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streamingfreedom

The Value Of Property - We Need The Economy To Improve To Lower Hps?

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Bear with me here...

Most people here agree the economy is royally f'ed up, standards of living have and are dropping, all while the gap between rich and poor increases. House prices are ridiculous in many areas as are rents. Opportunities for building wealth and social mobility are generally worse than the last few decades. The majority of people I know under 45 are struggling if they have financial dependents, even those on very good salaries.

I cannot understand which demographic are out spending hundreds of pounds on home improvements, holidays, cars etc, and least of all houses but I guess it must be those that already own property or bought 15 years ago and saw there monthly mortgage payments drop to almost nothing post 2008 as IR dropped to the floor.

In such times, owning a property outright or most of it makes you very well off. As mortgage/rent becomes an ever increasing slice of take-home pay, so one becomes increasingly better off relatively if they already own outright. When housing is such a high cost, the value of owning increases. Of course, we know that without low IRs, HTB props etc the market wouldn't be where it is now, however is there not some logic in saying that right now, just as the value of gold increases in turbulent times, with housing being such a high cost to bear so too the value of property increases?

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This came to mind while having a house price discussion with the in-laws in Seoul - they also live with ridiculous house prices and don't find what we tell them all that strange. Their opinion is of course they are expensive because if you own you are so much better off. To be fair their housing market is set for a downturn too, but the there are no government props, just a very high cost of living.

Felt like a controversial post tonight

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House prices are high because people can obtain the money to put them into their names jointly with the lender, but they can't afford to actually pay for them in full within a working lifetime......they effectively rent from the lenders....what now needs to come down is the private rents to match low interest rates......then fewer would want to buy.....and far fewer would want to buy to rent out. ;)

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This came to mind while having a house price discussion with the in-laws in Seoul - they also live with ridiculous house prices and don't find what we tell them all that strange. Their opinion is of course they are expensive because if you own you are so much better off. To be fair their housing market is set for a downturn too, but the there are no government props, just a very high cost of living.

Felt like a controversial post tonight

Thread theme:

pop pop, bubble pop

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Id say there is some truth in the title. To get us out of the zirp NIRP cycle, leaders need to feel their rises aren't going to crash the market and the global ecomonony is strong. Well bug fat zero chance if either of those. The only way is to force the hand with a forced rise and inflation. The only catalyst I can see if if we brexit and oil surges back to 150 a barell.

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I read the OP x2 and although I think I understand the premise, I'm still not sure how the dynamics would work? Isn't most housing paid off and owned by old people!

Edited by renting til I die

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I read the OP x2 and although I think I understand the premise, I'm still not sure how the dynamics would work? Isn't most housing paid off and owned by old people!

I think that the OP is arguing that if an asset you must has have access to becomes ridiculously expensive to purchase or rent, then it's a boon if you already own it outright. What I can't understand is why this proposition is supposed to be controversial. Of course, these people are spending into the economy, but just not enough to offset the fact that everyone else is f**ked, (to use the technical vernacular).

Edit: "Must has access to" is both too lol catz and not sufficiently lol catz. Sorry

Edited by Idlewild

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I read the OP x2 and although I think I understand the premise, I'm still not sure how the dynamics would work? Isn't most housing paid off and owned by old people!

I imagine the opposite as the economy is doing really well, wages are good and housing costs as a percentage of take-home pay are low. Therefore to have a good quality of life it's less important that you own property outright. As a result equality is fairly good.

At the moment it's the exact opposite in the UK; equality standards are low because regardless of your salary, if you own property outright you're rich, if you rent or take on silly debt you're poor. In this situation, the value of property is high.

I pay around 40% of take-home pay as rent, if I had a mortgage for the same property it would be more like 50%. If I owned the property I rent I would be really well off. If like 15 years ago rent and mortgage was more like 25% of take home pay property is less valuable because it's less of a contributor to quality of life.

In terms of dynamics, I feel this is like an amplifier - Hps have been boosted by loose lending policy and move to double incomes but this phenomena only amplifies the situation. If that's the case it would also apply in reverse in the event of a HPC.

Edited by streamingfreedom

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