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Moneyweek Starting To Indicate A House Purchase Wouldnt Be Too Bad An Inflation Hedge....

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No

A hedge is all about reducing a specific risk.

If your position leaves you over-exposed to losses if inflation takes off (e.g. because you are holding 100% cash) then you may want to reduce that exposure by taking on some debt. So, depending on your circumstances, buying something on high leverage might be a good option, provided you don't overstretch yourself. However, as other posters have mentioned, now might not be the best time to take on debt against a new house, and there are other hedges against inflation.

A non-leveraged hedge on property recovery is an investment in property and (property-dependent) stocks or funds. Wimpey and Barrett, RBS and Lloyds, ...

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If interest rates rise, this would ultimately cause more reposessions, and an exodus of BTL, and less purchasing ability for most people, leading to lower house prices. Buying now BECAUSE interest rates will go up in future sounds bonkers to me.

Unless, of course, you think they'll go up by just enough to make your own mortgage payments more if you wait, but not enough to crash the market? Yeah.. right...

Inflation hedge - fair enough, but if everything else goes up how will you afford the mortgage?

Makes more sense in the US where you can get a 30 year fixed @ 4.5%.

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And where you get a heck of alot more for your money than over here.

I kid you not this has just happened to us. We have a nice house (in Mineola just outside Orlando) rented for an employee. Landlord defaulted so the bank called (six months ago) and asked if we wanted to buy. We said no (even at $140K down from $320K). The now call every month asking if we are OK and reminding us not to "trash" the place. We have paid no rent. I reckon we could get it at $90K if we pushed it but the problem is the area is becoming depressed with foreclosures and so the spiral continues. It's tempting but not as tempting as living for bugger all (apart from utilities-wonder if we can get em to stump up for them?-nah LOL). It's just to easy to walk away here (jingle mail and all that) which has accelerated the crash but at least the bottom will be reached far quicker than the UK. Bit like ripping a band-aid off.

Did I really say "Band Aid" instead of a plaster?

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I kid you not this has just happened to us. We have a nice house (in Mineola just outside Orlando) rented for an employee. Landlord defaulted so the bank called (six months ago) and asked if we wanted to buy. We said no (even at $140K down from $320K). The now call every month asking if we are OK and reminding us not to "trash" the place. We have paid no rent. I reckon we could get it at $90K if we pushed it but the problem is the area is becoming depressed with foreclosures and so the spiral continues. It's tempting but not as tempting as living for bugger all (apart from utilities-wonder if we can get em to stump up for them?-nah LOL). It's just to easy to walk away here (jingle mail and all that) which has accelerated the crash but at least the bottom will be reached far quicker than the UK. Bit like ripping a band-aid off.

Did I really say "Band Aid" instead of a plaster?

It has crossed my mind whether we will see an exodus of Brits to the US in the next few years - the US will come out of this recession before us, housing is cheaper and you get more bang for bucks.

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It has crossed my mind whether we will see an exodus of Brits to the US in the next few years - the US will come out of this recession before us, housing is cheaper and you get more bang for bucks.

I agree 100%. Florida is still the best place as "immigrants" are still welcome. You can still get a Drivers Licence (for the length of your stay) which you can't elsewhere. I live in RI and you have to have a Social security number so therefore a work visa/Greencard etc.

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It has crossed my mind whether we will see an exodus of Brits to the US in the next few years - the US will come out of this recession before us, housing is cheaper and you get more bang for bucks.

"Bang for the buck" is important obviously. Don't know how this compares with the UK right now but picked up a few things yesterday. Here goes:-

Eggs Dozen extra large 99c (say 60p)

Milk $2.29 gallon (say 1.50)

Petrol $2.30 a gallon (ditto)

Butter 94c a pound (59 pence)

would imagine that compares pretty fabvourably with the UK does it not?

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I agree 100%. Florida is still the best place as "immigrants" are still welcome. You can still get a Drivers Licence (for the length of your stay) which you can't elsewhere. I live in RI and you have to have a Social security number so therefore a work visa/Greencard etc.

RI?

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If that was Merryn or John Stepak or James Fergusson writing that I would be alarmed.

Note that it is an article which has appeared elsewhere and they are simply reprinting it.

In this week's edition, and the previous weeks, MW has been saying that HPs have much further to fall because of the underlying weakness of the UK economy - unemployed people do not buy houses, people in fear of losing their jobs do not buy houses.

So, who is this Theo chap then? Did anyone read the byline?

Merryn is looking to buy a house at the moment.

I think it's way too early to play this game. January next year will be good, interest rates won't rise before then.

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I can't see how this country can be better off if the majority of our surplus cash funds is plowed into property...property is dead, it doesn't do anything, it sits there doing nothing, it can't create value, investment and growth that this country desperately needs.

Money can and should be invested in other innovative projects that invests into our future and creates jobs for our people, the government needs to encourage this and strive to keep the necessary requirement of a roof over our heads low cost and affordable. ;)

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I can't see how this country can be better off if the majority of our surplus cash funds is plowed into property...property is dead, it doesn't do anything, it sits there doing nothing, it can't create value, investment and growth that this country desperately needs.

Money can and should be invested in other innovative projects that invests into our future and creates jobs for our people, the government needs to encourage this and strive to keep the necessary requirement of a roof over our heads low cost and affordable. ;)

Well said :)

Edited by ChrisOH

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I have thought a lot about what will happen to house prices over the next few years. Obviously they are falling and will continue to do so for a while yet in nominal terms. I reckon they will stop falling in nominal terms when general inflation picks up. However I do not see that they will rise in line with general inflation. Why not? They will be kept low in real terms because in an inflationary environment people will not have the spare money to spend on property - they will be too busy coping with household bills and of course taxes. That is what happened in the high inflationary period of the 70s and to a lesser extent in the 80s. On top of that the inevitable rises in interest rates will bring further downward pressure on the hosuing market.

No, when they stop falling in nominal terms, they will surely continue to fall in real terms for years to come. So whereas many will still buy property to live in, it makes no sense to rush into it right now. Sensible people will ignore the EA hype and sit tight.

As for investing in property - my view is that it is downright dangerous to do so now. Prices falling, rental yields dropping like a stone, interest rates likely to go only one way from here on...

I believe that the best hedge against inflation will be selected stocks and shares (those enterprises that are inflation-proof e.g. BP, Glaxo) and of course certain commodities - steel, copper etc. Property will become a good 'investment' again one day, it surely will, but not until the next economic cycle is on the upwave and perhaps not for a generation.

That's my considered opinion. Over to the property bulls for some hilarious counter-arguments!

Edited by othello

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How property faired in hyperinflation.

Not that it is likely to happen here - Old ladies had to sell their houses for millions of Marks, in Weimar Germany to put food on the table.

We'll have to ask Van Hoogstraten and how his BTL portfolio is doing in Zimbabwe [after selling his massive UK portfolio to fund it].

I can see his logic, he must be a trillionaire in Zimbabwe now, but probably no better off in £ terms.

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Guest vicmac64

I would say not just yet - but very shortly - the problem is going to be the value of our debauched currency. In light of our ratings changing that surely cannot be far off at this stage.

I would give it a another 3 months - but at the same time keep a tight eye on House Prices and our currency - there will be a point where those lines in the graph meet............

This new global gang need slaves - they are not going to cut adrift their debt slaves. THEY WILL CUT THE PRUDENT ADRIFT BEFORE THEY DO THAT.

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I have thought a lot about what will happen to house prices over the next few years. Obviously they are falling and will continue to do so for a while yet in nominal terms. I reckon they will stop falling in nominal terms when general inflation picks up. However I do not see that they will rise in line with general inflation. Why not? They will be kept low in real terms because in an inflationary environment people will not have the spare money to spend on property - they will be too busy coping with household bills and of course taxes. That is what happened in the high inflationary period of the 70s and to a lesser extent in the 80s. On top of that the inevitable rises in interest rates will bring further downward pressure on the hosuing market.

No, when they stop falling in nominal terms, they will surely continue to fall in real terms for years to come. So whereas many will still buy property to live in, it makes no sense to rush into it right now. Sensible people will ignore the EA hype and sit tight.

As for investing in property - my view is that it is downright dangerous to do so now. Prices falling, rental yields dropping like a stone, interest rates likely to go only one way from here on...

I believe that the best hedge against inflation will be selected stocks and shares (those enterprises that are inflation-proof e.g. BP, Glaxo) and of course certain commodities - steel, copper etc. Property will become a good 'investment' again one day, it surely will, but not until the next economic cycle is on the upwave and perhaps not for a generation.

That's my considered opinion. Over to the property bulls for some hilarious counter-arguments!

two words ....interest rates.

buy now and buy with cash if you feel like it.

buy with a mortgage to affordability levels and you'll be on the street in no time if inflation takes off

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two words ....interest rates.

buy now and buy with cash if you feel like it.

buy with a mortgage to affordability levels and you'll be on the street in no time if inflation takes off

You think property will guard against inflation? I think the opposite is true and would be interested to know what's behind your thinking.

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I would say not just yet - but very shortly - the problem is going to be the value of our debauched currency. In light of our ratings changing that surely cannot be far off at this stage.

I would give it a another 3 months - but at the same time keep a tight eye on House Prices and our currency - there will be a point where those lines in the graph meet............

This new global gang need slaves - they are not going to cut adrift their debt slaves. THEY WILL CUT THE PRUDENT ADRIFT BEFORE THEY DO THAT.

You really are a bit confused aren't you.

On one hand you think the FTSE will drop to around 1500 in the next few months and in the other you think our currency is going to be massively devalued out of line with all the other countries that have done exactly the same as us.

If our currency becomes mega cheap the FTSE will rise as it becomes cheap for other countries.

All currencies are debasing. Therefor the currency markets are maintaining an equilibrium. If britain was the only country in the world to slash interest rates an quese then our currency would be worthless already!

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