tag:blogger.com,1999:blog-2875915890415125655.post9182938310406438646..comments2023-05-18T10:37:34.608+01:00Comments on <a href="http://www.retirementinvestingtoday.com">Retirement Investing Today</a>: UK House Value vs UK House Affordability – September 2012RetirementInvestingTodayhttp://www.blogger.com/profile/03088383743670046657noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-2875915890415125655.post-8996953602513795262012-09-22T20:15:35.909+01:002012-09-22T20:15:35.909+01:00Hi Ric
Your proposal could indeed work but it'...Hi Ric<br /><br />Your proposal could indeed work but it's not the method I have chosen to use in this case. Have you run this analysis? I'd be interested in the results.<br /><br />To expand on my method a little to hopfully further clarify why I do what I do. The reason I have used the method I have is that if you think about the affordability vs value metrics above the big RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-52185163111295405302012-09-22T20:02:02.157+01:002012-09-22T20:02:02.157+01:00Hi A1
I guess everyones situation is different an...Hi A1<br /><br />I guess everyones situation is different and your example could be appropriate for others. I am happy to rent my current place for a few years however I would never buy here. If I bought this place then I'm up for stamp duty, maintenance costs and then real estate/solicitor fees when I sell. I would also have to deploy capital (deposit) plus be geared on an asset which I RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-65351601406494986062012-09-22T18:43:07.792+01:002012-09-22T18:43:07.792+01:00@ A1
Okay so now I'm being pedantic. You say:...@ A1<br /><br />Okay so now I'm being pedantic. You say:<br /><br />"I would therefore suggest it's not unreasonable to note that taking advantage of perhaps 8 or 10 years of record low interest rates can have as big an impact on reducing lifetime housing costs as achieving a significant reduction in the house price."<br /><br />According to my FT the best 10 year mortgage rate Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-15703134398522507242012-09-22T18:31:57.912+01:002012-09-22T18:31:57.912+01:00Great post, thanks.
When I use P/E to value shar...Great post, thanks. <br /><br />When I use P/E to value shares, I look at price of the share & company earnings per share. To get a comparable P/E for house prices, would it be better to use the price of a house (as you have) and the earnings for the house, such as its ability to earn rent (or to save you rent), rather than average wages?<br /><br />A useful second line on the house value Ricnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-17762875344727993982012-09-22T12:54:43.499+01:002012-09-22T12:54:43.499+01:00I think "wrong" is a bit of a stretch......I think "wrong" is a bit of a stretch.... ;) <br /><br />Although I'll certainly concede that it is very much a simplification for the purposes of a general discussion.<br /><br />So to address those points....<br /><br />- you ignore key other variables, namely: annual house value change for owned property; repair costs on owned property; and annual rental cost increases<br /><br Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-89881401972195194922012-09-22T11:28:30.100+01:002012-09-22T11:28:30.100+01:00@A1
I agree with the general thrust of your argum...@A1<br /><br />I agree with the general thrust of your argument but your numeric analysis is just plan wrong :(<br /><br />You say: "As an example, the current average rental yield is circa 5.5%, the current average mortgage rate is circa 3.4%, so the gain from buying versus renting is circa 2.1% per year."<br /><br />My complaint is two fold:<br /><br />- you ignore key other variablesAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-31671939456069582602012-09-22T10:51:43.222+01:002012-09-22T10:51:43.222+01:00I think you've raised a number of interesting ...I think you've raised a number of interesting points.<br /><br />Yes, I would agree if you can reduce your rent expenses then a comparison against buying can certainly stack up more positively. <br /><br />The young person living with their parents for free, to use the most extreme example, would have a clear financial advantage over someone paying market rent. <br /><br />Likewise, a young Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-30648768798122043732012-09-22T00:05:17.746+01:002012-09-22T00:05:17.746+01:00Hi A1
I very much agree with your statement that ...Hi A1<br /><br />I very much agree with your statement that the game is "... to maximise "value" is to allocate the smallest percentage possible of your lifetime earnings in order to pay for your lifetime housing costs."<br /><br />I feel that I am actually playing that game through a few techniques:<br /><br />- A key one that you may have missed is that I am taking advantageRetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-29246149811654705232012-09-21T23:21:40.865+01:002012-09-21T23:21:40.865+01:00Hi TI
Agree with you. It certainly is a mad marke...Hi TI<br />Agree with you. It certainly is a mad market.RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-73722155132769029652012-09-21T23:21:02.176+01:002012-09-21T23:21:02.176+01:00Hi Steven
Thanks for jumping in with some thought...Hi Steven<br /><br />Thanks for jumping in with some thoughts. Given you're a Chartered Surveyor you are clearly living this everday and are much closer to it than I am. I and I'm sure Retirement Investing Today readers would love to hear more about wht you are seeing out there? Particularly given your last teaser paragraph.<br /><br />Cheers<br />RIT RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-12977492275711351602012-09-21T23:17:34.322+01:002012-09-21T23:17:34.322+01:00Hi Anonymous
When running my analysis I am not co...Hi Anonymous<br /><br />When running my analysis I am not considering rents. I am looking at the ability for somebody to service a mortgage which is what I believe drives prices.<br /><br />Cheers<br />RITRetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-88004561686905702222012-09-21T23:15:17.925+01:002012-09-21T23:15:17.925+01:00Hi SG
I agree that an analysis and then compariso...Hi SG<br /><br />I agree that an analysis and then comparison of an inside M25 vs outside M25 (or similar) could reveal some intersting trends. Unfortunately, I don't think that the freely available datasets that I'd need are out there.<br /><br />Thinking aloud:<br />- I'd need a house price dataset. I could probably switch to the Land Registry data which would certainly give me &RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-12387038391466774632012-09-21T22:24:18.445+01:002012-09-21T22:24:18.445+01:00Hi RIT,
A great post, and the more I read of your...Hi RIT,<br /><br />A great post, and the more I read of your site, the more impressed I become with your research.<br /><br />I am interested in your perspective of "value" however....<br /><br />You say; <br /><br />"I personally only want to buy a house when it is at a sensible Valuation".<br /><br />Surely the only real way to maximise "value" is to allocate the Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-31487087188137783952012-09-21T19:18:13.323+01:002012-09-21T19:18:13.323+01:00Steven you said: "You've let yourself be ...Steven you said: "You've let yourself be fooled by the averages, which are of course skewed by the occasional oligarch buying a mansion in Belgravia from time to time."<br /><br />That sounds like two markets to me?<br /><br />I happen to me in the market for (non-oligarch) property in London and trust me, these properties (to my surprise) are actually selling for 20-40% above &Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-37609987961006569862012-09-21T17:13:26.483+01:002012-09-21T17:13:26.483+01:00Good stuff... I'd love to see London broken ou...Good stuff... I'd love to see London broken out, too, though that's because I follow that mad market most closely! ;)Monevatorhttp://monevator.comnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-46142939527816450842012-09-21T01:27:34.475+01:002012-09-21T01:27:34.475+01:00Anonymous -
Nope, there are not two markets, and ...Anonymous -<br /><br />Nope, there are not two markets, and SG did not claim that. Stop twisting people's words. <br /><br />It's all the same market, and prices in London, whilst naturally higher, are falling slowly just as they are elsewhere.<br /><br />You've let yourself be fooled by the averages, which are of course skewed by the occasional oligarch buying a mansion in Belgravia Steven MacDermott - Chartered Surveyornoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-62742794260999391762012-09-20T21:46:45.605+01:002012-09-20T21:46:45.605+01:00I'm not sure you will ever buy a house
They a...I'm not sure you will ever buy a house<br /><br />They are based on affordability you are right, but they always look expensive compared to renting<br /><br />The reason is that most people value security of tenure and being able to have a home the way they want it over the flexibility of being able to move at short notice<br /><br />This doesn't really fit into your graphs and Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-52713493352085654082012-09-20T17:10:35.586+01:002012-09-20T17:10:35.586+01:00This is all good stuff but I will observe that, fo...This is all good stuff but I will observe that, for people looking to buy, it might be more useful to check geographical focus, particularly in London. Not sure how feasible this is, but regional cyclicity may have its part to play.KoRhttps://www.blogger.com/profile/11163824542900298686noreply@blogger.com