A press release by Zoopla claiming that Buying is cheaper than renting in 74% of Britain was eagerly lapped up by the Home-Owner-Ist newspapers like the Mail or the Telegraph.
Lola reliably informs me that the best interest rate for a FTB with a ten per cent deposit would be about 6%. So to compare like-with-like, we can reduce the cost of renting to 90% of the figures given by Zoopla; and increase the mortgage cost to 5.4% of the purchase price. If you chuck in (say) £1,000 a year for costs which are borne by owner-occupiers but not by tenants (insurance, repairs & hassle), then by my reckoning, renting is cheaper than buying in "100% of Britain".
To be fair, the differences are not enormous: which one is better in the long run depends largely on which is the better strategy for avoiding capital losses.
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7 hours ago
6 comments:
I still think it is weird to maintian that taking on a huge debt to buy a wasting asset (a house) on inflating land is ever 'cheap'. Or 'cheaper'. Whatever way you look at it, you end up being hugely in debt.
If you think that the previous and current governements have a deliberate policy of stoking inflation to avoid losses in the banks - then it makes more sense.
Not that Zoopla even mentioned this strategic thought.
Zoopla's figures are utter cock, as the Telepgraph hinted (at the end) and as many commentators explicitly stated.
One interesting implication of your quite correct assessment, MW, is that landlords are making big losses, especially once you take into account periods when their houses may be empty and renting agency fees. Unless, of course, house prices rise...
L, correct, it's the debts that crush you, not the rent you have to pay.
J, there is an element of that in what they are doing at the moment.
AC, a lot of newer entrants with big mortgages are indeed making losses; they were all gambling on making capital gains. Old established landlords who borrowed sensibly are coining it in.
One thing i've noticed too is that you couldn't go out and buy a big ass house that you couldn't afford to pay the mortgage on yourself but could by having some friends living with you as lodgers BUT you can go out and rent a big ass house with some friends because the cost per person of renting a big ass house between 3-4 is the same as renting a 2 bed house between 2!!
Isn't inflation making me vastly richer simply because I own a huge debt?
Renters do not own a huge debt and are therefore not making that same profit.
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