Why Do People Think Property Is Different?

[Number79]

'Cause they look at what their old folks spent on a house in the 50/6070s - £2 or 3k perhaps - and work out that in nominal terms they have multiplied 100 fold?

Most people aren't economists (most economists appear to be wrong most of the time anyway), don't understand inflation but can figure out that if they bought a house in the 60s they'd no longer have a mortgage, they'd have their own home etc etc. Or going back further still, they may have had grandparents with small businesses, grocers, shoe shops, bakeries and so on who when they managed to save some money used it to buy a few terraced homes up the road (for cash!) and rent them out. That's what people did. For the most part they didn't have access to a stock broker!

Plus, they've learned, much as we are starting to see now, that every time there has been a property crash the govt. has come to the rescue to support prices. It's thus not unreasonable to assume that if they can hold onto their house long enough nominal prices will keep rising.

The alternative - selling up, risking getting the timing wrong, the hassle of renting, paying (increasing) fees and taxes, disrupting their kids schooling and so on, make doing nothing a rational choice based upon most people's experience.

Where things have tended to go a bit awry has been the capture of society by the banksters and the corporations who are effectively operating a fascist model. Again, we have seen that government will do everything in its power, and beyond, to keep this model going. People do what seems like the rational thing to do at the time, irrespective of whether it's in their best interests. Govts, banksters and corporate fascists know this and exploit it.

good post. Explains why those of us that do understand and can manage the interim can treat property as an investment and capitalise on our investment/money. It is a pain but when considering the gains/loss in terms of tens of thousands between a cycle high and low then I think that it is worth the hassle.

[bagsos]

and you, a registered bull, buy and hold or treat as your cash and play the peaks and troughs?

with anything else that people could put money into they would keep an eye on the price and buy/sell according to price and market moves. I understand that the British mentality is different when it come to property but can not understand why even when discuaaing ones home.

Here's an interesting little exercise. Get the sunday times rich list. They break down the rich into categories of how they made their money. Property is about the biggest, and if you lump in inheritance (which usually means "inherited property") it is by far and away the biggest, and that's why its different. Generally the thing to do with property to make money from it is not trade it very often (the costs of trade are quite high) but keep it, and charge rent on it. It isn't rocket science and if my ex-father in law, a brickie, can make huge pots of money doing it, pretty much anyone can.

[AteMoose]

hmm...I mean that as an investment it is unlikely to act again as it has during this bubble. Sure, prices do always go up in reality, due to inflation but shouldn't we consider our single and largest investment as just that? Why is property different such that people do not protect or maximise their investment but sit and hold regardless? All those here waiting to buy at bottom, are they going to be sitting tight in 15 -18 years time rather than doubling up?

I think it will always go up (over a 25 year period), faster than you can save because you only put a small amount down. Every month property prices stay stable, inflation eats away at it at a geared rate, wages don't need to rise much to bring multiples down. IMHO in the future we will have other property bubbles and crashes, but the trend will always be up. Try and buy in the troughs and try and sell at the peaks, but if you buy at anytime you will be quids in eventually. I've been on here for years, and been a bear and a bull, but I have turned bullish again today.

If you have alot of property, your extracting your own form of tax and living off inflation

Edited August 6, 2009 by moosetea

[Stars]

Here's an interesting little exercise. Get the sunday times rich list. They break down the rich into categories of how they made their money. Property is about the biggest, and if you lump in inheritance (which usually means "inherited property") it is by far and away the biggest, and that's why its different. Generally the thing to do with property to make money from it is not trade it very often (the costs of trade are quite high) but keep it, and charge rent on it. It isn't rocket science and if my ex-father in law, a brickie, can make huge pots of money doing it, pretty much anyone can.

The reason it really isn't rocket science is that really isn't production. Exploiting a cartel power over production is far easier than producing.

Edited August 6, 2009 by Stars

[Number79]

Here's an interesting little exercise. Get the sunday times rich list. They break down the rich into categories of how they made their money. Property is about the biggest, and if you lump in inheritance (which usually means "inherited property") it is by far and away the biggest, and that's why its different. Generally the thing to do with property to make money from it is not trade it very often (the costs of trade are quite high) but keep it, and charge rent on it. It isn't rocket science and if my ex-father in law, a brickie, can make huge pots of money doing it, pretty much anyone can.

we all know that money makes money so point taken from above but it doesn't often work like that for the average joe does it? My grandfather died some years back, his daughters had to sell the place to pay the tax, they split the money three ways which was begger all in reality given the circumstances. The common man can not win this unless they get on and off the bus at the right time.

Inheritance is a different issue but consider your own place. Leave it to the kids? can they pay the tax? The common man is the cash cow of the system, only those that can play the system and get on and off the bus at the right time have any chance.

[Number79]

I think it will always go up (over a 25 year period), faster than you can save because you only put a small amount down. Every month property prices stay stable, inflation eats away at it at a geared rate, wages don't need to rise much to bring multiples down. IMHO in the future we will have other property bubbles and crashes, but the trend will always be up. Try and buy in the troughs and try and sell at the peaks, but if you buy at anytime you will be quids in eventually. I've been on here for years, and been a bear and a bull, but I have turned bullish again today.

If you have alot of property, your extracting your own form of tax and living off inflation

makes sense. So, a longterm bull rather than a short term sibley? I think that we are all longterm bulls, anyone who isn't doesn't understand inflation or how their savings are being raped by the government. That does not make me a bull right now though, short term I am uber bearish.

[bagsos]

we all know that money makes money so point taken from above but it doesn't often work like that for the average joe does it? My grandfather died some years back, his daughters had to sell the place to pay the tax, they split the money three ways which was begger all in reality given the circumstances. The common man can not win this unless they get on and off the bus at the right time.

Inheritance is a different issue but consider your own place. Leave it to the kids? can they pay the tax? The common man is the cash cow of the system, only those that can play the system and get on and off the bus at the right time have any chance.

That's not quite true; only about 2% of all estates pay Inheritance Tax, so its not that common. Something like 45% of all the income tax raised is paid by about 6% of the population. Where the common man is a cash cow is NIC, VAT and Fuel, alcohol and tobacco duties. But this is another topic really.

[AteMoose]

That's not quite true; only about 2% of all estates pay Inheritance Tax, so its not that common. Something like 45% of all the income tax raised is paid by about 6% of the population. Where the common man is a cash cow is NIC, VAT and Fuel, alcohol and tobacco duties. But this is another topic really.

That's not quite true, the bigger land owners and farmers usually avoid inheritance tax altogether. The people who pay are the middle classes that have got wealthy accidently, or somone who didn't do enough inheritance tax planning..

[Stars]

makes sense. So, a longterm bull rather than a short term sibley? I think that we are all longterm bulls, anyone who isn't doesn't understand inflation or how their savings are being raped by the government. That does not make me a bull right now though, short term I am uber bearish.

It has little to do with inflation; production increases over time, so a piece of land becomes more valuable over time

[bagsos]

That's not quite true, the bigger land owners and farmers usually avoid inheritance tax altogether. The people who pay are the middle classes that have got wealthy accidently, or somone who didn't do enough inheritance tax planning..

Yes the big estates avoid it because of APR, but the fact remains that of all estates (ie pools of assets left by dead people) only 2% suffer IHT. But you are right; it is mainly the middle class or the very mean rich who suffer it (the rest of the rich give it away more than 7 years before death, or hide it offshore).

[Stars]

Owning land is a passive 'road to riches', because the government taxes people other than landowners to supply public infrastructure and services, whose value appears in the price of land.

It's quite a scam

Edited August 6, 2009 by Stars