Fidelity House Price Review

[house-down]

Decades of rising prices have solidified a belief in housing. For many, property is their pension. Yet when assessing returns we often forget about inflation. The reality is that “real” house prices have been falling since 2015, and for longer in some regions. There are also worrying comparisons to be drawn with the 1970s. Andrew Oxlade explains the numbers and compares property’s progress with the stock market.
 

 

https://www.fidelity.co.uk/markets-insights/personal-finance/personal-finance/house-prices-did-you-miss-the-16-year-crash/?utm_term=pi_citywire&utm_campaign=pi_newsletter_11.11.23&utm_medium=email&utm_source=marketo&utm_content=lead_story__SippN_ISAN_B. 35-44&mkt_tok=MTQzLUpSTS0wMzIAAAGPXOppjCsGgt0c6XEY36xfLQbP4Ij6CsO2CbTfDYL96oDFTOnFphH2kmNVFaLbOsQnbvmfdKU5npx5SovNkDqBYVAC33A86_kGg5qTh86LYyIwwAw

[TenYearToGetMyMoneyBack]

I got the same link in my email but didn't post it as I concluded it was just a big advertisement for buying stocks and shares.

• If house prices haven't kept up with inflation how come they are at massive multiples of wages (wages not keeping up with inflation ?)
• Houses are probably the only thing Joe Public can buy with massive leverage. Ask to borrow £200K to invest in shares and I can guess what the answer would be.

[BorrowToLeech]

9 hours ago, TenYearToGetMyMoneyBack said:

I got the same link in my email but didn't post it as I concluded it was just a big advertisement for buying stocks and shares.

• If house prices haven't kept up with inflation how come they are at massive multiples of wages (wages not keeping up with inflation ?)
• Houses are probably the only thing Joe Public can buy with massive leverage. Ask to borrow £200K to invest in shares and I can guess what the answer would be. 

It is simply not true that you cannot use leverage in other markets, you can. I don’t know where this idea comes from, but I’ve heard it several times now.

It is almost certainly easier to leverage stocks than to get a BTL, although I’ve never bought a BTL, obviously. Hell, you can leverage Fx if you’re mad enough, and some people make a fortune doing it. 

There are various ways to go about it, and a quick check suggests I can get at least 20/1 (i.e. a 95% mortgage equivalent) on equity indices.

On top of that there’s the easiest least risky way to leverage into the stock markets: your pension. For a higher rate tax payer you can get around 2/1 leverage at zero risk. This is free money, basically.  

Of course, most people don’t do any of this normally because leverage is, rightly, seen to be risky. But then they blindly ignore that risk when it comes to housing. That’s mostly for cultural and political reasons. Housing ‘investment’ is a religious cult in the UK. 

[TenYearToGetMyMoneyBack]

22 hours ago, BorrowToLeech said:

It is simply not true that you cannot use leverage in other markets, you can. I don’t know where this idea comes from, but I’ve heard it several times now.

It is almost certainly easier to leverage stocks than to get a BTL, although I’ve never bought a BTL, obviously. Hell, you can leverage Fx if you’re mad enough, and some people make a fortune doing it. 

There are various ways to go about it, and a quick check suggests I can get at least 20/1 (i.e. a 95% mortgage equivalent) on equity indices.

On top of that there’s the easiest least risky way to leverage into the stock markets: your pension. For a higher rate tax payer you can get around 2/1 leverage at zero risk. This is free money, basically.  

Of course, most people don’t do any of this normally because leverage is, rightly, seen to be risky. But then they blindly ignore that risk when it comes to housing. That’s mostly for cultural and political reasons. Housing ‘investment’ is a religious cult in the UK. 

I guess you are thinking of things like Spread Betting or traded options. Don't they tend to be quite short term? (I'll admit a lack of knowledge about them). 

Back in 1987 a colleague was into traded options. After Black Monday I asked him if he lost much of his money. His reply was "Just the families". It sounds as if he had been using the bank of Mum and Dad and relatives for his risky trades.

Yes I know about pensions but wouldn't call them the same kind of leverage. As you say they can be invested in cash making them no more risky than a bank deposit, although for anyone under 55? It is almost impossible to get the money out.