Reply to: Beginning of the end

[AtW]

By waht criteria do you judge over-pricing?

I can't afford the house I fancy?

chav.

[lws]

How do you know we are at the peak of the current boom. I suggest there's another 5 years to go.

I don't know for sure, all I can do is look at the facts and figures and come to my own conclusion. Interest rates are set to rise, each 0.25% on a £200,000 mortgage works out to roughly £60 - £80 a month. Repossesions are at an all time high and are still rising. It ain't gonna last forever.

Look up the newspaper articles just before the last crash, they were spouting exactly the same tulip as they are now.

[wonderwaif]

(As has already been explained) You don't have a rent free salable asset just because you've paid 15 years of mortgage interest. You have it because you've also paid 200K of principal. If you have the capacity to save 200K in 15 years (and I suspect than most FTBs do not) then you'll have 200K at the end, whether you started with a house or not.



Yes, I'm well aware of the 'increase in population keeping house prices high forever' theory.

IMHO it is bunkum, just like the 'new business paradigm' theory keeping Dot Con shares prices high was bunkum (and I did say so at the time).

The basic economic valuation of house prices says that they are too high. Sooner or later the ever increasing stampeed of people chasing nothing other than theoretical increase in price, will run out of steam.

tim

As I said, do it your way. I think it's working fine for me, I really don't give a rats ass whether other people rent or buy. I like where I live and work all over the country, so I don't need to sell.

Edit : I haven't paid £200,000.00 in principle, my £108,000.00 is my total purchase price of the house. We bought cheap and added value. The £200,000.00 is a very conservative estimate of how much it would be worth now in the condition we bought it in, it's actually worth considerably more going on recent sale prices in our area. If we needed to sell and couldn't get back what it cost us I assure you that the entire country would be so deep in the sh1te it wouldn't make any difference.

anyway, I've made "Should try harder" now, so thanks guys.

[tim123]

But what about the time after the 10-15 years. Rent free, saleable asset. (And rent free for your kids - add that saving in rent to your equation, even after taking off inheritance tax it's a huge saving for them.).

(As has already been explained) You don't have a rent free salable asset just because you've paid 15 years of mortgage interest. You have it because you've also paid 200K of principal. If you have the capacity to save 200K in 15 years (and I suspect than most FTBs do not) then you'll have 200K at the end, whether you started with a house or not.

The media is highlighting how existing and future mass immigration is creating grave housing shortgages. Even if you can't sell the house you are protected against your rent going through the roof as there are'nt enough houses to meet demand.
That should be 97 now.

Yes, I'm well aware of the 'increase in population keeping house prices high forever' theory.

IMHO it is bunkum, just like the 'new business paradigm' theory keeping Dot Con shares prices high was bunkum (and I did say so at the time).

The basic economic valuation of house prices says that they are too high. Sooner or later the ever increasing stampeed of people chasing nothing other than theoretical increase in price, will run out of steam.

tim

[wonderwaif]

Indeed. So, do you agree that right now the price for property (in general) is NOT right, or in other words it is heavily overpriced?

no I don't. The right property at the right price can still be found. Just depends what your expectations are.
I don't know what the housing market will do, neither do you.
What I do know is that if the worst came to the worst i would struggle to pay my rent just as i struggle to pay my mortgage.
I also know that at a fixed point in the future I get £600.00 a month to play with and a house my children won't have to pay rent for, while you will be paying rent until you die.
I know if your house is re-possessed you could end up with a big debt, but as with any investment you can minimise risk. How many people have lost their shirt on the stock market?

[DaveB]

If you own property already it's not over priced. If you don't own property already it is.

[sasguru]

Indeed. So, do you agree that right now the price for property (in general) is NOT right, or in other words it is heavily overpriced?

By waht criteria do you judge over-pricing?

[AtW]

Completely agree. Right property at the right price is what I said.

Indeed. So, do you agree that right now the price for property (in general) is NOT right, or in other words it is heavily overpriced?

[wonderwaif]

Well, I'm not a rent junkie, I've owned 4 times before and will again (as soon as I'm living somewhere that I at least might be in for more that 2 years). But the basic problem with your reckoning is that you have factored in growth in house prices for the buyer, whereas you have not factored in interest for the renter & saver (or better, dividends + growth in shares). This is the very essence of my point: that each option has 2 parts. Rent goes "down the drain", but so does interest; equity increases over the period, but so does investment.

I am by no means suggesting that either one is better than the other, merely pointing out that the renting option, in order to compare like costs, must be allied to a substantial investment.

If you choose to spend the investment money instead of saving it, that roughly corresponds to giving away your house. If you do that, buying is not the best option!

Don't compare record house price growth with "£27,000.00 plus whatever meagre interest it has accrued" as if that were nothing: 150 a month for 15 years at 6% is 90k. That's what the difference would give you if you just shoved it in a savings account. If you invested it in shares over the same period you would stand to make more than you will out of the house (and that's with you paying too much in rent, and not taking other ownership costs into account).

I didn't factor it in because it was too small to worry me.
I don't care if my house doesn't increase in value, rent can rise as well as rise.Share values can fall as well as rise.
90K will pay a rent of £500.00 per month for 15 years. During which I could have been paying my £600.00 a month that I lno onger pay in mortgage into your investment plan. How much would that earn me?
Do it your way, that's fine by me.

[sasguru]

There's nothing wrong with ownership but there's a time and a place, and that isn't at the peak of the current boom.

How do you know we are at the peak of the current boom. I suggest there's another 5 years to go.

[wonderwaif]

You say you lost your job and interest rates went crazy overnight, but wouldn't have you been better off waiting then, as we are doing now?

There's nothing wrong with ownership but there's a time and a place, and that isn't at the peak of the current boom.

Completely agree. Right property at the right price is what I said.
I got it wrong then, but got it right this time.
Even though we bought this one when we thought property prices were not going to go much higher, we bought one that needed fixing up so was well below the price for the area - the worst house on the best street.The difference in mortgage/rent was too small to worry us and the work has been carried out in easy stages over the years.
You can't know what the housing market is going to do, but you can have a rough guess at how much you will lose\save by buying rather than renting.
You say they have gone up 300% in the last seven years. Who would have bet any money on that? It's a crazy increase so who's to say the next seven years won't be equally crazy?
It can and does work, just make sure you can afford your mortgage just like you would make sure you can affoird your rent.
Horses for courses, just don't tell me it doesn't work.

[expat]

I don't know about other peoples situation, but we are paying around £600.00 for 15 years at a total outlay of £108,000.00.
We previously rented at £450.00 per month, which over 15 years would be £81,000.00. The difference being a princely £27,000.00.
So, either pay a £600.00 a month mortgage and after 15 years live rent free in a property worth, at an extremely conservative estimate, £200,000.00, or rent for fifteen years, have the princely sum of £27,000.00 plus whatever meagre interest it has accrued, and then carry on renting.
Tough choice.
The miss-spent youth must have caused the recreational drugs to addle my brain as I'm obviously missing something here.
If it really was as good as I thought it was, home ownership would be banned.
I'm sure one of the rent junkies will explain.

Well, I'm not a rent junkie, I've owned 4 times before and will again (as soon as I'm living somewhere that I at least might be in for more that 2 years). But the basic problem with your reckoning is that you have factored in growth in house prices for the buyer, whereas you have not factored in interest for the renter & saver (or better, dividends + growth in shares). This is the very essence of my point: that each option has 2 parts. Rent goes "down the drain", but so does interest; equity increases over the period, but so does investment.

I am by no means suggesting that either one is better than the other, merely pointing out that the renting option, in order to compare like costs, must be allied to a substantial investment.

If you choose to spend the investment money instead of saving it, that roughly corresponds to giving away your house. If you do that, buying is not the best option!

Don't compare record house price growth with "£27,000.00 plus whatever meagre interest it has accrued" as if that were nothing: 150 a month for 15 years at 6% is 90k. That's what the difference would give you if you just shoved it in a savings account. If you invested it in shares over the same period you would stand to make more than you will out of the house (and that's with you paying too much in rent, and not taking other ownership costs into account).

[AtW]

No need to fight lads, I am not buying those big 2 houses just now.

I was just wondering if such thing is doable, and it seems that it is and it should be a bit easier than doing something that requires council permission in addition to other things that are needed (like that building regulations crock).

[DaveB]

Sorry, AtW, you've been fed a crock of tulip. Although you do not need planning permission, you do building regulations permission, which is just as tortuous, if not more so. The only difference is that the neighbours don't get as much opportunity to object.

It's not a crock of tulip. He asked about planning permission and thats what I posted about.

With regard to the structural work, that why, as I said, you get a good reputable builder who knows the regulations and will deal with them. Building regs is not that bad as long as you plan ahead and book the inspections in plenty of time. The Inpector will turn up on an agreed date and check the work is being done correctly and assuming it is, that is an end to it. Major works over a period of time may require a number of vists but again, planning in advance minimises the hassle.

You can fnd a good summary of how it works here.

[Lucifer Box]

I presume this is mainly from safety point of view, ie whether proposed changes (breaking door into the wall inside to connect two houses) won't make dwelling unsafe?

Safety is one aspect, a major one, there are also other considerations. For example, energy efficiency is a hot topic with most councils at the moment. You cannot sell the house without a building regulations certificate if it is different from as described on the deeds.