Monday, November 2, 2009

8 reasons why you shouldn’t buy a house

8 reasons why you shouldn't buy a house

If you have been trying to decide whether to buy or rent, you know there is no easy answer. The decision depends on a variety of personal factors, including your finances, geographic location, and life situation. Before it became obvious we were in the midst of a housing bubble in 2007, conventional wisdom portrayed home-ownership as a sure-fire investment. Home values that were widely expected to continue rising and loose, plentiful credit clearly attracted many who were not really in a position to buy.

Posted by ellipse @ 09:45 AM (1259 views)
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9 thoughts on “8 reasons why you shouldn’t buy a house

  • The ‘price to annual rent ratio’ is interesting.

    if 14 was the norm, and 20 is getting high …. mine is 32

    Most large houses in south east (outside london anyway) must be making fractional yields (I work out my landlady gets about 2% – hanging on for when things get back to ‘normal’).

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  • Mine is 33, outside of South East queue fest. Don’t believe this ratio.

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  • I reckon mine is about 32 as well – great isn’t it? If my landlord offered it to me for 14 times I’d buy it this afternoon!

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  • My rent ratio is about 36+

    I’d bite the landladies hand off for 20 times – although I do honestly beleive that 20 would represent fair value.

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  • greenshootsandleaves says:

    [email protected] ‘Mine is 33, outside of South East queue fest. Don’t believe this ratio’

    To be fair to the authors of what is a very sensible article, they do suggest factoring location in and simply advise caution if the ratio is higher than 14.
    I’m sure there are many people who bought a couple of years ago, say, and now wish they’d had access to this sort of advice before taking the plunge.

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  • Mine works out about 20. How come you lot have got such good deals then?

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  • greenshootsandleaves says:

    On the price:rent ratio (again). All too often this ends up as a comparison between someone’s current rent and the price not of a similar property but of a property they can afford, thereby obscuring from view some of the major potential benefits of renting, including a shorter commute. Being spared an extra couple of hours daily on a crowded train has its price.

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  • GSAL – When people are trying to justify a move from rented to a property purchase further from work, they often forget the monetary cost of commuting. Can easily reach £3k annually. In addition to lost time.

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  • greenshootsandleaves says:

    D&G* @8

    Too true! Need not be a reason not to buy but certainly have to be taken into account. It’s an argument that usually falls on deaf ears, though. I remember years ago someone in his mid-twenties who worked in London but decided to buy a property in Brighton because that’s where he wanted to spend his retirement!

    * Hope this is not in breach of any copyright laws!

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