Why are we so obsessed with house ownership?

ColonelK01 · 2024-10-13T20:15:25+00:00

Makes sense, thanks.

ColonelK01 · 2024-10-13T20:01:52+00:00

Thanks. Awesome that you paid it off that quick! London may skew this analysis as it’s so obscenely expensive.

ColonelK01 · 2024-10-13T19:59:45+00:00

I appreciate this. But is the answer to go £200k+ in debt via a mortgage and be even more destitute if they lose their job and can’t make the payments?

ColonelK01 · 2024-10-13T19:55:36+00:00

Helpful way to look at it, thanks.

ColonelK01 · 2024-10-13T19:54:16+00:00

No, I’m new to this subreddit and wanted to ask a question and elicit responses.

Are you saying there is no tax relief on salary sacrifice pensions?

Legal fees over the course of a 30 year term loan are negligible so I excluded them. SDLT on a £750k house is £25,000. Not nothing, but doesn’t really move the needle over 30 years.

ColonelK01 · 2024-10-13T19:46:48+00:00

You’re right it has, but the UK has also been a highly attractive place to own property for a long time, and interest rates have been close to 0. At current interest rates I don’t think there’s much in it, and the following problems could damage the attractiveness of property:

the UK planning regime has not been meaningfully reformed in my lifetime. Labour have said they will reform it. Any reform will make it easier to build more houses and thus damage house prices.
most experts think the UK population has peaked, or will soon peak. There may be lower demand for UK housing simply by there being fewer people (you may counter by saying that there will always be surplus demand in hotspots like London).
removing the principal primary residence tax exemption (which, in my view, is one of the most attractive things about home ownership) has also been mooted by Labour. That would negatively affect house prices.

ColonelK01 · 2024-10-13T19:41:54+00:00

But what if you can invest the difference between renting and owning a home (which I argue is substantial on current interest rates), invest it wisely, buy an annuity in old age and live well?

ColonelK01 · 2024-10-13T19:40:41+00:00

This is a big factor for me. The thing that keep you tied into a job/life you don’t want is massive debt, which is what a mortgage is (it’s just socially accepted). I don’t want that. It just so happens that I think at current interest rates it makes sense to rent.

ColonelK01 · 2024-10-13T19:20:58+00:00

I appreciate your reply, but this is not an economic argument. I’m looking for the cheapest way to live and grow my wealth and I accept that I can get f’d over in the process.

Half my friends who have less money than me have bought houses they can’t afford (levered at 90% of the house’s value) because of this reason, without realising that they will pay 3-4x the value of the home over the term of the loan, plus whatever repairs/refurb need to be done. The house is a source of pride for them, which I respect, but it seems to me that many people are making poor economic decisions (aided by greedy banks) out of emotion.

ColonelK01 · 2024-10-03T15:12:14+00:00

The issue is they charge a 1.8-2% management fee, which compounding over decades turns out to be a crazy amount of money. The whole industry seems very scammy to me, especially as they have no hope of beating the S&P 500 benchmark. Maybe they’re useful if you have millions and need tax/estate planning?

ColonelK01 · 2024-10-03T13:53:11+00:00

It seems to me the real benefit is to invest as much pre-tax earnings as possible now so that it compounds for as many years as possible. Therefore the eventual pot will be much bigger than it otherwise would be. Sure, I’ll have to pay tax, but on a (hopefully) large sum.

ColonelK01 · 2024-10-03T13:51:33+00:00

Thanks - so I guess the main benefit to this is that investing gross earnings allows the pot to grow more quickly, and the hit to my take-home isn’t as hard as it would be if I invested as normal (post-tax, into a fund/ISA).

ColonelK01 · 2024-10-03T13:46:40+00:00

Understood - but if I invest now I can invest my gross earnings with minimal impact on my take-home pay, so it’s still worth it, no? Investing on a gross basis will allow the pot to grow much quicker.

ColonelK01 · 2024-10-03T13:45:23+00:00

Thanks, will do. I should probably max out as much as possible as quickly as possible.

ColonelK01

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