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Amount spent by private renters is approaching parity with mortgage payments

independent.co.uk

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Re: Amount spent by private renters is approaching parity with mortgage payments

#41

Post by dsr_ »

cdolan wrote: post #12
turblety wrote: post #9

Earlier quoted context omitted.

But the deposit is a massive issue. If you put that deposit into stocks and shares (a diversified portfolio) you could (will probably) find that outperform the cost of your mortgage and maintenance together. If they could get rid of the deposit you might break even with a stocks and shares investment plan. https://www.thebalance.com/real-estate-vs-stocks-which-is-th...

Are you advocating for zero money down mortgages? That’s what causes market crashes.

Technically, it's the inability of the payer to pay the mortgage that causes market crashes.

If you had an oracle that could predict with 99% certainty whether a given housebuyer would make a certain size of mortgage payments, you could afford to lend them that amount no matter the size of the down-payment, with a 1% risk premium over your interest rate.

We don't have such an oracle, so we look for other signs. One of the signs of financial stability is the ability to pay a large fraction of the price in advance.

Re: Amount spent by private renters is approaching parity with mortgage payments

#42

Post by angarg12 »

J-dawg wrote: post #17
abtinf wrote: post #2

In a free market, rent will always be higher than cost of a property. If it were less, the property is an unprofitable investment and should be divested. This article drops critical context. 10 years ago, one of the earliest and most potent warning signs of the coming collapse was the extreme disparity between rents and mortgages. Home prices skyrocketed while rents remained relatively flat. And just a couple years b…

The article isn't talking about disparity between rents and mortgages. It's saying the total amount being paid in rent is approaching the total amount paid in mortgage payments. I'm not sure what that proves other than far more people are renting than previously. This needn't even be a problem, inherently. It's just that renting is often a miserable experience in the UK, and people are having to spend far too much of…

I moved to England less than a year ago, and out of all the countries where I have rented, this is my worst experience so far.

Ignoring the poor treatment received by letting agencies, the landscape of property ownership is grim for newcomers. My salary puts me comfortably in the top 5% of the country earners, yet I spend about one third of it renting a tiny studio in town. We would need my partner to make above average salary to afford a modest 2 bedroom flat in town, or to be on my same payscale to be able to afford one of those terraced houses that we usually associate with middle class.

Don't get me wrong, I know I'm privileged, for me this data is just a symptom of the economic divide that this country is undergoing. If I can hardly afford to get into the property ladder, what should those in lower brackets expect? Will there be an increasing difference between those that own multiple properties and those who will be forced to rent all their lives?

Re: Amount spent by private renters is approaching parity with mortgage payments

#43

Post by quailman8 »

I think the only escape from going back to generational landlords (feudalism) is to have all rentals become rent to own: you live there for 5 (3?) years and can purchase that part of the building (ala condo) or duplex. You'd have to pay your share of taxes, but you would no longer be renting and would have your own property. If you go to sell it, the landlord gets first call on buying it.

Re: Amount spent by private renters is approaching parity with mortgage payments

#44

Post by majewsky »

nigelcleland wrote: post #4

What isn't mentioned in this article is any commentary regarding the falling rates of home ownership in various countries compounded with rapid price increases (driven by low rates and zoning policies). This is particularly acute as it appears to be driven predominately by a generational gap as opposed to a socio-economic gap. Pitting the young against the old is never a good thing. What is also missed completely is…

That's assuming that people rent because they cannot afford a house. I rent because I don't want a house. Owning a house is a ton of additional responsibility for what would be very little to no gain for me. I don't have space requirements (no children and don't plan to have any, no spacious hobby that would require a workshop, no car that would need to be parked in a garage). I'm not saying that everyone is like me, but I'm pretty confident there are more people like me than there used to be.

Re: Amount spent by private renters is approaching parity with mortgage payments

#45

Post by cjrp »

J-dawg wrote: post #27

The UK has a problem with housing supply, which will take time to fix. But what needs to happen urgently (and could happen virtually overnight if politicians wanted it to) is that renting needs to be made slightly less awful. Renting a home is no longer something that people do for a few years while they're young. Many will be doing it for life, and the rules need to change accordingly. Some ideas: - A total ban on a…

> But what needs to happen urgently (and could happen virtually overnight if politicians wanted it to)

Nearly 1/5 of MPs are landlords, that could be part of the problem.

Re: Amount spent by private renters is approaching parity with mortgage payments

#46

Post by CptMauli »

J-dawg wrote: post #27

The UK has a problem with housing supply, which will take time to fix. But what needs to happen urgently (and could happen virtually overnight if politicians wanted it to) is that renting needs to be made slightly less awful. Renting a home is no longer something that people do for a few years while they're young. Many will be doing it for life, and the rules need to change accordingly. Some ideas: - A total ban on a…

These kind of regulations are essentially in place in Germany.

Re: Amount spent by private renters is approaching parity with mortgage payments

#47

Post by nigelcleland »

majewsky wrote: post #44
nigelcleland wrote: post #4

What isn't mentioned in this article is any commentary regarding the falling rates of home ownership in various countries compounded with rapid price increases (driven by low rates and zoning policies). This is particularly acute as it appears to be driven predominately by a generational gap as opposed to a socio-economic gap. Pitting the young against the old is never a good thing. What is also missed completely is…

That's assuming that people rent because they cannot afford a house. I rent because I don't want a house . Owning a house is a ton of additional responsibility for what would be very little to no gain for me. I don't have space requirements (no children and don't plan to have any, no spacious hobby that would require a workshop, no car that would need to be parked in a garage). I'm not saying that everyone is like me…

I am in complete agreement with you, I rent for very similar reasons.

What I was attempting to flag was that for many this was no longer about it being a choice. The dramatic rise in house prices has meant that saving a deposit is now a lengthy endeavour in many areas, one that is driving a much larger renter culture. It is to be expected that lifestyle norms will change around this as well.

Re: Amount spent by private renters is approaching parity with mortgage payments

#48

Post by abtinf »

alex_duf wrote: post #7
abtinf wrote: post #2

In a free market, rent will always be higher than cost of a property. If it were less, the property is an unprofitable investment and should be divested. This article drops critical context. 10 years ago, one of the earliest and most potent warning signs of the coming collapse was the extreme disparity between rents and mortgages. Home prices skyrocketed while rents remained relatively flat. And just a couple years b…

> In a free market, rent will always be higher than cost of a property. If it were less, the property is an unprofitable investment and should be divested. That's assuming you finance your property with debt and let someone else pay for your debt. If you either happen to own a property you don't use, or own the property you live in, it makes perfect sense. You're describing everything that's wrong about the property…

The concepts of “cost of capital” and “opportunity cost” account for the scenarios you describe.

Money has a price. If you want to borrow money, you pay interest. If you have uninvested money, you forego interest and suffer inflation. If you have investors’ funds, that has a cost too. The combined costs of your various sources of money are your cost of capital. Investments are only economically profitable if they make more than the cost of capital. It is quite common to earn an accounting profit but suffer an actual economic loss.

If you own property you don’t use, then, assuming you aren’t enjoying some offsetting non-pecuniary benefit, you are suffering an economic loss. You would be better off selling that property so that you can reallocate your capital to a productive purpose.

Re: Amount spent by private renters is approaching parity with mortgage payments

#49

Post by abtinf »

alex_duf wrote: post #22
brightball wrote: post #16

Earlier quoted context omitted.

I’m not sure that’s anything other than math. If I have a property and I decide to rent it, why would I rent it for anything less than the sum of my expenses plus a profit margin that will cover maintenance or repairs? Why would anyone else? A rental property is just like any other business.

That's absolutely correct, my point was that once you've done the math - and assuming you are still paying a mortgage - it should give you a rent high enough such that no-one would agree to take it, unless you are willing to keep paying for part of it. It would therefore push the owner to either sell or stay in their property. That's my blue-sky-point-of-view of the property market which doesn't reflect the reality,…

Would you agree that when evaluating the housing market, we should take into account the full context of the decision to rent or buy, including the positives of renting and the negatives of ownership?

Re: Amount spent by private renters is approaching parity with mortgage payments

#50

Post by abtinf »

raverbashing wrote: post #25
roel_v wrote: post #20

Earlier quoted context omitted.

Let's say I look 10 years into the future. How does that change anything?

How much can real estate appreciate in 10 years again? (though it can definitely depreciate, but depends on its current situation). Also its future value may depend on how you're renting it currently. (Or even if your overcharging for rent and the property is empty because you are waiting for "the perfect tenant") You're also assuming buying and selling property is frictionless. If your equity is negative it might be…

Housing is a consumable good, not an investment. That homes appreciate is a symptom that reveals the catastrophic government policies imposed on the market.

In a free market, homes would be very unlikely to appreciate in value. Indeed, they would be much more likely to depreciate as they degrade and fall technologically behind.

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