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Can We Compile A List Of Uk Property Myths ?


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#1 Saving For a Space Ship

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Posted 20 November 2004 - 12:36 PM

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


Edit by Mods: Discussion about what a "myth" is has been moved to this separate thread.

#2 zzg113

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Posted 20 November 2004 - 12:40 PM

There is a shortage of houses



********. 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.


Low interest rates make higher house prices more affordable


Wrong. They lower your initial monthly repayment, but the debt is not eroded and your Total Lifetime Cost of housing(LCH) is exponentially higher.
Al Greenspan, who facilitated the birth of world-wide HPI with irrationally exuberant interest rates

mortgage

#3 Saving For a Space Ship

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Posted 20 November 2004 - 12:50 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.

<{POST_SNAPBACK}>



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

#4 The Masked Tulip

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Posted 20 November 2004 - 01:05 PM

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.

Edit by Mods: The discussion about the above myth has been moved to this separate thread.


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.
The success or failure of your deeds does not add up to the sum of your life. Your spirit cannot be weighed. Judge yourself by the intention of your actions and by the strength you faced the challenges that have stood in your way.

The people closest to you have been trying to tell you that you have made a difference. That you did change things for the better. The Universe is vast and we are so small. There is really only one thing that we can ever truly control - whether we are good or evil.


The political triumph of the American Right has been to advance relentlessly the economic interests of the country's richest people, while emphasising a swath of moral, social and foreign policy issues that motivate and certainly distract middle-class and poor voters.

#5 brainclamp

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Posted 20 November 2004 - 01:22 PM

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.

#6 zzg113

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Posted 20 November 2004 - 01:24 PM

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



Brainclamp, get your facts right. 85% is MORTGAGE debt, not specifically BTL DEBT.
Al Greenspan, who facilitated the birth of world-wide HPI with irrationally exuberant interest rates

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#7 George Mainwaring

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Posted 21 November 2004 - 07:43 PM

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.

#8 Saving For a Space Ship

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Posted 22 November 2004 - 04:32 AM

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 - http://www.aviddeten.....t-wing agenda - 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

#9 captain sensible

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Posted 22 November 2004 - 12:52 PM

Myth: Rent is dead money so you are better off buying

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

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

#10 wriggly

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Posted 22 November 2004 - 04:26 PM

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.

#11 war

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Posted 22 November 2004 - 06:47 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.

#12 red

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Posted 22 November 2004 - 07:07 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.

<{POST_SNAPBACK}>


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!
;)

#13 No Muggy Bear

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Posted 22 November 2004 - 08:18 PM

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!
Lets party like it's 1929

#14 zzg113

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Posted 22 November 2004 - 08:24 PM

100% mortgages



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

(some friends have even managed to get this over 35 yrs!).



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.
Al Greenspan, who facilitated the birth of world-wide HPI with irrationally exuberant interest rates

mortgage

#15 Saving For a Space Ship

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Posted 28 November 2004 - 07:03 PM

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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