Property : rent vs buy?

If you buy first it should be a small investment not something ridiculous, but I think it's wiser to rent and save money to put towards buying a property in the future.

The upside of buying is you can lock down a house before it appreciates its value and end up being twice as expensive.

. You can rent out your newly bought home and let the tenant pay your mortgage meanwhile you live elsewhere cheaper. When your mortgage ends you own a house, compare to the renter who will own nothing.

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When your mortgage ends you own a house, compare to the renter who will own nothing.

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But the upside is you have spare cash and could invest in something that outperforms the real estate and become wealthier, and then buy your property later with cash or with very little mortgage. .

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Also you would have a ton of freedom, one of the biggest problem with buying is once you tie yourself down to a 30 year mortgage, you lose your freedom, and freedom itself can be an important asset..

If you buy first it should be a small investment not something ridiculous, but I think it's wiser to rent and save money to put towards buying a property in the future.

Rent an apartment at a convenient location while buy an apartment at a strategic location.

2) cheap leverage with no liquidity risk. Remember that when you put down a £20,000 cash deposit on a £200k house, if the house increases in value by 5% then your profit is 5% of £200k (=£10k), not 5% of £20k (=£1k). As such, you will probably make much more on your home than you would if you invested in the stock market/etc, even if house prices go up less than the stock market (and remember, there is no capital gains tax if its your main home). Of course, you can also make leveraged investments in the stock market /(eg buying futures) but then you carry substantial liquidity risk (ie a short term crash can make you go bankrupt, but you dont have to sell your house the minute you hit negative equity so you can ride-out short term price movements without any problem)

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Depends what aspect of freedom you are looking at. i value the freedom to decorate/renovate my house however I please - and the freedom to live in the same property as long as I want without a landlord kicking me out - very highly. You dont have that freedom when renting, even if you have more geographic mobility.

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I am not sure if you realise that this thread is based on the assumption that you do not have the cash available to buy those property immediately(which is 99% of us working people). If you have 300k in your pocket right now obviously there would be no controversy between buy or rent, but not for those who just graduated and started working for a few years, its either get a mortgage and buy or rent and save and buy later.

First you said that "this is arguably a bad time to buy UK property since the London property market has been stagnant for a while (and is dropping in several places)" , now you said that the house will increase in value by 5% hence making it better than investing in stock market , so which is it, is the property price increasing or not?

If i invest in the stock market, i can dump the stock whenever i see it reach its potential, raise cash and find other stocks, or just spend the money. On the contrary I cant sell my house if i am buying it to live in it. Whether its value go up by 200% or 400 % makes no difference, i cant sell 1 sqft of the house to raise cash to put food on the table.

I was talking about buying with a mortgage (arguably you should always buy your primary residence with as big a mortgage as possible even if you have cash, since mortgages are the only way that most people can get cheap leverage thats fairly risk-free)


The 5% was more a typical annual long-term number, i.e. if you expect to hold a mortgage for 10+ years (even if you move it between different houses). Short term predictions are much harder. But the point is that with a house you make the profit percentage (or loss) based on the full value of the property, not on your upfront investment (ie your deposit). Thats a huge factor and the main reason why buying a house is a good investment. Getting that sort of leverage in the stock market is much more risky.

Sure, houses are less liquid and thats a problem. However:

1) you really cant overstate the importance of leverage when it comes to any form of investing (compare stocks vs futures for example),

2) Buying a house is partially a hedge against inflation in the housing market. If the house you are renting goes up 200% in value over a 10 year period then your rent should increase by a similar amount (ie double). But if you bought the house then your mortgage payments would stay the same as they always were (they might even go down since you could remortgage at a more favorable rate since you have better LTV, but interest rate rises may work against this). Since your mortgage payments stay relatively fixed, you are basically immune to inflation, which means the payments gradually get lower in real terms (since the nominal value is fixed) over time. Rent is the opposite: it rises over time due to inflation.

3) its not strictly true that you cant "sell 1 sq ft of your house to raise cash". If your house increases in value then you can take some of that money in cash through equity release for example.



Most normal people dont want to spend their lives moving around the country/globe. Its fine in your early 20s but you'll probably want to have a relationship.kids/long term friends at some point. But if youre living in a city where you think youll move away in 3 years time then obviosuly renting makes more sense.



I dont think thats a useful way to think of it. The bank owns the loan/debt, not the house. Obviously you have to keep up payments or be forced to sell assets (not necessarily the house) to cover it but that applies to any loan. You can buy mortgage protection insurance to cover short term cash flow problems (eg losing your job or getting hospitalized), The government may also bail you out as well. Getting your house repossessed is pretty rare

You can always rent the house out if you are moving abroad or whatever anyway. Its not the best thing to do long-term for the reasons I mentioned earlier but if its only for a couple of years then meh.

But yeah if you dont expect to be living in the property for a reasonable long period of time then buying may not be a great idea unless you just want to hedge the risk of getting priced out if the UK property market continues to increase at a stupid rate.

Before

> rent is bad due to tax law change
>UK property price unlikely to increase

now

>you can always rent the house out for a couple of years.
>UK properties increases 5% at a annual rate for long term.

also dafock is equity release?? thats usually for people above age of 55. and its completely irrelevant, you have to pay back the amount later when you die. How can you co; mpare that to cold hard cash gain from stock market?

In addition, i dont want to hedge against inflation on any house, i want to hedge inflation on everything, house, cars alike. And the only way to do that is to become wealthy.

Well yeah, there is a difference between short term and long term.

Buying a property with the deliberate intent of renting it out = maybe not a great since since BTL has been hammered by recent tax law. Whereas becoming an accidental landlord for a year or two due to travelling isnt a big deal.

Expecting good returns from UK property in the next few years = speculative. But expecting UK property to rise in value (at least nominally) over the lifetime of a 20-30 year mortgage = reasonable. The same applies to the stock market - who knows what its going to du over the next few years, but long term you can probably expect a 5-7% growth rate. Short vs long term horizons.

No: https://www.uswitch.com/mortgages/guides/equity-and-remortgaging/


Obviously, but you arent going to get wealthy by investing in the stock market for 5-7% a year unless you have a high income, and its likely that in the long term you would make much more by buying your primary residence due to the leverage factor,

What is the realistic worse case scenario for UK housing over the long term? 1-2% increase a year? (i.e. below inflation, so a real term decline). That still works out as 10-20% annual returns on your 10% deposit, with no capital gains tax. You just arent going to beat that anywhere else. Now take a more likely scenario of 3-5% increase a year and youre looking at 30-50% returns.

The only way to get anything remotely similar in the stock market is to leverage yourself up massively on futures/derivatives in which case you will go bankrupt the minute the market has a short term downcycle). You cant really go above 2-3x leverage on markets, whereas 10x on housing is pretty safe.

so basically what you are saying is the way to get wealthy is to buy a house and sell it when goes <insert number here>00% return over long term?

No, the way to get wealthy is to earn or inherit a lot of money.

But when you are investing whatever money you have, buying your primary residence is probably a better idea than investing in stocks/etc. Renting to free up money for stocks/etc makes no sense since they are likely to be worse investment than buying a house. The only reason to rent is if you dont think you will be staying in an area for long.

Its only really after you have bought your house that you should start thinking about other types of investment, since they are probably going to be less lucrative over the long term.

This is the million dollar debate again, i want to know what people on here thinks. Should you buy a property early or rent first?