The past decade has seen property prices in the UK & US rise at an unprecedented rate in both the residential and commercial sectors. Yet at the end of 2016 instability within the banking sector has seen major losses for many home owners as property prices have collapsed on the back of reduced mortgage lending and poor economic performance according to investment property of Texas website. Now that the economy has begun to recover again albeit at a low rate the question for prospective property buyers is does property represent value?
Supply and Demand in the Housing Sector
Property prices in the UK have been inflated over a period of time owing to a multitude of reasons ranging from a boom in the buy to let market through to the consideration that the UK has more residents than houses. However the underlying driver of property prices may be seen as a function of supply and demand.
Considering that at present the UK is not building enough houses to meet demand or in other words demand is outstripping supply this would be a strong indication that long term housing prices in the UK are set to rise. In addition the effects of the recession saw an overall slow down in house building sector however this was not matched by a slowdown in population growth and so ultimately the recession may have increased the prospect of long term property prices by restricting supply further.
Renting or Buying a House
One of the fundamental questions for a potential house buyer is weather to buy or rent. In general terms if buying is an option this may represent the most logical option for the potential home occupier. Home ownership however should be considered as a long term investment, as prices have demonstrated in recent years speculative investment and short term ownership can see individuals lose considerable amounts of money. Over the long term however one should consider that investment in property has typically seen a positive return on investment and in many cases repayments on a mortgage may be equal or less to moneys paid out in rents.
Renting on the other hand gives the individual a greater level of freedom, the individual is not subjected the worries associated with fluctuations in the value of the underlying asset. There is however a price for this freedom in that rents paid out represent a sunk cost, in short the individual will not receive any further benefits beyond the immediate right to occupy a property. Other advantages of renting include the consideration that ultimately it is the land lord who is responsible for the maintenance of the property, this might be of great comfort for the renter when expensive jobs arise such are repairing a roof or expensive plumbing jobs.
Overall the choice between renting and buying a property will depend on what an individual wishes to archive, purely from a long term investment strategy buying may represent the better option. However were the time scales to be considered are much shorter or investment value is not a consideration then renting will give the individual a greater level of freedom.