buy or rent?

[BOB D.O.L.E]

[

 

[Deleted member 105431]

"what goes up must come down" springs to mind. House prices are subject to market forces like anything else and the market will dictate their value. A 50% fall is not impossible although that would be devastating to the economy. There is no precadent for the current economic crisis so I wouldn't bank on anything at the moment including property. Investment is always a risk assesment and a gamble and there are always winners and losers. I predict massive repossessions at least a 30% drop in house values over the next two years, record unemployment and inflation around 8-12%.

 

[snico]

I had this debate a long time ago i had all the smooth talking b..ul.ll shi..ters and i said there is going to be a recession but i have the same response again you will loose at lease 50% on your property 12 month from now

I think you should work for the BOE then. They predict that house prices will fall a further 10% tops, until the market turns around. That is based on interest rates remaining at the same level. Interest rates WILL be dropped to around the 3 - 3.5% mark after christmas.

Just think about what you are saying and do some research, a fall of over 50% within 12 months is impossible

 

[Deleted member 105431]

I had this debate a long time ago i had all the smooth talking b..ul.ll shi..ters and i said there is going to be a recession but i have the same response again you will loose at lease 50% on your property 12 month from now

50% within 12 months is impossible

Nothing is impossible. People thought the bailout of the banks was impossible 12mths ago. I admit it is unlikely. . . .

 

[snico]

I had this debate a long time ago i had all the smooth talking b..ul.ll shi..ters and i said there is going to be a recession but i have the same response again you will loose at lease 50% on your property 12 month from now

50% within 12 months is impossible

Nothing is impossible. People thought the bailout of the banks was impossible 12mths ago. I admit it is unlikely. . . .

I'm stating in the 12 month period Bob predicted.

 

[Blasphemous]

I think asking this sort of question on a forum is a little naive to be honest Steve and if you want to listen to Bob then that's your entitlement but I wouldn't take advice from someone who seems to struggle with even the English Language! Bob is entitled to his opinion just like the rest of us but as for predictions... I think he'd struggle to predict what he's going to have for lunch!

I know you're probably just looking for the views of others Steve and there's nothing wrong with that. My opinion differs somewhat to Bob's (I don't suppose that surprises you). Its obviously difficult to predict what the housing market is going to do over the next 30 years (the term of your mortgage), but if you look at it historically, more people have gained than lost. There's an old saying, 'Don't touch what you can't afford'. Historically banks had a rule that you don't lend to people who cannot afford to pay it back. That rule seemed to fall away over the last few years and 'Sub Prime Lending' came about. That is a huge factor in the down fall of so many banks both here and in the USA. Now they have reverted back to the 'Old Rules' and it is suddenly 'harder to get credit'. Actually, its just the old rules coming back which should never have been dropped! I'm not sure it is 'harder to get credit'. I think some banks are probably being VERY cautious at the minute but I also think that credit is there 'if' you can afford it. People were getting credit before who couldn't really afford it and I think that's the difference now.

So anyway, if you can afford it and you believe (like many others do), that the housing market will recover, then I think your decision is an obvious one. If you don't believe it will recover and/or that it is a good long term investment, then you should do as Bob says and stay with your parents (if possible), for as long as possible. Its your decision Steve.

 

[BOB D.O.L.E]

I think asking this sort of question on a forum is a little naive to be honest Steve and if you want to listen to Bob then that's your entitlement but I wouldn't take advice from someone who seems to struggle with even the English Language! Bob is entitled to his opinion just like the rest of us but as for predictions... I think he'd struggle to predict what he's going to have for lunch!

I known you're probably just looking for the views of others Steve and there's nothing wrong with that. My opinion differs somewhat to Bob's (I don't suppose that surprises you). Its obviously difficult to predict what the housing market is going to do over the next 30 years (the term of your mortgage), but if you look at it historically, more people have gained than lost. There's an old saying, 'Don't touch what you can't afford'. Historically banks had a rule that you don't lend to people who cannot afford to pay it back. That rule seemed to fall away over the last few years and 'Sub Prime Lending' came about. That is a huge factor in the down fall of so many banks both here and in the USA. Now they have reverted back to the 'Old Rules' and it is suddenly 'harder to get credit'. Actually, its just the old rules coming back which should never have been dropped! I'm not sure it is 'harder to get credit'. I think some banks are probably being VERY cautious at the minute but I also think that credit is there 'if' you can afford it. People were getting credit before who couldn't really afford it and I think that's the difference now.

So anyway, if you can afford it and you believe (like many others do), that the housing market will recover, then I think your decision is an obvious one. If you don't believe it will recover and/or that it is a good long term investment, then you should do as Bob says and stay with your parents (if possible), for as long as possible. Its your decision Steve.

 

[Steve]

Bob, clear off your not welcome on this thread. You have made no useful contribution. I actually wanted serious opinions, not verbal diaorrhea.

 

[blondini]

Steve, as a first time buyer in a falling market you are in a strong position to negotiate on price. Lenders are still lending and the first time buyer is key to the whole housing market. So if you want to buy now, shop around for a lender to make sure you can get the money, then shop around for a property and don't be afraid to make offers.

Having said that, I would be tempted to play a waiting game. Stay put and save that rent money for a larger deposit.

 

[Bilioustrumpstaine]

Just look at the people who lend the money to get an idea of the property market. If banks are lending 85% of the property value then they must be pretty confident that that is what the property will be worth now and in the short term future.

The market is very stagnant now and will be until after Christmas, nobody wants to move house over the festive season. This is when you can pick up some bargains. Make some bullish offers on properties, you will be suprised what you can get for your money.

By renting you are paying someone elses mortgage, why not pay your own.

Before you start go and get some independent advice as to the affordability of your mortgage, get your finances agreed in principle and you are in a very strong position.


My two pence worth on house prices
There is a shorage of properties in the UK and our population is rising, property prices will rally next year and start an increase from about Easter, not huge jumps as we have seen but back on an upward path and by 2010 we will be back at 2008 prices.

But who knows really it is just my opinion.

Opinions are like ar**holes, we all have one

 

[Softus]

Steve, there have been much worse times to buy property, and also much better ones.

There are only four questions, and only you have the correct answers to two of them.

They are:

1. What will the market do in the short term?
2. What will the market do in the long term?
3. How long will it be before you need to repay a mortgage?
4. What risk can you afford to take of entering negative equity?

We can all give our opinions about Q1 & Q2, e.g.:

1. Values will fall.
2. Values will rise.

As for Q3, if you enter a 25-year contract and don't move, then it's likely that the exit value of the property would easily pay off the mortgage, even if you don't repay any capital, still leave enough to buy something tiny to live in.

What happens for most people is that they move within those 25 years, very often in order to buy bigger or better, investing more money and borrowing more money. Each purchase involves revisiting the decision about the relative amounts of value, deposit, and loan.

As for Q4, it's only a problem if you want, or need to move at a moment where the property value has fallen to the point where you can't pay your debts.

You can control when you want to sell, and if you stay in work, then you're not likely to need to sell.

So the only really difficult assessment is whether or not you stay healthy and skilled enough to work in your chosen field.

This risk can be mitigated by insurance - any financial advisor is likely to recommend, especially at your age (because it's very cheap then) that you consider death and critical illness cover.

If you want my opinion, if you really have to move out/away from where you are, then invest the rent in paying off a mortgage, but don't be in a rush to trade up.

 

[Blasphemous]

@Bob Dole, Why have you deleted all of your posts here? I enjoy your input Bob even if I don't always agree with you. That's what makes this place an enjoyable forum, the fact that there are views that we will agree with and views that we don't but I for one am always open to other views and indeed I am quite happy to have someone try and sway my views. If I've offended you in some way Bob I truly do apologise.

Now get ya backside back in here and give me a booting!

 

[hermes]

My twopennorth, and I have done a lot of thinking about this recently as I'm faced with the same decision.

If you need to get a large mortgage, what I don't think has been mentioned so far (forgive me if I missed it) is that a very large proportion (if not all) of your mortgage repayments in the early years is interest on the loan, so you're not really paying that much off the loan itself.

If you assume, for the sake of argument, that your rent for the next year would be £500/month, and that your repayments if you were to buy, would be about £550/month on an £80,000 mortgage

At the end of the year you would have spent £6000 on rent or £6600 on a mortgage. If you had been paying a repayment mortgage you would have paid maybe £1300 off the loan, the rest would have been interest http://www.mortgagesexposed.com/Book_Contents/capital repayment loans.htm

Therefore the actual cost would be £6000 rent or £5300 mortgage.

Assume that if you buy then the property loses another 10% in value over the next year (in my opinion it could well), you have lost £8,000 in depreciation.

Therefore you would be £7300 better off if you waited for a year.

I realise that the figures may not be completely accurate but I'm just trying to make the point about the weighting of the interest charges in the early days of a repayment mortgage.

 

[BOB D.O.L.E]

My twopennorth, and I have done a lot of thinking about this recently as I'm faced with the same decision.

If you need to get a large mortgage, what I don't think has been mentioned so far (forgive me if I missed it) is that a very large proportion (if not all) of your mortgage repayments in the early years is interest on the loan, so you're not really paying that much off the loan itself.

If you assume, for the sake of argument, that your rent for the next year would be £500/month, and that your repayments if you were to buy, would be about £550/month on an £80,000 mortgage

At the end of the year you would have spent £6000 on rent or £6600 on a mortgage. If you had been paying a repayment mortgage you would have paid maybe £1300 off the loan, the rest would have been interest http://www.mortgagesexposed.com/Book_Contents/capital repayment loans.htm

Therefore the actual cost would be £6000 rent or £5300 mortgage.

Assume that if you buy then the property loses another 10% in value over the next year (in my opinion it could well), you have lost £8,000 in depreciation.

Therefore you would be £7300 better off if you waited for a year.

I realise that the figures may not be completely accurate but I'm just trying to make the point about the weighting of the interest charges in the early days of a repayment mortgage.

This is what i was trying to drive home in those block heads of theres but leave him to it let him listen to what he wants to ear i hope he buys the flat tomorrow its the last time i try to help someone out.

 

[Softus]

Assume that if you buy then the property loses another 10% in value over the next year (in my opinion it could well), you have lost £8,000 in depreciation.

Therefore you would be £7300 better off if you waited for a year.

I realise that the figures may not be completely accurate but I'm just trying to make the point about the weighting of the interest charges in the early days of a repayment mortgage.

The financial balance is tilted further in favour of renting if you consider that the lower value will be accompanied by smaller mortgage payments.

And the balance is tilted further still if you consider the cost of maintaining a property that you own.

However, leaving those factors aside, does it not strike you that the nominal £600 advantage of renting in the first year is a drop in the ocean compared to the possible fluctuation in value?

In other words, if the value of a £120,000 property goes up only 0.5% each year, then you have only to pay the legal (etc.) fees at the time of selling to come out financially no worse off than if renting, but any smaller increase, i.e. including decreases, results in a loss.

In other words, any drop in value, let alone 10%, is a compelling argument for waiting.

On the other hand, nobody who really wants to buy their own house right now, and plans to stay on the property ladder for ever, will lose out in the long term.

The bottom line is that each person has to weigh the strength of their desire to own against how much money they could 'save' by playing a waiting game and gambling on the market falling further.

It's already a buyers' market, and it won't be easy to time it right, i.e. know when it has bottomed, when everyone else is trying to do the same thing, and find the right property at that moment, and persuade the owner to sell it to you, and not be gazumped, and not fall foul of the multitude of ways in which a property transaction can go wrong at the last minute, causing untold stress and robbing you of several millimetres of hairline and even more years off the end of your life.....