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planit

It Will Always Go Up In The Long Term.

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One of the arguments about buying a house now is that in thirty years it will have gone up hugely. So much so in fact that it makes the decision now inconsequential.

Assuming that someone bought a house in 1989 and someone else waited and bought in 1993 what would be the difference now to their wealth?

We could even go further back and look at the figures for the 1970's crash (since property prices now look minute now looking back).

I would have thought that there must be some kind of compound effect on the equity that means there is a big difference in the long term affect on your wealth.

I have forgotten all my university maths but perhaps someone here could help me out. Conversely if it really does not make any difference in the long time maybe I will just go out and buy!

I would appreciate any help.

P

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Guest Riser

Inflation adjusted National and Regional house prices are available here from the Nationwide

Nationwide Data

The Long term growth in house prices is only about 3.5% per year but the market swings upto 50% above and 30% below this average, boom and bust is nothing new, don't let Brown try and tell you its different this time.

Hitting the cycles is simple just Buy when HPI goes positive and Sell when it goes negative....

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.....Assuming that someone bought a house in 1989 and someone else waited and bought in 1993 what would be the difference now to their wealth?...........

Anyone buying a house in 1989 was getting in at the top of the market and paying top dollar. Four years later in 1993 the same or a similiar house would be going for between 20 to 40% less.

The moral is : buying at the top of the market is bad for your wealth.

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Thanks for the replies but assuming I buy now and hold for 15years are you saying that I will only lose say £50k (if the property is worth 50k less in 5 years time). Because in 15 years time that wont seem like much and the loss is only on paper.

The reason I made the post is to find out what other differences it can make to someones long term wealth.

For example the mortgage interest I pay will be less for those 15 years. How much would this add up to?

Or if I had the 50k as cash and invested it I might be 500k better off after 15 years.

Any other ideas.

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Guest prudence
One of the arguments about buying a house now is that in thirty years it will have gone up hugely. So much so in fact that it makes the decision now inconsequential.

Assuming that someone bought a house in 1989 and someone else waited and bought in 1993 what would be the difference now to their wealth?

We could even go further back and look at the figures for the 1970's crash (since property prices now look minute now looking back).

I would have thought that there must be some kind of compound effect on the equity that means there is a big difference in the long term affect on your wealth.

I have forgotten all my university maths but perhaps someone here could help me out. Conversely if it really does not make any difference in the long time maybe I will just go out and buy!

I would appreciate any help.

P

you should not need university maths to understand the benefits of market timing. If you buy a property for £100k and sell for £200k you have doubled your money. If you buy for £150k and sell for £200k you have increased your money by around a third. Likewise that the percentage effects of falls is greater than when prices rise..............

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Because in 15 years time that wont seem like much and the loss is only on paper.

Why won't 50k (closer to 100k including interest at historicaly normal rates) seem like much in 15 years?

Ah, because you expect massive wage inflation to destroy your debt and stiff the lender.

Where do you think that massive wage inflation is going to come from in the next fifteen years when there are Chinese people queueing up to do your job for $0.50 an hour? Are you a government 'worker' or something?

Edited by MarkG

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Guest prudence
Thanks for the replies but assuming I buy now and hold for 15years are you saying that I will only lose say £50k (if the property is worth 50k less in 5 years time). Because in 15 years time that wont seem like much and the loss is only on paper.

The reason I made the post is to find out what other differences it can make to someones long term wealth.

For example the mortgage interest I pay will be less for those 15 years. How much would this add up to?

Or if I had the 50k as cash and invested it I might be 500k better off after 15 years.

Any other ideas.

I have an o-level in maths which I got many decades ago. You sound as if you are a recent maths graduate and therefore the future of this country..........

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Cyclically, the market looks set for a 3-5 year drop.

After that, from 2010 onwards, the Demographics are poor.

The assumption that "property will always rise in the long term"

cannot be taken as granted anymore

For once I disagree with Bubb.

The demographics look poor at a national level but they are more than compensated for by increasing immigration.

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One of the arguments about buying a house now is that in thirty years it will have gone up hugely. So much so in fact that it makes the decision now inconsequential.

Assuming that someone bought a house in 1989 and someone else waited and bought in 1993 what would be the difference now to their wealth?

We could even go further back and look at the figures for the 1970's crash (since property prices now look minute now looking back).

I would have thought that there must be some kind of compound effect on the equity that means there is a big difference in the long term affect on your wealth.

I have forgotten all my university maths but perhaps someone here could help me out. Conversely if it really does not make any difference in the long time maybe I will just go out and buy!

I would appreciate any help.

P

Imagine the kind of property you could have bought in 1995 for the same price as the much more inferior one you would have bought in 1989, with the same outlay (3 bed detaches as opposed to a 2 bed maisonnette?) Now imagine the respective values today.

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If you look at the trough to peak data in the graph shown above, one thing stands out a mile. The current trough to peak is enormous compared with the other two. That is why interest rates alone are not going to make any appreciable difference this time round.

VP

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they are more than compensated for by increasing immigration.

Yeah, all those cockle-pickers will be really eager to pay 500k for a one-bed flat.

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For example the mortgage interest I pay will be less for those 15 years. How much would this add up to?

Or if I had the 50k as cash and invested it I might be 500k better off after 15 years.

Any other ideas.

I would not rely on houses as an asset anymore,

As Dr Bubb said demographics will mean there are less people, and house price may never boom again just slowly fall away.

Immigration won't help that much, wages will be higher in other parts of the world by then, and public opinion dislikes mass immigation,

there's gonna be several million more houses than we need in 25 years and thats if we stop building now which we won't,

I think a lot of baby boomers hoping that houses will pay fo their pension and care in old age are going to wish they hadn't, early babyboomers will be better off,

Don't forget Peak oil will be well and truly in effect by then too,

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Kam,

A lot of Boomers are not only hoping that their house will buy a pension but also provide them with the captial to buy up somewhere nice abroad. I would suggest the number in this category to be in the millions, if the UK keeps on going the way it is it could be many millions - this is part of the potential demographic change ahead.

Still, there's a lot fo water to go under the bridge and it isn;t just a collapse in hosue prices that could scupper some of these rose tinted dreams, the £ could put paid to it as well, particulalry if the BOE and gov persist in their hell bent task of try to encourage economic growth through nothing other than the creation of more debt and more liabilities which some day will have to be paid back.

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Kam,

Another thing, if the gov think they have a demographic problem now - probably based on piss-poor extrapolation of previous trends wait till a few of the dullards work out what is going to happen when the compared shockwave of cramped Precottian boxes, students maxed out on debt and high pricing of property will have on birth rates I think they will be increasingly staggered by the whirlwind that they have reaped in order to massage the economy and their short term political interests.

A feel for what might be beginning to happen is only really visible from a few press snippets at the moment - mostly centred around the closure of swathes of primary schools in country areas.

http://www.mansfieldtoday.co.uk/ViewArticl...ticleID=1102880

Falling numbers at 9 primary schools

A NUMBER of Mansfield's primary schools are suffering from falling pupil numbers and a drop in admissions, Chad can exclusively reveal.

Figures obtained under the Freedom of Information Act show nine of the area's 36 primary schools have seen pupil numbers steadily decline over the past four academic years.

And of those nine schools, there are five –– Abbey Primary, Newgate Lane Primary, Robin Hood Primary, Northfield Primary and John T. Rice Infant School –– which also show a decline in the number of pupils being admitted into Year One.

For example, Mansfield's Abbey Primary had 348 pupils in September 2001, but the number fell each year until it had 252 children in September 2004 –– while over the same period admissions to Year One fell from 42 to 29.

The figures for some schools show there can be major fluctuations from year to year, but these schools have shown a consistent decline in numbers.

Peafield Lane Primary School headteacher John Peck, who also serves on the National Association of Headteachers' executive, said this was part of a national problem.

"We've known for some time about the falling birth rate throughout the country –– it's not just a local issue," he told Chad yesterday.

Mr Peck said he did not know the exact situation locally, but speaking in general terms he believes the problem could ultimately lead to school closures and amalgamations across the country

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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