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renting til I die

Young People Need Houseprice Rises?!

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http://www.dailymail.co.uk/money/mortgageshome/article-2865295/Millions-younger-homeowners-struggle-ladder-two-years.html

Post on the main blog and I can't comment there! So, just wanted to point out that Iibertas is really bad at maths! If the house you bought goes up by 10%, any larger house in the same area will also have gone up 10% (a greater amount). Buying a bigger house is more about saving, i.e, the amount you can save after servicing your debt or paying your rent. Yes, increase equity is a kind of saving, just as share price increases, increase my equity, but as I have already pointed out the larger house you want to buy will have gone up by more than that equity saving! So saving will have to make up the shortfall, unless you really want one of those IO mortgages!

Oh BTW, there is no ladder (I really must get around to drawing that picture of the bamboos flying helicopters and home buyers jumping from rope to rope! Anyone who remembers the BBC4 show will know what I mean).

Anyone else want to tell libby that basic maths is beyond him.....

At least some of the posters on the article get it!

Dodgy logic here. If you house goes up in value then the house you buy also increases assuming all else remains equal i.e. same area etc. Sensible logic dictates you need to move to a cheaper area to get more for the same money.
Bit of a daft article. If they are waiting for the value of their home to increase, the value of the more-expensive homes they want to buy will have increased by even more. House price inflation is their enemy, overpayments are their friend.
Nice clickbait! If prices rise so will the next rung! It doesn¿t work without wage inflation! And no one in that age group with any sense would want it to happen purely because the debt that is created is unrealised future earnings of that generation! Why do I read this rubbish... for a laugh :-)
'Millions of young homeowners' must lack basic maths skills then, because rising prices make it more expensive to move up the ladder as the price differential increases. But I think a large part of our debt-ridden economy depends on people not being able or prepared to think rationally, so no great surprise.

And this is my fav so far! From a young homeowner....

Sorry, I'm still not getting it. 10 years ago I needed an extra £40,000 to move up, now I need at least £80,000. As my income has only gone up by an extra £10,000 working on the basis of income multiples surely I'd be overstretching myself even if the bank would lend me the extra. Isn't this why we're in this mess?

Edited by renting til I die

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I do, if they're both way ahead of interest rates. When you favour asset speculation over saving you get bubbles.

How is HPI/Wage Inflation ahead of interest rates? I don't understand the correlation you're implying.

I didn't say I favour speculation over saving.

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I think it's more a case that we need a correction in terms of wage inflation to HPI.

We need a correction. But what chance is there of wage inflation catching up with HPI? Ideally a correction of prices falling, but policy is clearly against that.

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I have no issue with House Price Inflation as long as it's in line with wage inflation.

Define a wage?......a mortgage is a long-term regular commitment... A wage can be up and down, irregular, unsecure, varied, short-term contract, zero hours, seasonal...

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Define a wage?......a mortgage is a long-term regular commitment... A wage can be up and down, irregular, unsecure, varied, short-term contract, zero hours, seasonal...

Zero hours means unemployed, no?

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I have no issue with House Price Inflation as long as it's in line with wage inflation.

The cheaper every living cost is, the better off we all are. Housing, being most people biggest living cost, will make the most difference of all: cheaper living costs -> more disposable income -> more demand -> more vibrant economy.

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Just the relaxed enemy playing its own position; hey... take on the plight and needs of all your competitors in the market, then excuse them for all their excess debt later, as they enjoy a home that is massively overvalued. "They didn't know what they were doing paying £500K+ for a semi." Can you sue? No lol.

I have no issue with House Price Inflation as long as it's in line with wage inflation.

Give me hpc. Even if wage inflation, it should be hpc at these prices, and in a true free market.

With a true free market, homes would be getting larger, better and cheaper in relative terms, in response to the demands of the consumer. This is not happening. New properties are about half the size they were in the 1930s and they have become so expensive that millions are now being delayed or excluded from homeownership.

The housing market is virtually the only sector where this is happening. Imagine if we, in the UK, were driving cars that were worse than they were in the 1930s. Relying on free market forces will not work so long as builders, lenders and private sector landlords can exploit the existing dysfunctional market. Things could even get worse.

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The cheaper every living cost is, the better off we all are. Housing, being most people biggest living cost, will make the most difference of all: cheaper living costs -> more disposable income -> more demand -> more vibrant economy.

Yep, why couldn't Georgie boy have seen that. If he had allowed a proper HPC back in 2008/9 we would now have the more balanced economy he spoke about and we could see real sustainable growth.

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I think it's more a case that we need a correction in terms of wage inflation to HPI.

There should be no inflation.

Inflation is said to be good by lenders who need to ensure there is 2% more money in the economy every year to ensure they get their 2% returns.

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Of course young people need higher house prices.

The higher the price, the more you gain by having many years of working life ahead of you to pay off a mortgage. If prices were to fall then oldies (who can't get a long mortgage) could pay cash or near-cash and push the youngsters out.

I'll get me coat.

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I havent read the article, but do they "need" HPI to get them out of negative equity? so they can start all over again.

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Apparently the more 'equity' you have the bigger multiple of it you can afford to borrow in order to jump to the next rung of the 'ladder'. Money is free, it seems, and debt-carrying capacity is limited only by your loan-to-value ratio.

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What's a balanced economy? House prices are up by 40% in London and SE since 2007, wait I see now it's like Dave was saying, in some parts of the country house prices are still below 2007 prices. By a balance economy they mean house prices going up by 10% per years everywhere not just London and that is what Dave is working towards.

Haha, a balanced economy is not having one sector so huge that it can blow the rest up by hiccuping! B)

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There should be no inflation.

Inflation is said to be good by lenders who need to ensure there is 2% more money in the economy every year to ensure they get their 2% returns.

Impossible under the current fiat system. But, i agree that it is government's obsession with growth and GDP numbers that make them bias to increased levels of inflation. Of course, I think most have forgotten how bad very high inflation is for an economy.

Edit: spelling.

Edited by renting til I die

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