February 5, 2014 at 3:48 pm #57931
It’s about the UK but applies everywhere. There is now a new epoch in the property business. The old ways of thinking have changed. Unless you buy in London capital gains will not materialise for years and years and even there they are simply catching up to pre recession levels.
That after all was always the principal incentive in owning property. You may as well tip money down the drain unless your costs can be recovered by that method. Holidays also become a costly business.
I like the writers view that paying a mortgage is simply renting money. When you are old maintenance is unaffordable and the house falls apart round your ears. View any house for sale where the elderly have lived and you will understand the point.
Of course governments encourage us to buy, it suits their demographic. Margaret Thatcher believed if the working class owned their own homes and owed money they would be far less likely to go on strike. It worked. 🙂
Renting is now the new cool.
February 5, 2014 at 5:52 pm #119075
The day I paid my mortgage off, I felt a huge weight lift from my shoulders. It also meant that if I wanted to retire and never work again, I could. However, not every one is in the same situation, so I can see times where renting would suit, but I wouldn’t want to be trying to pay rent on a UK pension.
February 5, 2014 at 6:30 pm #119076
I think there are regional differences, and it depends upon an individual’s objectives.
Here in San Francisco, the rents have doubled, tripled and sometimes quadrupled in the last 24 months. I’m sure that many who are being evicted or otherwise losing their apartments because of rent increases wished that they had purchased something after the real estate market crash in 2008, which has since recovered and soared to new heights.
If someone was looking for a place to live ‘forever’ in San Francisco, they would have been better-off buying. If they were looking for an investment, they would have been better-off buying only if they purchased soon after the crash.
February 5, 2014 at 10:50 pm #119077
UK rental laws force people to buy if they want to raise a family. The fact that you can be kicked out with 2 months notice means that families have no security. Especially in more rural areas where finding another suitable rental property near a school might be impossible. Also the UK government will do anything to bail out mortgage holders because it won’t let the banks go bust. And holding a mortgage is quite a good hedge against inflation. As Daryl mentioned, not having to pay rent when you are retired is a huge benefit (ok so you have some maintenance costs but they’ll be less than what you’d be paying in rent). In the long run mortgage repayments get relatively cheaper while rents don’t.
In other countries such as Spain where they have rental laws that favour the tenant more, such as 3 year contracts and restrictions on rent increases then renting might well be a better option.
February 6, 2014 at 7:38 am #119079
Good points Chopera. The article in the FT was really aimed at upwardly mobile professional people with high incomes. These days mobility is essential in the corporate world and in those circumstances renting makes more sense. In a low interest, low capital growth environment tying up a capital asset such as a home makes no sense. Money needs to work provide sufficient income that pays the rent. The alternative is paying high levels of interest, charges and tax. There is no security in variable interest rate mortgages.
It depends entirely on your personal situation when it comes to this subject. Governments encourage a culture of home ownership among the working diaspora because it creates social stability. Also for ordinary people the aspiration of owning their own place is a powerful dynamic. Traditionally for blue collar workers, owning their own home was just a pipe dream but now it’s a reality. That adds to industrial peace and social cohesion, two very desirable elements for capitalist friendly governments.
I’m an out of the box thinker. Where a strong cultural force exists like home ownership I look for the alternative because it’s there the opportunities really lie.
The elderly in the UK are usually are forced to sell their homes eventually to provide for social care which the state pays for in the absence of a capital assets and rents are then subsidised by housing benefit. In Spain and France it’s the family who have to carry that burden in return for the inheritance of the property. Here you cannot disinherit your kids for that very important reason.
February 12, 2014 at 9:32 pm #119158
@chopera: Landlords do not throw the tenants out on a whim. A good tenant is as hard to find as a good employee. (I know it very rear in Spain for a employer to realise the benefits of good employee & help them to develop and get the synergy going ).
The Landlord only does this where his/her circumstances changes i.e. job relocation, divorce, children needing housing near university/work or the tenants have been a disruptive to the others.
In UK the Landlord has the obligation/responsibility as to how his/her tenants behave
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