Credit Crash Britain

yes I saw that, it was what I term 'fill in' bullshit. They ran out of news and needed to slot something in.

yes putting your money into shares..........those that have just dropped to

that's why the gov is aiming everyone to retire at 85. By then you will not know where you are, in a house, a hospital, a box or urn.........but they have got another 20 years tax out of you.

From what I saw, though, they never took the period 2000-2007 which would, for most people be the most relevant as being the most recent.

Of course, any period leading up to 2000 will show a good return from shares. The FTSE 100 index rose rapidly and stood at 6930 at the end of 1999, whereas now it languishes somewhere just above 4000.. So, since 2000, any investment in shares will have seen very sharp losses, and any investment in housing will, on average, even taking into account the recent falls, have shown very large gains.

Things go up. Things come down. I don't think it's possible at all to generalise about whether it is beneficial to rent or to buy. The only thing that does seem certain is that if you choose one, the other will do better for as long as you do it. Just like check-in queues.

For you maybe. We got some Gaelic nonsense.

That's been true for most of history. In the past 400 years (for which England has financial records) property has risen by 0.5% per annum in real terms, whereas shares have risen nearly 2%

The numbers I saw on the BBC website subtracted equivalent rent from the gains on shares.

I daresay it would have.

Irrelevant. Any valid analysis compares like with like. You seem to assume that everyone would choose to live as well as their means permitted (or beyond as sadly too many of our countryment have clearly been doing). There are you know those of us who choose to live below our means.

That's the cunning part: with all the money we've saved, we can buy a house for cash at the bottom of the bust.

My plan is to have lived without ever having paid a penny of interest. You don't get more "mortgage free" than that.

By having lower house prices?

If it helps break the psychology here of "I must own a house" then I'd see that as a good thing.

FoFP

Which country was that in?

FoFP

Not necessarily. Provided renting works out cheaper than buying, one could put the difference into shares or some other saving scheme.

Yes, but if you did that, then you fall victim to your "kicker" point below.

One model is that you rent during your working life, while making enough contributions into a building society that by the time you retire there are sufficient funds to buy a modest retirement property.

Another model (and this works both for renting and owning) is that you live in a house which is large enough for an extended family. The principal offspring's family takes over the lease while the parents stay on, while making a smaller contribution (if any) to the house expenses.

I don't follow your logic. The second part is OK, i.e. if being a landlord did not provide a decent return, then no-one would be in that game, and there would be no rental market at all (unless state subsidised). But I don't follow the first part. Why does the retired being able to afford to rent cast doubt on landlords getting a decent return? Surely if a retired person's housing budget is smaller than a working person's, they simply rent a cheaper property.

During their working lives they would have been raising a family, and needing a bigger house, which is more expensive, and housing which is conveniently located for work (big city) is likely also to be more expensive. When they retire they move to somewhere which is cheaper both because it is smaller and because it is not so close to well-paying jobs.

The logic is supposed to work like this:

Say you choose between £500 a month mortgage to buy a property or £500 a month to rent one.

The £500 mortgage will stay more or less constant over the 25 year term, varying only with interest rates (going up or down).

The £500 rent might be expected to increase in line with inflation and property over 25 years, so near the end of that term you might be paying £1500 or £2000 instead of £500.

And after 25 years, the mortgage is paid off and the house is yours (and eventually, your childrens'). The rent payer meanwhile continues paying £2000 a month (and rising) for the rest of his life. (To be fair, you can also say that in real terms, the mortgage would go down while the rent stays about the same.)

(All of which explains why I'm renting at the moment...)

mine.............

Here are their numbers:

Their other error is to ignore inflation. Inflation drives up rents (though also interest costs) while reducing the real value of the debt. Of course by introducing inflation, the house price gains would also be greatly reduced by being expressed in real terms. Still, if they want to do a valid comparison, all of the numbers should be normalised to real terms.

If anyone does care to take their tables and do that, I'd be intruiged to see the results.

FoFP

You have to consider that those retired on basic state pension or with modest additional resources will qualify for a substantial contribution from housing benefit to cover rental costs. On the other hand, it is, of course, the availability of such benefits which can increase the cost of renting above that which the market might sustain.

Toom

They did. It compared the cost of a mortgage vs the cost of renting and putting your deposit in shares rather than in a house.