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Martin

Moving Up The Property Ladder

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Could you lot of here help me settle an argument, which I had at work?

I said to her “Nowadays is it a lot harder to move up the property ladder than it used to be 4 years ago, because the gap has got bigger and thus you need to borrow more to move upwards.

The other person said, “If you are on the ladder, then you have it made and can move easily because your home has gained in capital at the same rate as house inflation”

Which is right?

Thanks greatly.

Martin

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Could you lot of here help me settle an argument, which I had at work?

I said to her “Nowadays is it a lot harder to move up the property ladder than it used to be 4 years ago, because the gap has got bigger and thus you need to borrow more to move upwards. 

The other person said, “If you are on the ladder, then you have it made and can move easily because your home has gained in capital at the same rate as house inflation”

Which is right?

Thanks greatly.

Martin

Just doing some maths:

House A = 50K

House B = 100K

House C = 200 K

To move up rung A to B is 50K.

To move up rung B to C is 100K.

Assume 100% HPI:

House A = 100K

House B = 200K

House C = 400K

Now, To move up rung A to B is 100K.

To move up rung B to C is 200K.

So yes, it is a lot harder to move up the property ladder.

The reverse of this also holds true on the way down. I.e. If house prices fell by 50% it will be much easier to move up the ladder (the difference in cash between the rungs will be reduced). This is known as a TUB (Trade Up at the Bottom).

I suppose your colleague could be saying that the increase in equity could be put forward to the next house as a deposit - enabling one to move easier, but that would mean taking out a considerably larger mortgage (and debt).

CF

Edited by Control Freak

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“If you are on the ladder, then you have it made and can move easily because your home has gained in capital at the same rate as house inflation”

And what does this person think has happened to the price of the property on the next rung of the ladder? :rolleyes: In fact there is some evidence that "trade-up-to" properties (normally large detached family homes) increase by much more than general HPI, so the gap becomes a yawning abyss of affordability.

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Guest Charlie The Tramp
The other person said, “If you are on the ladder, then you have it made and can move easily because your home has gained in capital at the same rate as house inflation”

In 2000 I found my dream house and needed an additional 20k to buy it. Due to business commitments I had to let it go.

The same house came on the market again in 2004 the difference then was I now needed an additional 90k to buy it. ;)

HPI does nobody any good who wants to move up the ladder, another reason IMO why the market stagnated.

Edited by Charlie The Tramp

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If find the phrase "property ladder" incredibly irritating.

Everyone uses it.

"Property market"

as in

"Stock Market" not "Stock Ladder"

"Second-hand car market" not "Second-hand car ladder"

I wish someone would push this ladder over. It pisses me off.

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Guest pioneer31
The other person said, “If you are on the ladder, then you have it made and can move easily because your home has gained in capital at the same rate as house inflation”

Martin

dumb cow

so has the other house

no wonder people get ripped off in this country, we're a nation of dunces.

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It is better to step out of the market for a few years after the cycle peaks.

Pertinent advice for those who will listen.

I have been buying and selling properties for 31 years, but have rented for eight of those years, selling when prices have gone too high and stepping back in when prices are sensible.

The additional benefit of this approach is the release of equity in the 'gap years' which can be much better employed elsewhere.

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Just doing some maths:

House A = 50K

House B = 100K

House C = 200 K

To move up rung A to B is 50K.

To move up rung B to C is 100K.

Assume 100% HPI:

House A = 100K

House B = 200K

House C = 400K

Now, To move up rung A to B is 100K.

To move up rung B to C is 200K.

So yes, it is a lot harder to move up the property ladder.

The reverse of this also holds true on the way down. I.e. If house prices fell by 50% it will be much easier to move up the ladder (the difference in cash between the rungs will be reduced). This is known as a TUB (Trade Up at the Bottom).

I suppose your colleague could be saying that the increase in equity could be put forward to the next house as a deposit - enabling one to move easier, but that would mean taking out a considerably larger mortgage (and debt).

CF

Roll on house price drop (Crash)!. As a home owner was looking to move from 2 bed to 3 bed, in 2003 the going rate required was £50k for that extra bedroom, in a not so nice an area. IMO not worth the extra 12sm.

Stayed put, and invested the money in a 2 bed property in a village inland costa del sol (could rent out but not interested). So now have a bolt hole to escape to and a better quality of life.

The more the house prices drop the smaller the gap between the next rung of the ladder ;)

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Yup, moving up the ladder has become so much harder that it's one of the reasons the ladder is no longer there for most people. The deltas between my house and one just slightly bigger and better built is about £120k in my area.

But whenever I tell someone that I'm waiting for prices to fall before I get a bigger house they invariably explain to me, very slowly and kindly like you do when you're talking to someone not very bright, "but when prices of more expensive houses fall, yours will fall as well" This is usually followed up by an explanation of how houses are now actually cheaper now because your monthly repayments are less, or how I needn't worry about taking on a large debt because inflation will soon melt it away :rolleyes: Umm...ok...

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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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