Bruce Banner

Why Can't The Media Say "buy A House"

63 posts in this topic

I once worked for a US company that forbade its salesmen from telling clients to "buy their product". Instead they had to say "invest in their product".

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I once worked for a US company that forbade its salesmen from telling clients to "buy their product". Instead they had to say "invest in their product".

An investment pays for itself, buy it and the money's gone.

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In fairness, most FTBs could hardly be said to be buying a house. If you borrow thousands of pounds from your parents for a deposit and then leverage up with a 4x joint salary 30 year mortgage or buy shared ownership, it is unlikely that you are going to end up actually owning a house at the end of it.

Edited by Dorkins

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Traditional principles of property rights include:

  1. control of the use of the property
  2. the right to any benefit from the property (examples: mining rights and rent)
  3. a right to transfer or sell the property
  4. a right to exclude others from the property.

However, anyone with a mortgage does not have control...as per the solar panels on the roof debacle.

So I would argue, you own a house, but the property belongs to you and the bank, in that the bank has restricted some uses by contract with you.

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Ah, so "getting on the property ladder" means starting the process towards owning a house.

That makes sense but I don't think it's what they mean.

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Ah, so "getting on the property ladder" means starting the process towards owning a house.

That makes sense but I don't think it's what they mean.

and ladder?....one with infinite rungs?....that would make it a perfect slide...wouldnt it?

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I've never understand how this magical "ladder" works. Unless you are a developer and buying a house doing work then selling at a profit and re investing.

Say I buy a flat in the ghettos of Basildon for £100k live there a few years and prices rise 20% I sell for £120k but the next step which when I bought would have cost £150k now costs £180k. So that's another £60k I have to find to step up the "ladder" whereas if prices had stayed the same it would have cost me £50k to step up. So the ladder actually relies on you borrowing/earning/finding more money each time.

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I've never understand how this magical "ladder" works. Unless you are a developer and buying a house doing work then selling at a profit and re investing.

Say I buy a flat in the ghettos of Basildon for £100k live there a few years and prices rise 20% I sell for £120k but the next step which when I bought would have cost £150k now costs £180k. So that's another £60k I have to find to step up the "ladder" whereas if prices had stayed the same it would have cost me £50k to step up. So the ladder actually relies on you borrowing/earning/finding more money each time.

penny-drops1.jpg

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Obviously we all understand that but where does the concept come from?

probably for the reasons you stated...you borrow 90% to buy the first one....for most people, it wont be a mansion.

inflation then made the next move up affordable, what with wage rises making the extra you will need available via a new loan, plus any repayment on the old loan you will have made...this will be rung two...and so on until you have reached the pinnacle...clearly every ladder must end in your very own Beckingham Palace.

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Obviously we all understand that but where does the concept come from?

Surely it originates from a time hen wage rises outstripped or at the very least kept pace with leveraged jncreases in house values so there was a very real ladder, you boughtone house with a mortgage (your very financial essence having been gone through individually with your bank manager) and worked paying down the priciple over time. You had a couple of kids and a few wage rises later decided time to move up th e rungs to a family home which you could fund by selling the current starter home and with wage rises the payments were no harder now than before etc.

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Surely it originates from a time hen wage rises outstripped or at the very least kept pace with leveraged jncreases in house values so there was a very real ladder, you boughtone house with a mortgage (your very financial essence having been gone through individually with your bank manager) and worked paying down the priciple over time. You had a couple of kids and a few wage rises later decided time to move up th e rungs to a family home which you could fund by selling the current starter home and with wage rises the payments were no harder now than before etc.

This. Plus in the old days the rental market consisted mostly of dodgy bedsits or places which cost more than the equivalent (repayment) mortgage, so there was a real wealth effect from being on the ladder even though this was offset buy the rungs getting further apart.

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Obviously we all understand that but where does the concept come from?

My guess is that it comes from people who bought in the 1960s/70s who were able to quickly wipe out mortgage debt thanks to wage inflation. The unexpectedly easy acquisition of equity meant they could upgrade to better properties every few years with relative ease. Of course this equity came at a price, which was the real terms destruction of other people's savings.

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My guess is that it comes from people who bought in the 1960s/70s who were able to quickly wipe out mortgage debt thanks to wage inflation. The unexpectedly easy acquisition of equity meant they could upgrade to better properties every few years with relative ease. Of course this equity came at a price, which was the real terms destruction of other people's savings.

little to do with equity...it was the size of loan you needed to change up.

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I've never understand how this magical "ladder" works. Unless you are a developer and buying a house doing work then selling at a profit and re investing.

Say I buy a flat in the ghettos of Basildon for £100k live there a few years and prices rise 20% I sell for £120k but the next step which when I bought would have cost £150k now costs £180k. So that's another £60k I have to find to step up the "ladder" whereas if prices had stayed the same it would have cost me £50k to step up. So the ladder actually relies on you borrowing/earning/finding more money each time.

There are some very over-paid people in some very swa-nky offices in Canary Wharf who would prefer that you keep such observations to yourself...

Edited by rantnrave

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My guess is that it comes from people who bought in the 1960s/70s who were able to quickly wipe out mortgage debt thanks to wage inflation. The unexpectedly easy acquisition of equity meant they could upgrade to better properties every few years with relative ease. Of course this equity came at a price, which was the real terms destruction of other people's savings.

I would agree with that, so why the hell do they keep going on about ladders?

The answer is probably to convince youngsters that the only way they will ever own a house is to "get on the ladder now", which in today's market is a nonsense.

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I've never understand how this magical "ladder" works. Unless you are a developer and buying a house doing work then selling at a profit and re investing.

Say I buy a flat in the ghettos of Basildon for £100k live there a few years and prices rise 20% I sell for £120k but the next step which when I bought would have cost £150k now costs £180k. So that's another £60k I have to find to step up the "ladder" whereas if prices had stayed the same it would have cost me £50k to step up. So the ladder actually relies on you borrowing/earning/finding more money each time.

I think it's more to do with how in a rising market your equity grow. Take this example:

I start with a 10% deposit on a 100k home = 10k

4 years later (if we go back in time to 1999 to 2003), my house is worth 200k

Suddenly I have 110k equity in a 200k house.

Time to move up the ladder and put down say 33.3% down on a 330k home.

4 years later (2003 to 2007), my 330k house is now worth 500k.

My original 10k has become 280k worth of equity in my half-mil house!!!!

The trouble is this breaks down as soon as property stops going up in value, and it becomes clear that it’s not a property ladder, it’s a ponzi scheme that just happens to look a bit like a ladder when everything’s going ok.

Edit to correct a percentage error half way through my working!

Edited by benzlife

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Surely it originates from a time hen wage rises outstripped or at the very least kept pace with leveraged jncreases in house values so there was a very real ladder, you boughtone house with a mortgage (your very financial essence having been gone through individually with your bank manager) and worked paying down the priciple over time. You had a couple of kids and a few wage rises later decided time to move up th e rungs to a family home which you could fund by selling the current starter home and with wage rises the payments were no harder now than before etc.

Ahh thanks. That's why the concept seems so strange to me. It's not been applicable since before I was born!!

Edited by Pent Up

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Buying, ie shelling out, can be seen as losing or giving something,whereas getting into a mythical property club/ investing in a money machine is seen as a gain? Basic sales patter used to keep sheeple borrowing,which unfortunately has gone badly badly wrong, but bbc etc keep using it for fear of speeding up the unwinding process , they want and need sheeple to believe?

Edited by dances with sheeple

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I think it's more to do with how in a rising market your equity grow. Take this example:

I start with a 10% deposit on a 100k home = 10k

4 years later (if we go back in time to 1999 to 2003), my house is worth 200k

Suddenly I have 110k equity in a 200k house.

Time to move up the ladder and put down say 33.3% down on a 330k home.

4 years later (2003 to 2007), my 330k house is now worth 500k.

My original 10k has become 280k worth of equity in my half-mil house!!!!

The trouble is this breaks down as soon as property stops going up in value, and it becomes clear that it's not a property ladder, it's a ponzi scheme that just happens to look a bit like a ladder when everything's going ok.

Edit to correct a percentage error half way through my working!

since when did your increase in equity buy another house?

LOANS do that.......your 90K loan has turned into 220K---

Edited by Bloo Loo

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since when did your increase in equity buy another house?

LOANS do that.

True, but if you have a high percentage deposit (which happens as your equity stake grows), you become a smaller risk to the bank, and theoretically they'll lend you more money.

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True, but if you have a high percentage deposit (which happens as your equity stake grows), you become a smaller risk to the bank, and theoretically they'll lend you more money.

and to do that, you need either a bigger salary, or support from a benign interest rate environment.

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Obviously we all understand that but where does the concept come from?

The forever increasing wages, increasing take up of debt, availability of debt, increase of equity that matched the increase in debt, debt increasing more than inflation increased to counterbalance, debt increasing more than interest rates decreased to counterbalance......debt = wealth, until the debt runs out then the ladder becomes a snake. ;)

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