Housing Rant

[Mike@TheWhippinpost]

So, as long as they keep interest rates at the levels they are, the slower the bleed from the effects of inflation on the populace

Although I agree with the gist of your post, I'm sure there's two agendas here:

1) Inflation is arising predominately from commodities (fuel, food etc.).

2) Interest rates at today's levels are, at best (or worse, depending if you're a homeowner or needing to move), artificially holding the housing market together. But let's not kid ourselves, few of us commoners are benefitting because we're locked out of credit markets anyway.

So whilst it's a soothing placard for politicians to say they're saving homeowners blah blah, it's just a convenient by-product of the measures to prop-up the system of governance and power at all costs (the elites). Hence my double agenda hypothesis (reality vs. opium)

And if you think that's hyperbole, think back to the 90s when the base rate went up to 15%.

Make no mistake, we are dispensable (after we've been robbed).

[familychoice]

There are times, financially, when renting is astute. For instance, a friend of mine is locked into a 5 year fixed rate of ~5.5% which expires in 2 years; by which time, so "they" say, interest rates will be back on-the-up.

Meanwhile his property has fallen in value, plunging him into negative equity; plus he has to maintain it. His home is currently a prison, not castle.

House buying is a long term investment. If he bought a few years back when it was at it's peak then yes, it'll probably be worth less now, but if he bought ten years ago then it will have increased in value. Personally I've multiplied my initial investment x10 over the past 18 years by buying and selling houses (during boom and bust), and if I hadn't had a divorce in that period it'd be double that. I can't think of many other investments that would have given me that sort of return.

Historically house prices rise - though who knows what horrors the next year will bring.

[Tony]

Good to see you back Mike - you been away? Camping perhaps?

The thing is, your mate made a decision to buy a house, if he can't afford it, then why did he buy it? Base rates average over the 15 years up to the crash have run at around 5.5% so common sense says that you should be able to afford at least 10% of a mortgage on an annual basis to accomodate the extra that the banks charge, repayment and fluctuations within it.

If it makes more sense for you to rent, then rent - it's no biggie, you're paying to live somewhere either way and if you can't afford a house, don't buy one.

In fact, people who can't afford the mortgage but getting one anyways is the reason that this whole financial shenanigans happened, if people lived within their means then we wouldn't be in the mess we're in now. I do understand that peer pressure and bankers marketing / sales tactics have a major role in this but they wouldn't have created it if there wasn't a market for it.

And yes, I know the rates can go much higher (it was 17% in 1979) I had half of a mortgage in 1989, and between us it was close on a grand a month on a 70k mortgage, I walked away from that and my mate rented all the rooms out to keep up with it. I went back to renting at less than half the price of the mortgage and been doing the same ever since.

Do I want to buy? Only if I can afford it, and as I live in a council house now, if the govt want to offer me half price I would probably buy it - 125-150k discount would do me nicely! Although I expect they'll cap it here to some useless figure which means I'll rent for the rest of my days which ain't a bad thing really.

[sarahA]

Renting is fine if you have the freedom to make your home yours, and you have the security of knowing you're not suddenly going to get 2 months notice to move out. Last but one house we were actually given a month's notice (although with or without a contract I believe the law states 2 for the landlord), so had to find somewhere else to live pretty quick. As it happens the day we found somewhere and paid the initial fees the landlady told us we didn't. We weren't happy being messed about so chose to move anyway.

Second house was damp. No cavity wall insulation, the boiler went within about 2 weeks of moving in, for a week, the shower broke by Christmas and wasn't fixed for 6 months. This is the downside to up here where estate agents get you in but then after you've paid your fees, bond and rent, inform you that the landlord/lady will take over management, so you have to chase them. Yes there's a contract in place but once your initial 6 month period is over it's a rolling contract, so you moan too much you may find you're asked to leave. It's expensive business moving frequently (one place round here charges about £350 fees plus £50-100 per person credit/background check).

Luckily this last house has been good. Good insulation, landlady is pretty quick to act when I phone or sms her, and the only delay in a problem was the shower a couple of months ago, took 2 weeks to fix. To be fair, we'd probably have had the same wait had we dealt with it ourselves. Only downside to here is no garden for Master A to run around in next summer (all paving slabs), and we're a bit lacking in space, although that's probably our own fault for having so much furniture.

My point being, the first house was great but suddenly being phoned and told to leave in a month at the drop of a hat isn't something we wanted, the second house was basically awful, and a lot of those problems we would have sorted far quicker had we owned the place (or long term rented). This place now, well we've not redecorated, although it does need it, but why pay for something that we're not going to see for much longer.

I think a lot of us will regard renting as money down the drain and owning a property as an investment simply because that's how we've been brought up and seen it. My parents are in a similar position to Mike, their house is now on the market for over 10x what their original mortgage had been, and they're mortgage free. When they started (in '82) the interest rate was 15% or so I think, so it was more expensive to have the mortgage than rent. Now it's the opposite in my experience.

So you may well still lose money putting it into a property, but unless you upscale, you'll find your mortgage cheaper than your rent, so anyone with a bit of sense would perhaps start saving the excess saved into an account, just in case. Plus you have the difference of being able to do pretty much what you like to the inside of your home, and a fair amount on the outside too (extensions excluded of course).

IMO.

[Matt]

I cant remember if I said this earlier in the thread - but now Mrs S is expecting - we have had to look at our housing arrangement - we have to move out a year in May anyway, and Ill loose my office come June next year.

We will have to rent -but I think we are going to try and get somewhere with a longer term agreement, SIL/BIL have just moved somwhere with a 2 year minimum term, which seems to make sense.

[familychoice]

The first house I ever rented cost £60 per week. Sounds pretty cheap. The house was also up for sale, and when I checked the price I got a shock to find it was only up for £3,500. The estate agents were showing a string of people round each week (very inconvenient for us) and so I got to know them and a selection of surveyors quite well. Apparently the landlord would have accepted £1500 for it which was less than half of what we paid each year in rent. This isn't 1952 by the way, but Stoke in the late 80's. He was retiring early due to the massive amount of money he was making from his properties and selling up.

The cottage that I mentioned previously, the one we were evicted from a week before my daughter was born was almost derelict when we moved in. After doing it up for them for free it was then worth more on the rental market so they kicked us out.

Unless you're very lucky the only time renting will ever be as cost effective as buying is if you're fortunate enough to have a council or subsidised housing scheme property. Landlords want a return on their investment and add x% onto their buy to let mortgage costs.

[Mike@TheWhippinpost]

House buying is a long term investment. If he bought a few years back when it was at it's peak then yes, it'll probably be worth less now, but if he bought ten years ago then it will have increased in value. Personally I've multiplied my initial investment x10 over the past 18 years by buying and selling houses (during boom and bust), and if I hadn't had a divorce in that period it'd be double that. I can't think of many other investments that would have given me that sort of return.

Historically house prices rise - though who knows what horrors the next year will bring.

Well this is it: unfortunately housing has become viewed as a cashcow rather than a home. But going along with that philosophy, you could'a made more if you'd sold your house in times of bust, rented, and put the equity into other assets (like gold, for instance).

Also, as a side-point, people often don't factor the total cost of buying a home; i.e., interest... and compound interest at that. This can be much more than the buying price of the property.

And then there are those with endowment policies which don't mature at the (mis-sold) value.

I also have a gut feeling that baby-boomers may be in for a shock in the next 20-30 years when we all discover that we're all trying to sell at the same time to cover nursing home costs.

As some accountant on the radio was saying the other day: he bought his first modest house around 20 years ago for around £100k and now he reckons it's worth just over a million - how many 1st-time buyers can afford that today?

[Mike@TheWhippinpost]

Good to see you back Mike - you been away? Camping perhaps?

The thing is, your mate made a decision to buy a house, if he can't afford it, then why did he buy it? Base rates average over the 15 years up to the crash have run at around 5.5% so common sense says that you should be able to afford at least 10% of a mortgage on an annual basis to accomodate the extra that the banks charge, repayment and fluctuations within it.

Mind on other things, Tony, thanks for asking

He bought it against my advice, that's for sure <- smart bum.

He bought it just a few months before Northern Rock. By the time it collapsed it was already too late. Xmas that year he was made redundant (Chinese takeover!). Now he's trapped.

Do I want to buy? Only if I can afford it, and as I live in a council house now, if the govt want to offer me half price I would probably buy it - 125-150k discount would do me nicely!

Grr... yeah, more taxpayer money spunked away - don't get me started on that! (although I wouldn't blame you for taking advantage ).

[Mike@TheWhippinpost]

RE: pitfalls of renting

Sarah, Thatcher et al removed a load of safeguards for tenants at the same time as flogging-off our council houses. The result is what we find today in the renting sector. I've never been happy about it.

Shelter is the one charity I support. It seems to be the only voice out there making noise. Most of us are only a couple of paychecks away from the street or rotten landlords.

[familychoice]

Well this is it: unfortunately housing has become viewed as a cashcow rather than a home. But going along with that philosophy, you could'a made more if you'd sold your house in times of bust, rented, and put the equity into other assets (like gold, for instance).

I didn't view any of the houses I've bought as a cash cows, they were a roof over my family's head and after being evicted a week before my wife was due to give birth they provided more security and peace of mind than renting. The fact it's provided a nice return is just a bonus.

Also, as a side-point, people often don't factor the total cost of buying a home; i.e., interest... and compound interest at that. This can be much more than the buying price of the property.

I always take that into account.

As some accountant on the radio was saying the other day: he bought his first modest house around 20 years ago for around £100k and now he reckons it's worth just over a million - how many 1st-time buyers can afford that today?

Well there are other options, they could buy the bungalow a few doors from us for £110k.

Houses have always been expensive. I couldn't afford to buy until I was 30 because interest rates were so high and even then getting one in the first place was as rare as hens teeth.

[Mike@TheWhippinpost]

I didn't view any of the houses I've bought as a cash cows, they were a roof over my family's head and after being evicted a week before my wife was due to give birth they provided more security and peace of mind than renting. The fact it's provided a nice return is just a bonus.

You said 'long-term investment', then went on about how much you've made.

P.S. the money in a property is a fiction until it's in your hand; until then it's just a building that'll (most likely) still be standing long after we're gone.

[sarahA]

I cant remember if I said this earlier in the thread - but now Mrs S is expecting - we have had to look at our housing arrangement - we have to move out a year in May anyway, and Ill loose my office come June next year.

Why will you lose your office in June? Because of the new baby? Obviously it's your and Jade's choice, but it's recommended to keep the baby in with you until 6 months. We kept Thomas in until he was almost 9 months, in part because he was a frequent night feeder and it was just more convenient.

We will have to rent -but I think we are going to try and get somewhere with a longer term agreement, SIL/BIL have just moved somwhere with a 2 year minimum term, which seems to make sense.

Sounds sensible. Whilst we've stayed here 2.5 years now, I must admit I constantly felt worried that the landlady would suddenly want us out whenever I have to call because something's broken. Not seen long term lets up here though.

[familychoice]

You said 'long-term investment', then went on about how much you've made.

Saying that "House buying is a long term investment" doesn't mean that's the reason I bought my first house 18 years ago, and it certainly doesn't make it a "cash cow". And the reason I 'went on' about how much money I made was to counter balance your friends experience with negative equity and to back up my own assertion that prices rise over the long term. If you buy a property within your means and get it at a good price there's no reason to slip into negative equity.

When I sold my first house I made a four thousand pound profit, which after living there for nearly 5 years and completely renovating it worked out as a loss. I then rented for nearly two years in which time the housing market went though it's biggest boom period so by the time I was able to buy again prices were double what they had been.

My point is that in the LONG TERM, prices have risen and if I was to sell up now and rent, I'd have made a profit. As I've said I didn't  buy for that reason so when I do sell any profits I make will be put into the next property or to reduce my mortgage.

P.S. the money in a property is a fiction until it's in your hand; until then it's just a building that'll (most likely) still be standing long after we're gone.

P.S. the money I invested in buying properties all those years ago means I have a tiny mortgage which works out at about an eighth of what it would cost me to rent, so every month it saves us money regardless of what property prices do.

As some accountant on the radio was saying the other day: he bought his first modest house around 20 years ago for around £100k and now he reckons it's worth just over a million - how many 1st-time buyers can afford that today?

I'm sure I don't need to point out that 20 years ago very few first time buyers would have been able to afford that house either.

[Jem]

I cant remember if I said this earlier in the thread - but now Mrs S is expecting - we have had to look at our housing arrangement - we have to move out a year in May anyway, and Ill loose my office come June next year.

Why will you lose your office in June? Because of the new baby? Obviously it's your and Jade's choice, but it's recommended to keep the baby in with you until 6 months. We kept Thomas in until he was almost 9 months, in part because he was a frequent night feeder and it was just more convenient.

And Isabel is 2 and still in with us (super king size bed ) - although I recognise that makes me a lentil-weaving hippie.

re: renting - I don't think there's enough hours in the day to write down all my renting rants. Lying scumbag estate agents don't help. Deciding to buy was one of the best things we've done, but we couldn't have done it without Karl's savings.

[sarahA]

I cant remember if I said this earlier in the thread - but now Mrs S is expecting - we have had to look at our housing arrangement - we have to move out a year in May anyway, and Ill loose my office come June next year.

Why will you lose your office in June? Because of the new baby? Obviously it's your and Jade's choice, but it's recommended to keep the baby in with you until 6 months. We kept Thomas in until he was almost 9 months, in part because he was a frequent night feeder and it was just more convenient.

And Isabel is 2 and still in with us (super king size bed ) - although I recognise that makes me a lentil-weaving hippie.

well in all honesty, Thomas starts in his cot but by about 2-3am he wakes up and comes in with us then. Makes for a better nights sleep, plus he's a little radiator so keeps me warm!

[Mike@TheWhippinpost]

Saying that "House buying is a long term investment" doesn't mean that's the reason I bought my first house 18 years ago, and it certainly doesn't make it a "cash cow".

You don't have to rationalise, I wasn't having a pop - I was talking generally about the mindset that has spawned the speculative property bubble over the past 20 or so years.

My point is that in the LONG TERM, prices have risen and if I was to sell up now and rent, I'd have made a profit. As I've said I didn't  buy for that reason so when I do sell any profits I make will be put into the next property or to reduce my mortgage.

Yes, well here's the paradox. The profit's never yours unless you downsize and bank the change, and then, technically, that would have to be more than you'd handed over to the bank and spent on the (old) place to be called a profit.

P.S. the money I invested in buying properties all those years ago means I have a tiny mortgage which works out at about an eighth of what it would cost me to rent, so every month it saves us money regardless of what property prices do.

Or what about selling up, banking the money and using the interest to pay the rent?

As some accountant on the radio was saying the other day: he bought his first modest house around 20 years ago for around £100k and now he reckons it's worth just over a million - how many 1st-time buyers can afford that today?

I'm sure I don't need to point out that 20 years ago very few first time buyers would have been able to afford that house either.

Yes, I take that on-board but he is an accountant, clearly well-paid and living around London. The point is, it was a modest first-house type of property (no doubt for middle-class type folk) who today, in his own words, couldn't afford it because incomes have not kept pace with house price inflation over the duration.

The inference being, prices have to come back to within peoples' means.

I'm sure we'd agree that property speculation and landlords have lifted home ownership out of many peoples' reach. One day, however, you (or your executors) have to sell your property. But to who, unless it's reduced in price?

I mean, the Govt. can subsidise, as it's trying to do with it's various whacky incentives, and pray for a return to the stupid days of excess, but for how long?

It got out of hand, you know that. The numbers weren't real, they were made-up then inflated some. Well now a new generation is coming up and these are the people we will sell our homes to, but have they got the money? Will they ever have the money we reckon our homes are worth?

If you're counting on your home as a pension pot, one might consider that question carefully.

Remember, it's fictional until it's in your hand. Sorry for the long post.

[familychoice]

Yes, well here's the paradox. The profit's never yours unless you downsize and bank the change, and then, technically, that would have to be more than you'd handed over to the bank and spent on the (old) place to be called a profit.

The profit is mine already for the following reasons:

It's enabled me to buy and live in a bigger house in a better area than I could previously afford.

It's cheaper than renting so I'm up on the deal each month.

The profit has been used to pay off the mortgage which means lower monthly payments than when I was a first time buyer.

And each time I buy a new property having a larger deposit makes it easier to get a mortgage (essential when you're self-employed) and a good deal. Eventually I'd like to have enough to buy a bit of a bargain for cash via an auction, something I could never have done as a first time buyer.

Or what about selling up, banking the money and using the interest to pay the rent?

Why would I do that? Interest saving rates are hopeless and the landlords profit margins would be more than the interest I'd get on savings.

Yes, I take that on-board but he is an accountant, clearly well-paid and living around London. The point is, it was a modest first-house type of property (no doubt for middle-class type folk) who today, in his own words, couldn't afford it because incomes have not kept pace with house price inflation over the duration.

That's not my definition of modest, and I doubt most people would think of a million pound property as modest either.

The inference being, prices have to come back to within peoples' means.

Definitely, but they've always been too high, my parents were renting until their 50's.

I'm sure we'd agree that property speculation and landlords have lifted home ownership out of many peoples' reach.

I think the increasing gap between rich and poor is the real problem, and allows those with the cash to mop up cheap property and push up prices to artificial levels.

If you're counting on your home as a pension pot, one might consider that question carefully.

I'm not, I've earmarked the considerably younger Mrs FC and her earning potential for that particular long term investment.

[Matt]

I cant remember if I said this earlier in the thread - but now Mrs S is expecting - we have had to look at our housing arrangement - we have to move out a year in May anyway, and Ill loose my office come June next year.

Why will you lose your office in June? Because of the new baby? Obviously it's your and Jade's choice, but it's recommended to keep the baby in with you until 6 months. We kept Thomas in until he was almost 9 months, in part because he was a frequent night feeder and it was just more convenient.

And Isabel is 2 and still in with us (super king size bed ) - although I recognise that makes me a lentil-weaving hippie.

re: renting - I don't think there's enough hours in the day to write down all my renting rants. Lying scumbag estate agents don't help. Deciding to buy was one of the best things we've done, but we couldn't have done it without Karl's savings.

Our room is not big, and james (our 6 yr old) room will be for the baby/their bits - attic where my office is will be james room. I'll prob have small desk in nursery for first 6 months. But it's unfair to keep james in his room and shove loads of baby stuff in there. Plus he can make as much noise as he wants in attic room!

Btw Sarah - I think thy just asked landlord about longer term. They were happy too as it meant security for them too. If your looking, may be worth asking. We will be.

[yawner]

I've earmarked the considerably younger Mrs FC and her earning potential for that particular long term investment.

r-e-s-p-e-c-t !!!