Buying a house (and renting)

Lex-Man wrote:I'm not sure that I agree with your assessment that houses are that safe. If I paid 500k for a house and the market crashes it's possible that I will lose a huge percentage of the value of the home so the value goes down to 125k. If I've got a substantial mortgage on the property it would make it harder to renew as I've trying to borrow say 300k on 125k worth of value and I may get the house repressed through negative equity. Interest could also spike making my repayments double and again I'm probably going to lose the house. Also the area where I have my house could become undesirable, I know in the past when house prices did drop it became almost impossible to sell houses in places like Croydon so although I own the house that has some theoretical value it's impossible to realise. Then houses have fixed costs you've got to pay to keep them habitable to retain their value.

With shares it's unlikely that you'll lose 100% of your investment as even if the company goes under, share holders are the first group to be paid back from the sale of any assets that the company holds.

That said I think there is a level of just belief in the value of houses that keeps the prices high, which is why I think it'll take a year or so of tiny 0.3 percent declines in price to get to the point where people accept that house prices can fall to get to the point where a large drop is possible. Also the government are seemingly going to do everything they can to keep house prices high.

What Bankruptcy Means for Shareholders
Shareholders are the last ones to be paid out if a company goes out of business. In many cases, those owning stock won’t get anything back at all.
If a company goes through a reorganization in bankruptcy, the stock is likely to go way down in value. It could get so bad that the stock is delisted from major stock exchanges.
The stock could very well become completely worthless. But there’s always a chance that the company could emerge from bankruptcy stronger and stock prices may rise. In the short-term, however, the stock price is likely to stay very low during bankruptcy and immediately after.

Albear wrote:

Lex-Man wrote:I'm not sure that I agree with your assessment that houses are that safe. If I paid 500k for a house and the market crashes it's possible that I will lose a huge percentage of the value of the home so the value goes down to 125k. If I've got a substantial mortgage on the property it would make it harder to renew as I've trying to borrow say 300k on 125k worth of value and I may get the house repressed through negative equity. Interest could also spike making my repayments double and again I'm probably going to lose the house. Also the area where I have my house could become undesirable, I know in the past when house prices did drop it became almost impossible to sell houses in places like Croydon so although I own the house that has some theoretical value it's impossible to realise. Then houses have fixed costs you've got to pay to keep them habitable to retain their value.

With shares it's unlikely that you'll lose 100% of your investment as even if the company goes under, share holders are the first group to be paid back from the sale of any assets that the company holds.

That said I think there is a level of just belief in the value of houses that keeps the prices high, which is why I think it'll take a year or so of tiny 0.3 percent declines in price to get to the point where people accept that house prices can fall to get to the point where a large drop is possible. Also the government are seemingly going to do everything they can to keep house prices high.

Sorry, this isn't correct.

This is not a good comparison. It would be extremely unlikely that house prices would ever drop by 75% (in the 2008 crash average house value dropped by 25%) It then went on to increase greatly over the coming years.

If a company goes bankrupt Shareholders are the last ones to be paid. Debtors will get paid first.

What Bankruptcy Means for Shareholders
Shareholders are the last ones to be paid out if a company goes out of business. In many cases, those owning stock won’t get anything back at all.
If a company goes through a reorganization in bankruptcy, the stock is likely to go way down in value. It could get so bad that the stock is delisted from major stock exchanges.
The stock could very well become completely worthless. But there’s always a chance that the company could emerge from bankruptcy stronger and stock prices may rise. In the short-term, however, the stock price is likely to stay very low during bankruptcy and immediately after.

https://www.thebalance.com/what-happens-to-stock-when-company-files-bankruptcy-3141358

Super Dragon 64 wrote:Does anyone have experience or advice regarding buying the freehold of the building in which your leasehold flat is? Our landlord has sent a letter with an offer to purchase and I would prefer to be a freeholder but have no idea about the process, costs and risks/liabilities.

Grumpy David wrote:(apparently 1 in 5 sales agreed in the summer still have not completed!).

Grumpy David wrote:The Times are reporting that the Stamp Duty Holiday will be extended till June (apparently 1 in 5 sales agreed in the summer still have not completed!).

The early signs were house prices were dropping in January and February as demand faded due to people giving up on the ability to complete before the deadline.