Mark1973_5

Stocks in Sainsbury? (Current market capitalisation £5bn). Tesco? (Current market capitalisation £17Bn). Associated British Foods? (Current market capitalisation £12Bn). What about healthcare - biggest company on the FTSE right now is Astra Zeneca, and GlaxoSmithkline is in the top ten ... Absolute basic needs ... but then all the pensioners who rely on dividends to pay out their annuities are just parasites and leeches ... but then you knew that already, right?

Of all the bizarre statements made on these threads, this one really does require some sort of explanation. Why will any home owners have to sell to ex-renters? And why would this make them the 'biggest losers'? And why does this stem from IO BTL? Not gone onto building equity for that renter. It's available for the landlord to build plenty of equity. They didn't receive any favours, though. The rates they were able to borrow at reflected the default risk in they eyes of the lender - often they already had their own residence to use as collateral. They took risk. How is this different to owning any other asset class and leeching income from it for doing nothing productive? Why is owning shares OK? Or bonds? How are you investing your stash, ready to pounce when the market drops to a level that meets your affordability level and risk appetite? Can't have it both ways ... either owners do provide a service by letting others use their assets, in which case they do deserve to be compensated, or they don't ... in which case they shouldn't be expected to cover any costs arising from others' use of those assets. I think most people, with the exception of diehard communists, tend to side with the former viewpoint - in which case getting angry at rents being set at a level that covers costs, wear and tear, contingencies and the opportunity cost of the capital employed seems rather unreasonable. Not at all - at the macro level that's exactly how it works. What changes is that as people get richer, the share of the total available property pool that they consume increases. The single biggest demographic factor driving scarcity (and thus HPI) has been the elderly living considerably longer, and the boomers remaining in their family homes (with 3 or 4 spare bedrooms that are only used twice per year).

Time in the market, versus timing the market. That's all this debate is about. It's better to have more money than less. In the past, this was largely determined by your birth right. In the last century talent, capability and hard work meant many people who were born poor could accumulate money. Since financial deregulation, even the untalented poor could borrow and experience the feeling of having a sizeable fortune - albeit one they would have to pay back with interest over their working life. In all three eras, time in the market was the most successful strategy for the majority of people. If you intend to be a homeowner for 50/60 years, and to pay off your mortgage during your working life, it really doesn't matter over that timescale whether you overpaid by 20% at the time of purchase, or timed the market just right and got a place for 30% less than someone else. Do you think the people who bought houses for £75k in the late 80s and have lived there for forty years are even remotely stressed out today at the thought that they might have overpaid, or listened to the HPC bloke in the pub who would only have paid £60k? When their house today is worth £700k? The really crazy belief is that you can do better by timing the market. It's the housing market equivalent of day traders, penny shares, NFTs and Bitcoin. The idea that you can 'make' money by buying or selling at the 'right' time is a joke - it's a zero sum game where any apparent windfalls can only come from someone else's losses. And compared against the steady, incremental wealth accumulation from buying early, paying down the mortgage, acquiring some equity, and climbing the housing ladder - it is a poor strategy. There's people here now who've pursued that strategy for 20 years now needing (and hoping for) 80% drops just to break even on their strategy. And yet, still they believe ...

There's a glitch in your matrix

Have you factored in the cost of the land?

Whether a mortgage is IO or not is a factor, but not the main one. The LTV matters more. I still have an IO mortgage with a balance currently of £250. It was a product that allowed unlimited overpayments, and my work paid well, but sporadically, so having the lowest possible monthly commitment with the option of repaying larger amounts suited me. The reason why I never just paid off the last £250? First, 'coz there's an admin fee of £750, and second, 'coz having a mortgage means I get access to existing borrower deals for any additional borrowing I need. But ... in the data, this is 1 x IO mortgage. I appreciate that this is an extreme case, but then, so is the over-leveraged BTL landlord facing imminent liquidation scenario. There'll be a couple that make the news, but many of them used their pension lump sums and have loads of equity - enough to ride out several more rate hikes.

Do try and keep up at the back. Yes, that is indeed a dissenting view. And one you are entitled to hold. Like, only 180 degrees wrong there ... I'm about as capitalist as they come. Was it the Brexit comment that triggered you? I'm curious then - what's the endgame? Not a generalised, Armageddon-for-everyone apocalypse, but your personal endgame? Do people want to own houses, or do they not? Presuming that at least some do, how is that going to come to pass? Specifically, what are the conditions that are going to persuade enough current owners to sell at a loss, to a cohort of prospective buyers who think what exactly about their purchasing decision? Sales will only happen when both parties think they are getting a good deal. What does that deal look like in the HPC endgame, and how is it any different from times past?

(*) Interesting side note - ever wondered why some markets prefer a Dutch auction format? It's because it results in higher sales prices. When there are multiple people interested in an item, this format places bidders under greater psychological stress, as they don't know what any other bidder's maximum price is, and so they have to bid and reveal their maximum price early or risk losing the lot. A falling housing market is similar - how do you anticipate the bottom? At any point, someone else might swoop in and your dream home gets snapped up.

Not sure what you mean. Interest rates are like the weather - people try and predict it, some do it better than others, but they are what they are. What I can influence is my own personal choices and decisions. And what I've noticed is that some people's toast seems to land buttered-side-up regardless of whether it is currently high growth / low growth, high inflation / low inflation, high interest rates / low interest rates, high house prices / low house prices outside. Right now, I'd say those people will have bought already, will have fixed for 5 years, will work in roles that get inflation-matching pay rises for the next five years, and will get to 2028 having overpaid on their mortgage and seen a good chunk of their outstanding balance reduced by 25-30% in real terms due to compounding inflation. They'll perhaps rue the missed opportunities to pick up bargains in 2023 and 2024, but overall they'll think themselves lucky not to have missed the boat. Meanwhile, the buttered-side-down crowd will find themselves facing a Dutch auction(*). No-one wants to catch a falling knife, and neither do they. Each monthly drop in prices is correlated with another round of economic bad news and rising interest rates, and net/net they cannot afford anything better in 2023 than they could have done in 2022. So they continue to hold off making offers ... until suddenly once again they are facing competition from other prospective buyers. Only now they are several years older, can borrow less, and getting outbid by all the buttered-side-up people who by this time have also amassed some equity in their current home and can get a lower LTV mortgage and afford to outbid them. That's what I mean by a dissenting view.

It's not really, though, is it? If you take a long hard look at what is tolerated here, you have to admit that the level of discourse has been swirling round the cesspool for a while now. Even if you try and laugh it off as 'banter', the fact is you wouldn't do it if you weren't hiding behind an avatar. Ever wondered how some X-ty thousand post 'Members' get to post whatever they like, whilst anyone who puts forward a dissenting view, no matter how well argued, gets relegated to 'New Member'? Ever wondered what a couple of decades of impunity might do to such people's inhibitions, sense of decorum or civility? Ever wondered what happens when people who feel respected, powerful, revered, vindicated and justified on the internet find themselves wielding power in a real-life situation? (Clue - the Brexit vote foreshadowed that nicely). It's only going to get worse ...

Can I just say it's nice to see you back after a long time away - and glad it's working out for you. I name-checked you in a post a couple of months ago as one of the contributors whose input I missed greatly.

OK, I'll go first - I own an upstairs flat in a house that twenty five years ago was converted into two flats. The downstairs flat has access to the garden. If it came up for sale and I thought I could get it at a price 40% lower than the Zoopla index currently says it is worth, I'd buy it in a heartbeat. That number has nothing to do with macro economic theory ... it is based on the size of the mortgage I could repay and my unique circumstances which determine the specific value that flat would offer me. 30% lower ... I'd have to have a long hard think. 20% lower - nope, I couldn't justify it (even though I could, theoretically, afford it). The kicker is that it may not even come up for sale. Or it does, but someone else values it more than I do and can afford to pay a higher price. Those situations would be disappointing, sure, but I'd not get angry about it. Nor do I believe there is any basic right for prices to magically be within my affordability comfort zone. HPC would be nice, but it's only one part of the equation, and other things matter more. Keeping your job. Staying healthy. Not getting divorced.

Anger is an emotional response to a situation, but it isn't particularly useful. It is proven to cloud judgment and impair decision making. It's purpose, from an evolutionary perspective, was to increase arousal and prepare the body for immediate physical action - fight or flight. However, humans have prospered as a species because evolution has prioritised rationality. This improves judgment and decision making. It allows long term outcomes and objectives to be weighed against short term impulses and desires. Winning the internet is neither of these things. It doesn't influence enough people to bring about societal change. It doesn't improve anyone's mental health or physical wellbeing. It seems to have all the negative effects of anger without prompting any actual action. So, apart from wailing at how unfair everything is, what are the actual, practical strategies that people think we should follow to thrive in the coming years? Instead of proclaiming paper crashes left right and centre and calling it victory - when is anyone actually going to buy a house? Where? What kind of house?

What those LR calculations do is allow an index to generalise to cover property types with low or zero sales in a particular region or area - i.e. it allows the index to calculate a price for a hypothetical 4 bedroom house in a town where the only sales that month were for 3 bedroom houses. That's fine, if you want to publish a comprehensive index without any gaps. But, the core assumption is still that if 4 beds attract a premium of x% and a thee-bed sold for 10% more than last year, then the four bed would sell for +10% plus x%. No one on this forum believes that to be true. The four bed would sell for whatever a willing buyer can borrow and add to their deposit ... there is no mechanistic valuation that can be extrapolated to determine this price. Add to that dilapidations, extensions, etc. etc. and there is no formula for any specific house to determine the price at which it must sell. The US link you shared is interesting - I've not seen that before, but its methodology starts with the following statement: "The main variable used for index calculation is the price change between two arms-length sales of the same single-family home." That's a really good start, and any UK analysis should ideally follow that model.

The housepricesintheuk formulas are flawed though ... using a geometric mean is just mathematically wrong, it should be an arithmetic mean, and a cursory search of postcodes I know well has shown incorrect valuations (far too high and far too low) of properties I know well and whose sales I have insider knowledge of. Nice idea, but flawed execution. What is needed is a compound annual growth rate of the same property that has sold twice or more over a period. This would show the change in value of that property on a year-on-year basis. You would still need to interpret whether that change in value was due to genuine change in the property (extensions, loft conversions, dilapidations etc.) or due to general HPI (or HPC). Note - in my previous post, I referred to property.io - this was a mistake. It's actually https://houseprices.io/