Monday 5 September 2005

Ladder or snake?

The Royal Bank and tell house buyers to head to Scotland for the best return on their "investment":
First-time buyers are being urged to head north for the best return on their investment, as house prices continue to climb.
But is a house an investment? It may be - my former home in London and now the one in Edinburgh turned out to be good purchases and I am very pleased to have paid off the mortgage and now live without debt or rent. But a house is primarily a consumer good - it's for living in. It isn't necessarily true that buying a house will always turn out to be an "investment", as Merryn Somerset Webb explains here:
In my building in Paddington, west London, I figure it is now about £5,000 a year cheaper to rent a two-bedroom apartment than to buy one (assuming you do so with a 90% interest-only mortgage) despite the fact that asking prices in the building are already down 20 odd per cent from their highs a year ago.

So why on earth would you buy one? It’s a very expensive way to put yourself “on the ladder”. If you rent instead, you can save your £5,000 a year and put it towards buying a flat when prices have fallen another 20% (which they will).

I think that's correct. Rent the house and put the £5K in gold, silver, oil, water or uranium. Avoid snakes.

1 comment:

David Farrer said...

Comments made on previous template:

David Farrer
Since I wrote this the increase in the value of my gold shares is enough to cover one third of the cost of the digital SLR that I recently ordered.

16 September 2005, 08:18:18 GMT+01:00
– Like – Reply

Neil Craig
I don't think they will fall in the medium term. It is the law of supply & demand & we aren't building houses even at the replacement rate. So long as that is the case the overall trend must be upwards. 
We could build houses at 1/3rd the cost on land at 1/4 the cost but we aren't allowed to.

16 September 2005, 00:32:54 GMT+01:00