4 ms·

The problem is this is far removed from the world that we live in. Here in the UK, at least in the south/east where the jobs are, monthly rents tend to be the

The problem is this is far removed from the world that we live in. Here in the UK, at least in the south/east where the jobs are, monthly rents tend to be the same order of magnitude as monthly mortgage payments on a 25-year loan for a home of the same size in the same location. The choice therefore is not between low rent or high purchase cost; it's between making about the same payment for 25 years then never again, or making it for your whole life (while your landlord keeps it for their nest egg). Since you have to live somewhere, if you are able to get a loan at all, and barring expectation of massive disaster, buying seems to be a no-brainer. Two things could change that equation. We could add vast numbers of rental properties to the market, enough that the competition forces down rent prices by a very significant amount. The private sector is certainly not going to shoot itself in the foot in this way, and conservative UK governments have been pushing hard in the other direction, so this seems unlikely. The other alternative would be to reduce the need for homes in expensive places by having more people live together, in cheaper areas. We're seeing this happen by default now as young people are priced out of the market, but widespread telecommuting has the potential to make this a plausible deliberate choice rather than a forced decision. No idea how the US situation compares, natch

rahimnathwani 10y ago
In the UK, very few mortgage deals have fixed rates further out than 5 years. So as a buyer you're also taking interest rate risk. Sure, this hasn't bitten anyone for the last 20 years, but it happened in the 80s.
ZenoArrow 10y ago
IMO, the best solution is neither of the two you mentioned. I'd say the best possible solution would be found in the increased availability of microhomes (to buy, not to rent). It tackles two problems in one go. First of all, many more people would be in a position to buy a home without taking on a mortgage. They would then be in a better place to save their money in order to move to a bigger place (if they so wished). Secondly, because mortgages would no longer be as great a requirement to purchase a house, mortgage lenders would be incentivised to offer people attractive mortgage rates in order to encourage people to borrow money. In addition, microhomes need not result in large compromises. There are some great microhome designs on the market that offer attractive features whilst still coming in at a lower price than most existing UK houses. I quite like the Dwelle designs, but there are plenty of other options available. http://www.dwelle.co.uk/ http://www.dwelle.co.uk/ As a side note, I have a book on economics called 'The Grip of Death'. The title of the book comes from the meaning of the word mortgage, which I found interesting... Mort = Death, Gage = Pledge ('Grip' is accurate if the pledge becomes an obligation). I personally believe long term mortgage arrangements to have a tendency to damage personal enjoyment of life, so the name seems apt.
- tsukikage 10y ago
  How do these compare for longevity to regular houses? I actually seriously considered possibilities like narrowboats and static caravans when I left uni, but was put off by the need to basically get a new one (or spend the equivalent amount patching up the old one) every 10 years or so - it doesn't seem much of an improvement? That said, in parts of the world (cough Japan) it is expected that you demolish the old building and build your own when you buy a property (and you build cheap and light, accordingly), so perhaps this is another UK-centric concern. Another UK consideration: we have a tendency here to build housing outwards rather than upwards. In a country with relatively little land, if we're considering alternatives, IMO it's well worth considering more high-rise buildings in place of low-density sprawl - not only do they not carry the stigma elsewhere in the world that they do in the UK, but they're even now losing it in the UK; check out the "luxury apartment" blocks going up like mushrooms in the London docklands and around rail stations in sleeper towns.
- NLips 10y ago
  Where do I put my microhome? The bulk of the cost of buying a house in the UK seems to be land price. In fact, those microhomes are _more_ expensive buildings than a traditional build - from this calculator (http://www.jewson.co.uk/working-with-you/for-self-builders/preliminary-planning/calculators/build-cost-calculator/ http://www.jewson.co.uk/working-with-you/for-self-builders/p...) the price of a 100m2 build might be ~112k, compared to the microhome 70m2 'lifetime' model. Microhomes are a nice idea, but they wouldn't help me in East of England.
maxsilver 10y ago
> The choice therefore is not between low rent or high purchase cost; it's between making about the same payment for 25 years then never again, or making it for your whole life (while your landlord keeps it for their nest egg). > No idea how the US situation compares, natch Speaking as a US citizen in a small midwest city, it's basically the same in most areas. I can rent a 2bed/1car/700sqft apartment for (X) dollars per month. Or I can own a 4bed/2car/1800sqft single-family home for the same (X) dollars per month, on a fixed 30yr mortgage. The main difference (besides the tons of extra space) is that the apartment is guaranteed to cost 5-15% more every single year for life. But the house mortgage payment only rises maybe 1% each year. If I leave an apartment, I have to pay them one or two thousand dollars (on top of any rent owed). If I leave my house, it's equity usually covers any realtor listing fee and gives me a few thousand to cover moving expenses. I hate home ownership, and no one really does condos in my state, so renting is the only other option. But I can do basic math. Even if we move every four years, it's still much cheaper to own rather than buy, in most situations. --- Every single person and organization in the entire nation, is doing everything possible to inflate housing costs as high as possible, in literally every market. Owning is the only way I know of to keep my head above water -- otherwise, I'd be fighting the entire national economy every day, for life.

rahimnathwani 10y ago

In the UK, very few mortgage deals have fixed rates further out than 5 years. So as a buyer you're also taking interest rate risk. Sure, this hasn't bitten anyone for the last 20 years, but it happened in the 80s.

ZenoArrow 10y ago

IMO, the best solution is neither of the two you mentioned. I'd say the best possible solution would be found in the increased availability of microhomes (to buy, not to rent). It tackles two problems in one go. First of all, many more people would be in a position to buy a home without taking on a mortgage. They would then be in a better place to save their money in order to move to a bigger place (if they so wished). Secondly, because mortgages would no longer be as great a requirement to purchase a house, mortgage lenders would be incentivised to offer people attractive mortgage rates in order to encourage people to borrow money. In addition, microhomes need not result in large compromises. There are some great microhome designs on the market that offer attractive features whilst still coming in at a lower price than most existing UK houses. I quite like the Dwelle designs, but there are plenty of other options available. http://www.dwelle.co.uk/ http://www.dwelle.co.uk/ As a side note, I have a book on economics called 'The Grip of Death'. The title of the book comes from the meaning of the word mortgage, which I found interesting... Mort = Death, Gage = Pledge ('Grip' is accurate if the pledge becomes an obligation). I personally believe long term mortgage arrangements to have a tendency to damage personal enjoyment of life, so the name seems apt.

tsukikage 10y ago
How do these compare for longevity to regular houses? I actually seriously considered possibilities like narrowboats and static caravans when I left uni, but was put off by the need to basically get a new one (or spend the equivalent amount patching up the old one) every 10 years or so - it doesn't seem much of an improvement? That said, in parts of the world (cough Japan) it is expected that you demolish the old building and build your own when you buy a property (and you build cheap and light, accordingly), so perhaps this is another UK-centric concern. Another UK consideration: we have a tendency here to build housing outwards rather than upwards. In a country with relatively little land, if we're considering alternatives, IMO it's well worth considering more high-rise buildings in place of low-density sprawl - not only do they not carry the stigma elsewhere in the world that they do in the UK, but they're even now losing it in the UK; check out the "luxury apartment" blocks going up like mushrooms in the London docklands and around rail stations in sleeper towns.
NLips 10y ago
Where do I put my microhome? The bulk of the cost of buying a house in the UK seems to be land price. In fact, those microhomes are _more_ expensive buildings than a traditional build - from this calculator (http://www.jewson.co.uk/working-with-you/for-self-builders/preliminary-planning/calculators/build-cost-calculator/ http://www.jewson.co.uk/working-with-you/for-self-builders/p...) the price of a 100m2 build might be ~112k, compared to the microhome 70m2 'lifetime' model. Microhomes are a nice idea, but they wouldn't help me in East of England.

maxsilver 10y ago

> The choice therefore is not between low rent or high purchase cost; it's between making about the same payment for 25 years then never again, or making it for your whole life (while your landlord keeps it for their nest egg). > No idea how the US situation compares, natch Speaking as a US citizen in a small midwest city, it's basically the same in most areas. I can rent a 2bed/1car/700sqft apartment for (X) dollars per month. Or I can own a 4bed/2car/1800sqft single-family home for the same (X) dollars per month, on a fixed 30yr mortgage. The main difference (besides the tons of extra space) is that the apartment is guaranteed to cost 5-15% more every single year for life. But the house mortgage payment only rises maybe 1% each year. If I leave an apartment, I have to pay them one or two thousand dollars (on top of any rent owed). If I leave my house, it's equity usually covers any realtor listing fee and gives me a few thousand to cover moving expenses. I hate home ownership, and no one really does condos in my state, so renting is the only other option. But I can do basic math. Even if we move every four years, it's still much cheaper to own rather than buy, in most situations. --- Every single person and organization in the entire nation, is doing everything possible to inflate housing costs as high as possible, in literally every market. Owning is the only way I know of to keep my head above water -- otherwise, I'd be fighting the entire national economy every day, for life.