Buying a house (and renting)

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Albear
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PostRe: Buying a house (and renting)
by Albear » Thu Feb 18, 2021 1:23 pm

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

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Lex-Man
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PostRe: Buying a house (and renting)
by Lex-Man » Thu Feb 18, 2021 2:25 pm

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


Ok, I accept that I made some errors in my argument, but I still think the general thrust of my argument is correct. It is possible to lose money on houses and share investing is not as risky as a lot of people maintain.

The average return from the S&P 500 in about 10%.

https://www.nerdwallet.com/article/inve ... ket-return

Also looking at the below graph is you bought a house in 1988/89 you would have probably lost money on your home (adjusted for inflation) if you sold your home anytime before 2001. Again house prices (adjusted for inflation) still aren't above the level they were at in 2007 and we're likely to see house prices fall over the short term.

https://www.allagents.co.uk/house-prices-adjusted/

The other thing is that I don't think that looking at historical house prices guarantee future returns, we could see population decline in the UK as birth rates fall reducing the desire for housing.

Amusement under late capitalism is the prolongation of work.
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Super Dragon 64
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PostRe: Buying a house (and renting)
by Super Dragon 64 » Thu Feb 18, 2021 3:49 pm

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.

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Moggy
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PostRe: Buying a house (and renting)
by Moggy » Thu Feb 18, 2021 3:54 pm

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.


I've not done it, but wish I had! We were offered it years ago, decided we didn't want the responsibility and it was then sold to a bunch of banana splits.

This seems a good guide to what you can expect: https://www.moneysavingexpert.com/mortg ... to-manage/

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Lex-Man
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PostRe: Buying a house (and renting)
by Lex-Man » Thu Feb 18, 2021 4:13 pm

My parents bought the freehold on two flats that they owned. In the first flat the tenants agreed to pay a company to deal with the maintenance of the building. In the second it was decided that the tenants would deal with the maintenance stuff themselves and it turned into petty bickering as people argued about how much they should spend and basic maintenance just didn't get done. I would recommend doing it though otherwise you'd probably end up in a situation with some private maintenance company who will push prices up to turn a large as possible profit.

Amusement under late capitalism is the prolongation of work.
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Grumpy David
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PostRe: Buying a house (and renting)
by Grumpy David » Wed Feb 24, 2021 11:27 am

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.

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OrangeRKN
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PostRe: Buying a house (and renting)
by OrangeRKN » Wed Feb 24, 2021 11:58 am

Very concerned a stamp duty holiday extension will give the top of our chain reason to delay as we still haven't exchanged contracts but have given our end of tenancy notice :S

Really need to exchange contracts this week then before the budget and anything being confirmed

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


Been going since mid-september here when we had our offer accepted

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speedboatchase
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PostRe: Buying a house (and renting)
by speedboatchase » Wed Feb 24, 2021 12:32 pm

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.


My wife and I had an offer pn a flat accepted today and then I saw this news. Hopefully we can make the new deadline :toot:

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Lex-Man
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PostRe: Buying a house (and renting)
by Lex-Man » Wed Feb 24, 2021 12:45 pm

It'll be good for my parents too as they're trying to move. I don't think they've found a buyer yet though and it might make people delay and look around more so who knows.

Amusement under late capitalism is the prolongation of work.
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BTB
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PostRe: Buying a house (and renting)
by BTB » Wed Feb 24, 2021 1:14 pm

Completing on our house today! :toot: Offer was accepted in mid August so it's taken a while! The stamp duty holiday along with covid/working from home seemed to be the main reason for it being so slow, as well as the solicitors who seemed to really struggle to contact each other.

We started looking before the stamp duty holiday was set but have obviously benefitted from it, although as first time buyers not as much as others may do. Glad they've extended if they have (although left a bit late) as the delays mean lots of people risk missing out.

Will be interesting to see what they do with stamp duty moving forwards.


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