I can’t for the life of me understand why first-time buyers in the UK make such a fuss about not being able to get on the property ladder at the moment. You’d think from the endless whining that everyone who doesn’t actually own a home in the UK and have a correspondingly massive mortgage will end their days as a poverty-stricken social outcast as a direct result. But why on earth would anyone want to buy a house now? Prices are at record levels and it’s clear to even the most optimistic of house-price bulls that the boom of the last eight years is over: even if prices don’t actually fall, they’re unlikely to do much more than stagnate. Moreover, rents have been falling relative to mortgage payments all over the country, and today you’d be hard pushed to find anywhere in the UK where it is cheaper to buy than rent. So why do it?
Four years ago, when I bought my flat, I did the numbers and figured out it would cost me about £400 a month less to buy a flat in the area I wanted than to rent one. I had a deposit saved up and mortgages were easy to get, so I bought one. Today, I wouldn’t. Better surely to save the extra cash as a deposit for the day when the tables turn again and buying is cheaper than renting.
So the real question for non-homeowners today should be not how to leverage themselves up enough to buy an overpriced house here or abroad, but how to invest any money they might manage to save by not doing so. This is where it gets tricky. The markets in general are not looking particularly attractive. Recent employment data out from the US has been disappointing (in June half the number of jobs expected were added), and the miserable sales figures from bellwether retail stock Walmart suggest that the US consumer may be close to sated. That’s not good news for the global economy. At the same time, the technology sector, which has until recently been wildly popular, appears to have taken a tumble and valuations in both the US and the UK are not cheap in general. That said, there is still plenty of opportunity about. Not only do several UK stocks have yields attractive enough to make them well worth buying, but many Asian markets look very attractive indeed over the long term and the commodities sector (oil in particular), while less of a sure bet than it was a few months ago. still looks pretty good to me. With all that on offer, why lose money on a house?