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Property Ladder Is A Misnomer

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There was a time that the property business was a bit like a ladder. Providing you could get onto the bottom rung, you could inch your way up over time to more habitable accomodation.

Today, the bottom rung is so far off the ground that people become stuck on the bottom rung for years. When they do decide to trade up, stamp duty breaks their ankles with every step they take.

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Guest muttley

People tend to think of linear progression.Hence a ladder is a suitable analogy.Recently I had a conversation with a friend who didn't understand my bear stance.His argument was "But if you buy now your house will still be worth x amount more in 20 years time."

If you could draw a straight line between what a house is worth now and what it will be worth in 20 years time,then that would be a good argument.

The housing market is not a ladder,it is a market.Markets are cyclical,and I believe we are past the peak and have commenced the downward part of the cycle.

Interestingly,peoples tendency to think in a linear fashion means that once the market turns yhey believe that prices will keep going down forever!This is the "change in sentiment" scenario.

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1) Low inflation means relatively little debt erosion

2) Obscenely high prices and lots more interest to be paid back to the mortgage lender in real terms

3) Average age of FTB in their thirties (much closer to their earnings peak than in the past).

I wonder how many housing market hopefuls who bought recently will be stuck in their starter homes for the next 20 years ?

Edited by Warwickshire Lad

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There was a time that the property business was a bit like a ladder. Providing you could get onto the bottom rung, you could inch your way up over time to more habitable accomodation.

Today, the bottom rung is so far off the ground that people become stuck on the bottom rung for years. When they do decide to trade up, stamp duty breaks their ankles with every step they take.

SO the property ladder should be more appropriately titled 'property stilts' and someones already using them :(

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There was a time that the property business was a bit like a ladder. Providing you could get onto the bottom rung, you could inch your way up over time to more habitable accomodation.

Today, the bottom rung is so far off the ground that people become stuck on the bottom rung for years. When they do decide to trade up, stamp duty breaks their ankles with every step they take.

I've got this picture of a ladder just behind that box on top of the wardrobe that you just can't quite reach, so you have to jump up and poke it a couple of times to dislodge it, so I am thinking it is more like the property trapise and even once you have negotiated the obstacles to get hold of the bottom rung you have to swing off it and hope that your arms are strong enough to hold on ;)

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1) Low inflation means relatively little debt erosion

2) Obscenely high prices and lots more interest to be paid back to the mortgage lender in real terms

3) Average age of FTB in their thirties (much closer to their earnings peak than in the past).

I wonder how many housing market hopefuls who bought recently will be stuck in their starter homes for the next 20 years ?

You've hit the nail on the head there I think. If you have to be close to your earning peak to buy your first house, and inflationary pay rises don't erode a mortgage quickly, then there is no mechanism to make the next step up any close really, even after years. Also, if you take into account people starting families a few years after buying that offsets even more of any small amount of extra buyng power they might have by then.

A LOT of people I know still don't get this. They are simply recycling "folk" wisdom passed down from their parents, who lived through large inflationary erosion of their mortgages. Sometimes they talk about "yes but as prices rise, you have a bigger deposit for you're next house". How crazy is that?

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Guest pioneer31

Sometimes they talk about "yes but as prices rise, you have a bigger deposit for you're next house". How crazy is that?

the number of times I've heard that

scary isn't it?

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I think the term "property escalator" is more appropriate.

When housing inflation is above wage inflation, people get wealthier fo doing nothing, basically standing still.

For the "ladder" analogy to apply, I would assume that people have made some effort and sacrifice to improve their lot.

So if you have done a great conversion, spent some money, and they place has gone up, that's the ladder.

If all you did was buy the place and sell it 3 years later for a 50% profit, that's an escalator.

What we now have is a "down escalator", where those who stay on are finding their wealth eroded for doing nothing.

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Property Roller Coaster.

Property toilet. Climb in, yank the chain, drown in debt.

Certainly gets the adrenaline pumping. Maybe buying property should be classed as an "adrenaline sport", and cause your life insurance premiums to rocket. The suicide risk would definitely be higher, but I suppose they don't pay out for that.

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To have a property ladder, you need a high level of increases in wages, due to career progression or - more likely for most people - inflation.

We have neither. So no property ladder.

One HPC factor I've not seen mentioned much is people not trading up. Increasingly people I talk to are weighing up the pros and cons and saying "forget it!". This will presumably help stall the market just as FTBs not buying will.

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I think the term "property escalator" is more appropriate.

When housing inflation is above wage inflation, people get wealthier fo doing nothing, basically standing still.

For the "ladder" analogy to apply, I would assume that people have made some effort and sacrifice to improve their lot.

So if you have done a great conversion, spent some money, and they place has gone up, that's the ladder.

If all you did was buy the place and sell it 3 years later for a 50% profit, that's an escalator.

What we now have is a "down escalator", where those who stay on are finding their wealth eroded for doing nothing.

Totally agree with this analogy. Next stop ground floor where we all hop on!!

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inflation isn't dead yet!!!

we had a similar situation in the mid 70's.

.....oil shocks,2 major wars.......and the result was rising inflation.

along with a commodity bull market,driven by cheap electronics from japan.

...sound similar(the cheap electronics come from china this time)

...and we had rising IR's all the way up to 1989....so this ain't over by a long stretch!

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inflation isn't dead yet!!!

But wage inflation largely is: except for government employees, anyway. And price inflation without wage inflation will not be fun.

One way or another most people in Britain are going to be earning the same as Chinese workers in twenty years: the only question is whether their wages rise or our wages fall.

Edited by MarkG

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Property Bungee

(unlike the eleveator example which I thought was exceellent) this allows for the wild oscillations near the bottom, as prices go up and down radically as the market finds a new direction.

I like Property Bungee. It speaks of our contemporary fondness for "diving in" and taking huge risks that have killed people in the past, given some a lot of fun and scares off others.

Property Bungee (Copyrighted by DD, 2005)

NOTE:

HPI = Bit when the Bungee is winched up again, as it gets higher and higher more and more people join the queue for the bungee, gawping at the thrill of the experience.

Bankrupcies = People who didnt give their correct weight to the Bungee-Operator and chose to undertake the Bungee in a spectacular (but dangerous) environment. The Bungee overstretches and the person attached hits the ground head-first. Ouch.

Edited by DonnieDarker

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There was a time that the property business was a bit like a ladder. Providing you could get onto the bottom rung, you could inch your way up over time to more habitable accomodation.

Today, the bottom rung is so far off the ground that people become stuck on the bottom rung for years. When they do decide to trade up, stamp duty breaks their ankles with every step they take.

No. people are stuck on the ground because they can't jump high enough to catch hold of the bottom rung.

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I'm seeing more and more of a property circle.

Older boomers are trading down to smaller places and inflating the prices beyond the reach of FTBs.

A closed market with the current members trading the same stuff between themselves at ever increasing prices. Once this was a definition of the antiques business.

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  • 341 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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