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!

It was the lack of security that really got me to buy a house, although a bad experience with a landlord that hated fixing anything was also a factor.

If we'd had secure tenancies in the UK, like they do in most of Europe, I probably wouldn't have bothered. The rental market here is totally dysfunctional in the UK imo, although I concede it may be less so in other regions (I'm in the SE). My DIL is paying £1400 a month for a tiny 2-bed flat, above a shop on a busy main road, and considers herself fortunate that she's been able to stay there for several years.

I am talking about conditions now, millions are coming off those low interest 5 year fixed deals to the normal rates now. How is a 400% increase in interest rates not huge. It’s a thing until 2027 I believe.Many will not be able to afford the increase and may put their property on the market. The OP is talking about what they should do now. All I am saying is carry on renting rather than buy into the falling prices of prime central London.

And in the 80s, people thought a crash would never happen, because prices had risen inexorably for decades.

The crash at the end of that decade was shocking, and prices took around a decade to recover. My house had been valued at £87.5k in 1987, I sold it at the end of 1992 for £49.5k.

If I'd bought in the mid-80s, I'd have been in negative equity for years.

One factor that didn’t exist a few decades ago, is a lot of properties in major cities being bought up as safe places (they assume) to park their money, by wealthy Chinese and other Far Eastern nationalities. Whole blocks of flats in London have been largely targeted at overseas buyers, and all too often the flats are left empty, not even rented, so as to maintain their ‘new’ value.

In Melbourne, according to Aussie friends who live there, a lot of new flats have been similarly targeted at overseas buyers. IIRC they do have a rule in Australia, that foreigners are not allowed to buy older properties.

Dh was told by a half-Dane at some business conference, that in Denmark foreigners are not allowed to buy any property unless they’ve been properly resident - not just back and forth - for at least 5 years. Apparently the rule was intended to stop Germans buying up loads of property, esp. along their extensive coastline, but since they couldn’t say ‘no Germans’ they said ‘no foreigners’ full stop.

The half-Dane was peeved that because of being only ‘half’, albeit with dual nationality, but not ordinarily resident, he was not allowed to buy.

Boggles my mind. We all tell ourselves stories to get through the days I suppose, and I think the OP is telling herself a story that renting is better than buying.

That only applies to people who obtained mortgages at artificially low rates. Interest rates generally reverted back to normal levels and are steadily falling.

I don't believe in the crash we have been promised for the last 50 years, and that some posters think would give them the chance to purchase a mansion for a tenner,

and financially it wouldn't be that great for me,

but the idea of a crash putting a stop to all the new developments ruining the countryside everywhere has some appeal 😂

See attached picture - on average a house bought in 1987 was worth more in 1992. The drop you describe is crazy, did something terrible happen in your neighbourhood? A flood or something? Or I see you say valued rather than bought, maybe it was very overvalued by someone?

Link in case picture fails to show - https://landregistry.data.gov.uk/app/ukhpi/browse?from=1980-01-01&location=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Funited-kingdom&to=1995-12-01&lang=en

I would love to know how much your rent is in zone 1, compared to paying a mortgage on the same property. I never see rent less than mortgages where I live. I think if you have the means to buy you would be stupid to rent instead. Your paying someone else's mortgage when you will still need to pay for rent in retirement. If you own you will have more money in retirement.

The recession of the early 1990s

In 1989 and the early 1990s the western world experienced another period of economic downturn thanks to the US savings and loan crisis, restrictive monetary policies introduced by banks and building societies to curb inflation, the end of the Cold War and the 1990 oil crisis in the wake of Iraqi’s invasion of Kuwait. In the UK, house prices had also seen an artificial increase as a result of prospective homebuyers rushing to purchase property prior to the withdrawal of the MIRAS tax relief option in August 1988

All of these issues in turn had a knock-on effect on consumer and business confidence and rising interest rates which resulted in a fall in house prices of 20% between 1989 and 1993. Properties in London were the worst hit, with an eyewatering reduction in value of 32%.

I recall the downturn but what I posted is the actual house price data from the Land Registry. Where is your paragraph from?

Social policy bods and economists have been warning about this for years.
Not only are there implications in terms of supporting them to pay their rent, when they need social care, they won't have assets to sell to offset any of the costs of it.

A friend's father has sudden onset dementia and has had to go into a care home. The cheapest place they could find that could take him is £2,200 pw. He's 85, but still incredibly fit for his age, physically, so could live for some years yet.

He has a house and investments, so no cost to the taxpayer yet apart from attendance allowance, but imagine the cost when generation rent get to that stage.

I listened to a great podcast as bout the rental market in the UK - it was last year I can’t unfortunately remember who it was - but it was about the lack of good social housing which meant millions were forced into private rentals, many of which were absolute shitholes but still cost a fortune.

A big takeaway was that since many many of these people/families were on some level
of housing benefit, the government is essentially lining the pockets of the greedy, immoral landlords. And as I say - a lot of the time for really poor quality housing.

It’s something I think Labour could do to really make a positive change if we did get building more social housing. But there is a lot of nimbyism around it - DS’ first flat is in a development surrounded by social housing and I did get comments from friends and coworkers about him living amongst “council houses” but it’s really improved the area. Lots of waste ground, graffiti, fly tipping, addicts using in the streets etc until the social housing was built. Street lighting, roads, anti social behaviour are all much better now. The housing associations manage the tenants very well and anyone causing repeated bother is out.

Great point!

I thought at the time that the valuation was high, so possibly overvalued. I remember being astonished that it was over £80k.

It was in Croydon, and London was particularly badly affected. There was a series of interest rate rises, and there was a change to the way tax relief on mortgage interest was given. Two friends bought a flat between them and had to complete by a deadline to beat the change. My recollection is that if there were two buyers they both got tax relief, so double the amount of relief, but it was a long time ago and that may not be right! Another friend who rushed to buy with her then partner was in negative equity until well into the 1990s, so much so that when they split, she didn't have to give him any money!

Lots of people had homes repossessed because they couldn't pay their mortgages, and Croydon county court issued more repossession orders than any other court in the country.

There's a bit more detail here:

Thanks that's really interesting!

I doubt they'll have to worry much. Californian legislators are working on amendments to the euthanasia law, to allow patients with dementia to access assisted dying once they have reached the stage where they have no quality of life. A kind of advance directive made while you still have capacity, that says 'darling, I'm at stage 4/5 /6 now. 1000mg of pure nembutal, intramuscular, and read the tibetan book of the dead to me.'

Where American culture goes, Britain always follows (give or take 20 years). By the time Gen Z are getting ill, that will be commonplace. The ponzi scheme of care homes (or holding cells) for violently unhappy distressed patients trapped in a void of relentless anxiety will probably collapse. You'll be encouraged to spend your savings on a nice ceremony at the beach run by a ceremonial dying company, not an understaffed poorly run care home. Those will be for the ultra rich pensioners only.

(Or solent green 😅)

You do you OP, I'm not sure many people actually care.

Personally, I'm very happy that I bought my little flat, I'll be mortgage free in 10 years or so, it's my sanctuary, I can decorate how I want, I feel connected to my local SE London community...I've rented for years like a lot of people, and never felt so much at home as I do in my flat.

I don't really care whether it's going to go up or down in value, the goal for me is to have a secure roof over my head.

violently unhappy distressed patients trapped in a void of relentless anxiety

That’s by no means how dementia presents in everyone - or even the majority.

I lived in HA until I bought a home (before I was too old). I paid service charge and rent and nothing was fixed quickly, or well I was once without any hot water for 8 weeks. And it just kept breaking and no one really cares about you or the state of your home

I doubt they'll have to worry much. Californian legislators are working on amendments to the euthanasia law, to allow patients with dementia to access assisted dying once they have reached the stage where they have no quality of life.

Didn't Wes say assisted dying was unaffordable? People will be left to die but it won't be with much dignity.

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You ONLY own the property if you take a repayment mortgage then you ONLY own the property once the mortgage has been repaid.

The INTEREST on the mortgage is the rent you pay the bank.

The interest on the mortgage is therefore comparable to renting a property.

I’ve been a renter since the 70’s and very happy. Just do you. What others think is irrelevant.

Wrong!

You OWN the property as the electronic deeds are in the home owners name, The bank's security is noted on the Land Register for the property and owns the secured debt upon the property until the home owner pays it off.

You fundamentally do not understand mortgages…