

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  • Sorry nathan!

    Hard to say how fast and how many of the liar loan brigade will come unstuck – many, I suspect, will be very vulnerable to rate hikes.

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  • Eternal Sceptic says:

    I suspect the guvmint is doing everything possible to delay reality until after the election. After the election the poor unfortunates that inherit the government will be forced to do many of the dastardly deeds that should have already been done. Heading south for property prices is a done deed for autumn 2010.

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  • TC

    Wish you all the best with that one, call anytime.

    Paranoia blue & vacuouspolitician re: renting being noney down the drain.
    It’s not in a falling market, but that’s only been for 18 months.
    The rest of the time you’d be better off owning (in the past anyway) as your deposit has acted as a leveraged investment.

    In the South East you can’t rent a 3 bed semi in a reasonable area for any less than £800 per month. That will get you roughly a £150k repayment mortgage.
    Currently you need to add about £70-80k to that to buy the house. But you didn’t in 2001. Threfore if you’d bought back then not only would you have got a £50kish tax free gain over renting, you’d also be 8 years into a 25 year repayment mortgage (maybe paid off 30k or so). Anyway you’d be roughly £80k better off by buying than renting – ok less say £10-15k maintenance.

    Bellwether
    I thought your cost on a CFD was the spread, like it is with spread trading, were you paying a set trading fee ?

    I haven’t started yet, but will start in earnest at the beginning of September using spreadtrading.

    Have you actually got a trading strategy you’re using or is it largely based on your gut feelings ?
    Also, before getting into a position are you pre-planning your entry and exit strategy ?
    And how are you managing your risk on each position ?

    Answer offline if you prefer
    [email protected]

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  • Strictly speaking, the maths for comparing renting with buying requires the consideration of mortgage interest less inflation, to which needs to be added the cost of maintenance and insurance that would otherwise be paid by the landlord if one was renting.

    The trend line on the house price graphs suggests real house price growth over and above inflation. I believe this is mostly an illusion borne of the fifty year underlying price bubble. Houses have become better appointed over the years, but as that would be an expense borne by the home owner along with maintenance costs, it does not enter into the comparison equation.

    Landlords in recent years have accepted uneconomic rents on the expectation of capital growth; an obviously unsustainable agenda.

    Investment cash has to work for its living – there is no point in being a landlord if you can better investment returns with a similar degree of risk. For a landlord owning a property outright, a return of 4% (nett of all expenses) would be expected; which equates to a gross yield of around 6.5% (although for low cost/low rent properties, the greater burden of admin can raise this considerably)

    A landlord borrowing money might be able to secure a good deal on that part of the finance that is borrowed, and quite possibly for a little less than inflation + 4%; but as his own investment would be subject to much greater risk, that would demand a higher return. ultimately the landlord working on finance needs a slightly higher gross return – around 7% – to be viable.

    But for two factors, the economics of renting vs buying would be quite closely balanced; those factors being the void periods and management costs that weigh on the economics of renting.

    The bottom line is that in a stable market, buying makes more sense, unless you expect to have to move frequently.

    In the long term, renting does not present a significantly cheaper solution for those priced out of the market. It follows that prices must fall to a level where all save those who qualify for housing benefit could afford to buy, if they chose to do so.

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  • tenyearstogetmymoneyback says:

    Regarding all the comments about renting, I currently rent a property which (based on the price
    of an identical one down the road) I couldn’t possibly afford to buy. With a 0% mortgage it would take
    me 40 years to pay of the capital with the same rent !

    Thinking about it form the landlords point of view selling might be difficult (the one down the road
    has been on the market since I moved in, and after being Sold STC is back for sale). Also if he did sell
    how easy would it be to get a better return elsewhere.

    I have always thought that in theory buying should be cheaper than renting since there are no void periods
    lettings agency charges etc. Until it is I will try and stay put.

    p.s Best of luck with the op Titanic Captain

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