h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

You know you are probably right but I don’t know *anyone* who invests in “the city”

The thing is when you are raising a family on a modest income...

eg

Wife - working part time on £11,000 pa
Hubby - Working hard on £30,000 pa

Your home becomes part of your pension as well as you have very little spare each month to put into savings plans. If you are renting instead of buying when you retire with little or no pension how will you afford the rent? I suppose income support etc but if you are doing an honest days work in a needed profession surely you deserve an opportunity to be able to fund your future so you can afford to retire before hitting the grave

"Your home becomes part of your pension"
Very true.
Or part down payment on your children's houses (should you have any). There is an increase in parents remortgaging to give their kids a low interest (or no interest) loan to cover the deposit.

There's also people like me who have to consider a future of singledom and provision for their later life. One such consideration for me is the house I own at that time. If I build up now then by then I should be in a position to sell my house and afford a place at a decent elderly home. Or to downsize and afford extra help.

So?

Homes are the highest taxed asset you can own, and they aren't going to grow much faster than the rate of inflation ever again.

Rental is approx 50% of equivalent mortgage payments (because the average of the buy to let people bought before the price surges) so renting for 10 years and putting the difference in a bank account will create more equity than buying and living in said house for 10 years - and it will be liquid.

This thread is completely wrong. Anyone who has read any reasonable financial paper would have noticed the clamouring about a global housing market bubble, that has inflated since the dot-com bubble, and the bubble is bursting, quite spectacularly in the US, and more gently elsewhere. Some economists reckon that house prices may not increase for 5-10 or even 15-20 years.

From the link in the first dot..

'Mr Weale thinks house prices here are 20% or 30% above the level that can be explained by the supply and demand.'

Mr Weale is director of the National Institute of Economic and Social Research, so presumably he knows a thing or two. So rephrasing SWL's original post with a 30% reduction in house prices, as would happen in the event of a 'crash'...

<>

"Rental is approx 50% of equivalent mortgage payments "

Well that depends very much on where you are and what you are renting/buying.

I have just come out of a rental agreement on a modern (built around 2000) 3 bed end terrace/semi house. Driveway but no garage, small garden. Central heating, double glazing, etc. I was paying £550 a month for that. Plus council tax for a band B at around 80 quid a month (single occupancy discount).

I have just bought my second house. Mortgage is less, house is bigger, older with more garden. And, value wise, worth more than the place I was renting.

So I'm afraid I don;t agree with your statement. OK, I ain;t on a 100% mortgage, but then that money wasn;t helping me in rental either.

arnie, got anywhere I can read up on the global houseing market issue? Otherwise I'll just go google it

Just dropping my own personal opinions as to the "why" folks may feel the need ...

I am a Canuck, from a very small village in the midst of a lot of farm country. Land was open, very cheap, and having your own home was just the way of life. Not as a status symbol or anything, it's just what people did. The house that my parents live in, they built (yes, literally they built it) in 1964, when I was just old enough to carry a handful of nails. So to me, having a place of your own, NOT at all beholding to anyone else but the property-tax-man was the norm.

Later years, a certain smugness towards THOSE who didn't have the gumption to establish their own home, and would pay someone else for a roof over their head? Shameful. So these aspects are all part of my growing environment.

I struck out on my own at a few weeks past 17 years old. A couple of boarding houses, 21 years of military time that included barracks, married quarters, and assorted rentals ... When I left the uniform behind, and my employment was 'secure' (as any ever get), we bought a simple 3-bedroom bungalow on a fifth of an acre, in town. Not for status, not because it was a lifelong dream, or even because it was just that way in my youth. I wanted a place that I could change, colour, physically alter the structure of, without needing someone else's permission. And a number of years down the road, when I no longer have the energy and the income, I will have a place to live rather than having tossed money into someone else's pocket for oh-so-many-years.

Oh, and in this part of Ontario, a mortgage with interest is still cheaper than common rent on a 3-bedroom unit. Even in this small'ish town.

Buy to let is a scandal and should have been taken in hand a long time ago. It not only reduces the size of the available housing to buy pool (and the vast majority of buy to lets are what would be termed ideal starter homes), it additionally added to the strain on the rental market and prices have risen as well, to the point where it is now cheaper to buy than rent in a lot of places. And my guess is that it will also negate the possibility of a price crash in house prices because people don't *need* to sell their buy to let' properties to move, and if prices do fall they will simply hang onto them anyway for the rental value.

The lenders need to take their sare of the blame as well. The farcical figures they are prepared to lend fuel a market that is already overheated.

And anyone thinking that the 50 year mortgages are a solution should take a look at the bursting of the Japanese bubble.

Pedro, the argument should be able to stand on its own without reference to external links.

* ... polishes the latest hobby-horse ...*

arnie, did you mean me instead of pedro?

No, pedro

"Rental is approx 50% of equivalent mortgage payments"

Just where is the Shangri-la where this is even close to true? Most places I've ever lived it's been cheaper to own than to buy.

SoRB

Obviously I meant cheaper to own than to rent.

SoRB

Pretty true, generally SorB, and the fact that increasingly it is no longer true, is one of the prime indications of the housing bubble.

It seems Spain has similar problems. However, it's claimed that house ownership there is around 85% and the danger comes from too many new houses being built.

http://news.bbc.co.uk/1/hi/business/6592203.stm

arnie, ok

thinking about this the other night. Is not one of the big problems with the comparison that it isn't really like for like.

In my case, I had equity from a previous house sale which covered quite a bit of the cost of the new house. Another person in a different position might have more, or less, capital to spend on the purchase. Therefore, the cost (as in the impact it has on the person doing the buying) depends on the person's finances.

Whereas with rental the cost is the same, regardless of how much money you have stuffed in the mattress.

(p.s. not entirely convinced by my own argument here, I'm putting it up for debate though)

My rent is eur:1300 per month

The house 2 down from where I rent sold for eur:750k

At a nominal 3.3% interest rate the interest on the mortgage for that house would be:- eur:3674.71

The stamp duty paid on that house was:- eur:67,500