by The Investor on February 22, 2008
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While many people have made a fortune out of property in the UK over the past few years, some have lost a packet – even as prices continued to rise. These are the so-called ‘Sell-to-Rent’ brigade, who attempt to time the peaks and troughs of the house price cycle by selling their home at the top and then buying after the presumed house price crash.
With prices finally wobbling and the credit crunch making terrible headlines every day, now looks a great time to sell-to-rent. Flog your home for £350,000 and you might be able to buy it back in five years for £250,000!
Happy times? Perhaps, but remember:
- 2005 looked a good time, too (prices dipped slightly when interest rates began to rise)
- 2003 also looked a promising time to sell (the onset of the second Gulf War led to a plunging stock market and global gloom)
- 2001 saw the earliest sell-to-renters make themselves known (this was around the time that London property first passed through its long-term price-to-earnings average, which has historically been a good barometer as to the future direction of house prices. It’s proven very unreliable in this era of low interest rates)
Now London property blog The Rat and Mouse notes that the sell-to-renters are back, going on to warn that:
Few financial decisions are as risky, or real-world calculations as tricky… taking in the cost of storage, rents (which can go up and down), the costs of selling and buying, the value of time, inconvenience and risk, all multiplied by however long it might take for prices to start to drop and then assuming it’s possible to buy in just before everybody else does. The chances of getting all this right are low.
Too right. I’ve not sold-to-rent, but I hold my hands up as a would-be first-time buyer who has sat out the property market for several years now, most recently believing that property prices are unjustifiable if you compare mortgage costs with rent.
It’s been a costly error. You gamble with the Great British love of property at your peril.
by The Investor on September 26, 2007
THE SCENE: A beautiful couple – they might be models fresh from a home shopping catalogue photoshoot – relax in their sixth-floor two-bedroom, two-bathroom, new build apartment.
He is in the kitchen area, mixing up mojitos on the island unit. She is on the balcony, gazing across the city landscape (an out-of-focus backdrop of railway tracks, supermarket car parks and the back of the block next door). And unseen in these shiny advertisements is the Buy-To-Let (BTL) investor in the suburbs, tearing her hair out as she tries to make the maths work.
Welcome to the bursting edge of Britain’s housing bubble. Get out while you can.
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by The Investor on September 9, 2007
A friend (let’s call him Peter, which is nicer than his real name) has bagged a pay rise from the BBC. Well done Peter.
(Incidentally, Peter’s job is to shepherd the flocks of so-called ‘runners’ you find clogging up TV and film sets. If you’re ever at such a media palaver, you can easily spot the runners: they’re the ones standing still. ‘Loiterers’, ‘texters’, or ’sullen coffee guzzlers’ would be more appropriate. That said, they’re young and paid bugger all, so we’ll let them off. Our warmongering ‘Defence Ministers’ are harder to forgive).
Peter is now thinking about buying a flat, afraid he’ll be the last person renting come the university reunion, and hankering for seagrass flooring. He’s also got an inheritance of around £40,000 to blow (my estimate – we are British, after all, and I reached my understanding of his financial position via a steady exchange of ‘ums’, ‘around’s, and frothy pints of Kronenburg).
Should Peter buy a flat, or continue renting?
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by The Investor on September 3, 2007
“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.”
Robert Frost
Whether to buy your own home or not is a tricky question for anyone wanting financial freedom.
Now that might seem to some a mad statement; in most English speaking countries, buying a house to live in is a rite-of-passage, and while these days renting doesn’t quite conjure up visions of a harried mother washing tired clothes in a tin bath while four kids sleep head-to-toe in a single bed behind her, it’s still frowned upon.
Indeed – and ironically – the British love affair with property has blossomed into Buy-To-Let (BTL), where renting is perfectly acceptable as long as it’s not you doing the renting. These nouveau landlords had better hope the rental sector doesn’t return to its bad old image of multi-occupancy squalor and sordid bedsits. (When most people want to buy their own home, just like you, it’s a daydream to believe that sufficient millions of your peers will put this aspiration aside just to rent from hundreds of thousands of similar new BTL investors and make you all rich.)
But leaving aside for now being a landlord – which can certainly make great money if you buy at the right price – what are the pros and cons of owning your own home to live in?
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by The Investor on September 2, 2007
Buying a house in Britain today costs a lot more than renting it. Fair enough, you might think: Home owners have seen prices triple in the past decade, so it’s understandable that it should cost more to buy your suburban castle and so potentially profit than to merely rent it. But wait a minute: If renting a house is cheaper than buying, how is the landlord going to make any money?
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