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paradox

Why I Don't Mind

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There is one argument that has yet to be answered by mega bulls and the house prices only go up brigade.

Lets assume they are right. Lets assume house prices grow faster than inflation and other forms of investment over the next 134 years.

My little sell to rent fund would never catch up with the increase in house prices. I would not even be able to afford to buy my flat back again. I would be priced out, forever, never again to have a mortgage.

Would that mean I had made a mistake? Should I go to see some of the bear baiters and say "its a fair cop" Brainclamp, TTRTR etc all is forgiven, you are right, I missed out, missed the boat, failed. Pass me a pistol please and I will end it all right now. Bang.

Answer: NO

I sold because we wanted a bigger place and could not afford the increased mortgage to get one. If our flat increased in value, so would all the bigger places. The capital gain would be irrelevant unless we sold up to move abroad. Even in the flat tripled in value over 8 months it would not make a difference because all things being equal the bigger house would also triple and the absolute value of the loan needed to trade up would triple as well.

The scale of house price inflation over the past 5 years has been quite staggering. Whether or not it is a step change or a temporary phenomenon only time will tell. However it has meant that many old "truths" no longer apply. This is why the debate on here is often generational.

What I am trying to say is that the phrase "buy now or you will miss out" is misleading. Miss out on what? The more prices rise, the more you are destined to remain in your starter home or flat because the less you will be able to trade up. So what are you missing out on?????

I am assuming a low inflation environment with low interest rates and property prices rising faster than anything else over a very long period.

Conclusion:

Under this scenario the whole property market will seize up as it is crushed under the weight of its own high prices and nobody can afford to move up.

What bulls should be praying for is HIGH inflation, WAGE inflation and HIGH interest rates for a period. These would wipe out the real value of the existing mortgages and free up the market again. Prices would fall somewhat (we can debate by how much they would fall in nominal terms)

Ok, the overcomitted would suffer, but the market as a whole would refresh itself ready for another bout of House Price Inflation.

Edited by paradox

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Good post predicated on the need for all FTBs to embrace a pragmatic view of home ownership until sanity returns to this bloated property bubble.

What is the point of buying if you are burdened with debt and remain trapped for ever in a shoebox because you are unable to trade up, or unlock yourself from negative equity?

Rent, save, have a life and wait for the inevitable correction.

Edited by Red Baron

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Guest muttley

What bulls should be praying for is HIGH inflation, WAGE inflation and HIGH interest rates for a period. These would wipe out the real value of the existing mortgages and free up the market again. Prices would fall somewhat (we can debate by how much they would fall in nominal terms)

Ok, the overcomitted would suffer, but the market as a whole would refresh itself ready for another bout of House Price Inflation.

Absolutely.The interest rate debates on this site are spurious.The real threat to house prices comes from lack of inflation and the possibility of deflation.

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There is one argument that has yet to be answered by mega bulls and the house prices only go up brigade.

Lets assume they are right. Lets assume house prices grow faster than inflation and other forms of investment over the next 134 years.

Err... if HPI ran ahead of general inflation for that length of time it would be many times the size of GDP, even if only servicing IO debts at 2% rates the interest payments alone would be more than GDP. Nothing can experience exponential growth without corrections.

Anything undergoing hyperbolic growth will eventually run out of idiots or money, or both. Like any pyramid they require ever more participants to prop it up, eventually they need more people than are in the UK, or even the world!

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Like any pyramid they require ever more participants to prop it up....

And thats why we have immigration.

Britain has successfully managed this for over 150 years.

With an open Europe and more air travel it will accelerate even further.

Yes, there will come a reckoning, but it may not be as sharp or as soon as you'd like it.

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Whether or not it is a step change or a temporary phenomenon

it can only be temporary. if this was a aperm feature of the uk from now on there would be a huge exodus of non owners. no one is going to put up with this for too much longer. if i ever established it was always going to be such as selfish and greedy sheeple place to live - id be off. i wouldnt waste my entire life jumping up for what little scraps of housing left while working 50 hours till im 69 ?

the country isnt THAT good.

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I mind HPI!! Being on a fixed income I sold to downsize. I was gazumped in my proposed purchase. I discovered this site and decided to rent until the HPC. Almost one year later I am considerably worse off in terms of a reducing capital sum for house purchase. In this area of Scotland house prices have risen by about 10% - 15% in the last year and still look very buoyant. There is not a glimpse of an HPC on the horizon here. Meanwhile my capital sum has remained static tending towards decline as the net interest has been used to fund the monthly rent. Many of the properties I could have offered on last year are now too expensive for me. If I wait another year before purchase how much less will my capital sum be worth and or how much less of a property will I be buying?

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if you are using the interest to pay your rent, then surely you are saving your wage?? In which case you would have made gains over the existing property market. If you are also considering renting for a long period you should invest into a diverse portfolio of gold, shares, long term savings and short term savings to maximise your growth and risk according to your profile

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And thats why we have immigration.

Britain has successfully managed this for over 150 years.

With an open Europe and more air travel it will accelerate even further.

Yes, there will come a reckoning, but it may not be as sharp or as soon as you'd like it.

Doesn't work, you'd need more than the entire population of Europe to sustain it, then the world, exponential growth requires ever more participants.

You assume migrants could or would want to buy a small rabbit hutch with £250k they don't have.

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I mind HPI!! Being on a fixed income I sold to downsize. I was gazumped in my proposed purchase. I discovered this site and decided to rent until the HPC. Almost one year later I am considerably worse off in terms of a reducing capital sum for house purchase. In this area of Scotland house prices have risen by about 10% - 15% in the last year and still look very buoyant. There is not a glimpse of an HPC on the horizon here. Meanwhile my capital sum has remained static tending towards decline as the net interest has been used to fund the monthly rent. Many of the properties I could have offered on last year are now too expensive for me. If I wait another year before purchase how much less will my capital sum be worth and or how much less of a property will I be buying?

What area of Scotland are you in?

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Sold in September 2005 - so far I have increased my equity through investing it elsewhere and the prices where I sold have been pretty much static.

Obviously the title of the thread is rhetorical. The point I am trying to make is very serious though. Lets say I called the shots wrong and the prices raced ahead again.

I would be left with having to overpay a large mortgage in order to get it under control. Even once I had done that I would have to take out another larger one to trade up, because prices were rising fast again.

The interests of the property market are best served by a slowdown in prices and / or a hefty bout of wage inflation. Low interest rates and continual real price increases (above wages and inflation) do not constitute a healthy market. This is the point the bulls always miss.

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  • 301 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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