Why are property headlines being so depressing?
I am a bit confused at the moment. For me, we have a pretty good property market just now:-
In the past I have been reporting huge rises in property prices - 20 to 40% in a year - or huge falls of up to 50%. In my early days, new builds were built with around 80 snags per property and weren't that great, while first time buyers ended up needing/getting big donations from the bank of mum and dad to fund their way onto the ladder.
This week I've been asked to comment on two bits of 'bad news' research:-
This is a very odd report for a letting agent body to put out. It basically says:-
"Cost of renting over a lifetime set to increase to £64,400 for those starting their rental journey this year, 22 per cent more than current FTBs"
"Two fifths of tenants don’t think they will ever be able to afford a home"
Well by my calculations, that's a pretty good deal tenants are getting - not a bad one. This is a cost that is spread over THIRTEEN YEARS ie assumes you rent from aged 18 to buying at the age of 31 years. So in other words, it costs under £5k per year to live in rented accommodation for a third of your 'working' life.
What's wrong with that?
There is no mention in the report about the 'dead money' cost of renting being no more these days for higher loan to values of 90-95% than the 'dead money' people give to the mortgage lender when borrowing to buy.
For example, in Oxford, if you wanted to rent a two bed terrace, it costs about £1,150 to £1,200 a month. No high fees to pay, no hassle or surprises when repairs are required.
To buy this property would cost £400,000 or more. That means £1,200 a month in 'dead money' to the lender and a monthly cost of around £1,600 for repayment mortgage (assumes 4% interest rate, 10% deposit and 25 year repayment).
Oh and to be able to buy this property you would have to have around £50,000 in cash lying about.
Renting is OK, it gives flexibility and can reduce your housing costs until you are
ready to settle
What's wrong with renting instead of buying in this case? Yes property prices might go up, mitigating the 'dead money' given to the mortgage lender, but equally you risk they could go down - as they did from 2007-9 with 15% or more wiped off property prices in areas like Oxford and London, while areas such as Northern Ireland saw 50% falls.
Lets stop depressing tenants, many are much better off financially each year as the cost to rent, particularly in more expensive areas is a lot less than the cost to buy.
For those that do want to get on the ladder, yes you may need to move out of the city to somewhere nearby to afford a property, but that doesn't mean, over time as equity grows, you can't come back to live in a nicer, more central location.
It's what most buyers did in the past - very few bought the 'ideal property' in the 'exact area' they wanted to live.
The second report to scare the living daylights out of anyone thinking they might try to save for a deposit and buy a house suggested that this was going to be impossible in the future for most Londoners. It doesn't talk about the huge number of affordable homes being built or that the property price growth in the capital (like many other capital cities) is actually slowing versus it's historic growth in many areas.
And another thing...while I am having a Monday rant... I saw this post which I thought was amazingly good news:-
"Seven years of ultra-low interest rates have saved British households more than £150 billion on their mortgages" according to the Resolution Foundation. On top of this, the English Housing Survey shows that more than 50% of people own their home outright, with no mortgage at all.
Where has all the joy been spread about these news stories?
So at the moment we should be happy:-
Now, that's not to say I don't think it's pretty miserable (and in my view unacceptable) if you are stuck in the private rented sector in poor accommodation renting from a bad agent or landlord because there simply isn't enough decent stock to go around.
But it's the government and local authorities' job as well as housing associations to tackle these issues, not the private sector, as in most areas the numbers just don't stack up financially, so intervention is the only way forward.
For most people in housing, the current and future market works and is bright, so lets just enjoy our homes and stop worrying so much about frightening current and future generations into the belief that, in the wise words of Dad's Army, "we are all doomed"!
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