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Saving For a Space Ship

Can We Compile A List Of Uk Property Myths ?

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Can regular HPC posters put together a list of common myths for the Uk property market and pin it on HPC, along with the situation in reality.
I'm getting more flack than usual from anxious homeowners I speak to, defending their ignorant positions. I would like to refer them to an educating list to save my breath.

It was also be interesting to hear which Myths people find most common. I come across 'There is a shortage of houses, so prices will not go down much, if at all' a lot, and recieve flack when trying to diferentiate it from 'there is a shortage of affordable property'

ADDED NOTE:

Webmaster has kindly pinned this topic at my request, so we can identify the main property myths along with a considered attempt at the translation of the myth in reality (I think truth is too strong a term in hindsight) .

Please try and stay on topic as I think this subject is important, given the smoke and mirrors used by the vested interests to hide what is really going on in the property market.

If they have time, I'd be grateful if a veteran HPC poster or two would agree to edit the myths as i don't feel my knowledge in the property area compares with theirs - PM me if wish - cheers


[color="blue"]Edit by Mods: Discussion about what a "myth" is has been moved to this [url="http://www.housepricecrash.co.uk/forum/index.php?showtopic=3666"]separate thread[/url].[/color]

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[quote]There is a shortage of houses[/quote]


********. If there were a shortage of houses you would be tripping over homeless people in the street every 2 seconds. There is a shortage of AFFORDABLE property.


[quote]Low interest rates make higher house prices more affordable[/quote]

Wrong. They lower your initial monthly repayment, but the debt is not eroded and your Total Lifetime Cost of housing(LCH) is exponentially higher.

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[quote name='zzg113' date='Nov 20 2004, 12:40 PM']********. If there were a shortage of houses you would be tripping over homeless people in the street every 2 seconds. There is a shortage of AFFORDABLE property.
Wrong. They lower your initial monthly repayment, but the debt is not eroded and your Total Lifetime Cost of housing(LCH) is exponentially higher.
[right][post="34566"]<{POST_SNAPBACK}>[/post][/right][/quote]

Exactly , thats why I use it as an example of a common myth.

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Myth: Shortage of land will mean house prices will keep on rising.

Truth: If so, why are rents struggling to keep even and in most cases rents are falling? If there was a shortage of land then rents would be rising at the same ridiculous rate as house prices.

Myth: Mass immigration to the UK means greater demand for housing.

Truth: In the last 10 years more people have LEFT the UK than the number entering the UK each year. The indigenous UK population is falling re the low birth rate and 30-something men who do not want to go near the 30-something women of this land so, in the future, less people in this country.

[color="blue"]Edit by Mods: The discussion about the above myth has been moved to this [url="http://www.housepricecrash.co.uk/forum/index.php?showtopic=3664"]separate thread[/url].[/color]


Myth: Housing will be my pension.

Truth: Yes, it is a good idea to have a mixed portfolio but everyone now sees housing as their pension which means, in 20 or so years, a flood of properties will come onto the market driving down prices.

The biggie - about low IRs - has aleady been mentioned.

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A list of these media babble myths which are bandied about as facts would be good and a link to them from the HPC homepage...

MEDIA-BABBLE ABOUT THE BUBBLE:

MYTH:
(1) "Aren't we just becoming like the rest of Europe? Over there EVERYONE rents - its the norm, and people just do not care about owning and are not as unhealthy obssessed as the Brits. "

In Europe, most households are owner-occupiers.
Only in Germany its was/is the norm to rent. The real costs of renting for all the population is paid for out of general taxation/deficit spending, in a 'bizzareo' series of social contracts which last many decades to encorage housebuilding from the post war reconstruction. This is ending, and, as a consequence, houseprices are falling as landlords will make less profits - without the subsidy the housing stock value is falling.

FACT:
(2) "Look - 90% of people rented at the start of the century, and it was normal not to ever own your home. I believe things are coming full circle and the same factors that made more people rent in 1910 then are here now. People best make way for the the new landed gentry."

Although it was the norm to rent, even then the cost of a house was not out of line with the wage multiple of 3-4 times earnings. However, people found they had to cover themselves and thier family for unemployment, illness etc... out of savings, had little job securitys, and they did not have access to finance. As these conditions changed, the ownership rate climbed within a few decades. By the time of the war, most households owned.

Now we do have a large reversal of these factors. A large part of the workforce, is basically forced into declaring themselves as being in 'self-employment' with little job security and no benifits - dispite the same taxes - having to cover themselves through savings against unemployment etc... with little pension and no ability to claim a living level of unemployment benifits.

However, this alone does not justify the houseprices.

MYTH:
(3) "UK Debt is a trillion pounds, that is being racked up on credit cards"

Most of the debt, 85% of it according to the BOE, has been lent to the BTL market. They do not see a significant rise in current consumption. Lending against assets is viewed as alright.

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[quote]Most of the debt, 85% of it according to the BOE, has been lent to the BTL market[/quote]


Brainclamp, get your facts right. 85% is MORTGAGE debt, not specifically BTL DEBT.

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As far as I can see most of the accepted wisdom (still) handed down by my parents generation is due 1970's economics.

If you did your house buying from 1965 to 1985 then the idea that "You can't loose on property", etc makes perfact sense. Of course you can't when inflation is between 10 and 20%. Especially if interest rates are lower than inflation as they were prior to 1979.

What they can't see is that low inflation renders the previous wisdom dagerously obsolete.

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I've attempted to summarise the myths so far, any more for any more or improving comments on those listed ? :)

MYTH 1 -- You Can't Lose on Property

from Captain Manaring:
As far as I can see most of the accepted wisdom (still) handed down by my parents generation is due 1970's economics.

TRUTH -- If you did your house buying from 1965 to 1985 then the idea that "You can't loose on property", etc makes perfact sense. Of course you can't when inflation is between 10 and 20%. Especially if interest rates are lower than inflation as they were prior to 1979.

What they can't see is that low inflation renders the previous wisdom dagerously obsolete.
--------------

MYTH 2 -- 'There is a shortage of houses, so house prices will not fall much, If at all.

TRUTH --There is a shortage of AFFORDABLE property-- If there were a shortage of houses you would be tripping over homeless people in the street every 2 seconds.

From ZZG 113

---------------

MYTH 3 -- Myth: Shortage of land will mean house prices will keep on rising.
From: Masked Tulip
TRUTH: If so, why are rents struggling to keep even and in most cases rents are falling? If there was a shortage of land then rents would be rising at the same ridiculous rate as house prices.
----------------

MYTH 4 -- Mass immigration to the UK means greater demand for housing.

Truth: In the last 10 years more people have LEFT the UK than the number entering the UK each year. The indigenous UK population is falling re the low birth rate and 30-something men who do not want to go near the 30-something women of this land so, in the future, less people in this country.

From: Masked Tulip
------------------

MYTH 5 -- Housing will be my pension.

Truth: Yes, it is a good idea to have a mixed portfolio but everyone now sees housing as their pension which means, in 20 or so years, a flood of properties will come onto the market driving down prices.

From: Masked Tulip
------------------

MYTH 6 -- MEDIA-BABBLE ABOUT THE BUBBLE:

MYTH 6A:
(1) "Aren't we just becoming like the rest of Europe? Over there EVERYONE rents - its the norm, and people just do not care about owning and are not as unhealthy obssessed as the Brits. "

In Europe, most households are owner-occupiers.
Only in Germany its was/is the norm to rent. The real costs of renting for all the population is paid for out of general taxation/deficit spending, in a 'bizzareo' series of social contracts which last many decades to encorage housebuilding from the post war reconstruction. This is ending, and, as a consequence, houseprices are falling as landlords will make less profits - without the subsidy the housing stock value is falling.

FACT:
(2) "Look - 90% of people rented at the start of the century, and it was normal not to ever own your home. I believe things are coming full circle and the same factors that made more people rent in 1910 then are here now. People best make way for the the new landed gentry."

Although it was the norm to rent, even then the cost of a house was not out of line with the wage multiple of 3-4 times earnings. However, people found they had to cover themselves and thier family for unemployment, illness etc... out of savings, had little job securitys, and they did not have access to finance. As these conditions changed, the ownership rate climbed within a few decades. By the time of the war, most households owned.

Now we do have a large reversal of these factors. A large part of the workforce, is basically forced into declaring themselves as being in 'self-employment' with little job security and no benifits - dispite the same taxes - having to cover themselves through savings against unemployment etc... with little pension and no ability to claim a living level of unemployment benifits.

However, this alone does not justify the houseprices.

MYTH 6B:
(3) "UK Debt is a trillion pounds, that is being racked up on credit cards"

Most of the debt, 85% of it according to the BOE, has been lent to the BTL market. They do not see a significant rise in current consumption. Lending against assets is viewed as alright.

From BrainClamp

zzg113 Disagres with above - Brainclamp, get your facts right. 85% is MORTGAGE debt, not specifically BTL DEBT.
-----------------------

MYTH 7 -- BIG DISAGREEMENTS ON THIS MYTH -- Needs Clarification, I will move on as I don't want to get bogged down/ distracted with one myth.
Myth: Mass immigration to the UK means greater demand for housing.

Truth: In the last 10 years more people have LEFT the UK than the number entering the UK each year. The indigenous UK population is falling re the low birth rate and 30-something men who do not want to go near the 30-something women of this land so, in the future, less people in this country.
From: The Masked Tulip

Disagreement From Brain Clamp : There are more workers in this country than ever before. We have the highest immigration in history - ever.
We have the highest immigration of any country in the world.
The native population birth rate is falling, but the non-native birth rate is set to rocket, which will represent 85% of all new britons.

From ZZG113 - [url="http://www.aviddetention.org.uk/migrationw...t-wing%20agenda"]http://www.aviddetention.org.uk/migrationw...t-wing%20agenda[/url] - MIGRATION WATCH UK
Plenty more discussion on the post on this subject

COMMENTS ON MYTHS Pt 1. -- I think you'll find a myth is a traditional belief, commonly accepted ie house prices can only go up. This site is a minority view, therefore the myths will be found on whichever website from which you migrated.
From -Surveyor

2. I thought this whole site (hpc) was dedicated to property myths.



MYTH 8 -- Mortgage Lenders & Estate Agents tell the truth in their reports on property & prices

TRUTH -- They are vested interests who benefit from 'talking up' a property market & rising prices, so often distort the facts or do not tell the truth
From : SFASC

MYTH 9 -- Low interest rates make higher house prices more affordable

TRUTH - They lower your initial monthly repayment, but the debt is not eroded and your Total Lifetime Cost of housing(LCH) is exponentially higher.
From zzg113

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[b]Myth: Rent is dead money so you are better off buying[/b]

Truth: Mortgage interest is also dead money. At present you pay about the same in mortgage interest and rent for a given property. So what really matters is the capital appreciation/depreciation. For instance:

2 bed exec apart in Derby £165k to buy or £700pcm to rent
Buy: at 5% mortgage, interest alone = £666 pcm

[b]So it costs you about the same in dead money to buy and to rent.[/b] Now take a SMALL fall in prices, a conservative estimate of 4% for the year, and you've [b]lost £6400 by buying.[/b] Or £500 odd a month.

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I suspect that the majority of people buying over the last few years have no experience of having savings and seeing it earn interest. Take graduates these days - they are generally in debt through little fault of their own.

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Myth: Lenders are going to continue giving the high income multiples as the mortgage


Ans: I feel that they will not. Once they start feeling that there is going to be negative equity, they will checken out. Some banks have already done that. Which means- house price falls are going to accelerate.

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[quote name='Doubtful' date='Nov 22 2004, 07:47 PM']Myth: Lenders are going to continue giving the high income multiples as the mortgage
Ans: I feel that they will not. Once they start feeling that there is going to be negative equity, they will checken out. Some banks have already done that. Which means- house price falls are going to accelerate.
[right][post="35233"]<{POST_SNAPBACK}>[/post][/right][/quote]

That's for damn sure as mortgage approvals are now going to be scrutinised more closely than before. Say goodbye to the days of OTT lending.
I'm so sure, in fact, I've put my house on it!
;)

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When I tell my friends that I am saving for a house deposit they all look at me blank as if I've never heard of 100% mortgages (some friends have even managed to get this over 35 yrs!).
I reckon when it goes over 20% falls the banks will only consider 10% deposits and more.
Unless Barratt start kicking in the £99 move in and … oh sorry I think they already have!

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[quote]100% mortgages[/quote]


From hereon in to be known as "INEMs" or Instant Negative Equity Mortgages.

[quote](some friends have even managed to get this over 35 yrs!).[/quote]


I'm sure they think this is some kind of achievement, "Wahey, I've managed to mortgage MY ENTIRE WORKING LIFE AWAY. Go Me!"

Never mind the fact that those with a 10%+ deposit have the best rates on the market available to them, whereas high LTV borrowers get shafted with the SVR.

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Webmaster has kindly pinned this topic at my request, so we can identify the main property myths along with a considered attempt at the translation of the myth in reality (I think truth is too strong a term in hindsight) .

Please try and stay on topic as I think this subject is important, given the smoke and mirrors used by the vested interests to hide what is really going on in the property market.

If they have time, I'd be grateful if a veteran HPC poster or two would agree to edit the myths as i don't feel my knowledge in the property area compares with theirs - PM me if wish - cheers

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A great myth about property is that it will fall in price.

Take property over the past 200 years and draw yourself a graph relating to price.

And voila what have you got?.

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This:


[img]http://home.pacbell.net/nstuart/Japan_Land.jpg[/img]

[quote]A great myth about property is that it will fall in price.[/quote]


I have just proven that this is not a myth.

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Nope you have just taken the timeline that served your purpose.

I think Japan has been around a hell of a long time before 1980 or did those figures suit your point.

If I was to take the period from 1945 to present day then the picture would prove my point. Look at an investment over a lifetime not just the short term.

Your investment may go down as well as up but in the long term there is only one way to go hence the reason you would like to purchase a property yourself in the future. Because you know it will go back up.

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[quote]Nope you have just taken the timeline that served your purpose.[/quote]

As have you.


[quote]hence the reason you would like to purchase a property yourself in the future. Because you know it will go back up.[/quote]

No I would buy it cos I want somewhere to live that i can call my own.

Laurejon, if an investment has gone up in the past, that does not mean it will go up in the future. So shut up.

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[quote name='Saving For a Space Ship' date='Nov 29 2004, 09:27 PM']BBB, How about giving us a list of property myths from a Bull view as the ones we 've got so far are mainly from bears.
[right][post="38309"]<{POST_SNAPBACK}>[/post][/right][/quote]


ok then no probs, however i won't be getting into any long arguments/discussions over them, i don't mind clarifying anything, but refuse to be drawn into any marathons. these are my opinions and my views, you may see them differently to me, thats why i'm bullish and you're bearish. i'm sure i will have covered the basics (and indeed depths) of most myths.


[b] BEAR MYTHS[/b]

1)population decreasing

2)planning permission is going to get easier.

3)the housing market acts the same as the stock market

4)Landlording is a non profitable mugs game

5) landlording/developing does not give back to the economy

6)paying £1000 pcm rent is a sound financial idea

7)high IR's and recession came after the crash in the early 90's ie the crash was caused by primarily through sentiment.

8)property is'nt a good long term investment in real terms.

9) you can gear a share in exactly the same way and with the same same risk element as a house

10) the bears on this site have no vested interests. :P

11) the market should be viewed and treat as a macro market.

12) interest only mortgages have no merits.

13) a three bed semi is my god given right.(at whatever age)

14) the crash will come this year (repeat per annum)

15)all bulls suffer from money illusion

16) theory is more important than practice

17) interest rates have no bearing on affordability.p/e is the [b]only[/b] worthy measure

18) self certs are dead

19) a degree makes you some kind of super human being, and the answer to all your dreams and aspirations (even though someone else in the meantime could have used the time to learn something far more appropriate to getting on in life/with people) although you may think this has nothing to do with property you only have to look to see how many priced out grads there are on here to prove my point.

20) there are no bargains anywhere in todays market.ie everywhere is topped out and yielded down.

21) people will bypass a basic human need to 'nest' and house themselves when in a position to be able to do so.

22) i messed around a little in my younger years,(not saving/spending too much/drinking/not making sacrifices) but now i have the right to own a house......right now. i mean now.




and........ thats just off the top of my head. :D

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Here's the biggest myth of them all

There will be no crash, just a soft landing :lol: :lol: :lol: :lol:

By that I presume they mean that these ridiculous prices will ease off just a touch so that STILL NO SOD can afford them. Interesting (and completely stupid) notion

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