The end of mass home ownership in Britain - and good riddance.
Credit Crash Britain on the BBC on 2008-11-14 had the predictable conversation with somehow in Britain who wants to buy a house.
"Renting is throwing your money away. I want to feel that I'm putting my money into something"
Throwing money away you say?! Look up you fool. That's a roof over your head! Go sleep on the streets if you think that accomodation is such a worthless commodity. Next you'll be pointing out that food expenditure is throwing your money away on something that doesn't last.
He said it with the same blank eyes and mindless expression that one see in some religious nuts. They repeat their dogma as if it's the most everyday obvious truth ever, yet somehow manage to do it with any feeling or sincerity, perhaps because the rational thinking part of their brain has been turned off by brainwashing. For example, this guy said it while closing the door on the fridge as if it was an obvious throwaway comment. (Of course, I'm not saying that all religious people are as stupid as homebuyers, but there are a not-insignificant section of religious people that are like this).
I dislike the term 'homeowner'. Most homeowners don't really own the home because, as any mortgagor
knows, the bank holds the deed until the mortgage is fully paid off. Renting money is actually much more awkward method of putting a roof over your head than directly renting a house. And actually, in the long room houses are no better than stocks as an investment. Of course, there are regular short periods where houses outperform stocks, just as there are regular episodes of the opposite, but trying to make these predictions is no sound basis for retirement planning.
Betting on a single house is putting all your eggs in one basket. Surely a broad range of properties, via a large property management company is a slightly better idea. Better still, buy a broad range of stocks. If you don't like this sort of gambling as a basis for your retirement, then you're starting to learn the lessons.
Some advice to finish up: Find something, one thing, that you are good at, that others are not good at, and that is in demand. Concentrate on this and make this your day job. Work hard and save your earnings in safeish investments, including a significant proportion of government backed savings. But be prepared and able to change cities and careers when things inevitably change, as is bound to happen over many decades of work in our modern faster-changing economy, by renting so you can move house at the drop of a hat.
Leave home ownership and construction to the small number of experts whose day job it is.
As long as you have a good minimum pension provision, feel free to engage in various high risks gambles. But you shouldn't borrow money to finance these gambles as you could bankrupt yourself and lose those "safe" pension assets you had saved up.
Comments
The end of mass home ownership in Britian - Are You Sure?
I believe the owner-occupation rate in the UK is around 70%. Are you suggesting this will drop to something like 10%?
How and when? Nationalisation of the whole housing stock?
Think of new towns, creating places such as Milton Keynes, Criagavon and Tallaght. These places encouraged the opposite of private ownership at the outset, and this did not go well. Only when genuine private ownership took hold did things improve.
Private ownership has its problems. Stronger regulation is needed in the future, in particular when it comes to lending money (for any reason, not just home ownership). But scrapping owner-occupation will not help make the majority of people better off in the long run. Lets not throw the baby out with the bath water here.
GC
Nationalisation? Where did you get that idea?
I'm not proposing any regulation to restrict ownership. Renting is the norm in many parts of the world and there was no need to nationalise anything.
This recession will, quite rightly, encourage a lot of people to realise that they know nothing about property and that they should rent their accommodation. Let the experts take the risks of being a landlord. Most people no longer own their own food supply (i.e. farms), so the next natural step is for owner occupying to become much less prevalent.
The examples of "Milton Keynes, Criagavon and Tallaght" will no longer be relevant. Once sensible middle class parents are warning their kids not to buy houses like their stupid parents did just before The Greater Depression of 2009, then there will be no shortage of happy, sensible, non-criminal tenants (like me!) all over the land.
Aaron
Is it so bad to want to own
Is it so bad to want to own your own home? Rent isn't cheap, and in some cases, can be dearer than paying off a mortgage ech month. Why should A pay B an extortionate amount to pay off B's mortgage, so B can own 4 or 5 houses (or however many he or she rents outs), when A could be putting that money into their own house, and not B's bank account?
People don't always leave to see their children and grandchildren all grown up and financially secure, is it wrong for them to be safe in the knowledge that IF their mortgage is paid off then their children actually have a home for when they are no longer around, or at least some money (the remainder) to help them/their guardian to look after them, out of what's left (if the house has to be sold) after the bank has been paid back? If someone is lucky enough to see all their children grown up and married, and in houses of their own, still what is wrong with wanting to leave them something extra? Pay of their own mortgage to ease the stress, or put that extra money to helping their own children (original's grandchildren) for thing like university, for example. And with the cap on tuition fees maybe being lifted in a couple of years, who knows how expensive university is going to be for future generations?
Renting isn't safe. If your landlord wants to give you notice to move out, then he can, even if you have the money to payt him or her, every month. So if you have that money (i.e. can pay a mortgage amount every month and not be at risk of repossession), then what is wrong with buying your own place? You are more secure in your own home, and noone can throw you out (yes, I am aware that your mortgage lender can if you go into arrears etc, but that's a whole other different argument, but before you jump down my throat, I am aware of it).
Are you really telling me that if you had the money yourself to do so, then you would rather be putting money into somebody else's savings account/help to pay of their five mortgages, then pay for your own house? I can see your point about renting, but landlord's are (a generalisation coming up) just in it for the money. Yes, I am more than aware of how life isn't fair (I have witnessed first hand some awful things happening), but why should we be helping greedy people just get even more greedy? Take, for example, my own landlady that I had one year while at university. The place was not clean when we entered, and we had to literaly scrub the place ourselves. We had mould in the bathrooms and kitchen, and, only after we pestered her three times, did she actually get someone to come out and survey it. It turned out that the dampness had been festering for "at least three years" (we only being there for 10 months, in total, and this survey was done near the start of the year). Still, she did nothing about it, and then tried to charged us for the mould, when it came to getting our deposits back (we did argue that one though, almost unsuccessfully at first). The place was completely furnished, yet she made five students pay for the washing machine to be repaired, when it broke (her washing machine, I emphasise). This is an extreme case, of course, but sadly is not the only case like this. Why shoule we be giving people like this OUR money?
I think you need to be more
I think you need to be more careful in your comments. I'm telling you that today it is cheaper to rent than it is to buy. Secondly, I am quite certain that if I rent instead of mortgage and save the difference I will be able to save so much money that in 25 years time I'll be able to buy a house and have money left over.
Do not misrepresent my opinion. I am recommending renting because it is the best plan, when you consider the full picture.
And please do not say things like "is it wrong to want to leave something for your kids?". If you had the manners to read my post, you would see that I believe renting is, in the majority of cases today, the cheaper way to find accommodation. I am quite certain that I'll have a larger nestegg for any kids by renting now than by buying now.
Over the last few years, some of my friends bought a house. The payments were so high that they made no savings and made no other pension provision. I instead saved money. Now they are in negative equity and I have a few thousand saved in the bank. It is me, the renter, that has made more progress towards having a large nest egg for my children. Also, with house prices falling, I could buy the same house next year on a 20 year mortgage and have lower monthly repayments than those who bought last year!
We may disagree on what is the cheapest option, but do not be so bold and presumptious to forget that I want to save up something substantial for my children too.
I hope now you realise that your first two paragraphs are inappropriate, false and irrelevant.
A tenant is more secure than a mortgagor. Landlords are always happy to have a good tenant. Landlords are more scared of losing the tenant. In fact, nowadays more mortgagors are being repossessed and thrown out. A bank is more likely to throw a 'homeowner' out of the home, than a landlord is likely to throw a tenant out. Also, remember that tenants like me have the benefit of the flexibility of moving when I like.
You may say "it's a different argument", but that's a pathetic copout. Given a choice between renting and paying a mortgage, in the current climate renting is more likely to give me security of tenure. Even homebuyers often find they want to move house sooner than they expected (e.g. divorce, more kids than expected, better job so can afford nicer accomodation) and they would like the flexibility of moving.
You shouldn't say "Are you really saying that ..."? I am not ashamed of my well-researched opinions so I will not retract things just because my opinions surprise you. I'm just pointing out that renting a house is little better or worse than renting money from a bank. If a landlord owns a house, then it's only fair that I pay him/her for the right to stay there. Paying a bank manager is hardly any more objectionable than paying a landlord. Secondly, less than half the money paid back in mortgage repayments actually goes to pay the original price. Most of it is interest payments, i.e. buyers are paying lots of money to 'rent' the money off the bank.
And rent money does not pay the full mortgage. Landlords have to put in some of their own money every month to pay the repayment. If some tenants are paying more than the mortgage would be, then that is their mistake for not shopping around properly.
If I had the money in cash now to buy a house, I wouldn't. It would be cheaper to save the money, and use the interest from these savings to pay the rent. I would actually have some money left over, especially now with the high savings rates on offer.
Finally, an obvious point. If house prices fell to a really low level and rents were high, it would obviously make sense to buy. And you would obviously sign up for a 25-year 1-pound-a-month lease. You need to move away from your 'buying is always the best option ever' dogma.
Aaron