Owning your own home

The need to own our homes is an age-old one. It's a question of "bettering" oneself. Mad Margaret allowed people the right to buy and Council tenants took full advantage of this when they could. The issue is that of all the homes that were sold under "right to buy", about twenty thousand new homes were built. This is why we have a housing shortage, which in turn is why rental costs have in the past and will in the future increase.

In a previous life I was involved in the satanic art of Estate Agency and whilst I have had the pleasure of some truly breathtaking property, I did have the misfortune of seeing property that was bordering on habitable. I saw one flat in a building that was later condemned. There are three reasons for for the manner in which prices have increased how they have, particularly in London:

1) Banks took the risk (reasonably quickly) to lend people more and more money. I bought my tiny house out in the sticks around 11 years ago and fought to borrow three-and-a-half times my salary. I had a thirty percent deposit (check my earlier posts in this thread for how I was able to amass that!) In 2009 I sold a flat to a bloke who'd borrowed seven times his salary. I had to question my morals and risked screwing the deal when I asked him what he was going to do when the market actually turned. He just shrugged.

2) Estate Agents have long been the whipping boys (along with the banks) for the issues with both rental as well as property value increases. My former landlord put the rent up by just under 20% and then said it was on the advice of the agent that he did this. I spoke to the agents (face to face) and asked them. They obviously denied all knowledge of this and we moved out. His flat was empty for 8 weeks and he lost rental revenue for that period.

3) Greed has driven prices higher. Unless you have a team of contractors who can move walls, property is a long-term investment. Thanks to the quick fix programmes on TV and the pneumatic chested Sarah Beeney, everybody thinks they're a developer. I used to see it every single day. Someone comes into the office, registers and says they're a developer and I'd show them some potential projects and they'd vanish. La Beeney always said that anyone can make money in a rising market, but the real skill is not losing money in a falling or static market.

Finally, all those fucking idiots who assumed that remortgaging and taking £250k out of their property and buying a rental investment in 2008/9 are in serious shit now. Their two or three year deals are expiring and they're trying to find finance for properties that they had valued at £750 and are now only worth £650k. Also, all the people who bought a house for £350k sat on it for a while, extended it and then had it re-valued for £500k and then took equity out to by themselves a Porsche (a depreciating asset, no less) - I have no sympathy for. Money made that quickly will vanish that quickly.

As the small print always says - "The value of an investment can rise and fall. Failure to keep up with payments may result in you losing your HOME". Don't look at your home as an investment - it's your home. Also, your property is only worth what somebody is prepared to pay for it. All well and good getting Fuckstons round to blow smoke up your arse and tell you it's worth between 10 & 15 percent more than what anyone else values it at. It'll still sell for what everyone values it for and you're still stuck paying 2.5% agency fees. If only you'd have avoided your greed-ridden, fast-buck desires and listened to the bloke who's done it for years and not a pimply oik in an M3.

Rant over.

Great post.
Those Grand Designs/ Escape to wherever/Im a property Developing greedy fucker programs have a lot to answer for. I cannot stand them

That's like blaming violent computer games for mass murders though.

And Streetfighter cannot be blamed for Charles Manson and Fred West.

More help like 110% loans? It doesn't get any easier than not having to raise a single cent to purchase a house.

If I have to toil for 30 years to raise enough to buy why should I subsidise other first time buyers?

I think It's perfectly acceptable to have people save up for a deposit, otherwise if banks lend out stupid amounts again we will just end up in the same situation as before. I just think that the wages to house price ratio is completely screwed. Not just in London but a lot of the country as well.

Currently I give away more than a third of my salary on rent, which isn't something I want to do forever, or even a moment longer than I have to.

Just FYI, interest payments = rent. It is just that your landlord is different, in one case it is the bank, in the other a regular landlord.

Those payments you make OVER AND ABOVE INTEREST (called principal repayments) are simply a choice you make about saving.

You could just as easily rent for 20 years or whatever and save in an ISA every year and the savings would allow you to buy a house outright whereupon you don't have to pay rent OR INTEREST.

Instead you are taking a MASSIVE bet on the property market.
Not that there is anything wrong with that but don't kid yourself that somehow owning a house makes you a better saver.

Greed is when people have 2+ houses and rent 1+ out.

The irony of that coming from someone who is, with his girlfriend, is renting 2 properties!!
Who would you rent from if people couldn't own more than one property??

maybe in the top end of the market funded by foreign investment due to our weaker currency .

But the whole housing market in London is largely top end.

I work in a company full of 25-30 year olds, earning salaries at or above the national average.

Only two of us have been able to buy property, one mortgaged himself to the hilt, and I only can because I got into the market 10 years ago as a 19 year old student, and built up a fuck ton of equity in the boom.

There is no way I could buy now without that.

My point is that your average worker can't afford it anyway, so in some ways problems affecting them are largely irrelevant, the whole London market is only really open to the top 25% of earners anyway...

Instead you are taking a MASSIVE bet on the property market.
Not that there is anything wrong with that but don't kid yourself that somehow owning a house makes you a better saver.

and the total repayable on every 100k is about 170k at 5%. most people with mortgages have no idea of the actual cost of a mortgage.

Massive gamble? Really?

Exactly - long-term.

So everyone who thinks that they can borrow 110% live in it, paint the walls magnolia and sell it a year later for 30% more than they paid can eat shit and die.

yes if you wanted to move between 89 and 02 and couldn't because you were in negative equity.
lots of people are again in this trap.

You can move, you just lose money.

Well Mr Smyth saving by paying principal repayments is actually pretty good in my opinion.
I think you are misunderstanding what people are doing when they pay for a mortgage.
Firstly as I said there are the interest payments.
These are the equivalent of rent.
You HAVE to live somewhere so these are a pretty much unavoidable cost of living.

Your "total repayable" is meaningless. You need to compare the interest cost vs. the rental cost of living in the equivalent property.
Then you need to compare the interest rate with other savings options.

Then you have the principal repayments and that is just one form of saving.
And as I said, I think it is a pretty good form of saving.
First of all it is entirely risk free which is rare these days.
(Remember for every £1 you pay off your mortgage you SAVE yourself whatever interest you would otherwise be paying.)
So for a 5% mortgage you have a guaranteed return of 5% on any principal repayments.
That's awesome.
Compare it to any high street saving accounts.

Further, you need to remember that interest income IS TAXED.
So if you were a higher rate tax payer then to achieve a genuine 5% interest you would need 8.33% (8.33*(1-40%) = 5).

Frankly though everyone should be doing their best to diversify - some mortgage repayments, some easy access savings account (for a rainy day), some ISA savings in equities and bonds as well as a pension of course.

Just my humble opinion and I am not an IFA.

Mad Margaret allowed people the right to buy and Council tenants took full advantage of this when they could. The issue is that of all the homes that were sold under "right to buy", about twenty thousand new homes were built. This is why we have a housing shortage, which in turn is why rental costs have in the past and will in the future increase.

I don't buy this argument.
It's not like they were empty properties before people bought them. They were all rented long term and were no more available to future tenants than they were after being sold.
Councils back then didn't have the money to maintain the homes they did own, never mind build new ones, so they weren't going to build enough to satisfy demand anyway. Barely any council houses were built after early 1970s.

Yes hippy, MASSIVE.
The biggest bet you will ever make.
And it's leveraged.

Is there any other way to take £20k and lever it 9:1? (That's what's happening when you make a 10% deposit and buy a house.)

I don't buy this argument.

I thought Tories believed they could buy anything...

Just my humble opinion and I am not an IFA.

you also forgot the effect of inflation and how your repayments will diminish in real terms too (in a steady economy and job market). in fairness i didn't mention it either :-)

And i'm not an IFA.

Exactly - long-term.

So everyone who thinks that they can borrow 110% live in it, paint the walls magnolia and sell it a year later for 30% more than they paid can eat shit and die.

Except if you are exceptionally lucky.
I bought a one bed flat in Bermondsey about 3 mins walk from the tube nine months before the extension was completed in 1999. Bought it for £63K and sold it for £95K less than a year later. That helped a great deal :)

I don't buy this argument.
It's not like they were empty properties before people bought them. They were all rented long term and were no more available to future tenants than they were after being sold.
Councils back then didn't have the money to maintain the homes they did own, never mind build new ones, so they weren't going to build enough to satisfy demand anyway. Barely any council houses were built after early 1970s.

That's handy, 'cos I'm not selling it. I wonder how much of the money generated from the sale of 2.5million local authority property was ploughed back into social housing?

A tenner?

Except if you are exceptionally lucky.
I bought a one bed flat in Bermondsey about 3 mins walk from the tube nine months before the extension was completed in 1999. Bought it for £63K and sold it for £95K less than a year later. That helped a great deal :)

Exactly - in 1999. That was how long ago? The cash-quick developers have always been around, but after 2000 all the cretins jumped on the bandwagon and thought they could play Rigsby.

Yes hippy, MASSIVE.
The biggest bet you will ever make.
And it's leveraged.
Is there any other way to take £20k and lever it 9:1? (That's what's happening when you make a 10% deposit and buy a house.)

You said "massive bet".
Are you talking about massive amount of risk or simply the size of the bet?
If it's the former then I still disagree. Leverage is something I do with pedal spanners..

#financialignoramous

Even your own chart shows that you could be out of the money FOR OVER A DECADE if you bought in 1989.
Your deposit could have been wiped out OR WORSE.

Any bet where you can not only lose you entire investment BUT MORE seems massively risky to me!
But each to their own I guess...

Even your own chart shows that you could be out of the money FOR OVER A DECADE if you bought in 1989.
Your deposit could have been wiped out OR WORSE.
Any bet where you can not only lose you entire investment BUT MORE seems massively risky to me!
But each to their own I guess...

Again, assuming you had to sell it.

That's handy, 'cos I'm not selling it. I wonder how much of the money generated from the sale of 2.5million local authority property was ploughed back into social housing?

A tenner?

That would be a tenner more than the none that was ploughed back into social housing for the 15 years prior to that.

That would be a tenner more than the none that was ploughed back into social housing for the 15 years prior to that.

Obviously in order for money to be invested into something it has to be generated from somewhere. The government prior to that of Mad Margaret probably didn't see the need for large scale investment in social housing because they didn't conceive the plan to sell it off and not re-invest it back into the system - we have that deranged bitch to thank for that.

Nowadays if someone wants to build a new development they have to provide a percentage of affordable housing. That pair of vomit-inducing twats the Candy brothers have built a small selection of flats in Battersea in order to account for their percentage at No 1 Hyde Park. Outrageous behaviour - but if you spend £80 million on a flat, the last thing you want is Frank Gallagher pissing in your car park or Rab C. Nesbitt loitering outside the door.

Just FYI, interest payments = rent. It is just that your landlord is different, in one case it is the bank, in the other a regular landlord.

Those payments you make OVER AND ABOVE INTEREST (called principal repayments) are simply a choice you make about saving.

You could just as easily rent for 20 years or whatever and save in an ISA every year and the savings would allow you to buy a house outright whereupon you don't have to pay rent OR INTEREST.

Instead you are taking a MASSIVE bet on the property market.
Not that there is anything wrong with that but don't kid yourself that somehow owning a house makes you a better saver.

The irony of that coming from someone who is, with his girlfriend, is renting 2 properties!!
Who would you rent from if people couldn't own more than one property??

I don't understand the point you're making. That I can rent at £625 a month and save a similar amount - then in 30 years buy a house outright? How can I rent and save that much at the same time? And what about the 30 years wasted rent? That's some very flawed thinking there. I'm aware of how mortgages work: at first you pay off hardly any of the debt, then eventually you do, then you own the house. I'm not worried about paying interest - it's a necessary evil.

And your point about me and my girlfriend renting two homes? We live in two different cities. What do you propose we do? It's not ideal, and I hope she'll move to London soon. Probably we'll try to buy at that point, or soon after.

Also, there's no "massive bet" - we want to buy a modest flat and live there for a long time. We aren't banking, particularly, on it going up or down in price - it's more to do with the fact that we want to buy, build an asset, have some stability and control our own destiny more. We want to get towards retirement and know that we have somewhere of our own to live - not continue to pay a landlord until we pop our clogs.

The last bit - "Who would you rent from if people couldn't own more than one property??" - I also don't get. I want to buy, not rent. Of course, the country needs rental properties, but I think the market needs to be more highly regulated, taxed and made more stable. That was my point. I'm not saying people shouldn't be allowed to BTL - just that it needs to be taxed harder. I took a taxi home from work the other day and the driver was telling me about the two flats he rents out in Tottenham - everyone has been making a fast buck, at the expense of renters, and that needs to stop.

No offence, but you're not bringing anything constructive to the debate here...