Q:Ok, this is me. Just on point of getting divorced (next month or two) and then i will be looking to either buy or rent.
I will have ￡200k available and can easily afford to buy a flat/small house. The big question is what is best at this time. Clearly the property market is in a state of flux and property prices may drop further. Would I be better off renting for 6 months to a year and then buying or would i be better off buying?
I am trying to sort out the maths involved, eh having ￡200k invested and the potential interest i will gain as opposed to the dead money in renting.
I am happy to consider either option but would really appreciate some views and thoughts.
I've done some reading on the subject recently and the future looks bleak for the UK property market to be honest. :rolleyes:
Varying opinions, but on the whole, people are hypothesising that the UK property market has been at saturation point for some time and we are at the end of the bull market we have been seeing and are turning into the inevitable bear market which some think will take several years to come full circle again.
Apparantly these things happen in cycles (Macro Cycle), some sources are suggesting a property crash over the next 5 to 10 years with prices dropping in the region of 5% all the way up to 20% or more over these periods.
I am no expert and only telling you what I've read recently.
If I was in a position to buy a new house outright now, personally I would hold onto my money (or at least a considerable chunk of it) and either rent, or only put down as much as you dare and mortgage the rest. If prices reverse as some expect, you could lose anything from £10k to £40k (or more) over the next 5 to 10 years on your £200k.
Putting this situation into money terms is difficult, if you put your £200k away and receive anywhere from say 5.5% after tax on it, thats £11k a year!
This is easily enough to cover your rent (and then some depending where you intend to live) while you test the water and see what the market is doing and still keep your capital £200k.
Weight this up against the investing in the current house market, sure the market could stay static (at best) and you won't lose (or gain) anything. On the other hand, you could lose anything from £1k to £4k per year (or more)!!!
Its a tough choice, but for me, I'd rent at least for one year and see what the market does. I personally think we're just on the turn of the market and there are further losses to come in UK property. You have little to lose if you can make the interest you earn on your £200k pay for your rent while you assess the market and possibly buy a better house for the same money in a year (or few years) time.
Important thing to do is do your own research and make up your own mind, please don't take what I would do as any kind of advice, its just a personal opinion and nothing more. Deffo do your own research!!!
Steve.
My advice would be to rent for 12 months with a six month break clause, keep looking to get a very good idea of the market in your chose area – go and see lots of houses. Having nothing to sell puts you in a very good bargaining position. Tell the agents that you are a cash buyer and can move quickly.
You might be able to buy at tomorrow's price today.
Put money in highest interest accounts and divide up in lots of ￡35k at each place.
Joe
Bank the ￡200k
Rent
Pay for your rent out of your job income.
￡200k will rise by ￡10k per year
A ￡200k house will be dropping by ￡10k per year
In 5 years' time:
Your ￡200k savings will be ￡250k
Your ￡200k house will be ￡150k
Buy the house at ￡150k and still have ￡100k in the bank
Its worth remembering that if you invest over ￡200k in a single financial institution, and that institution collapsed, then you would only get a guaranteed ￡35k back!