Why don’t people understand that not everyone wants to buy a house?

[tarrantulla]

We rent a flat in London. Have a big deposit but would rather invest it across several asset classes. Prices around us in zone 1-2 are dropping.

People will often say things like “oh are you saving for a deposit” or “it’s such a waste of money to rent” when in reality, for the last few years smart people in London rent and not buy!

repayments are around 1270 a month with Barclays (first search result I found). The same property is being advertised at 1200pcm to rent

This is where the system breaks down. I know more than one person who would love to buy. They pay £££ to rent and never missed a payment. Mortgage would be around the same, but banks won't give them a mortgage because they feel like the monthly payments are too high.

My best friend was looking to buy some years ago. I asked how she picked the bank. She said that only one would give her a mortgage to buy a house big enough for a family of 4. She doesn't make enough as a teacher and they wouldn't take her contractor husband into account cause he doesn't have a monthly salary.

I have an opportunity to buy the flat I live in now. One bank said that after calculations, they feel like monthly payments would be too much so they wouldn't lend me money
I think the quote was "so you would have enough money to live on and do fun things besides mortage payments". I would have had £1400 left over after the mortage and monthly flat maintenance fees. Im lucky that my rent is 1/3 of what a monthly mortgage payments would be. So I can sit tight and save. There aren't cheaper places around unless I move to a fixer upper or further away from the city.

I really don't think it is as simple as "just buy". I mean obviously you can just move away to a different area (my grandma's village you can buy a studio flat for £6k but im sure you can imagine the quality of life there) and all of that. But location and living quarters are significant factors in quality of life. Sometimes renting will provide that even if you can technically afford to buy.

As for op. If peole want to rent. Let them rent. If you think it is waste of money, then buy a house. It is ok if someone wants to rent and it has minimal effect on anyone else's life.

I see rent as wasted money because at least at the end of your 25 years you will own your property and not have to worry about renting in retirement. Also the uncertainty of being asked to leave. In my older years where I might have ill health I don’t want the stress

But you pay maintenance costs to your landlord in the inflated market rent, they are making a profit from you. You aren’t getting maintenance for free

Just in case someone doesn't realise this poster is on the wind up. You can't just get a housing association house. And when you do you will be treated like crap by the housing association, your toilet will take ages to be fixed, the leaking roof that has damaged the kids ceiling will take months to even be looked at and the broken gutter might be fixed within six months. Housing association management are literally scum of the earth.

I thought I would look at this. Numbers are a bit clumsy. I have probably got something wrong, but in my mind.

If a 500k flat with 10 percent deposit was purchased at an interest rate of 2.5 percent 5 years ago. That would be approximately £2000 pcm. I appreciate the interest rates are now more than that.

After 5 years they will owe 380K according to MSE mortgage calculator. Presuming there is no increase in property prices.So they will have equity of 50k initial deposit and 70k.
They will have spent 2000x60 which is 120k.
So will leave with 50k. Costing them 70k for the 5 years.
Now if they were to sell they would need fees say 5k. Only would need stamp duty if they bought again.

Now the price of rent is what impacts the calculation. Estimate at 1500 rent pcm. It will likely be more but the total payment is 90k.

So if they were to leave after 5 years and start afresh with the mortgage they paid out 120k made 70k back. ( won't include the deposit) so have cash of 50k. So total cost of the 5 years from their pocket 70k.
Renting at 1500 cost them 90k
Renting at 1000 would cost them 60k
Renting at 2000 would cost them 120k.

So there is a point it is cheaper. I am just not sure rents are that cheap. Maybe they are.

Now if the house was to lose 100k in value for 5 years. Now it has cost them 120k minus the loss in selling so they would make 20k. The whole 5 years has cost them 100k.

Now if they stayed as a forever home. A mortgage of 450k for 25 years would cost 605k. After 25 years you would own this 500k property. Presuming no increase which is unlikely so cost 105k. All appreciate your relatives get the locked in 500k as you need a place to live. The cost of a home hs stopped and you are now sheltering for free.
The rent would cost over the same period ( presuming no increases, again unlikely)
at 1500 pcm is 450k
at 2000 pcm is 600k. Then you still need to pay it after 25 years.

Long term buying seems to be better. Renting only short term and if can get cheap rents. Seems more economical.

Now preferances of not being locked in etc or being able to decorate without permission on the other hand. I get that but financially it really depends.

I've always found this puzzling. Are you allowed to do the maintenance yourself? Like you would if you were paying the mortgage or are you then liable if it goes wrong?

Oh I agree. I would never buy a flat . Leasehold properties are a nightmare

Quite a few of my younger colleagues & family have rented for a few more years, skipped the flat stage & bought a small house. Stamp duty makes moving ££££ too

Obviously depends on the Landlord. HA and LA perform maintenance on a non profit basis and have their own teams of workers. Much cheaper and more tax efficient than an individual arranging it for themselves. Large institutional landlords can do the same. Also much more straightforward than an individual trying to find a reliable worker in many parts of the country.

Smaller landlords pay higher maintenace costs. They will try to pass on these costs via the rent - but they are usually unable to do that in full. Most are no longer making any profit and that is why they are exiting the sector in droves. Fine if their offer is replaced by decent quality HA, LA, large investors - but the key will be the timing.

@Blueyshift have you allowed for stamp duty, service charges & if you had the deposit in stocks and shares it might have had gains?

This is what I did, just lived in a tiny rented flat as long as possible then went straight to buying a 3 bed house with garden

I saw too many friends buy flats and struggled to sell /get stung with huge service charges

Heaven forbid someone has to wait for their toilet to be repaired (or in the case of a post from a few months ago where someone complained they had to be there, at great inconvenience, when the housing association were coming to fix her toilet for free).

It may be people have to wait a bit but what do you think those in a private house or rented do? They have to pay and wait, and pay a lot sometimes (often these days) they can’t afford it and have to muddle on. I’ve heard stories from tradies about HA tenants and their expectations or entitlement. People don’t know how lucky they are.

So is this a market where the only landlords are not for profit? I'm not necessarily against this, but it does mean this 'ideal market' is essentially impossible from where we are now.

Also, @Blueyshift ’s interest rates are way too low

Private renting is a mugs game. It only ever benefits the landlord in the end. The renters will forever be paying higher and higher rents, never have a home to call their own, can’t decorate it how they’d like and risk being evicted several times over the course of their lives. Why people choose to rent when they COULD buy astonishes me. Obviously I realise not everyone can buy and have no other choice but to rent. But if you can buy and you choose not to I think it’s madness.

I love owning my own house. It’s mine and can’t be taken away. Do you feel that security OP? I didn’t when I was renting because the house wasn’t mine.

Ok so if allow 10k for stamp duty and invest the 50k in a basic account of 5 percent. Again appreciate it could be more or less given the climate and risk.
So invest 60k for 5 years.

The return would be 76580 so made 16k. This can then be taken from the total rent. So
at 1500 total is 74k
at 1000 total is 44k
at 2000 totak is 104k

The rent would need to be half the mortgage for a good impact.

Our neighbours rented their three bedroomed house for almost 20 years. The landlord decided to sell and they couldn't find anywhere as retirees to rent so have had to move into a one bedroomed council flat. I feel sorry for them but at the end of the day it wasn't their house.

You have no idea at all what rents will do in to the future. Just ask all the people in the UK who cannot afford rent when they could easily do so 15 years ago. If you buy something you can have fixed payments set in stone and once it's yours you have some sort of future home security.

You're also subject to strangers coming into your home to inspect it, forever and are severely limited as to any changes or improvements you can make.

And, ultimately, they can kick you out after giving you notice

Yea they are for taking out a mortgage now. I said this . This was a pp example. Was presuming they had a locked in rate. Like lots still do. Can do the calculation again for 4.5 percent.

Yes, I'd quite happily rent if you weren't subject to moving on the whim of a landlord. We ended up buying after being forced to move for the second time in 18 months. At that stage in our life, we'd have preferred to have stayed more geographically mobile. It also meant we could get our dogs, something I wouldn't have risked in rented accommodation.

Loads of people rent because they do not plan to stay in an area for ever, or expect their circumstances to change (new job, marriage, children, retirement) etc.

Some of these people would have bought “starter homes” in the past and then sold and stepped up the “ housing ladder” but house price increases are no longer happening and the costs associated with buying and selling have increased, so that model no longer works. Hece the stagnation in the hosung market.

Hope it crashes even further in the future again when they look to sell/move.

The issue is as well there are no “starter homes” anymore. There are “starter flats” - but they either require a ton of work, or have service charges so high that lenders don’t lend. Flats that were £80,000 before Covid in my area are still on the market, for £120,000. A 50% increase in the last 5 years, and still nobody can afford them because of the service charges.

Homes that were sold as starter homes 25 years ago now go for £300,000 plus. It’s a disaster.

stripey. Some residents have paid for urgent plumbers / boiler repairs themselves after having a long wait with the housing association. They have been reimbursed for that work. I can't imagine it is the same for every area of maintenance though, probably only the really urgent stuff.

I'm exceptionally lucky that I'm not a housing association resident and have a mortgage.

I bought a house 20 years ago, I only have 5 years until it's mine! I bought is while prices were high, it dropped in value for 5 years then went back up. Buying a home is a long term investment. My mortgage is £400 per month, to rent one like it in my street is £1800 today. If prices are dropping that's the perfect time to buy!