Just wanted to get people's thoughts on buying a property in London vs renting
This is my thoughts but I could be completely wrong - pretty bored so thought I would come up with some thoughts
Scenario A: Buy
Buy a 2 bedroom flat in London for £600k with a 20% deposit, leaving you with a £480k mortgage at a monthly repayment of £2890 for 20 years using Barclay's mortgage calculate.
Over 20 years you would have paid the £120k deposit plus the mortgage with interest, which is £693,600 which makes a total of £813,600 over 20 years for a £600k flat. Take into consideration interest rates may increase so call it £850,000.
Now with this option comes renting out the other room with a colleague/room mate. Say you charge £300pm for it, that's £72,000 over the 20 years, so it really only costs you £778,000 for the property.
With an average increase in London house prices of 4-6% a year, taking into consideration margin of error because it isn't ofc going to constantly rise by that much a year, say an average increase of 2% means you can sell it on for just under £900,000 at the end of the 20 years
Sources: http://data.london.gov.uk/housingmarket/ and http://www.thisismoney.co.uk/money/m...duty-hike.html
Which leaves you with £122,000 profit if you sell it on, however taking into consideration opportunity cost and inflation, time value of money etc, say the required rate of return is at 3% it means it is around £60,000 worth of profit in todays value for the 20 year investment
Scenario B: Rent
If we had a roommate paying rent for Scenario A, it's only fair to have a room mate to rent for this option.
Rent a 2 bedroom flat in London for £2,000 so £1,000 per person.
Over the 20 years that is £240,000, which is a lot cheaper than buying the house, you will have almost £2,000 PER MONTH of additional disposable income to spend on whatever you like
also means you have no risk if you get fired and can't pay a mortgage, also it gives you flexibility to move around,
But... it's dead money and you won't have a property of your own to then sell on
What's everyones thoughts?
EDIT: F*** did I write this much at 3am
...or just paranoid?