Kicking the Property Ladder

Why buying a house makes less sense than renting - and how to invest the money you save in shares, gold, stamps and more

Robin Bennett

• Publisher: Harriman House
• Year: 2012
• ISBN:
  9780857192813
• Topic: Crescita personale
• Subtopic: Finanza a livello personale

Is property investment all it is cracked up to be?Buying a house has become a byword for financial security; renting is dismissed as a lacklustre alternative to a mortgage and the bounties of ever-rising property prices.But what if it's not true? What if renting represents far better value for money - and the best financial decision you could ever make is NOT buying your own house?Did you know that half of all people living in poverty in Britain today are home-owners?In this compelling and witty exploration of home ownership in 21st century Britain, author and entrepreneur Robin Bennett reveals the startling truths behind the modern property myth beloved of certain newspapers and estate agents - and why far from guaranteeing profit, buying a house might be an unnecessary drain on your financial wellbeing.He then shows what you should do with your money instead - exploring firsthand how to secure your future with effective investment in stocks and shares, gold, stamps and more.Jargon-free, hilarious and wise, 'Kicking the Property Ladder' is a must-read for anyone despairing of ever getting their own house, wondering what it might mean to rent instead, or puzzled by the impossible promises of an ever-expanding price bubble.

Chapter 1. Life on the Farm

WE LIVE IN a five-bedroom house about nine miles south of Oxford. Someone started to build it in 1630 and someone else finally got around to finishing the job in about 1940. One of the interesting things about our house – given the shortage of character properties in our neck of the woods – was that between the wars it was very nearly knocked down (it was apparently very cold to live in and, until very recently, it had a disappointing tendency to flood).

However, attractive lead-windows have been fitted, door frames sealed, roofs mended and ditches widened. It’s what you would call snug now, and when we light a fire in the living room this is generally just for effect and not to stop the children’s extremities going black and falling off.

The second point of note is that it’s got a secret room. Up one of the chimneys, big enough to sleep in – like a priest hole – although I’m told it was just a place intended for smoking bits of pig.

The property also has three barns, mature gardens, and an arbour down which my wife and I can wander of a summer’s evening, reciting poetry to one another should we wish. It’s got a paddock, an orchard and around six acres of field swarming with rabbits we like to eat; last summer we kept orphaned lambs there.

If it sounds idyllic, it almost is. Between April and September our three children spend most of their time outside with the dog. They are going through a camps phase at present and recently an alarming number of temporary dwellings have sprung up around the place. One day I’m going to get up and find that protesters or travellers have moved in.

Our sociopathic cat, Dennis, loves the barns in particular. This is his realm, where he is Nemesis of Rodents. But I like the barns, too. The property was a real farm up until the 1980s and the previous occupants never got around to clearing them out before we moved in. I’ve got one barn where I can put all the tools I’ve bought since we were married and never use, and another that is a sort of living museum to life on a small holding in the 1950s. 40-year-old copies of The Sun lie in yellowing stacks next to cast-iron beds, a bicycle that looks like it belonged to an Edwardian masochist, sheep-fencing materials and the sort of utensils for goat care you just won’t find at B&Q these days.

It smells of tractor oil, dust and straw and it’s a great place to hide from the rest of the family.

On a practical level, our house is about 15 minutes for the school run, five minutes to the nearest Tescos, and 25 minutes to my office in Henley-on-Thames.

As with all properties, unless you are a gazillionnaire, there are drawbacks – for one, there’s a public footpath that crosses the property. It doesn’t get used much but this just lures you into a false sense of security. On a few occasions, I’ve been caught out by groups of ladies out for an early morning jog. They in lycra, carrying bottles of water, me standing in naught but my boxer shorts, having a coffee. I’ve also been surprised whilst yelling obscenities at the children, wondering why they have gone oddly still – only to find a man with a goatee and a map in a plastic sleeve had been standing behind me, politely waiting for my tirade to peter out so he could ask the way to Didcot.

And that reminds me, the power station looms about three fields away – its cooling towers look like giant loo pedestals.

However, if mortgage rates go up, I don’t care. If a tap leaks, a window breaks or the boiler goes on strike, it’s not my problem. We suspect there may be subsidence and the chimney with the secret room looks crumbly, but this does not keep me up at night. The reason for this is simple. We rent.

The property dilemma

Initially (about 11 years ago) the decision to rent was because we were not sure that moving to the country was a permanent thing or if we’d decide to bolt back to Clapham at the first sign of angry villagers carrying pikes and brands. But then something began to dawn on us. With three children and a taste for old properties with a bit of land, we actually could not afford to buy. The value of where we live now is around £1.6 million. However, we pay £1,950 a month to live there with no maintenance costs.

To put that into perspective, if I wanted my mortgage to be the same, I would have to sink £1.3 million into the property (this is assuming a 20-year mortgage at 3.5%.) and leave around £3–5k a year for upkeep. Money we feel could be better invested elsewhere.

We do own property, just not the one we actually live in; the rental income from an existing commercial property simply covers our rent where we live. Over the last few years, my wife and I have even begun to question whether we will ever own a family home, or if we would want to.

Nevertheless, we are still asked by friends and relatives when we will eventually buy. And I will admit to a certain sense of discomfort brought about by being a man who houses his family in rented accommodation – almost as if I’m not quite doing my duty on some inherently masculine level – a bit like those house husbands who are in charge of Alphabetti Spaghetti and colouring in, whose wives earn far more than them and are in charge of the legal department in a blue chip city firm.

Most people assume that us renting is a phase and we will eventually grow up properly and join the real world where people cope with mortgage payments and aged boilers.

However, the figures (for us at least) just don’t add up, which got me thinking: are we missing something obvious, or perhaps are we an aberration – an exception to the general rule that owning one’s house should be the eventual goal of any self-respecting adult? Or might it be that we have stumbled onto something, namely that renting can save money, which might in turn be invested more usefully elsewhere?

With property prices falling and interests rates so low, this has become a bit of an obsession lately, so I decided to stop mulling and take a more rigorous approach to finding out the truth of the matter. Initially, I set my sights at looking at the figures and statistics as a businessman who has run several reasonably successful companies over the last 20 years. But I didn’t plan to leave it there, as statistics can be misleading; I would also study the property market in context, it’s history, how it came to become such a national pastime we all love to discuss incessantly at dinner parties. And finally I would look at the alternatives.

In this way, I hoped I would find the answer to the question – compared with the options, is property investment all it is cracked up to be?

Chapter 2. The Property Myth

LIKE MOST PEOPLE these days, when faced with a problem I did not fully understand, I strolled into the kitchen and made myself a coffee. That done, I opened my laptop and went online.

Happily, there is a wealth of statistical information and analytical tools on the web to help the curious, and my first revelation, after about 20 minutes of looking at the current products offered by high street lenders, is that mortgages are expensive.

Alongside your pension, they are most likely to be the dearest financial products you will buy in your lifetime. In the great pension versus property debate, people are comparing their two biggest outlays in their adult life, so it is important to get it right. It struck me that it might well be that both are overpriced and I intended to look into that later.

For now, I just wanted a few salient facts.

Any householder knows that it is the interest rate that is key when deciding on a mortgage, so the obvious thing to do was look at what interest rates have been doing the last few decades.

Mortgages peaked at the end of the 80s at 17.5%. I remember my father mentioning a figure of 29% interest during the 70s property crash. However, the average in the last 30 years is 7%. So, according to Barclays Mortgage Calculator if you borrowed £300,000 over 20 years, you would end up paying £566,160 in total. To put that into perspective, the interest alone would cost £1,700 a month, before you paid ...