adarmo

I'm not planning on it. It's a contingency. Just like I'm not planning on dying, but I have life insurance. They do have an awful lot of space though, and a jolly nice house. I think they enjoy having me there too. My parents are always inviting me back. Do tell me all about my poor financial decisions today. Being such an expert you'll of course be aware that nobody can predict the future so whether or not buying a house at this moment proves to be a good or poor decision remains to be seen. Incidentally, on whose framework should we judge my decision? Yours, when it has no bearing on me and you have virtually no understanding of my financial position, or perhaps the person far more than capable of making a financial decision and judging it...... me? Since I'm clearly making some poor financial decisions perhaps, in your munificence, you'd be so good as to put me on the right track? When should I buy if not now? Next year? Year after? What if i'm at the age whereby I can't get a full term mortgage and have to settle for a smaller property in a cheaper area? What if the area I'm buying in is having millions spent on it in regeneration and new roads which might make it less affordable in a few years? How long have you been thinking now isn't the time to buy?

I like how they say he's a bigger threat than China. I guess if he kicks of world war three I'll have to concede that one though.

http://www.bbc.co.uk/news/business-40880640 Rising interest rates a greater threat than China.

Which taxes?

I guess then nobody should ever buy a house because any contingency plan for a worst case scenario would render them with a modern entitled to a bailout mindset. FYI I think it would be highly unlikely that both of us would be unemployed (being a chartered accountant and a solicitor). Has it occurred to you that I might be buying this place because it has scope to build and annex where I might one day look after an elderly parent (or bail them out in your view)? If you're seeking an absolute collapse in prices are you not expecting a bailout from this reality?

Zoopla is generally quite good to get a feel.

Even though I'm in the buy a house now camp I think she's nuts! It's one thing to borrow to buy a home you're happy living in forever regardless of prices, interest rates or war with North Korea etc (i.e. me and the other half) but quite another to start leveraging the hell out of yourself to buy more property! We know we can cover our mortgage on one salary (a the moment at least) and worst case scenario we could both move in with family and rent it out while still paying something towards the mortgage. Having two mortgages though and relying on a tenant to pay one, with all that's going on right now I think she wants her head reading. It's marginal behaviours like this that really creates the instability within the market. I agree with you @darkmarket (didn't know you could do that @ thing so cheers!) moral hazard is alive and well and driving us to hell.

https://www.numbeo.com/property-investment/rankings.jsp Tokyo cheaper than London, but not cheap. Cost of living is 22nd in the world https://www.numbeo.com/cost-of-living/rankings.jsp

I've used the discount here to be the 10 year gilt (which is not cash but which is considered risk free since the government has not defaulted for a while) which is used for annuity and perpetuity pricing. We could make the model more complicated, add in inflation (which nobody can really predict) and the returns in other investment classes (which nobody can really predict). Instead of a nice bit of simple maths we'd end up with scenario analysis with varying probabilities of likelihood.

Haha, yes quite. I think from what I'd done I was happy that buying is short term cashflow negative, but long term very very very cashflow positive!

I'm not sure this is a clean comparison. I was renting a flat for £900 a month, which was £11k a year (I'm rounding to nearest £100) . New house mortgage is £1,300, but is detached in a much nicer location with a garden and none of this shared parking nonsense. Interest only I would be paying £400/month. It is correct to say that from a cash flow perspective the mortgage is more per month than renting. The true comparison would be renting from the bank though, and that's only £400 on an IO. The other way to look at this is today's present value of my future mortgage payments, v the present value of my future rental payments . Present value of mortgage = £367K easy since that's just what I owe but if I go interest only for 50 years (until I die lets say) then the present value is £183k Present value of renting at £11k/year until I die (50 years) at 1.13% discount rate (10 year gilt) £419K Assumptions are that interest rates stay as they are today, but also that the rental doesn't increase and I've not factored in moving costs (buying or renting) nor property maintenance/insurance etc. Also bear in mind that the properties are not comparable. the house we're buying is a three bed detached walking distance of a market town and mainline station. The flat is a rental on a main road opposite a few takeaways .

In my experience they wouldn't. they;d withdraw from the labour market and work fewer hours since they wouldn't need to work as much to have a living wage. My theory about high house prices is that they want them high so that most of us have to stay working as much as we can for as long as we can in order to generate lots of tax revenue. Then, at the end of it all we have lovely expensive asset that can be taxed on death, or used to pay for care etc.

How cheap are houses in Japan?

Who knows. Perhaps they could do with some LVT themselves

I don't disagree, and especially on the thing about leaving places empty.... they have the view that property depreciates once people start living in it. You are correct that foreigners can buy property. Iirc it was the Americans buying up Tokyo that drove the start of the mania I the late 70s

Whats interesting to me is that the ratio has held as stable from the crash in the early 1980s to today. If the Chinese buyers were the explanation then they'd have had to be doing it a while. Japan has a notoriously restrictive immigration policy and is a fairly closed border country. Of course Chinese, and other foreign, investors will have an impact but I'm not so sure that explains the relationship of prices to incomes. For example the Chinese have crazy house price to income ratios. The highest in the world in fact. Who is investing there? Is it circular to suggest the Chinese are blowing bubbles in other markets, and their own? If that's the case then there's either something about the Chinese buying houses that causes prices to go crazy, or there's more to it than just Chinese investors if you see what I mean? https://www.numbeo.com/property-investment/rankings.jsp

Stimulus is akin to pushing on a string. You can pull (tighten) with immediate and proportionate effect. But to release the string and make it work the other way is tricky. You can't force people to borrow and spend. Tellingly the stimulus we've had inflicted/gifted has ended up with people borrowing cheap money to buy assets they hope with generate a yield or capital gain. BTL, stocks, bonds, even Private Equity is borrowing billions to buy companies previously too large for their remit.

And 7 million empty homes....

But the ratio of prices to incomes is as much of a surprise as the inability of said 'stimulus' to ignite inflation.

It is true that property is now more affordable than during their boom, but still not cheap. To be fair to anyone who hasn't researched the numbers it is a common story in house price circles that in some areas of hyper super prime Tokyo prices fell by more than 90%. What is more interesting is that in the world of low interest rates and perennial stimulus, average property prices can maintain a level around 7-8 times average earnings and do so without the immigration pressures that Britain enjoys/endures. I'm struggling to find house building numbers.

Not so fast. Not so cheap http://japanpropertycentral.com/2016/08/japans-new-apartment-price-to-income-ratios-reach-24-year-high/ One must stand back and appreciate the enormity of the property bubble they had, but they've never been cheap. All this without crazy immigration too.

I'm inclined to agree that the Japan scenario is a likely one.

I hate to be pedantic (not really, I love it) but it was actually the loss of control and oversight of the BoE that, within ten years, caused the mess. Previously the BoE had full responsibility for this, but under Brown the tripartite system was born with (unclear) responsibilities shared between the BoE for monetary policy, the FSA (now FCA) for regulation and the Treasury. http://www.politics.co.uk/news/2009/06/02/the-tripartite-system-was-responsible-for-the Re the interest rates - the issue here as I've said before is that the inflation index required to be controlled to 2.5% +/-1% and then lowered to 2% +/-1% explicitly excluded housing and other assets from its measure and this was a failure of the government. NuLabour turned what was once a extremely strong a powerful regulatory and controlling tool into a lapdog for the government's monetary whim (not that the the previous arrangement under the Tories with respect to interest rates was much better).

Crazy indeed. A good friend of mine is a commodity broker in London. Earns very good money so pays a tonne of income tax and E'ee NI. I was talking to him once about LVT and he literally couldn't believe what I was suggesting. You could see the standard arguments coming out, like what about dear old ladies in their £5 million house (ignoring the fact that a single old dear doesn't need a house of that size, and if she can afford it she can stay. TBH I've struggled to persuade anyone of the merits of such a system. I think I might re-write animal farm. High income tax good, high house prices better or something along those lines.

If any party of any colour proposed to reduce income tax to zero for everyone under £80k, and replace the lost tax revenue with an LVT they'd get my vote.