Friday, 11 April 2008

Fun with other people's lives!

Some of you wanted another quiz, which this is not. But you still get to answer some multiple choice questions, and that's always fun, right? Also some of you may have useful insights into the world of international economics. Or not, who knows. If all else fails there is always the entertainment to be derived from poking about in the detritus of other people's lives, no?

So.

I have a house in Oxford. Its value has certainly increased considerably since I bought in 2004, not least since I did some major restructuring works. It is a nice little house, currently rented out to friends. These tenants will be leaving in the summer.

If I rented it through an agency, I would be earning about half what I pay each month as the mortgage. Managing the rental myself has been stressful and difficult. I can pay the mortgage, just about, but it is a big financial commitment/ burden and as you know I am forever banging on about money in a boring fashion.

The house price crash in the UK has not, apparently, affected Oxford as much as elsewhere (or to quote someone who knows more about these things than I, "the property is resilient" which makes me think of my little house bravely fighting a storm far out in the Atlantic somewhere with stoical acceptance of its fate). Oxford generally has an insulatory bubble which stops things getting really bad there.

I have guaranteed work at the University here for next semester and they are already talking about what I might do this time next year. Chances of me moving back to the UK in the next 12-16 months are low. And I am in the process of looking to move out of my flat.

The Euro has reached a record high against the pound, so that €1 is worth a whole 80p. This makes it a pretty shit time to import capital into Italy.

I very very much like owning a house. It makes me feel safe.

Considering all the above factors, financial, practical and emotional, should I:

1) Rent the house out through an agency; muddle through somehow financially. The emotional & financial security of a UK house is worth it in the long run and the market will bounce back.

2) Rent the house out directly; cope with the extra hassle. Spend a lot of time traipsing back and forth between the UK and Italy in a stress. Console self with the security aspect.

3) Sell the house, buy a place here. House prices in the UK are only going to continue falling the longer I leave it. Sod the international exchange rate.

4) Sell the house, invest the money in something more secure, carry on renting here. Buying here right now would be foolish in the extreme. Cope without owning a house. Eek.

5) Sell the house, sell all my possessions, join a cult. Stop worrying about the material world. Embrace natural fibres, eat more chickpeas. Have dorm bed allocated to me in unlikely suburban ex-asylum.

6) Put on a miniskirt, go to Gilda, seduce Mirko Vucinic. Stop worrying about the material world. Embrace Dolce & Gabbana, drink more champagne. Have palatial apartment purchased for me in Garbatella.

Take your pick. Feel free to make other suggestions, if you have them.

7 comments:

Henry Ford said...

Property in Oxford has not fallen in real terms since 1971. You'd be a loon to sell.

Aussie Romanista said...

Brisbane & Melbourne. Boom property markets. You could sell Oxford and probably buy one in each city, close to the city, and then you're owning 2 properties in an upward looking housing market rather than stagnant or downturning market.
I'm not a financial consultant by any means but I'd seriously consider looking in to it if I earned the euro or the pound.

So let's say you have a AUS$350,000 (205,000eur) rental property earning $300 (176eur) per week in rent income, property managed at 8.5% you pay about $110 (64eur) a month to your agent.

You need to do all the numbers and get in touch with the right people in the game here but I think it's the place to be investing in bricks and mortar. Europe is full, Australia is filling. Makes sense.

Chelsea Boy said...

Sweetheart I'm sure we could find someone out there who can advise you properly about the financial implications of all of those scenarios. Except the seducing Vucinic one anyway.

Spangly Princess said...

aw, that was my favourite

joejoejoe said...

I'm not sure if it applies to the UK but I saw a report in the US that showed that university towns were much more resilient in terms of real estate prices than other markets. (click link in my name to read the Business Week article)

OT: The Chicago Fire logo is an almost exact knockoff of the actual Chicago Fire Department logo. I saw you comment on Pitch Invasion and tried to add my 2c but my comment was lost in the internets.

sp3ktor said...

Due to regulations regarding financial advice I have to point out that this is not financial advice.

Option 1 (getting an agency to rent it) seems like the best solutions. Managing tenants from 1000 miles away seems like asking for trouble.

There's still no evidence that a property crash will happen at all. Demand for housing in the UK is still high while supply is still low.

In the early nineties demand dropped through high interest rates and high unemployment - neither of which apply in the current climate.
Of course the removal of excessive mortgage offers could lead to a drop in demand, but at the moment all it looks like doing is just throwing the brakes on a period of excessive growth.

But hey, don't let any of that stop you going for the WAG option.

chris c paul said...

As less people buy there will be more properties available to rent and more people looking to rent. this will drive rents down. I imagine that the commuter belt and student status of Oxford ensures that the renting market is quite resilient though. Someone is always sure to rent a nice little house in Oxford.

So I would rent through an agency to make life hassle free.

I would then don a very short mini-skirt, join a wild commune, drink lots champagne, vote socialist far left. That way, if the world economy does fall apart, at least you will have lots of friends, lots of sex, be too drunk to care, and have the moral high ground.

Hope this helps.