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Using Property As Pension Is Delusional

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Sniffing at £113,000+ downsize pot?

Has he also got any pension advice for renter-savers vs forever HPI house price bubble, with ever more landlords caused by 'tenant demand'?

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I have no respect for anything Steve Webb has to say on the subject. I have email responses from him regarding HPI, FLS, HTB etc in which his responses were bordering on delusional themselves. Career politician wants to get re-elected, starts talking sense. Too late, mate.

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Of course its delusional.

What else is to be expected from one maybe two generations that have experienced nothing but inflation in house prices?

To them it seems like a one way bet.

Trouble is that when it comes to a pension, the time scales that have to be considered are several generations longer.

Gen X and especially the Boomers should really know better.

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My parent's property is my pension.

Except, your fresh local produce consuming, excellent work life balance, fit parents' generation may have longer longetivity than your imported GM eating, social media brain mortgaged, work till you drop generation.

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Except, your fresh local produce consuming, excellent work life balance, fit parents' generation may have longer longetivity than your imported GM eating, social media brain mortgaged, work till you drop generation.

And don't forget those last few years in that expensive care home.

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One change that I would like to see - now that houses seem to be first and foremost financial assets, instead of places to live - is housing equity treated in the same way as savings for benefits calculations. If benefits are required there and then, then the govt can take a lien on the house and get the money back (with interest) on eventual sale of the house. It's desperately unfair on renters who have put money aside in other ways (and to be clear, I am not suggesting exempting renters, just a level playing field - if you have the money/equity, you use that before you get benefits).

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This is a great idea! ...and probably why it won't happen. Still, with the political scene changing by the minute, I suppose that anything is possible.

Yes - it would be a simple change, just include the primary residence in the list of assets that count as capital (which already includes just about everything else). The double kicker for savers is that their savings have been earnt, and already been taxed once - and any income they produce is likely further taxed. Most housing equity is unearned and untaxed, yet actually gets preferential treatment when means testing.

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I believe paying someone else's mortgage is delusional.

How much money have you guys wasted on rent over the years? How much more have you really been able to save vs a mortgaged house owner who will likely have a fair bit of equity given the boom years, regardless of any realistic future house price crash?

Has your strategy been to hope for a house price crash? or do you have an actual plan?

I'm genuinely interested, not baiting.

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I believe paying someone else's mortgage is delusional.

How much money have you guys wasted on rent over the years? How much more have you really been able to save vs a mortgaged house owner who will likely have a fair bit of equity given the boom years, regardless of any realistic future house price crash?

Has your strategy been to hope for a house price crash? or do you have an actual plan?

I'm genuinely interested, not baiting.

I've spent about £100k on rent.. which equates to the repayments on £50k of mortgage over 25yrs. I'm expecting houses in my price range to drop by at least £100k

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...

How much money have you guys wasted on rent over the years? How much more have you really been able to save vs a mortgaged house owner who will likely have a fair bit of equity given the boom years, regardless of any realistic future house price crash?

Has your strategy been to hope for a house price crash? or do you have an actual plan?

...

Not buying (mortgaging?) has cost me £95,000. Full disclosure inc all calculations here.

Have a definite Plan B which involves not buying an overpriced UK house which has/is worked/working out very well.

Edit to add: Not buying was one of a few financial mistakes I've made over the years. That said I've so far made more good decisions than bad. ...and to think when I came to HPC all I wanted was a simple home for my family.

Edited by wish I could afford one

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I believe paying someone else's mortgage is delusional.

How much money have you guys wasted on rent over the years? How much more have you really been able to save vs a mortgaged house owner who will likely have a fair bit of equity given the boom years, regardless of any realistic future house price crash?

Has your strategy been to hope for a house price crash? or do you have an actual plan?

I'm genuinely interested, not baiting.

It's a great argument, well put.

The double-win for the owners side is, just like 2008 and the 0.5%/QE rescue that followed it, we now have the sympathy and the suffering positions for exactly the same people who thought the same way, and have bid up prices to extremes, as well as those who snub £100K+ sell-to-downsize pots. Ahead of the renter-savers.

However alternative possibilities are. So what brought you back here anyway Reigate, since 2009? 3% BTLer stamp duty hike? Section24 concerns? BTLers freaking out on the BTL forums? Media Brexit wobbles on over-inflated housing market? Gnawing concerns possibility of HPC on your house - or 'financial asset' as I'm now reading so more frequently for homeowner side?

I was in a rental, paying £695 pcm. Nobody else was exactly biting their arm off to rent it at £695 when I moved in. The whole row was owned by a big local business - the one next door had let for £625 last year sometime. They are now trying to sell whole lot. The one I was in is on the market for £225k. Even if you put down a £35k deposit giving you 85% LTV, you'd still be looking at about £1,150 each month on the mortgage on a 5 year fix, even at these rates. Once you roll in the £50/month you'd forego as interest income when you surrendered the deposit you end up with a picture of £695 vs £1,200. For me when I look at the grim detail it's obvious than in the South East we still have a massive bubble in prices. Escalation of rents is oversold, the idea of masses of demand is likewise oversold. It's all very well talking about people being too old to be granted mortgages, at these multiples you're got to think about whether you might expect to live long enough to make it worth your while buying instead of renting! £225k makes sense (on a very broad definition of sense) if you can get a 85% LTV mortgage interest only mortgage at about 5% and believe that house prices only ever go up and the costs of maintaining the asset are always trivial.

I don't know about other places and other segments but for horrid 2 beds where I'm based its pretty clear that the rents people can afford are about £750pcm-£850pcm, but people are trying to sell houses as if people could afford to pay a mortgage that was £300/£400 more.

The nature of the financing has changed. This Hamish goon is right that it's about mortgages, but the resolution is not going to be a return to profligate lending. The resolution will be a resumption of the needed correction to house prices. I don't think that we'll be in the new normal till people trying to sell houses work that out. Until then modest transaction volumes and a queue of late entrant BTLers strengthening the banks balance sheets one deposit at a time.

Well, based on the loan value for standard SVR mortgage I've just looked at on my Banks website, you would actually be looking at £400k interest on a £400k loan over the next 25 years (that's if interest rates stay as low as they currently are - which I don't think anyone believes will happen.)

Now, look at some of the daft £450k terraced houses. I can easily see those dropping by at least 10-20% in value over the next 5 years; maybe much more. But even at just over a 10% fall and no rises in interest rates, that's your £50k deposit gone (plus the loss of the interest it could have earned in an ISA/etc..) And in the first 5 years of mortgage payments, at £2.6-2.7k per month? Well, you've only paid off £26k of your house. But remember the interest on the loan? That's cost you another £121k in just the first 5 years. So, after 5 years, you are ~£180k down on a £450k house - if interest rates don't go up at all and your house only drops in value by about 12%. The reality is likely to be something much more severe, IMHO - a 30% fall in prices and interest rates at just 2% higher than today gives a loss of over £300k on a £450k house in just five years. And what have you got for that £180k-£300k of investment? Just £26k worth of equity in a house (and minus all your other costs for 5 years - moving costs, stamp duty, maintenance, etc., you don't even have that!)

So that, to me at least, is what is so frightening about buying in the current market. Not a single young person under the age of 35 I speak to can afford to buy at current prices. And for those that do, the doubling and trebling of houses prices needed to wipe out the enormous amount of interest they'd paid in the first 5-10 years of ownership is just not going to happen. Scary stuff indeed.

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Depends on a lot of things - gearing up to get a BTL might not be the smartest of moves at this time but if you had enough money to buy outright then a BTL property in an area with lower prices (or if you could find a bargain) would at least generate a return on your investment.

Over the long term (i.e. 10 years plus) if you could hold it 'til the market was right, then you could probably sell with a profit at least equal to inflation. Remember that interest from bank savings is almost zero (with some counter party risk too) and the stock market could go anywhere over the next few years, most likely tanking too fast to get your money out. Property looks like a fairly reliable way to get a reasonable return with less risk than that.

On the other hand, if you are gearing up to buy overpriced properties to build your own mini property empire with the expectation that interest rates will stay low over a couple of decades, prices are only going to keep shooting up, and you will face no hassle or effort in renting the house then you are likely to get a very big shock indeed.

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Not buying (mortgaging?) has cost me £95,000. Full disclosure inc all calculations here.

Have a definite Plan B which involves not buying an overpriced UK house which has/is worked/working out very well.

Edit to add: Not buying was one of a few financial mistakes I've made over the years. That said I've so far made more good decisions than bad. ...and to think when I came to HPC all I wanted was a simple home for my family.

That was insightful thanks and seems you knew exactly what you were doing. I know people who rent but are simply just waiting for housing to become more affordable, there is no real plan B!

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I've spent about £100k on rent.. which equates to the repayments on £50k of mortgage over 25yrs. I'm expecting houses in my price range to drop by at least £100k

Makes sense, but still a gamble. Assume you have invested well but still risky with shares etc?

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Why didn't you buy this then Sour Mash?

My view is there's a HPC coming. Also tighter BTLers licensing and regulation coming in, as well as new regulations that have recently come in.

Timing: A Section 21 Notice cannot validly be served in the first four months of a tenancy. (re 14 days for LL to get things fixed else tenant can escalate to local authority (and then landlord can't issue S.21 until resolved) “Good landlords will deal with complaints within the given 14 days, but my concern is the level of resource the local authorities have in place to action environmental health officers to carry out inspections when staffing levels have been cut to the bone.

I posted it up on forum. Right behind the Hilton Hotel in Blackpool.

------------------

We are acting in the sale of the above property and have received an offer of £52,500

http://www.rightmove.co.uk/property-for-sale/property-39422568.html

35 Boothroyden, Blackpool, Blackpool FY1 2NT
£75,950 Terraced, Freehold 09 Jan 2006 3 bedrooms
£91,000 Terraced, Freehold 17 Nov 2005
http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=28212816&sale=16589258&country=england

That's a 1995 price imo

http://www.rightmove.co.uk/house-prices/FY1-2NT.html

Edited by Venger

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It's a great argument, well put.

The double-win for the owners side is, just like 2008 and the 0.5%/QE rescue that followed it, we now have the sympathy and the suffering positions for exactly the same people who thought the same way, and have bid up prices to extremes, as well as those who snub £100K+ sell-to-downsize pots. Ahead of the renter-savers.

However alternative possibilities are. So what brought you back here anyway Reigate, since 2009? 3% BTLer stamp duty hike? Section24 concerns? BTLers freaking out on the BTL forums? Media Brexit wobbles on over-inflated housing market? Gnawing concerns possibility of HPC on your house - or 'financial asset' as I'm now reading so more frequently for homeowner side?

Hello Venger it wasn't an argument just an opinion.

I came back on just out of interest to see if the same people who predicted the gloom in 2008 were still renting, and now making the same predictions and hoping for a crash to suit there own needs.

I didn't buy to make money, just bought to have a settled place for my family.

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Hello Venger it wasn't an argument just an opinion.

I came back on just out of interest to see if the same people who predicted the gloom in 2008 were still renting, and now making the same predictions and hoping for a crash to suit there own needs.

I didn't buy to make money, just bought to have a settled place for my family.

People want lower prices to suit their own needs. (to have a home to settle in with family)

Other people want to buy at prices others recoil from, to suit their own needs.

It's called a market.

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That was insightful thanks and seems you knew exactly what you were doing. I know people who rent but are simply just waiting for housing to become more affordable, there is no real plan B!

If I didn't buy AND didn't enact a Plan B I'd be a little bit "excited" about now. I really hope HPC'ers have a back-up as a HPC may or may not happen. I fully admit I have absolutely no idea as I have a very broken crystal ball. All I know is that it is very very messed up and I've chosen to just opt out.

A famous quote that sort of seems relevant - The market can remain irrational longer than you can remain solvent. In the case of HPC it might be longer than you can stay alive...

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People want lower prices to suit their own needs. (to have a home to settle in with family)

Other people want to buy at prices others recoil from, to suit their own needs.

It's called a market.

True. Just seems a lot of people bitter about the market and now want the people who bought homes (not because they wanted to pay over inflated prices) to now suffer so they can take advantage.

Whats your position by the way?

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True. Just seems a lot of people bitter about the market and now want the people who bought homes (not because they wanted to pay over inflated prices) to now suffer so they can take advantage.

Whats your position by the way?

Renter-side bitterness and owner-side suffering in event of HPC. Both barrels eh.

Nothing about the £Trillions in owner-side equity? Even this thread, snubbing £100K+ downsize profit??? What does HPC do for all those millions of owners in terms of suffering. Nothing apart from maybe knock their egos. <1 in 4 owners under 45. Around 1 in 5 properties a BTL.

Daily Mail

Average UK house price to hit £780,000 by 2040, says leading think tank

Kilo Charlie, My World, 9 hours ago

We purchased a property in 1983 for £72,000.........today it's worth £650,000 plus. It's certainly possible and quite likely.

Sam, Bucks, 3 hours ago

Bought house in ,74 for 16k added extention about £8k now valued at £480k you do the maths?

And of course there is no suffering vs priced out renter-savers from BTL landlords.....

It's psychologically healthy to get knocked back a bit by reality from time to time. Governments have created a huge amount of psychological poor health by transferring the costs of poor economic decisions from those who made the decisions onto others. They've encouraged the people who made the poor decisions to think they're invincible and life is super easy because they're so clever and talented, and they've made the ones bearing the costs (mainly younger renting workers) think that life is impossibly hard and there's no way to make progress no matter what they do.

It's more like saying you feel sorry for someone who has taken risky financial decisions and bid up the price of housing and is currently enjoying that position and might - but will not necessarily - suffer for it in the future, whilst totally failing to mention all of the people who their actions have helped to price out and who are actually suffering as a result now.

The two are intrinsically interlinked.

More people are already suffering, because of the current dislocation between house prices and wages, than will possibly suffer in a HPC.

People who own their homes outright won't suffer.

People who have borrowed sensibly in relation to their household incomes and savings buffers won't suffer.

The only people who might possibly suffer are those who have acted speculatively, whether by holding multiple properties or by borrowing unsustainably for their main residences in order to maximise their stake in the housing market.

This relatively small cohort who might possibly suffer are also the ones who are most likely to have been driving the bubble and causing the suffering of those who are, as a result, priced out and unable to own homes of their own without borrowing in a similarly reckless manner.

In so doing this relatively small cohort who might possibly suffer have ultimately caused this possibility themselves. Not only in choosing their own personal exposure to the housing market, but also in the aggregate effect of their actions on house prices. It is the build up over the course of the boom that causes the bust. The boom is the bad times. The bust is just the bad times coming to an end.

This relatively small cohort who might possibly suffer are also, currently, not suffering. In fact they are enjoying the fruits of their speculation as we speak, and many of them have been doing so for quite some time now, and may well continue to do so even in the event of a HPC, if they play their cards right.

....I still hold the same opinion. I am not sufficiently convinced that prices are stable at this level to start handing over every last penny of savings to a bank in order to buy a shit house. I am happy to pay a BTLer to take that balance sheet risk on my behalf. I'd rather we'd had a massive correction in prices and the extermination of the buy-to-let sector, but that hasn't happened yet, so I take the world as I find it and make a call. I sleep well at night. I feel no rancour towards the BTL tw@ts. The whole business is not a big deal emotionally for me. What I feel is, as I've said before, sadness and grief; I think that Byron cut to the chase when he mentioned his anger at the fact that these clowns meant that family formation is delayed and thus some people have gone to their grave having never met their grandchildren, just so that we could have a societally destructive housing bubble.

For me it's all about how do you respond to idiocy and iniquity. If you see a chance to make an easy buck and pile in, I think you are scum. I don't think that's manipulative. It's just my opinion.

The reason why I feel that it is fair game to mock MS is that he's missed the point on something so fundamental. The fact that some posters on hpc hold a different opinion to him and try to argue from the evidence to support that opinion does not make us manipulative. I'm not saying, "Golly, if I can make everyone believe this rubbish, I'll get a cheap house", I'm saying, "This is societally destructive unsustainable idiocy and I refuse to be complicit by an act of commission". I can't stop some herbert like Mark ganging up with a shit bank and using my earnings to pay a BTL mortgage but I can chose not to hand over my savings and sign up for a whacking great repayment mortgage.

The fundamental error in MS's reasoning about us is that he is a true believer in himself. He's failing to understand that an alternative perspective on him is consistent with the facts. An amoral chancer disrupting other people's lives by making a daft and unsustainable pact with a bunch of banks that are so crap that they put themselves out of business.

1.There is nothing remotely selfish about wanting a cheaper house. Everyone benefits when goods and services are more widely, and more easily available, that is the entire point of a capitalist economy.

In a rational economy no-one loses from cheaper housing. We have intentionally created a system of rationing and enforced landlord dependency, to benefit a few very greedy people, who do not want to change the status quo. Now that is selfish.

2. Landlording only exists because of regulation, it is an entirely state dependent activity. The only question is how it should be regulated.

BTL is a businesses the way that unemployment benefit is a profession.

If you really fear a HPC so much, then sell up, at new UK wide peak prices.

The idea that older people don't see their homes as investments is a ridiculous self-serving platitude.

If that were true, the age demographics of landlords wouldn't be what they are, the daily mail wouldn't print the house price of every serial killer and murder victim, and house prices probably wouldn't be an issue.

Very few people can afford to ignore the value of their home, whatever their age, it's a key factor in everyone's decisions about housing.

I'll repeat my earlier point, in the hope that reading comprehension wasn't just a passing fad from my youth.

We live in a market economy, of sorts. The selling point of a market economy is that selfish decisions should lead to an optimal allocation of resources.

The distribution of housing is not optimal. Why?

The elderly ought to downsize. Not that they should be forced to, like in a command economy, but that it ought to be the outcome of their selfish decisions, and it isn't. That is a fact that needs explaining.

I claim that this can be explained by looking at the lack of incentives to move. Retired people don't downsize because:

1. They don't pay the costs of their decision, other people do.

2. Homes are investments, and the financial incentives beat the real economic incentives.

In other words, we don't have a free market for housing. An alternative position is that we do have a free market, but free markets don't work for some reason.

'Some older people are poor' isn't an alternative argument.

Nor is individual psychology, the relative mentality of demographic groups (as if such a thing even exists) or how anyone feels about anything.

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