ABCDEFGHIJKLMNOPQRSTUVWXYZ
1
pessimisticrealisticoptimisticNotes
2
Oxford Price/rental ratio (for reference)
3
Rental cost per year£16,200£16,200£16,200
4
Total acquisition cost£469,940£470,190£470,890
5
P/r ratio29.0129.0229.07
Above 20 means you should hesitate before buying, >25 means you shouldn't buy
6
Afford anything
7
Investing and renting
8
Initial money in to index fund£140,000£140,000£140,000Assumption
9
Annual return5.0%6.5%7.5%NutmegVanguardAfter fees
10
10 yr total £228,045£262,799£288,544Calc
11
10 yr profit£88,045£122,799£148,544Calc
12
Initial monthly rent + bills£1,450£1,450£1,450Assumption
13
Rent and bills at 10 yrs£1,856£1,949£1,949Rents over time
Rent increases slower than house prices because houses are an asset
14
Average rent and bills over 10 years£1,653£1,699£1,699
over the course of ten yrs
15
10 yr total rent£198,367£203,921£203,921Calc
16
Overall balance£29,678£58,879£84,624Calc
17
18
19
House
Assume sell after 10 years
20
Deposit£140,000£140,000£140,000assumption
21
Headline house price cost£450,000£450,000£450,000rightmove
22
Size of mortgage£310,000£310,000£310,000calc
23
Annual return to housing3%4.0%6%Oxford prices
24
10 yr house price£576,038£666,110£805,881Calc
25
Pay off time252525Assumption
26
Interest rate (5 yr fixed rate, repayment)1.58%1.58%1.58%
Barclays mortgage calculator
27
Follow on rate (6 yr on)4.25%4.25%4.25%
Barclays mortgage calculator
28
Total monthly mortgage payment (first 5 yr)£1,138£1,138£1,138
Barclays mortgage calculator
29
Of which interest (roughly)£450£450£45040%
30
Of which principal (roughly)£683£683£683
31
Total monthly mortgage patment (second 5 yrs)£1,355£1,355£1,355
Barclays mortgage calculator
32
Of which interest (roughly)£667£667£66750%average to interest45%
33
Of which principal (roughly)£667£667£667
34
Total mortgage repayment at 10 yrs£149,540£149,540£149,540
Barclays mortgage calculator
35
Of which interest (roughly)£67,073£67,073£67,073
36
Of which principal (roughly)£82,467£82,467£82,467
37
Sale money at 10 yrs = 10 yr house price£576,038£666,110£805,881Calc
38
Remaining mortgage balance£180,148£180,148£180,148
Barclays mortgage calculator
39
Crude profit from house sale£395,890£485,962£625,733Calc
40
Profit from house sale minus deposit and repayments£106,350£196,422£336,193Calc
41
42
Other costs
43
Stamp duty £11,000£11,000£11,000UK govt
44
Estate agent fees£6,390£6,390£6,390Which
45
Legal fees£850£1,000£1,500
money advice service
46
Property inspection£500£500£600
money advice service
47
Home insurance£1,200£1,300£1,400120 a year
48
Utilities£12,000£12,000£12,000
100 a month, as in renting
49
Maintenance/repairs£12,000£20,400£45,000TrainioAfford anything
50
Furniture£4,000£4,000£5,000
one grand per room?
51
Sum of other costs£47,940£56,590£82,890Calc
52
53
Overall balance housing£58,410£139,832£253,303
54
Overall balance investing£29,678£58,879£84,624
55
Investing diff to owning-£28,732-£80,953-£168,680
56
57
New kitchen£6,000£6,000£6,000My builder
58
Other major renovation£6,000£6,000£6,000
59
60
Repeatable costs if buy second house
61
Stamp duty £11,000£11,000£11,000
62
Estate agent fees£6,390£6,390£6,390
63
Legal fees£850£1,000£1,500
64
Property inspection£300£450£550
65
Sum of other costs£18,540£18,840£19,440
66
67
Conclusions
68
There is research suggesting that increasing house prices have mainly been driven by very low interest rates since the 1990s. If interest rates were to rise (and they cannot go further down), house prices would plummet and we would lose a lot of money. "In December 2018, the real yield on a 10 year index-linked gilt was -2%. […] Were real gilt yields to rise to 0% (levels last seen around 2011), this would imply a 31% fall in house prices.” BoE paperIan mulheirn
69
After 10 yrs, it's pretty even betwen buying and investing on the best guess assumptions about what will happen
70
If house prices rise at 3% or less, we would lose money if we bought a house. eg 2007-13, house prices in oxford barely rose, so if we had bought then and decided to move five years on, we would have lost a lot of money due to the costs of buying and selling. If there were a house market crash, we would lose a lot of money
71
Generally, If we sold and bought another house within ten years, investing is very likely better. This means that if we did buy, we would have to be sure we were going to stay for >10 years
72
There is generally greater risk involved in buying a house - if something goes badly wrong with the house and we incur a lot of costs, then we would probably lose money, same if we had to move for some reason. So, investing and renting is a safer bet in this sense
73
Prices have historically risen at 5% in Oxford Cambridge and London
74
We could get lucky and do a lot better with buying a house if prices rise at 6%
75
Buying turned out a bit better than I thought due to historical house prices in Oxford in particular. I still don't think it is worth it for the next few years until we have a clearer idea of where we will be. If we don't know where we will be in >10 years, buying a house looks like a bad idea. Buying is also generally riskier for reasons laid out above.
76
77
78
Other advans of investing
79
With a house, any money we made would be tied up in a house that we might not want to leave, so although we could have more wealth, we would not have access to it. The only way we could ever realise our gain would be to move to another area or move to a worse house in Oxford, which would likely only be in 25 years (when we would be 55) once kids leave
80
Alternatively, we could start renting again
81
With investing, we would have the money to spend on things that could make our life better
82
83
84
Advans of owning
85
We would have security
86
More scope to change house to our wishes
87
88
Useful links
89
real estate vs stocks
90
https://affordanything.com/is-renting-better-than-buying-should-i-rent-or-buy/
91
Prices in London Oxford and Cambridge
92
93
94
95
96
97
98
99
100