How do people afford large houses?

Viewing 40 posts - 161 through 200 (of 229 total)
  • How do people afford large houses?
  • tjagain
    Member

    because in other countries they do not have the artificially supported and unsustainable above inflation house price rises and proper rent protection and controls make renting easier and cheaper. so in many European countries a house is seen as a burden rather than an asset and renting seen as sensible because its cheaper. more flexible and somone else has the burden of maintaining it.

    You say you have a £250 000 asset but its not one you can actually use tho is it? You can never get that money.

    Premier Icon Cougar
    Subscriber

    Our obsession with owning property is pretty weird when seen from others viewpoints.

    I can pay off my own mortgage, or someone else’s…?

    in many European countries a house is seen as a burden rather than an asset and renting seen as sensible because its cheaper. more flexible and somone else has the burden of maintaining it.

    And as counterpoint to what I just said: it’s like leasing a car. You get a new car plus warranty, breakdown cover…

    deserter
    Member

    I’ve never understood the argument to rent vs buy, rent is more than the mortgage and taxes as long as you had a deposit, and all this invest instead forgets you still need somewhere to live so have to spend the money on rent you would have used on a mortgage

    Only reason to rent is if you know/think you are going to move regularly for work or travel and don’t want to be tied down

    My idea of hell will be retiring on a fixed income and not having my own home

    Premier Icon Kryton57
    Subscriber

    Is it me or is everyone ignoring the fact that Interest only works fine while your house value is appreciating, but becomes an issue if it depreciates and you don’t have financial cover?

    hence, its more of a risk?  Those sitting on interest only mortgages with a house value to equal or exceed the loan might be in a very different world if there was a crash tomorrow.

    trail_rat
    Member

    Or job loss.

    Illiquid asset. Even less so if it’s not appreciated yet.

    Not like you can over pay and retrospectively draw down on an interest only.

    While the facts as they are presented here -make sense.

    I’ve watched too many people do it and fall fowl half way through and lose the house.

    A secure home to bring up my kids was my priority over making money.

    kerley
    Member

    Is it me or is everyone ignoring the fact that Interest only works fine while your house value is appreciating, but becomes an issue if it depreciates and you don’t have financial cover?

    hence, its more of a risk? Those sitting on interest only mortgages with a house value to equal or exceed the loan might be in a very different world if there was a crash tomorrow.

    It is a long term thing. Over 20 years your house is not going to be worth less than it was when you bought it. If it goes down a year or two after buying (or due to a crash) so what, just keep paying the mortgage and living in it. You don’t have to move because your house value has decreased do you?

    And if you have a job loss how is that any better if you rent?

    Premier Icon matt_outandabout
    Subscriber

    Over 20 years your house is not going to be worth less than it was when you bought it.

    Yeah. We all thought that before the tech bubble burst.
    As I said, I’ve seen no growth in 10 years now.
    You can’t guarantee that growth, therefore it is a risk.

    I really haven’t a clue what my house is worth, as I’ve no intention of ever selling it! paying inflated rent into retirement is a sobering thought btw…..

    scruff9252
    Member

    Financially speaking, renting is a fools game and a deeply unpleasant experience in the whole. I rented for 10 years in a range of shit flats & houses. Any defects raised generally not rectified until you move on & not allowed to decorate and no scope to improve your living conditions. The one flat I was allowed to decorate – I paid for the (only magnolia allowed) paint, done the work myself and then got my rent increased as the flat was now worth more on the open market!

    Now bought a house and live in a 3 bed detached house in leafy suburbs of Balerno. Speaking to my cousin last night & she is spending the same as we do on our mortgage on rent for a small 1 bed & box room in Granton. This is through a housing association, so she has bedroom tax on top as she’s a single twenty something so overall she is spending more than we are. It’s crazy.

    trail_rat
    Member

    Kerley there are more options than just interest only or rent ….

    But then that wouldn’t fit the argument.

    Premier Icon Kryton57
    Subscriber

    I’m very much on that path – using a decent salary while I have it to pay down the Mortgage, with a view to downsizing with the capital when/if the kids leave home in 12 years time.

    As above, my view is that if I can retire without a mortgage, everything else is a little easier to manage.

    I’ve no idea whether thats right or wrong, its just the path I decided to follow.

    tjagain
    Member

    Financially speaking, renting is a fools game and a deeply unpleasant experience in the whole.

    In the UK yes. It doesn’t have to be like this. Why do so many rent across europe? High rental standards properly enforced and controlled rents. Most places its much cheaper to rent and also nie and secure with high quality property

    Premier Icon BadlyWiredDog
    Subscriber

    Our obsession with owning property is pretty weird when seen from others viewpoints.

    Thank you Margaret Thatcher.

    5lab
    Member

    because in other countries they do not have the artificially supported and unsustainable above inflation house price rises

    that is often the argument, but I believe it is specious. If you look at property prices in another big capital (say Berlin, or Paris), they seem broadly similar to London, which is the one place in the UK which espouses price inflation

    https://www.rightmove.co.uk/overseas-property/property-61075524.html

    https://www.rightmove.co.uk/overseas-property/property-79861547.html

    I’m sure we can find examples of where british prices are higher, however they are not orders of magnitude higher which would be the case if we had been running much more inflation than our european partners for years and years.

    A lot of the cultural difference is aversion to, or appetite for debt. The germans generally don’t buy anything on credit – the reason the €500 note exists is so they can buy cars in cash. Generally, the pattern there is that you save whilst working (and renting) then buy a house (in cash) towards the end of your life when you have enough cash.

    The real financial advantage of buying is it locks in your monthly payment, whereas renting will generally inflate over time. Even if you’re only talking about a in-line-with-inflation 3% annual rent increase (which is generally how the german rent controls work), after 25 years your rent will have doubled (taking home the same proportion of your household income) whereas your mortgage payments will have remained broadly flat, taking up half as much of your income as they did when you got the mortgage

    kerley
    Member

    Yeah. We all thought that before the tech bubble burst.
    As I said, I’ve seen no growth in 10 years now.
    You can’t guarantee that growth, therefore it is a risk.

    The risk is based on data. I will bet that you cannot show me a period in the last 50 years where a house is worth less than it was 20 years before.

    And as I said before you have only been there 10 years and you may have just made a poor choice of house, overpaid or purchased at the absolutely worst time possible. I am not saying you don’t need to put some basic thoughts into the purchase but as long as you do then 20 years later you will never have a house worth less than purchase price.
    Make it longer than 20 years and it is impossible to lose. My parents house cost them £2,800 50 years ago and is now worth around £250,000. Do you seriously believe that the value of their house could ever go back below £2,800 ? (i.e the price of a half decent bike)

    tjagain
    Member

    I think commuter villages will see a huge price drop over the next 50 years as commuting becomes non viable due to the constantly rising cost and inconvenience of car driving

    scruff9252
    Member

    “I think commuter villages will see a huge price drop over the next 50 years as commuting becomes non viable due to the constantly rising cost and inconvenience of car driving”

    I would suspect that will be more than offset by the increase in home / agile working.

    kerley
    Member

    I think commuter villages will see a huge price drop over the next 50 years as commuting becomes non viable due to the constantly rising cost and inconvenience of car driving

    No they won’t. A house in 50 years will NEVER be worth less than it is today, this is some basic stuff here.

    trail_rat
    Member

    No matter how much it’s worth its still an illiquid asset in times of crisis.

    I think commuter villages will see a huge price drop over the next 50 years as commuting becomes non viable due to the constantly rising cost and inconvenience of car driving

    You’re getting your desires mixed up with reality again.

    oldgit
    Member

    Talking to the twenty somethings in the pub last night.
    So a lad needs a place. £165,000 for a flat. Looks like he can afford it, though anymore ski trips and festivals might be a bit tougher?
    He has a mortgage in principle.
    His point is that it’ll be fine, his flat will probably be worth twice as much as his loan, winner.
    ‘But you’ll still owe 165K at the end’ ‘how will you pay that off’
    by selling the place and making 150k
    What are you going to buy for 150k in 28 years time?

    Fast Show, Bloke in the pub.

    plyphon
    Member

    Well i guess the answer is you use the 150k for a huge deposit and then hope his 4.5x salary is enough to afford a 500-600kk 1 bed flat.

    nickjb
    Member

    ‘how will you pay that off’
    by selling the place and making 150k
    What are you going to buy for 150k in 28 years time?

    Seems sensible enough. It’s the middle ground option. With a repayment mortgage he’d have the whole sale value (but might not be able to afford the monthly payment). If he rents he has nothing at the end of it. Being £150,000 up isn’t too bad is it?

    oldgit
    Member

    True. I think the problem he had was not realizing he’d still owe what he had borrowed.
    We’ve seen this before haven’t we.
    In 1985 interest only with endowment was the way to go, so I did. But that went **** up big time. The banks in fairness did their best to sort us out. Just scraped through that one.

    Things change I guess. I still remember 12% plus interest rates. That was bad times

    Premier Icon Dickyboy
    Subscriber

    Can you even get an interest only mortgage on a domestic mortgage these days?

    Nico
    Member

    And as counterpoint to what I just said: it’s like leasing a car. You get a new car plus warranty, breakdown cover…

    I wish the car I bought in 1991 for £1000 was still working fine and worth £4500.

    johndoh
    Member

    As I said, I’ve seen no growth in 10 years now.

    You must be an outlier – where do you live that has had zero increase in property value over ten years? Even taking into account the recession (which was give or take a few months ten years ago) house prices around us seem to have increased by around 20-40% since then (according to RightMove).

    tjagain
    Member

    Most of central scotland has seen little price rises in the last 10 years IMO. Certainly around my way there was huge inflatiopn 25-10 years ago and nothing significant since

    kerley
    Member

    If he rents he has nothing at the end of it. Being £150,000 up isn’t too bad is it?

    Exactly, and the point many are missing. If he rented he would be £0 up but would have spent the same amount. And again, my parents house example – bought house for £2,800 fifty years ago and paid off mortgage before it ended because in the 1990s £2,800 was no longer a big amount of money…

    tjagain
    Member

    And the point many are also missing. If a mortgage is more than the rent ( common across Europe) then if you saved the difference you have a lump of money after 20 years. spend it on a mortgage instead and have no cash after 20 years.

    Also when buying you are responsible for repairs, when renting not. You also have the risk of interest rate rises increasing your payments significantly.

    scruff9252
    Member

    All very well TJ, but rent costs more than mortgages in the UK. Using my example above, my cousin is paying more for a 1 bed and box room rental in Granton through a housing association (i.e. discounted housing) than I pay for a mortgage in a 3 bed detached house in a desirable suburb.

    johndoh
    Member

    You also have the risk of interest rate rises increasing your payments significantly.

    But surely if interest rates went up, the BTL owners would put rents up correspondingly?

    Premier Icon molgrips
    Subscriber

    In the UK yes. It doesn’t have to be like this.

    What, rent money doesn’t have to go to someone else? That sounds nice.

    You say you have a £250 000 asset but its not one you can actually use tho is it? You can never get that money.

    You can either leave it to your kids or sell it to cover the cost of care when you are old. You can also downsize to release a lot of money. A house is a significant asset for plenty of reasons.

    My house hasn’t gone up much since I bought it – local factors made it drop after the recession – but I’ve been paying off the capital so I’m still about £50k in the black. If I’d rented my rent would have been the same and there’d be no way I’d have saved £50k. Mortgage is the same as rent would be.

    5lab
    Member

    The risk is based on data. I will bet that you cannot show me a period in the last 50 years where a house is worth less than it was 20 years before.

    Japanese real estate (particularly tokyo) is worth (significantly) less today than it was in the 80s. An outlier, perhaps, but it does happen

    But surely if interest rates went up, the BTL owners would put rents up correspondingly?

    rental pricing doesn’t work like that – its driven by what people can afford\are willing to pay, not a combination of costs + margin – which is why there wasn’t a big drop in rent in 2008 (when interest rates hit the floor). A lot of BTL is on relatively small leverage (particularly now as the rules got tighter) or no leverage (owned outright) anyway

    Premier Icon matt_outandabout
    Subscriber

    I will bet that you cannot show me a period in the last 50 years where a house is worth less than it was 20 years before.

    Accounting for inflation and maintenance of the house, I bet I could.
    Can I ask where you live in the UK?

    FWIW, as well as the flat that has flatlined on price, I do have a house that has supposedly gone up 30% in 5 years…

    My point being that past performance is no guarantee of future returns.

    Premier Icon jam bo
    Subscriber

    And again, my parents house example – bought house for £2,800 fifty years ago and paid off mortgage before it ended because in the 1990s £2,800 was no longer a big amount of money…

    so you are advising that we all invest in property at 1970’s prices we can’t fail? i’m in. where do i sign up?

    can I get a defined benefit pension at the same time too?

    I will bet that you cannot show me a period in the last 50 years where a house is worth less than it was 20 years before.

    When I bought my house in 1997, you could buy an ex-council one or two bedroom flat in the town for £20-£25 k

    22 years later you can now buy similar properties for £20-£25k

    nealglover
    Member

    You say you have a £250 000 asset but its not one you can actually use tho is it? You can never get that money.

    Of course I can.
    I can sell my asset and buy something smaller. Or I could rent if I fancy it.
    I have options.

    I now have about 20 mortgage free working years ahead, to let my asset grow in value.

    Do you honestly think when I retire and have the options that asset allows me, I would have been better off spending more by renting for 40 years and owning nothing and having no assets ?

    If you do, That’s what is weird.

    footflaps
    Member

    My house has been one of the best investments I’ve made, over 500% gross profit in 20 years if I sold today. Can’t really see that being repeated over the next 20 years though…..

    johndoh
    Member

    My head would ache if I tried to do the sums but if I had stayed in my first house (£42,500) I would have just about have paid it off now (and they are currently worth about £200k) – which would mean I could save lots each month (current mortgage is £1250 a month – but that’s on a £210k loan against a £600k home so much more equity. I kinda think I would have been better off staying in my first home but it was tiny and had barely any outside space.

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