Or in terms of an extra bedroom; on a two bed £125k house the cost to go to a three bed may be £25k ie three bed costs £150k ie one salary extra, if they double in price overnight your two bed is worth £250k but the three bed now cost £300k ie two salaries and you can't afford it as it is two salaries. If you did not own even the two bed then you may as will emigrate as you will never even be able to buy a two bed.
Yep I always use the example of a 100K flat and moving to a 200k flat.
Bascially if the price doubles - everyone THINK they have 'made' £100k - when in fact in terms of payments they have 'lost' £100k
When you explain this most simple of thing sto people it is like they have just been told some amazing fact.
This is essentially what happened over the last decade with rampant HPI. You end up with a property worth a fortune but can't move to one where you can bring up a family.
Edited by satch, 23 September 2011 - 01:12 PM.