Reinvest your savings in what?Your argument is incorrect as well. Like for like, the rental to a property will be much lower than the EMI/mortgage you pay to the bank in most parts of the urban world. Assuming you can reinvest the savings into something that yields better than property, you'd possibly be equally wealthy by then.
In many places its cheaper to own a home in the long run. In the US you can get a 30 fixed mortgage so you housing costs will be locked in for 30 years then practically free after that. I am in a rented property now, and the rent is $1,600 a month. You could buy the house with a $1,200 a month mortgage, plus $200 for property tax. Lets say the maintenance is $200, which is on the high side. Total costs to own would also be $1,600 a month. So the cost to buy/own is exactly the same as rent. There is zero opportunity to invest surplus cash because there is no surplus cash. Plus the rent will go up 4-5% a year and the mortgage stays at $1,200 for 30 years.Your argument is incorrect as well. Like for like, the rental to a property will be much lower than the EMI/mortgage you pay to the bank in most parts of the urban world. Assuming you can reinvest the savings into something that yields better than property, you'd possibly be equally wealthy by then.
Interesting that you can fix the interest rate for 30 years. Has been a while since my last fixed term ended but almost certain that the max a UK bank would do is 10.In many places its cheaper to own a home in the long run. In the US you can get a 30 fixed mortgage so you housing costs will be locked in for 30 years then practically free after that. I am in a rented property now, and the rent is $1,600 a month. You could buy the house with a $1,200 a month mortgage, plus $200 for property tax. Lets say the maintenance is $200, which is on the high side. Total costs to own would also be $1,600 a month. So the cost to buy/own is exactly the same as rent. There is zero opportunity to invest surplus cash because there is no surplus cash. Plus the rent will go up 4-5% a year and the mortgage stays at $1,200 for 30 years.
What are these fantastical places? I'd like to buy a house there and put it on rent.In many places its cheaper to own a home in the long run. In the US you can get a 30 fixed mortgage so you housing costs will be locked in for 30 years then practically free after that. I am in a rented property now, and the rent is $1,600 a month. You could buy the house with a $1,200 a month mortgage, plus $200 for property tax. Lets say the maintenance is $200, which is on the high side. Total costs to own would also be $1,600 a month. So the cost to buy/own is exactly the same as rent. There is zero opportunity to invest surplus cash because there is no surplus cash. Plus the rent will go up 4-5% a year and the mortgage stays at $1,200 for 30 years.
Generation X is certainly a lot better than Millennials. We gave the world, Kurt Cobain. You gave the world, uh, I'm struggling here.I'm a millennial?
Generation X was a bit shit. Windows 8 of humans. Discuss?
Mutual funds are much safer than casinos and cryptos. A well balanced portfolio of MFs, debt funds has shown to outperform real estate over longer time periods. Not ot mention the fact that most home buyers have limited to no idea of how the value of their property will appreciate over the next 15-20 years. So you're equally clueless on that front as well.Reinvest your savings in what?
Unless you quit your job and start your own business, there is absolutely no better investment than paying your own house.
You can obviously play the casino, wall street, cryptocurrencies, etc, and make more money, but you need to know what are you doing, and 99% of the people don't.
That’s an interesting point.Up to a third of millenuals face renting their entire life... isn't that another way of saying at least 2 thirds of millenuals will be able to afford to buy a house
I believe home ownership rates are currently around 65%
http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7706
So basically 2/3 people own homes now... and moving forwards about 2/3 people will be able to afford their own homes
Bit if a nothing story isn't it?
Doesn't that mean it's cheaper than elsewhere though?It's bullshit. I live in Ashton just outside of Manchester and have bought my own house. Also everyone of my mates bar one has their own house, with the one having the money to just waiting on finding the right house.
That's from a really rundown area of the UK where people are expected to struggle.
I have a team in Frankfurt and a lot of them are late 30s early 40s and all happy enough to rent for the foreseeable. They were surprised I had bought a house in my 20s.My wife and I are saving towards buying at some point in the future. Nevertheless, I have my doubts if we'll actually ever do it. It's not like you can safely assume that you'll work and earn your living in one place for the next 30+ years anymore. Especially for me jobs are likely to be few and far between, so switching jobs will almost certainly entail moving home as well, and I definitely wouldn't want to deal with getting rid of a half-paid home, or try to pay back the loan and rent a new place at the same time. Maybe our own house is a dream for retirement.
As a Xennial, I can safely say that you both suck - https://en.wikipedia.org/wiki/XennialsGeneration X is certainly a lot better than Millennials. We gave the world, Kurt Cobain. You gave the world, uh, I'm struggling here.
Care to explain what the rationale is behind this, because none of the maths I've seen support this in the slightest. I'm unlikely to read the book at the moment.Watch or read freakonomics. The personal wealth of a renter v an owner is minimal over a perio d of 30 years.
I’ve read it. It’s fun and interesting. He makes some bonkers deductive leaps though. It’s basically just a load of hot takes. So I wouldn’t be surprised at all if he’s wrong on this point.Care to explain what the rationale is behind this, because none of the maths I've seen support this in the slightest. I'm unlikely to read the book at the moment.
I'm in the process of buying a flat in London with a £300k mortgage. The mortgage will cost me £450k by the time I've paid it off in 30 years. I spend 17k on rent per year at the moment. Over 30 years, If we forget about inflation, I'll have paid £510k in rent. If I buy, I pay the bank a £150k profit and am left with £300k of equity.
The difference is quite staggering.
Because mortgages come with additional costs other than the mortgage. Like council rates that renters don't pay. Mortgaged are also more expensive. If a renter invested the difference between paying a mortgage and rent in a pension the difference in wealth over 30 years is about 30,000 - 40,000. You're maths must not be your strongest skillset.Care to explain what the rationale is behind this, because none of the maths I've seen support this in the slightest. I'm unlikely to read the book at the moment.
I'm in the process of buying a flat in London with a £300k mortgage. The mortgage will cost me £450k by the time I've paid it off in 30 years. I spend 17k on rent per year at the moment. Over 30 years, If we forget about inflation, I'll have paid £510k in rent. If I buy, I pay the bank a £150k profit and am left with £300k of equity.
The difference is quite staggering.
And that’s assuming your house doesn’t increase in value over the next 30 years. Your calculations also assume rent won’t increase. There’s an excellent chance property values and rent will both increase. Leaving you even better off than you calculated.Care to explain what the rationale is behind this, because none of the maths I've seen support this in the slightest. I'm unlikely to read the book at the moment.
I'm in the process of buying a flat in London with a £300k mortgage. The mortgage will cost me £450k by the time I've paid it off in 30 years. I spend 17k on rent per year at the moment. Over 30 years, If we forget about inflation, I'll have paid £510k in rent. If I buy, I pay the bank a £150k profit and am left with £300k of equity.
The difference is quite staggering.
Do you think your equity will be £300k in 30 years?Care to explain what the rationale is behind this, because none of the maths I've seen support this in the slightest. I'm unlikely to read the book at the moment.
I'm in the process of buying a flat in London with a £300k mortgage. The mortgage will cost me £450k by the time I've paid it off in 30 years. I spend 17k on rent per year at the moment. Over 30 years, If we forget about inflation, I'll have paid £510k in rent. If I buy, I pay the bank a £150k profit and am left with £300k of equity.
The difference is quite staggering.
The cost of maintaining a house is pretty high too, over the course of 25 years you will spend tens of thousands on it unless you let it go into disrepair, one of my brothers is getting quoted £5k to get a reroof on a three bed semi detached.Care to explain what the rationale is behind this, because none of the maths I've seen support this in the slightest. I'm unlikely to read the book at the moment.
I'm in the process of buying a flat in London with a £300k mortgage. The mortgage will cost me £450k by the time I've paid it off in 30 years. I spend 17k on rent per year at the moment. Over 30 years, If we forget about inflation, I'll have paid £510k in rent. If I buy, I pay the bank a £150k profit and am left with £300k of equity.
The difference is quite staggering.
Not sure where you are from, but in London and the SE its way cheaper at the moment to have a mortgage (even a repayment mortgage) rather than rent somewhere. That may change if interest rates rise to 5-6%+ in the next few years granted, but don't think that is particularly likely. People renting still pay council tax, but perhaps that is different in other countries.Because mortgages come with additional costs other than the mortgage. Like council rates that renters don't pay. Mortgaged are also more expensive. If a renter invested the difference between paying a mortgage and rent in a pension the difference in wealth over 30 years is about 30,000 - 40,000. You're maths must not be your strongest skillset.
I think you are right in terms of it having a very positive benefit later in life, especially if you actively switch your mortgage when appropriate, and overpay as much as possible.The biggest flaw in all these theories about renting being a better option is human psychology. The idea that anyone in their 20s/30s will diligently divert a big chunk of their salary into mutual funds (or a fecking pension!) is a complete pipe dream. We all know the way life works. You get your salary, pay your rent, then spend what you have left over each month. Rinse and repeat. So it's a no brainer signing up for something which forces you to put a huge chunk of money each month into something which will help make you financially secure in the long term. Plus you have the stability of knowing nobody can feck you out of your gaff at a few months notice. Which is a nightmare for anyone who is thinking about starting a family, wants to send kids to school etc. If you're lucky/well paid enough to have an option to buy then it makes perfect sense.
Well, for one, a mortgage also pins you down and makes you helpless/ averse to risk if it is sucking up more than 30-40% of your salary. So yeah, I can understand the reason why most of the younger generations, that are anyway leaning towards freelancing roles, would not prefer to be tied down to something that forces you to invest in huge chunks of their money.The biggest flaw in all these theories about renting being a better option is human psychology. The idea that anyone in their 20s/30s will diligently divert a big chunk of their salary into mutual funds (or a fecking pension!) is a complete pipe dream. We all know the way life works. You get your salary, pay your rent, then spend what you have left over each month. Rinse and repeat. So it's a no brainer signing up for something which forces you to put a huge chunk of money each month into something which will help make you financially secure in the long term. Plus you have the stability of knowing nobody can feck you out of your gaff at a few months notice. Which is a nightmare for anyone who is thinking about starting a family, wants to send kids to school etc. If you're lucky/well paid enough to have an option to buy then it makes perfect sense.
If you can't afford to buy then it's a tough one. I really like the idea of the co-op apartments in Germany someone mentioned earlier on in this thread. They would be a game changer for young British/Irish people who want a bit of security about where they live. The current situation for people who are forced to rent in the long-term is kind of grim.
If post-war history is any indication, property equity will see % increases above inflation. Especially so in a metropolis like London and with urbanisation still in progress.Do you think your equity will be £300k in 30 years?
EDIT - Bugger off Pogue
Well it's a flat, but sure. By my previous calculations, in 30 years I'd have to pay either a) £510k in rent or b) £450k back to the bank. The difference of £60k will cover the bulk of the maintenance costs. And I'm still left with £300k of equity.The cost of maintaining a house is pretty high too, over the course of 25 years you will spend tens of thousands on it unless you let it go into disrepair, one of my brothers is getting quoted £5k to get a reroof on a three bed semi detached.
Not that I’d argue that renting is more financially sensible than owning a house but it isn’t as cut and dry as people seem to think. If rent controls were brought in it could possibly become more financially sensible to rent.
You pay 10% interest on a mortgage?! Fecking hell. Where do you live?Well, for one, a mortgage also pins you down and makes you helpless/ averse to risk if it is sucking up more than 30-40% of your salary. So yeah, I can understand the reason why most of the younger generations, that are anyway leaning towards freelancing roles, would not prefer to be tied down to something that forces you to invest in huge chunks of their money.
As far as investing in alternatives. Most working professionals aged 25+ that I know who make surplus money invest religiously in monthly SIPs - anywhere between 15%-30% of their income. And I don't think its a bad idea to not want to buy a house if the rental yield on it 3% and the interest your're paying is 10%. If anything, in most metros, you should sell your house and live on rent.
Rent controls that make renting economically viable could hit property prices significantly. I agree with you broadly though. I’m a home owner and wouldn’t rent in any case. Owning my own place made me feel more secure. The government’s own research showed that home ownership is a key indicator for higher levels of emotional wellbeing in the UK.If post-war history is any indication, property equity will see % increases above inflation. Especially so in a metropolis like London and with urbanisation still in progress.
So in a probability distribution model, I'd say the peak of the distribution indicates more than 300k equity, adjusted for inflation.
Well it's a flat, but sure. By my previous calculations, in 30 years I'd have to pay either a) £510k in rent or b) £450k back to the bank. The difference of £60k will cover the bulk of the maintenance costs. And I'm still left with £300k of equity.
And of course the privilege (or psychological benefit if you will) of living in my own property. Not having to worry about being forced to move due to termination notices, or worrying about the landlord letting the property fall into disrepair, or not being allowed to have a pet or put a fecking painting up because I'm not allowed to make holes in the wall etc.
Also in my case, I'm putting a sizeable 30% deposit down. Which means that from day 1... (mortgage payment + ground rent + service charge) < 90% of expected annual rent. So I'm not bound to the property. If I find a job in another city or country, I can let the agents manage it for 10% of the annual rent and it will still pay itself off over time.
Only if the property loses 2/3s of its value in the next 30 years, will it end up costing me the same as renting. And for London property to lose 2/3s of its value, we're talking about apocalyptic events, like WW3 or Black Death or something. In which case I'd be more pre-occupied with surviving it, rather than worrying about the value of my investment.
Yeah, I live in India. Interest rates here are 10%+ while rental yields are 2%-4%. But that doesn't change the calculation. In most metro areas in the world (I'm sure London included) would have rental yields that are lower than the prevailing interest rates there. It so works out because the property owner factors in the long term appreciation in value of the property. https://ftalphaville.ft.com/2016/06...-property-market-is-doomed-doomed-i-tells-ya/You pay 10% interest on a mortgage?! Fecking hell. Where do you live?
I also know precisely nobody who was putting 30% of their monthly salary into long term saving schemes in their mid twenties so suspect we’re coming at this from very different perspectives.
Ok, right. Things are completely the opposite in Ireland. Rental yield is about 7-8% and mortgage interest rates are about 3-5%. I reckon it’s similar in London and most big European cities. In fact, mortgage rates may even be a lot lower.Yeah, I live in India. Interest rates here are 10%+ while rental yields are 2%-4%. But that doesn't change the calculation. In most metro areas in the world (I'm sure London included) would have rental yields that are lower than the prevailing interest rates there. It so works out because the property owner factors in the long term appreciation in value of the property. https://ftalphaville.ft.com/2016/06...-property-market-is-doomed-doomed-i-tells-ya/
As long as that is the case, you'd prefer to be renting as long as having the 'security' of housing is not something that you seek. Which brings us to the second driver. Younger generations do not seek this 'security' since they are highly mobile, do not like consistently working and don't like the anchor of fixed payments. So its not surprising that an entire generation of people prefer to just rent rather than put down big chunks of their income and stay in that one location their entire lives having to necessarily work it off. It also enables them to spend a larger chunk of their income, which is great.
As far as savings go, its to do with mindset. In India, most youngsters are forced to save by their parents. So they do end up saving.
It is the same in the UK. Initial rates are avavailble under 2% generally too, most people remortgage to achieve those.Ok, right. Things are completely the opposite in Ireland. Rental yield is about 7-8% and mortgage interest rates are about 3-5%. I reckon it’s similar in London and most big European cities. In fact, mortgage rates may even be a lot lower.
We also tend not to listen to our parents, don’t save anything and spend all our spare money on booze!
My rental yield is 4.6%. I've been offered a 2% fixed rate for 5 years, then 3.75% variable.Yeah, I live in India. Interest rates here are 10%+ while rental yields are 2%-4%. But that doesn't change the calculation. In most metro areas in the world (I'm sure London included) would have rental yields that are lower than the prevailing interest rates there. It so works out because the property owner factors in the long term appreciation in value of the property. https://ftalphaville.ft.com/2016/06...-property-market-is-doomed-doomed-i-tells-ya/
Feck me that’s good. Everything in Ireland is more expensive than the rest of Europe. Rip off Republic strikes again.It is the same in the UK. Initial rates are avavailble under 2% generally too, most people remortgage to achieve those.
What difference in council rates? Tenants pay the council tax and it's not altered depending on whether you own or rent.Because mortgages come with additional costs other than the mortgage. Like council rates that renters don't pay. Mortgaged are also more expensive. If a renter invested the difference between paying a mortgage and rent in a pension the difference in wealth over 30 years is about 30,000 - 40,000. You're maths must not be your strongest skillset.
The lowest 2 year fixed rate on moneysupermarket is 1.29% currently. On a five year it is 1.89%.Feck me that’s good. Everything in Ireland is more expensive than the rest of Europe. Rip off Republic strikes again.
You should be buying more property then! If that rental yield in your neighborhood goes below 2%, sell that property and cash in the capital returns.My rental yield is 4.6%. I've been offered a 2% fixed rate for 5 years, then 3.75% variable.
If I fix for 2 years only, the initial rate can be as low as 1.35%.
Naah. See the link that I gave; London is the opposite. But fair if that's the case in other European cities. I didn't know asset prices in these prices are still so deflatedOk, right. Things are completely the opposite in Ireland. Rental yield is about 7-8% and mortgage interest rates are about 3-5%. I reckon it’s similar in London and most big European cities. In fact, mortgage rates may even be a lot lower.
We also tend not to listen to our parents, don’t save anything and spend all our spare money on booze!
10% interest isn't unusual. In fact, I imagine in the majority of countries outside of the West, mortgage rates are higher, such that mortgages are niche or non-existent. No-one has the faith in the local currencies for them to be anything but.You pay 10% interest on a mortgage?! Fecking hell. Where do you live?
I also know precisely nobody who was putting 30% of their monthly salary into long term saving schemes in their mid twenties so suspect we’re coming at this from very different perspectives.
Or rent it out if/when they need to rent a second property somewhere else.The ability to move freely because of renting doesn't hold up as strong though, does it? Lots of people sell their house before they've paid it off, sometimes even with profit. You don't have to live 30 years at the same house if you don't want to.
We pay roughly 10% (give or take a couple of percentages up or down depending on how well the economy is doing/inflation) interest here in South Africa, on most of financed assets as well, including home loans and vehicle finance.You pay 10% interest on a mortgage?! Fecking hell. Where do you live?
I also know precisely nobody who was putting 30% of their monthly salary into long term saving schemes in their mid twenties so suspect we’re coming at this from very different perspectives.
Buying and selling property is a long-drawn often stressful experience. Its not like you can up and move tomorrow. Especially if you're going to be earning the same money in another city (or slightly more) and you can't afford to pay rent + mortgage. Atleast let's not pretend like any working man with a mortgage doesn't have to think 10 times (or maybe a 100) before throwing in his quitting papers or changing geography.The ability to move freely because of renting doesn't hold up as strong though, does it? Lots of people sell their house before they've paid it off, sometimes even with profit. You don't have to live 30 years at the same house if you don't want to.
