Hpi / Btl Is The Equivalent Of Smelling Your Own Farts

[Arpeggio]

Globally, property investment plays such a small role in funds in general.

Just looking at some funds now including Gold mining, Russia, India, Alternate energy and South America, I see that "property" isn't in the spread at all, it's 0%. Property does not make the world go round.

Picturing the above funds as different organs within a body (the economy) to enable the body (the economy) to move, function and live. House prices, when rising (in any realistic non-propped up by taxpayer sense) have always been due to the success of an economy; people earn more money, house prices go up.

Rising house prices are like the "exhaust" of the successful economy, They aren't integral or essential to it. Like the human body, an economy cannot sustain itself from smelling it's own farts.

[Bland Unsight]

I think that's the best thread title I've read in my five years of posting here. Property gets too much attention because we all need to secure access to it and more latterly mug punters can play it with leverage. The fact that it has shown pretty monster returns in some markets has played into that too, but as you suggest in terms of what makes the world turn, the main role of property is to blow up the banking sector from time to time and amp up recessions as household balance sheets suffer in corrections.

[Bland Unsight]

Still laughing about that title BTW

[Arpeggio]

http://www.tullettprebon.com/documents/strategyinsights/tpsi_armaggaddonusa_a4_spw_008.pdf

Page 29: "Third,middle class Americans have tended increasingly to have their assets over-allocated to the housing sector. Fourth, and worst of all from an economic perspective, houses are capital sinks, which absorb investment without generating a return.In other words, tying up capital in property reduces national productivity. Borrowing to do this is folly, and borrowing from abroad for this purpose is the economics of the mad-house."

Paaarp! Pffft! WHUUF! Poot!.....Sniff them farts good.

[Arpeggio]

I think that's the best thread title I've read in my five years of posting here. Property gets too much attention because we all need to secure access to it and more latterly mug punters can play it with leverage. The fact that it has shown pretty monster returns in some markets has played into that too, but as you suggest in terms of what makes the world turn, the main role of property is to blow up the banking sector from time to time and amp up recessions as household balance sheets suffer in corrections.

Thankyou Idlewild. Pleased you like it, the comparison occurred to me today.

[london_thirtythree]

I don't get the mainstream obsession with blowing up property prices - I guess it is good for owners to imagine themselves as financial wizards and be able to cash out, but seems obvious that it is bad for wider society and so something that politicians should be monitoring and doing something to stop. (given the whole industry is based on lending, presumably would be pretty easy to do)

In my own little microcosm, if I wasn't saving at a mad pace to try and afford to buy somewhere to live (as the missus and me are probably ready to look at sprogging in a few years time), then I would be able to relax a bit and invest more in the business rather than sinking profits into saving for property. This investment would then result in more jobs, more R&D and things we claim we care about; but instead goes into the black hole of bricks and mortar.

However if I don't do that, then my personal life will be diverted massively as I'll probably never have kids - and people will probably always value their personal existence over what benefits society at large.

Scaling that up, the report makes perfect sense - just borrowing to pump up your personal ponzi instead of governing to build investment and a better world will probably run out of road and end in disaster. Depressing.

[london_thirtythree]

(opps - sorry - only just found this thread from the link elsewhere, so didn't twig I was resurrecting it.. think that report is worth a read though, found it very interesting)

[jfk]

Best thread title award