Bog Roll ::

It's Not Magic, It's Work!

04 May 2008


We asked our landlady what she wanted for the house we rent from her. Today I spoke with her. I had expected her to say £200k, which while wildly overpriced in the current market would be a sensible opening position. Instead she said £225k, which is utter insanity. While it is livable, the house needs a total refurbishment and a significant upgrade to the heating and insulation to make it comfortable in winter.

If you assume a 30-50% price correction[1] over the next 2-3 years, that means I would loose between £67.5-112.5k (excluding mortgage charges) compared with a £20.4-30.6k loss if we continue to rent at the current market rate. Even if we bought at £150k, we'd still loose up to £37.5k on the property, and that's before we spend anything on it to bring it up to a sensible standard.

We will be renting, it's just a case of deciding where and for how much. Once the price correction has taken place we will buy having saved even more by then, two more years of pain for a mortgage free life seems to be worth it.

  1. Over the past half century British house prices hover between three and four times the gross salary of their occupants, under three is considered "affordable" and over four is "expensive". At the moment we are between 6 and 10 times gross salary. I refuse to buy a house that costs more than 4 times my gross salary.