easy2012

If they can't buy then obviously there is no choice. If they can but choose not to then it is their decisions based on their circumstances. If they are staying out for the sole reason for expecting the price to fall - then they are speculating - and if they can afford to speculate, then it is totally fine by me. Buying is effectively paying a fixed sum for all the future rents that one will be paying, plus the freedom to transform the house and the burden to upkeep it that comes with it. As with all fixed price jobs, it could be higher or lower, but no one can foretell the future with any certainty. You may well priced a base case risk of a 20% price fall (so around £20k on average house price of £150k, over 20-30 years) as worthwhile against the hassle of estate agent 'check up', contract renewals, lack of freedom to paint the room pink, but not all do. It certainly sounds to me that you are speculating (for a nominal price fall) - if you can afford to and feel comfortable to, then that is totally fine - but not all feel comfortable doing so.

Then you are taking the view that the debt backed Sterling is somewhat around the fair value against the basket of goods/services that you will need in the future.

Exactly. There are a few STR (i.e. shorting the housing market) around here though. As for Bruce, he is at a stage of life with sufficient financial resources to be wherever he wants and so it is perfectly ok to do whatever he pleases. In his case, renting probably give him more flexibility. Can't say the same for families with kids in school though.

Thanks. Yes - they are very progressive and people with high tolerance of pain to do the right thing. Worth added to the my list then :-) Thank you.

Yup - and all circumstances and preferences dependent.

No I don't work for the financial sector. The answer to most problem/questions are in the middle - those who fervently saying buy at all cost, and those who say stay out at all cost are likely to be both wrong. You have misrepresented the call (deliberately or otherwise) - you left out things like 'afford to buy at reasonable leverage within reasonable distance', 'need to buy for families reasons' bits. If someone is buying a house as a pension, then I say don't. Deliberate staying out of something, or deliberately hoarding more than what is needed - are both, by definition - speculating. The future is inherently very uncertain. For the same reason, margin shares positions get closed out when margin calls are not met even though the stock is "obviously looks' overvalued/undervalued. Sometimes the speculator gets it right, sometimes then don't. If one can afford to speculate, then by all means. If not, then don't.

You mean binary options broker? No I am neither. While one can make a judgement based on risk/reward ratio, those who think they can be certain of future movement of asset prices is perhaps as folly as S&P and Moody when they issued those AAA ratings on the CDO. The future is uncertain, and it can go either way - the question remain whether one can afford the risk (either way).

That is of course perfectly fine for someone in you situation. The 10% bet is a lot worse than you think actually. What it entails is something like calling up RBS Market and ask to by a binary option for say £20k (net worth 200k) that matures in 2028 using selective indices. If the nominal value is higher than today's nominal value, then you lost £20k+interest lost in between. If it is lower, then you lost the interest in between and get a paid out of whatever the agreement says (maybe 2x the stake or something like that?). Ladbroke may do a deal on this too. It is a different issue for someone who needs to have kids and bring up a family over the next 25 years and feel (or that other half feels that) they needs to buy but are just waiting for a (big) nominal dip (that may or may not appear) before jumping in. After the mortgage is repaid, the couple may have another 20 years to go before retirement and it is extremely unlikely that the nominal price of a house is lower today than it is in 2058 under today's fiat/inflating system. If I can afford to speculate, I will do what you do and stay out of the game as the risk reward for this 'asset class' (rather than home) is unattractive but if I need a home, I will just buy one.

Thanks for responding. Just wondering if you suffer from any issues and or discrimination living there? Do you speak Latvian or Russian ?

I am afraid as long as you use/earn/pay taxes in Sterling, you are on the bus whether you like it or not. The risks is not so much in the bricks and land, but rather the leverage obviously. Of course such symmetry exists, especially rules can be changed at a whimp. Somebody who bought a house in 1960 for £1000 would of course think that it is totally unthinkable that one day a house would be priced at £150000 but we operate in a nominal economy. Negative Nominal interest rate (NNRIP) is extremely unlikely to happen, but N(Real)IRP can go on forever (and in fact have been for most part of the 'modern' banking history). Would you seriously dare to bet 10% of your net worth that nominal house price is lower in 2028 then today ? p.s. Even when we talked about pay stagnation, nominal pay is actually advancing at 1.4% pa nominal (-1.6% in real term) and so a 20% nominal over valuation would be corrected in about 10 years IF everything else stays the same. (Source: BBC from ONS, 04/2007-04/12, nominal wage up 10%, price up 18%)

Thank you too for coming back. My guess is that as a Med country, they could rely on families and black economy to help to live on the minimum wage amount. I also saw a survey that says the local tend to own the place / have very low mortgage left and so that helps. The report also says all stuffs are imported so not cheap so I suppose if one really wants to live on the absolute minimum, one could get away with eur 750 or so but I would rather suffer at home for the same price (up north) rather then in Malta if that is what I have to live on.

Ah.. but that is not how the law or the T&C works. I am not sure but perhaps German law does not recognise spread betting as tax free after all the betting duties go to the UK government only? If there is a dispute then some of these may become an issue. I would rather live in Birmingham/Manchester if I am doing the SB for a living though. I think I can live on £700/e800 a month there. p.s: I am not judging you on your arrangement here - it is non of my business.

It depends on what the corporation has promised and what the individual is up to. This in theory works when interest rate could go either way (this ZIRP madness obviously makes all financial theory irrelevant). Then we have people who think they can get out just in time before others. Remember that we no longer operate on normal, or even fixed rules. I will not bet 10% of my balance sheet that house prices will FALL either. It goes into the 'too hard' basket and hence I say if one needs one and can really afford one, buy one (life is much more than a profit or loss of £20k or so). Further, unless one is at the end of the housing ladder, if house prices crash that means one can then afford to consume more and better housing. Further, there are a lot more factors that will affect House price. If Georgie do a double tax relief on mortgage and Gods knows what can happen. The Economy too will eventually recover and even if the rate do rise, it could still trail inflation (and hence negative real rates). If there is a crisis in France and the French move enmass to the UK, then would then provide another demand led HPI even though people will be squeeze into a shoe box. UK could also do a UK version of the Freddie's. It is just too hard and it is too risky to 'invest' in. However, for an owner occupier, it is equally risky to deliberately stay out of the market.

Thanks. That sounds like a much more achievable retirement destination compared to Malta which I calculated to require around £667k capital to live on interest. Having said that you could live on £650 in a share room in many UK cities though. I thought UK being a for the financier by the financier economy would have more lenient treatment on (day) trading profits ?

No - I looked at Malta based on numbers a few years ago. I had a looked at various low tax jurisdiction in the Europe and Malta was top of the list (and Cyprus, which is now a gone case). It also includes the (english) language and cost of living. It is not as efficient as Western europe though and the business culture there is rather Mediterranean but obviously it is no where as bad as Greece. Estonia is the nicer of the 3-ia (Estoia, Lithuania and Latvia) but still suffer from ethnic tensions between the Russian and the Estonian so there is a bit of a risk there. Western Europe taxes are too high for early retirement (if one is in the 60+ and needs healthcare, then it may be worthwhile to be in Western europe). My bad for being lazy about the cost of living. I google around and it looks like it is going to cost around e1500 - e2000 per month to live reasonably (rent + utilities + housing etc = eur1000; others = another eur 1000). So that is really around £20000 pa and with an interest rate of 3% max, you will need around £667k to live on interest. Not easily done though.

No bank would (or should) take on long term fixed rate risks anyway. In the US, they sell it off into the market (including securitisation) and make a spread. For the non jumbo, the banks sell to the Freddie's and they then onwards securitised them. It is the pension fund / people living on fixed income / Pimco bond fund (with inflation within expected range (yah yah i know)) that should be buying these sort of fixed rate bonds. There are also plenty of hedge fund/traders type who think they can get out in time who will be buying these. Failing that, Ben will buy them.

Can you tell us how much do one needs per month to live in Berlin ?

Oh yes, Malta is a good place to retire. What is the monthly amount you think will be needed to retire there ?

The question here is where did she get the idea from when she was 17? Is that what they teach in the school nowadays? Work hard and you will be able to buy a place, settled down and do well ?

Or you can see it as just a tax refund ?

I think here is that in the wild, the reckless don't last very long and neither would be the ultra conservative. After a while, the population sways back to the mean. In the housing market + financial system, the reckless got rescued at the expense of the prudent and there is nothing you or me can do about it as long as we hold/spend/pay taxes in £. If one needs a house, then buy one that suits one needs at sensible leverage within sensible distance. If one is to 'invest' - then I say don't - it is just too riskly. It is not just England though, it is around the world like in Japan, and we will see if the Chinese, Canadian, the Aussie, Malaysia, Thailand will let their market correct. The only 2 housing market that I know of that allowed the housing market to correct without blowing up the whole thing are the HK and the Singapores (post 97, house prices dropped 50% in both places). But then those governments are not responsible for rehousing people who are being turfed out of their homes - then can go for to live in the cage home if that is all that they can afford.

Backing of the law? Parking has always been a civil / traffic offense. For private parking, it is dealt under common law of agreement/trespassing/compensation as it always has been. (plus the private of use of force called clamping which was outlawed a year ago). The surplus should be removed via LVT as it always should have been. Telling people what to/not to do with their driveways (unless it affects neighbours) is not really the way a 'free country' does thing.

No I don't. But neither I want councillors with normally about 10% of the popular vote telling me what to do with my driveway. (Council elections has about 20% turnout, and those who got about half of that amount wins). If the council puts through a referendum banning driveway rental, then I accept the outcome. We live in a free country (so I thought anyway). The aristocracy land ownership stuffs are totally separate issue - they are not renting out driveways, they are renting out vast and prime estates.

And you want council the coersive quasi monopoly to remove competing parking spaces through planning permission? More space = less price ? Strict planning the problem here.

I think it depends. 90% LTV interest is about 4-5% with no service while a BTL would be on 4% yield (though I think Bruce got it at under 3%) plus services.