Reply to: House prices!!

[Francko]

Not now. But I have 3 flats that fulfil that criterion, due to timing.

I have actually misread. Think you can hardly find a cheaper rent on 1-2 bed flats in zone 2. Even studio-flats now ask for 1 grand a month in decent areas. Well, guess if you look for a 4-5 bedroom flat in zone 2 then you might be better off renting as the demand for those types of houses is low there (who can live in central London with 2-3 kids unless he doesn't have any perception of money spent?).

[sasguru]

Please, post them here in the group as there are a few people who would be interested to know that.

Not now. But I have 3 flats that fulfil that criterion, due to timing.

[Francko]

The key question is: can you find a nice 1 bed flat in zone 2 where the rent will cover the mortgage and agency fees.

If you can, please feel to pm me with the details....

Please, post them here in the group as there are a few people who would be interested to know that.

[XLMonkey]

example of a typical 4 bed family house in a "nice" location commutable to london (just happens to be one I have been looking at and not one I specially selected to make my point) :-

http://www.rightmove.co.uk/viewdetai...a_n=1&tr_t=buy

Asking price is : £642500
An 25 year INTEREST ONLY mortgage (i.e. renting from the bank) @ 5.0% would cost you £2677.08 PCM
A 25 year repayment mortgage for the same amount @5.0% would cost £3798.91 PCM

And here is the very same property available for rent at £2500 PCM
http://www.rightmove.co.uk/viewdetai..._n=3&tr_t=rent

Although I agree with the general point about the property market, I don't think that this is a representative example. The rental market is not the same as the purchase market. Typically, rental properties are 1-2 bed flats in the centre of town. It's actually very unusual to make a decent return on the example you quote: a four bedroom family house. The attached link (I know it's 10 years old, but the point is still valid), shows the detail very nicely -- rental yields vary massively by property type.

http://www.jrf.org.uk/knowledge/find...using/H194.asp

The key question is: can you find a nice 1 bed flat in zone 2 where the rent will cover the mortgage and agency fees.

If you can, please feel to pm me with the details....

[eternalnomad]

do you mean you can find mortgage companies offering rates lower than 5%?
???
???
???

Rebecca - I am not sure if you are saying 5% is too high or too low for this rough and ready comparison of renting 'v' buying

In absence of wanting to spend my whole life looking at the various offers and options from dozens of mortgage providers I looked at the Halifax and say they did a few "deals" at around 5% (e.g. 10 year fix at 5.19%)

Many of these deals reverted to SVR at some point in the future

[Rebecca Loos]

do you mean you can find mortgage companies offering rates lower than 5%?
???
???
???

[eternalnomad]

Asking price is : £642500
An 25 year INTEREST ONLY mortgage (i.e. renting from the bank) @ 5.0% would cost you £2677.08 PCM
A 25 year repayment mortgage for the same amount @5.0% would cost £3798.91 PCM

And here is the very same property available for rent at £2500 PCM
http://www.rightmove.co.uk/viewdetai..._n=3&tr_t=rent

So in the above example you can rent the property and save yourself £177.08 PCM and not have any hassles with property maintenance etc.

I don't think 5% is a fair interest. You should go lower and then you will equalise the 2500 rent. I think the property is overpriced too but again there is a shortage of big houses in London so they can ask for a premium.[/QUOTE]

On the basis that the Halifax standard variable rate is 6.50% I believe that 5.0% is a reasonable figure to use -assuming 5% interest then the property has to dropto 600K to become equivalent cost and that is before adding in the additional costs of property maintenance etc.

[ASB]

An 25 year INTEREST ONLY mortgage (i.e. renting from the bank) @ 5.0% would cost you £2677.08 PCM

.....

And here is the very same property available for rent at £2500 PCM

You are not comparing like with like at all. If you are renting from the bank you have traded the capital value change (up or down) for maintenance. That may, or may not, turn out to be a good move.

You also need to consider what the vendor gets from it. They would be lucky to get more than 4.5% on the money. That is about the yield they will get after agents fees. They perhaps think the maintenance requirement is an acceptable risk premium in exchange for the change in value.

[Francko]

Asking price is : £642500
An 25 year INTEREST ONLY mortgage (i.e. renting from the bank) @ 5.0% would cost you £2677.08 PCM
A 25 year repayment mortgage for the same amount @5.0% would cost £3798.91 PCM

And here is the very same property available for rent at £2500 PCM
http://www.rightmove.co.uk/viewdetai..._n=3&tr_t=rent

So in the above example you can rent the property and save yourself £177.08 PCM and not have any hassles with property maintenance etc.
[/QUOTE]

I don't think 5% is a fair interest. You should go lower and then you will equalise the 2500 rent. I think the property is overpriced too but again there is a shortage of big houses in London so they can ask for a premium.

[AlfredJPruffock]

example of a typical 4 bed family house in a "nice" location commutable to london (just happens to be one I have been looking at and not one I specially selected to make my point) :-

http://www.rightmove.co.uk/viewdetai...a_n=1&tr_t=buy

Asking price is : £642500
An 25 year INTEREST ONLY mortgage (i.e. renting from the bank) @ 5.0% would cost you £2677.08 PCM
A 25 year repayment mortgage for the same amount @5.0% would cost £3798.91 PCM

And here is the very same property available for rent at £2500 PCM
http://www.rightmove.co.uk/viewdetai..._n=3&tr_t=rent

So in the above example you can rent the property and save yourself £177.08 PCM and not have any hassles with property maintenance etc.

When the mortgage rates increase the case for renting will becoming even stronger.

If you bought a property a few years ago then its not a big deal - but my point is that anyone buying into the market now is mad

The problem is that this assumes that UK consumers are rational beings, they are not, consider the re election of Tony Blair as a prime example.

So they will continue to buy because *its a good thing*

Let them eat cake.

[eternalnomad]

Such as? I don't see many examples of cheaper rents out there. I pay 1200 for the mortgage and the flat next to mine (very similar) has been given 1200 as rent. And I gave only 5% deposit. Well, I don't know about you lot but for me the only money I have saved in my life was the profit on property (+ what I paid already on the mortgage). Money is so easy to spend..... at least with a house you don't have to worry about and eat beans on a candlelight. At the end you get something, whether is not the best investment or not, it is the only way to save money if you enjoy life.

example of a typical 4 bed family house in a "nice" location commutable to london (just happens to be one I have been looking at and not one I specially selected to make my point) :-

http://www.rightmove.co.uk/viewdetai...a_n=1&tr_t=buy

Asking price is : £642500
An 25 year INTEREST ONLY mortgage (i.e. renting from the bank) @ 5.0% would cost you £2677.08 PCM
A 25 year repayment mortgage for the same amount @5.0% would cost £3798.91 PCM

And here is the very same property available for rent at £2500 PCM
http://www.rightmove.co.uk/viewdetai..._n=3&tr_t=rent

So in the above example you can rent the property and save yourself £177.08 PCM and not have any hassles with property maintenance etc.

When the mortgage rates increase the case for renting will becoming even stronger.

If you bought a property a few years ago then its not a big deal - but my point is that anyone buying into the market now is mad

[AlfredJPruffock]

Another worrying lesson from abroad for America is that even a mere levelling-off of house prices can trigger a sharp slowdown in consumer spending. Take the Netherlands. In the late 1990s, the booming Dutch economy was heralded as a model of success. At the time, both house prices and household credit were rising at double-digit rates. The rate of Dutch house-price inflation then slowed from 20% in 2000 to nearly zero by 2003. This appeared to be the perfect soft landing: prices did not drop. Yet consumer spending declined in 2003, pushing the economy into recession, from which it has still not recovered. When house prices had been rising, borrowing against capital gains on homes to finance other spending had surged. Although house prices did not fall, this housing-equity withdrawal plunged after 2001, removing a powerful stimulus to spending.

Interesting link there XCM.

I lived in NLands during the mid 90s so this indeed was the case.

Property booming, firms crying out for contractors...come 2000 then it all went pear shaped.

Nobody could move property, loads of contractors found themselves out of work.

Rates dropped massively and the situation is still grim in the NL, apart from the hookers who doubled their prices from 25 to 50 Euros overnight, Nlands seemed to suffer more from Euro overpricing than France for example.

I think that was another factor in the Dutch economic malaise which like the January fog permeates the country.

Prehaps the above scenario would seem the most likely outcome for the UK, property prices will not so much crash as stagnate, but its the UK consumer sector, like the NLands, that will crash, so look out for more closed retail outlets and layoffs in the retail sector.

[XLMonkey]

A sure sign that the property market is way overpriced is the fact that you can now rent cheaper (and in some cases significantly cheaper) than buying the same place.

sure is, the economist reckons that now is definitely a time to be a renter

http://www.economist.com/finance/dis...ory_id=4079027

[Lucifer Box]

Franco, you can't count the delivery chick from Pizza Hut as a good looking girlie who's keen to come on in.

[Francko]

Franco, did you buy that exclusive SW19 apartment in the end?

Of course, it's exclusive, there is me there and I don't let anybody else inside (unless it's a good looking female).