7 ms·

I find intellectually dishonest the suggestion that not owning a house is somehow going to remove the ability to settle down and start a family. I don't own a h

• lhopki01 10y ago
  All a great and good till you do the math. In the UK you can own a house 2 hours away from work or you can rent a house 3 hours away from work. Rental prices in the UK are well above the rate needed to service a mortgage so if you can get a mortgage it's much cheaper. To give you an idea the 3 bedroom flat I live in has a mortgage repayment of around 800pounds a month but a rental income of 1700pounds a month.
  • switch007 10y ago
    Which part of the UK can you rent for £1,700 but mortgage for £800? The housing market varies greatly in the UK, e.g. London is an extreme outlier. It's usually only useful to talk about specific locations
    • collyw 10y ago
      Probably anywhere if you bought the house 15+ years ago.
    • lhopki01 10y ago
      London is more extreme but it's the case in almost the entire UK that rents are higher than mortgage payments.
      • switch007 10y ago
        Perhaps so. e.g. in Greater Manchester rent might be £470 for a 2 bed terraced house whereas the mortgage would be about £300-400, depending on interest rate, but a mortgage payment isn't a direct comparison to a rent payment: you need life insurance, buildings insurance, contributions to a repairs fund, service fees if a flat, upfront costs to be amortised over the duration of ownership etc (but those payments are not necessarily the difference). Also, the set of people who are renting and unable to get a mortgage I imagine is quite large.
        • sokoloff 10y ago
          What does life insurance have to do with owning a house? Is that required for a mortgage in the UK?
  • maxaf 10y ago
    Wow, now that's the major difference from NYC. A mortgage payment for anything decent anywhere in Manhattan is far beyond my current means, yet I afford the rent easily enough. I wonder why the UK is so different? Are landlords simply profiteering off a bad situation?
    • deleted 10y ago
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    • UVB-76 10y ago
      I find the inverse to be strange, i.e. the notion that the rental value of a property should be less than the cost of a mortgage. Not least because landlords incur overheads over and above those an owner-occupier does. There is a large 'buy-to-let' industry in the UK, whereby millions have taken out mortgages to buy properties for the sole purpose of renting them out. The rental income pays the mortgage, and usually provides some profit on top, all while the value of the property itself continues to appreciate.
      • awinder 10y ago
        In the US anyways you have favorable tax treatments for interest and property taxes, but rent (of private properties like houses) tends to exceed principle + interest + taxes in many areas. I find that to be fairly weird, because you've essentially got a very low out of pocket expense at that point (or even nearly net positive) in raw money exchanged, yet principle is recoverable on sale and tax deductions offset a portion of property taxes. Basically if buying a house and renting it out immediately turns a profit, that's a renter-saturated market, and it seems best to be on the non-saturated side of the market
      • dagw 10y ago
        Not least because landlords incur overheads over and above those an owner-occupier does. But isn't there also an economy of scales argument to be made. If you own dozens of buildings and hundreds of flats, you should be able to keep your pr. flat cost lower than someone who just bought one flat.
  • dharma1 10y ago
    While rental can be above mortgage repayments in the UK (particularly London), 2x is unusually high. It sounds like the mortgage in question is only for a small part of the total value of the flat.
    • dan1234 10y ago
      My mortgage is £350/month but the house next door is rented out at £750/month so it does happen, but then I had a reasonable deposit and got a low rate.
      • sokoloff 10y ago
        I think the best apples-to-apples comparison would be to compare the mortgage payment, property taxes, and insurance calculated as if the full market value of the property was mortgaged. That takes out the variance from deposit variances and purchases made many years ago.
        • freshyill 10y ago
          Isn't that how it's usually done? My mortgage payment is somewhere around $2,700/month, but I'm pretty sure that covers insurance and taxes.
          • sokoloff 10y ago
            Yes, but I'm talking about something else. If landlord A puts down 50% of the purchase price and landlord B puts down 20%, their mortgage amounts (and montly cashflows) will be different, but the inherent value proposition to the landlord will be about the same. Likewise, if someone bought 10 years ago and their value doubled (but their mortgage stayed the same), that property will "appear" more profitable to that landlord than if they sold that rental to another landlord. That's why I think the "property holding costs" should be based on the full, mark-to-market, cost of the property today, and be based on a 100% financing mortgage rate. There's also a strong argument that we shouldn't include the principal paydown part of the mortgage payment when doing this analysis, as that's a forced-savings (and cashflow) item, not an inherent profitability impact.
  • atwebb 10y ago
    Not untrue in the states either, it's common for the rental price on a house to be 1.5-2x the mortgage payment or more, especially with rates the way they are. I'm not talking about major, top ten city, I'm not familiar with the pricing there. I'm speaking from experience in 2 "B" tier cities. Rents in our neighborhood are around 2-2.2x our payment of mortage+insurance+taxes, though we put 20% down so the payment is a little lower. In our previous location it was around 1.5x and rents are rising.
    • charlesdm 10y ago
      That's the premium you get for owning property in a B city. Imagine having a portfolio of 50+ properties in Detroit in this day and age. Imagine owning high value property in a city like Detroit - it'll be hard to sell, hence the premium.
      • atwebb 10y ago
        I guess so, our current city is redhot property wise so anything is expensive relative to what it was, the other city has a very large portion of renters which lends to the increased cost I'm guessing.
  • e12e 10y ago
    At ~3% interest rate (ie: less than one should plan for in case of change in the economy), a 25 year mortage comes to approx 480 GBP/month per 100K. Are you saying your 1700GPB/month rental property sells for ~200k? Certainly rent should come at a premium to buying (eg: in the example above, down payment isn't considered as an investment -- mostly because you'll need somewhere to live. If you sell your house, were will you live?). As far as I've been able to figure out in Norway, you'll generally end up paying more (total) per month if buy than if you rent. But like all things in life, if you can afford the monthly total of rent+downpayment, you'll be better off than renting due to the presumed price increase of the house. Worst case, you'll pay it down and live "for free" the rest of your life. I think it's interesting to look at median yearly wage and house prices. How many years wages does it cost to buy a place to live outright? And as the article states, how can it be more expensive now, than it used to be?
    • lhopki01 10y ago
      Close 275k but with a slightly larger than 10% deposit. 2% interest rate but the point that it is cheaper to pay a mortgage than rent is valid even if interest rates go to 8 or 9%. Also you consider that in a vacuum. What do you think happens if interest rates go up? All the buy-to-let people that require the rental income to pay for the property will also raise their rental rates. There are enough of them that they will move the market.
      • e12e 10y ago
        Certainly sounds like the difference between rental and mortage is much bigger where you live, than here. One obviously need to look at the concrete market one is buing/renting in.
  • seanmcdirmid 10y ago
    Interesting, this is quite the opposite from Beijing. 7500 RMB/ month rent translates to around a 20,000 RMB/month mortgage (not exactly since down payments are much larger). But we are also at peak proper bubble.
• tzmudzin 10y ago
  True, but house ownership + mortgage (as opposed to rent) may be the only way to accumulate some wealth for a lot of people.
  • citizensixteen 10y ago
    Regular (monthly) investments are available to nearly everyone. Investing is perhaps even easier- no points to pay with mortgage and investments are liquid and highly portable.
    • marincounty 10y ago
      Yea, but you can't live in your annunity fund. With a home, can rent it out. You can use it to start a home business. You can help out family members in need. You can work on your vechicle on the driveway. (Just read a housing rental agreement. A 42 page agreement. The agreement was so restrictive, the renters would only be able to sleep in the over-priced, code ridden, chit box. They literally had a clause in the lease that restricted opening the hood of your vechicle for more than 10 minutes in their carport. No quick trouble shooting on that old vechicle. You are forced to roll it on the street, and then risk a municipal ticket? I still think a house is a good investment for most poor, and middle class people. I'm so dissalusioned, at this point in my life; I would just like to see areas where you can pitch a tent, without the fear of racking up tickets. I hate to be that guy, but I forsee a lot more homeless in the near future. I'm just asking for a few fields, and some restrooms. A safe place where people could go after an deviating life event--like a nervous breakdown, or the loss of a key job. A place where you could save a few bucks, so you could get back into the system.
    • UVB-76 10y ago
      There are very few investments that have outperformed the average UK property over the last few decades. Let alone investments that you can live in.
  • unprepare 10y ago
    You can also maintain a line of credit through the equity in your house, allowing you to borrow money at lower interest rates than most other types of credit.
• rayiner 10y ago
  It's all a part of this baby boomer generation narrative glorifying owning a house. I've got one kid and we're thinking about number two. We rent in the city so we can be close to friends and work. Meanwhile, my parents and their friends are leveraged to the hilt in housing, carrying mortgages that they will definitely not be able to pay off before retirement. And leverage is the name of the game. Housing here in the DC area is subject to their weird island effect driven by what two people on GS-scale salaries can qualify for. Just under a million and you're looking at cramped fixer-uppers. At just under two million, you're looking at mansions in Georgetown.
  • UVB-76 10y ago
    Homeownership has been glorified because, over the past few decades at least, it's been an unbeatable investment. There is no need to pay off a mortgage before retirement. You can sell up (likely for a huge profit) and use the proceeds to buy a smaller property, rent, or retire to somewhere with significantly lower living costs.
    • sokoloff 10y ago
      Agreed. I save and invest aggressively and my housing returns for the last 9 years are greater than my total 401K and IRA balances (and I've been working and investing heavily into 401K and/or IRAs for 22 years).
      • tostitos1979 10y ago
        A friend of mine moved to a different coast and sold his house. His return from his house was more than his income over the past 5 years ... and we're talking about high, bay area salaries. The cash he got was also tax free.
        • sokoloff 10y ago
          I think that only $500K was tax-free (for a married couple filing jointly).
    • 10y ago
• k-mcgrady 10y ago
  In the UK at least a mortgage tends to work out about half the price of renting in my experience. Also add in the extra security ownership provides which I would much prefer if I had a family. If I had a family, lost my job, and was renting instead of owning/paying a mortgage, I would be on the street much, much quicker. Also, outside of London I don't think commuting is as big of a thing here. At least when I lived in Northern Ireland I didn't know anyone who commuted more than 60 mins to work and these people also owned houses in the suburbs. Looking at it from the perspective of a well paid tech worker who can find a new job very easily renting isn't a big deal but for most people finding a new job can be a long and difficult process so renting can be a huge risk with a family.
  • shubb 10y ago
    Additionally, as the price of houses in London increases, Landlords are much more likely to end / refuse to renew tenancies. Maybe they want to sell, and maybe they want to renovate first. Maybe they want to bank the gain in price, or convert a house they own 50% of into two houses they own 25% of. Either way, a lot of my friends who rent in London have been politely evicted every year or two for the past few years. Once evicted, they usually find they can no longer afford rent in that area and need to move. Getting your kid into a good school is difficult and based on where you live here, so moving is going to compromise your childs schooling unless it is planned in advance. Ideally, parents don't want to have to move at short notice every few years.
  • cpncrunch 10y ago
    >In the UK at least a mortgage tends to work out about half the price of renting in my experience It depends where you live. It is only in London that house prices have risen to silly heights compared to income, so I assume that is what the article is referring to: http://moneystepper.com/property/rental-income-vs-house-prices-uk/ http://moneystepper.com/property/rental-income-vs-house-pric... If you look at rental yields in the above graph, they have been sharply dropping in London in recent years. This makes sense if people are buying houses as investments: unless they're going to be sitting empty, they will be rented out and that will increase supply and reduce demand. Essentially these London real-estate investors are subsidising cheap rents. So it's really a great way to save money by renting instead of buying, and investing your money in the stock market instead. >If I had a family, lost my job, and was renting instead of owning/paying a mortgage, I would be on the street much, much quicker Nope. If you were sensible you would put the money you saved by renting into investments, and you would have at least a year of runway before being on the streets. With a mortgage (assuming your mortgage is higher than rent, and you can't save much) you will have about 90 days before being kicked out. >At least when I lived in Northern Ireland I didn't know anyone who commuted more than 60 mins to work and these people also owned houses in the suburbs. Belfast is completely different to London in terms of commuting. Also, house prices haven't gone up the same way they have in London.
• achen2345 10y ago
  You must live in the Bay Area or the East Coast. In the heavily cost inflated economies this is the reality. In the cost depreciated realities this is a complete farce. For comparison I like to use Texas versus California because the demographics are often nearly equally comparable given comparison of various metros and distributions. The biggest differences between the two states are that in California the cost of living is about 8x more (or 12x more in more extreme comparisons) even though both locations have near equal employment capabilities, same currency, and often many similar laws. To be clear earning $100,000 per year in Texas is a far greater indicator of wealth than earning $300,000 per year in California. Owning an apartment in California is the reality in a major metro with a booming economy. Housing prices cost so much that owning a house often becomes completely unrealistic for many people. Not that it matters since past a certain point an apartment becomes a better value per square foot than a house anyways. In Texas the opposite is true. After the housing crash of 2008 many people who could not pay their mortgage were forced out of their homes. The costs of apartments dramatically increased and the cost of homes dramatically decreased. It has always been a better value to own a home than live in an apartment, but that value gap increased noticeably. I can remember spending about $1200 per month for a 1200 sq ft apartment at that time and moving to a 3000 sq ft house and paying less per month. This gap is less noticeable in my geography now with Facebook and various other companies setting up shop minutes away. I have also noticed that working in Texas (at various employers) there is a huge demographic divide among home owners and apartment renters at the work place. Once you get past around 27-30 years of age generally everybody in the office who is an employee owns a house. For contractors (non-employees) the home ownership rate goes down slightly. For non-citizens the home ownership rate goes down dramatically. Generally, given the income rates associated with technology work price is not a primary discriminator from owning a home in Texas, but mobility is. Those who have a greater need for increased mobility are less likely to own a home. The bottom line is that if you want to own a home with a yard close to solid jobs you absolutely can and it is absolutely within reach. You must be willing to sacrifice your geographic location to achieve it though.
• jasode 10y ago
  >, or I can rent a great apartment 10 minutes from work and enjoy a vastly greater quality of life. > The "American Dream" of owning a house [...], in my opinion, a waste of mindshare and money. If we want to discuss city apartments vs suburban houses with "intellectual honesty", I would hope those in favor of downtown urban living acknowledge that some of us really do prefer living in houses. I lived for 2 years in Chicago's downtown loop in a "nice" apartment. Yes, everything was "walking distance". I could walk to Grant Park, the lake, the museum, the restaurants. But I don't care about any of that. Even though I was on the 6th floor, I heard police sirens and taxi horns every day and never got used to it. I also spent a year consulting in downtown Manhattan and visited Tokyo,London,Paris. I can see how the vibrancy and immediacy of those cities appeal to others but they don't appeal to me. I now live 35 miles away from downtown and the tranquility is wonderful. I can look out the window and watch squirrels and birds around the trees. Also, I can putz around my garage with noisy woodworking tools for weekend projects. I don't like the implication that my brain is somehow "broken" for not preferring city living. Many of us are not ignorant of the urban lifestyle. We tried it and we'd prefer to raise a family away from it. We will spend a big chunk of income to make that happen. It doesn't mean we're irrational or brainwashed.
  • Sacho 10y ago
    The part GP highlighted wasn't the museum, or restaurants, or the lake. It was the short commute to work. Slashing the commute from 1 hour to 10 minutes gives you at least 1 and a half hours more each day, or about 10% more life. If you count it in "time spent with the family"(subtract work hours, personal time and various other engagements), it's anywhere from 20-50% more time spent with the family. Is a house worth that much time? Well, it probably depends on the people.
    • koolba 10y ago
      > The part GP highlighted wasn't the museum, or restaurants, or the lake. It was the short commute to work. Slashing the commute from 1 hour to 10 minutes gives you at least 1 and a half hours more each day, or about 10% more life. If you count it in "time spent with the family"(subtract work hours, personal time and various other engagements), it's anywhere from 20-50% more time spent with the family. Is a house worth that much time? Well, it probably depends on the people. While true on paper here's what really happens to most people: 1) They spend the extra time working instead of what they would otherwise consider family/fun/relax time. 2) If buying a place costs X and renting costs Y, they end up spending (Y-X) frivolously and getting accustomed to that level of spending. If nothing else, owning a home tricks/forces/cajoles people into saving money. Sure you can argue, "I'll save the difference and invest it at Z% ... Win!" but that's not what the VAST majority of people will do.
• pjc50 10y ago
  I can either own a house 2 hours away from work and spend 1/6 of my weekday waking hours on public transit, or I can rent a great apartment 10 minutes from work and enjoy a vastly greater quality of life In the UK the rent/mortgage price calculation is the other way round, especially in the hearts of big cities. Not only is the mortgage cheaper on a monthly basis, it's also not subject to arbitary increases. UK renters are also subject to arbitary eviction due to shorthold tenancies. If you were told you had 1 month to find a new rental for your family, would you be able to? At the same cost? Including the cost of moving all your stuff? And moving the kids' schools in the middle of term?
  • tomp 10y ago
    > In the UK the rent/mortgage price calculation is the other way round, especially in the hearts of big cities. Not only is the mortgage cheaper on a monthly basis, it's also not subject to arbitary increases. What?! Maybe you're not including London, but AFAIK, mortgages to buy a flat in London are at least as expensive as rents, if not more; in addition, with interest rates being at historical lows, it's more than likely that they'll be a subject to arbitrary increases in the years to come.
    • pjc50 10y ago
      My experiences are from Edinburgh, Cambridge and secondhand reports of various London suburbs. Certainly I don't know very many people who regard renting as a choice which makes economic sense for them if they could buy (which they can't). London may be a bit strange due to overseas money putting up prices.
    • hnal943 10y ago
      If you have a fixed-rate mortgage, you will never experience an increase in your payment, so I'm not sure why you think there will be arbitrary increases. Also, while the payment will be higher on a mortgage, you also have an asset. The only part of a mortgage payment comparable to rent is the interest. Do you really mean to say that the interest on a flat is more than rent?
• agentgt 10y ago
  The issue is not having space aka house in suburbia... the issue is ownership. I am assuming you don't own your apartment. It would be ideal if you did and speaking as a landlord in a semi urban area it is not "It's unnecessary and, in my opinion, a waste of mindshare and money.". It is funny how many people like to take the risk of creating or working for a startup often because of control factors but yet do not want to take the risk of owning property with a group of friends (or even strangers... yes people do this).
• tomp 10y ago
  In the UK (or London, at least), "house" means "a place to live", so it can mean appartment as well. According to my observations, most young people won't be able to afford an apartment either. > my family enjoys a Manhattan penthouse with a rooftop If anything, the intelectual dishonesty is pretending that it matters whether it's a proper house or an apartment; if you were to sell your NY penthouse, you'd be able to afford a good house almost anywhere on Earth, unlike many "lazy millenials" who will never own any property.
• gambiting 10y ago
  Well, here in UK I could pay 1/2 of what I pay in rent on a mortgage for a similar home. Buying houses is just a lot cheaper than renting in the long run.
• Spooky23 10y ago
  The reality for a more typical household isn't a Manhattan penthouse, it's a choice between some gritty apartment a 90 minute commute away in Queens or a nicer apartment/dumpy house in Jersey, Rockland/Orange County or Long Island.
• totalrobe 10y ago
  What's your point? If you can afford to rent a manhattan penthouse, you could afford a house pretty much anywhere on earth. You're just bragging..this article isn't about choosing to live in the city or the burbs - it's about those of modest means who in the recent past have been able to afford homes and now can't.