House Prices

[DimPrawn]

In my opinion only buy if it really is something you want to live in.

If you want to make money buy an investment rag read it and stick your money in shares or bonds, then rent. GAZPROM, for example will probably give you stacks more than some overpriced home. GAZPROM has the same resources as BP but its current market value is an eighth. Now that's what I call an opportunity.

...and as someone said above rent is dead money, but so are interest payments, only that tiny little bit that pays off the mortgage is invested. The other several hundred pounds go straight to the bank.

eg

Mortgage £600
approx £500 on interest and £100 in the house

or rent £500 and £100 in Gazprom

Now I know what I would choose.

But house prices are going up 13% per year, every year forever?

At this rate, I could be a millionaire in 5 years time.

[eternalnomad]

With the difference that after 25 years you net the gain from the house minus the expenses, while with renting you are off on the street with nothing in your pockets. Unless the price in 25 years will be lower than now, but I kind of doubt that. Nevertheless, I think waiting 1-2 years could be a good option now perhaps, as in the short term and if interest rates rise then there might be a reduction in the prices.

And in 25 years you better hope you have enough capital to pay the bank what you owe them (i.e. 100% of the capital you borrowed in the first place) ....otherwise you are off on the streets with nothing in your pockets

[Pondlife]

The difference between renting + shares vs property is the value the % increase is based on. E.g. you pay £500 in rent and £100 into stocks/bonds etc. If the investment goes up by 10% that year you've made about £100 profit. On the other hand, the £100,000 house that you bought and are paying off at £600 a month has also gone up by 10% giving you a rise of £1000. Obviously your primary residence isn't the same type of investment as a secondary one. Everyone has to live somewhere.

[Francko]

And in 25 years you better hope you have enough capital to pay the bank what you owe them (i.e. 100% of the capital you borrowed in the first place) ....otherwise you are off on the streets with nothing in your pockets

Do you actually need the whole sum in your pocket? Can't you just sell the house and pay the mortgage with the sale?

[The Lone Gunman]

Well if you are just going to repay the interest you are running a risk. If you also pay off the capital then you are left with the no debt and the bricks and mortar.
You may have an asset that is worth less than you paid but you are not holding a debt with no equity.
The smart money pays extra when they can to reduce the term and therefore the cost.

[BlasterBates]

...and if the house price drops by 10% you look as sick as you would happy were it rise by 10%. In other words for your £1000 investment you would have lost £10000.

You can do exactly the same on the stock market using options. There basically you pay a small sum and get huge bucks if it goes up. In fact with options you only lose your initial investment, so actually it is less risky.

[Francko]

...and if the house price drops by 10% you look as sick as you would happy were it rise by 10%. In other words for your £1000 investment you would have lost £10000.

Well, we are talking about 25 years time. How many chances that houses in 2032 will be 10% less than now?

[eternalnomad]

Well, we are talking about 25 years time. How many chances that houses in 2032 will be 10% less than now?

In real terms (as in purchasing power of the currency) .....I would say its a 50/50 bet

Or are you a person that believes house prices only ever go up ?

[nobody here but us chicke]

prices fall by £20,000

local rag reports prices in harrogate have fallen by 9% in the last year.
'Average price drops of £20000'

In the village there was a small development built last year (10 houses) - None of them have sold.

Local estate agents say - nothing to worry about, temporary blip, can we interest you in a spanish/french/bulgarian villa instead?

[Francko]

In real terms (as in purchasing power of the currency) .....I would say its a 50/50 bet

Or are you a person that believes house prices only ever go up ?

Surely in relative terms (purchasing power) but I am not talking about the good investor but the normal people who enjoy life and spend money when they have it available (unfortunately rather common in UK otherwise there wouldn't be such a high level of debt). To me it's a choice between nothing after 25 years or something, which certainly would be more if you are a saviour investor (but let's face it, are we really all such good ants?) but for the ones who prefer to sleep at night rather than having nightmares about stock market crashes (which are certainly more common than house ones) is good enough.