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Here ya go.  5BR house on Worrin Road in Brentwood that's up for both sale and rent (always helpful when you can compare them on the same house obviously).

You can rent it for £2,950 per month or buy it for £950k.

Good way to figure out if this makes sense: Divide the annual rent by the interest rate, and adjust the interest rate up (thus the price down) to take into account maintenance, insurance, taxes, etc.

P = (RPCM*12)/i

Actual interest alone is going to run you more than 4%, but even assuming 4% the house is only worth £885k.

At 6% -- typically thought of as a good sort of indifference point between buying and renting -- the house is only worth £590k.  At 9% -- a good point to say, "Okay, time to buy before I miss my chance" -- the house is only worth £393k.

That house can't even fetch enough in rent to cover the interest payment, let alone principal and cost of ownership.

Here's another for rent at £900/month.  One next to it is selling for £215k.  At 5% interest, it's about spot on.  On a fairly generous 7% assumption, it should go for £155k.  At 9%, £120k.

That's similar to the math on Mig's place in Leyton.  It's less bubblicious than the 5BR, but still quite bad.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Jun 1st, 2011 at 07:54:07 AM EST
[ Parent ]
Worrin road (only 3 miles away form me) probably ranks as one of the most desirable places in Essex. Leafy, quiet, upper middle class (very non-Essex) grass verges on pavements and walking distance from a fast train into the City. Front door to Bank (in the middle of the City) in 35 - 40mins easy.

So wealthy that Shenfield still has two very up-market butchers (one is a game supplier), a fish shop, a greengrocers as well as a Tesco.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Wed Jun 1st, 2011 at 08:06:51 AM EST
[ Parent ]
Those things are relevant when comparing neighborhoods.  But if people are willing to pay more to live in the area, they'll be willing to pay more in either mortgage or rent.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Jun 1st, 2011 at 08:22:28 AM EST
[ Parent ]
Well since 2009 the Financial services Authority has put a limit of a maximum of 3*earnings as an amount that can be loaned as a mortgage, so on mean London income, the maximum available as a mortgage is  just under £90,000 which will mean you need quite a deposit to get anything.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Wed Jun 1st, 2011 at 09:48:54 AM EST
[ Parent ]
Or prices will have to go down.

I knew the UK housing market was insane when they started offering 5x mortgages and I still couldn't afford to by the place I was renting.

And it hasn't let up.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Jun 1st, 2011 at 09:55:54 AM EST
[ Parent ]
That on its own is going to kill most of the market, when average earnings are around £21kpa.

Anyone with a £100k deposit and earning enough to afford a £200k mortgage isn't going to want to live in an area where they can afford a £300k family home.

Really what's happening is that buy-to-let is keeping prices artificially inflated. People with no choice keep renting, the owners keep cashing in.

But if rates rise the numbers won't add up, and it's unlikely rents can rise much further.

If there's a mass exodus from b2l, or mass repossessions, prices will fall by up to 30% best case.

Worst case will be Ireland 2.0.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jun 1st, 2011 at 10:05:05 AM EST
[ Parent ]
I'm surprised Buy to Let hasn't blown up yet.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Jun 1st, 2011 at 10:08:29 AM EST
[ Parent ]
BBC News:

The number of mortgages approved for house purchases hit a new low in April, Bank of England figures show.

At just 45,166, the number of new approvals was the lowest April figure since the Bank's records began in 1992.

Analysts said the data may have been affected by the number of public holidays in April.

However, the figures suggest that the UK property market will remain subdued in the coming months, with a low level of sales and falling prices.

The number of approvals was 4% lower than in March and 9% down on April last year.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jun 1st, 2011 at 10:17:59 AM EST
[ Parent ]
9% down on last year when sales were terrible, that can't be good.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Wed Jun 1st, 2011 at 11:21:40 AM EST
[ Parent ]
Depends on your definition of "good."

A housing market where an entry-level mortgage is 5+ times median income is not my definition of "good." There are only two ways in which that can change: Higher incomes or lower prices. And higher incomes would take time, even if the British government had the inclination or the economic expertise to make them happen.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jun 1st, 2011 at 11:54:47 AM EST
[ Parent ]
I'm sure with 0% down and 45 years to pay the mortgage the 5-bedroom makes more sense.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Jun 1st, 2011 at 08:14:58 AM EST
[ Parent ]
Funny how close to that we got by accident. We need to move because there will be one more of us. And we had found a place to rent.

But then we saw that, all of a sudden, it was for sale! And we were not in the flat yet so we did not feel too comfortable. I much preferred renting (hell, we probably won't even be in the same country in 10 years time...), my wife maybe swallows a little bit too easily some of the legends about housing but I tried to keep that in check.
Of course, renting in the UK is not the most pleasant situation, with the landlord able to raise the prices pretty much as he feels (that is highly regulated in France).

Anyway, we had agreed to rent it for 550 a week, which was a lot but with the nursery we had to be close to our workplace.
And we made the offer at... 480k (they were asking for 530). Which makes the rental price 5.96% of the offered price. Which they ended up accepting. So we're pretty much in the indifference zone.

On the other hand, it confirms that our Paris flat (which we failed to sell when the market just stopped) should not be worth what it would apparently sell for right now. Based on the rent (OK, maybe I could have a wee bit more but it's not too silly) it should be 260k€. And judging from the offers on the agencies (even taking 10% off) and what you read in the press it would probably go for 360k€.


Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Thu Jun 2nd, 2011 at 02:24:08 PM EST
[ Parent ]
In countries where tenants have rights (foreign concept, I know), there tends to be a markdown if it's occupied - so you'd want to sell when between tenants.

Or not at all - as long as the operating expenses and amortisations are paid out of revenue, it's making you free money.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 03:50:07 PM EST
[ Parent ]
I know that -but there were no tenants. The owners were leaving. So AFTER agreeing to have us as tenants (but pushing back the date when they'd vacate it) they decided to try and sell it -without telling us.

A bit unsettling when you're supposed to move 3 weeks later. With a pregnant wife and the clear knowledge that your current place already isn't enough with the number of children (well, child) you currently have.

On a side note, it's a flat with a freehold.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Thu Jun 2nd, 2011 at 05:17:48 PM EST
[ Parent ]

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