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HPCheese

Homeowners - Please Explain

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Speaking to a friend the other day who has "made £50K in the last 2 years" thanks to house price inflation.

There was no question in his mind that this was a 'good thing' - he'd heard so on the news.

"Great", I said, "What are you going to spend the £50K on? A nice skiing holiday, or maybe put it towards your mortgage?"

"Err... I don't think it works like that."

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

Now obviously I'm missing something, because when the BBC/Daily Mail etc. tells us it's good news that property prices have gone up, I can't figure-out who it's actually good for other than :

1. People downsizing.

2. People emigrating.

3. People with multiple properties.

4. People who's parents have just kicked the bucket.

Please explain...

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The are THICK and NAIVE!!!

I made 50K on my house but need to find another £80K on top of that because of HPI?

WOW!!! Im RICH?? :blink:

I want these KNOBS to be the ones that suffer the most with a crash. I cannot tolerate STUPIDITY on this level!

TB

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Speaking to a friend the other day who has "made £50K in the last 2 years" thanks to house price inflation.

There was no question in his mind that this was a 'good thing' - he'd heard so on the news.

"Great", I said, "What are you going to spend the £50K on? A nice skiing holiday, or maybe put it towards your mortgage?"

"Err... I don't think it works like that."

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

Now obviously I'm missing something, because when the BBC/Daily Mail etc. tells us it's good news that property prices have gone up, I can't figure-out who it's actually good for other than :

1. People downsizing.

2. People emigrating.

3. People with multiple properties.

4. People who's parents have just kicked the bucket.

Please explain...

Mmmm...

1/ It means they were right to buy when they did - good news.

2/ It means the risk they took on has subsided - good news.

3/ It means should they want to move, they'll have a larger % deposit for their next place (yes we know they'll pay more for the next place though) which means they may have the opportunity to pay a better interest rate - good news.

4/ It means that they can safely MEW to make improvements to the property (1 of the few MEW reasons that I personally approve of) - good news.

5/ It means that they can MEW a deposit for a BTL & do even better out of property - good news.

6/ It means they can consolidate all those expensive credit cards & hire purchase loans into a lower rate MEW (not that I approve) - good news.

7/ It means that they now have a higher implied return from their equity in the property - good news, but they wouldn't realise.

I'm sure I could keep going until sunset if I really tried.

Now it's your turn. Why is it bad news for Homeowners?

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I hear the “house prices are not real money” argument most often bandied about by home owners, as, although they appear to have done a “buy one and get one free” after 5 years, they usually realise that their next house will cost more as well. So, as they would say “it’s not real money”. But good news nevertheless as their net worth would have improved.

Edited by spline

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Speaking to a friend the other day who has "made £50K in the last 2 years" thanks to house price inflation.

There was no question in his mind that this was a 'good thing' - he'd heard so on the news.

"Great", I said, "What are you going to spend the £50K on? A nice skiing holiday, or maybe put it towards your mortgage?"

"Err... I don't think it works like that."

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

Now obviously I'm missing something, because when the BBC/Daily Mail etc. tells us it's good news that property prices have gone up, I can't figure-out who it's actually good for other than :

1. People downsizing.

2. People emigrating.

3. People with multiple properties.

4. People who's parents have just kicked the bucket.

Please explain...

Here's your explanation:

1. People downsizing.

2. People emigrating.

3. People with multiple properties.

4. People who's parents have just kicked the bucket

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Now it's your turn. Why is it bad news for Homeowners?

For those who want to stay put and don't wish to MEW or move their mortgage it makes little difference. For those like me who want to trade up it makes the "rungs of the ladder" further apart. What matters to me is not really what my current house is worth, or what the house I would like to buy is worth, its the difference between the two that matters. The higher HPI is the bigger this difference is, and the greater the total interest on my new mortgage will be, and the higher the amount & rate of stamp duty will be on the place I am buying, and the higher the agents fees will be on the place I'm selling.

Edited by Neil D Possitt

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Mmmm...

1/ It means they were right to buy when they did - good news.

2/ It means the risk they took on has subsided - good news.

3/ It means should they want to move, they'll have a larger % deposit for their next place (yes we know they'll pay more for the next place though) which means they may have the opportunity to pay a better interest rate - good news.

4/ It means that they can safely MEW to make improvements to the property (1 of the few MEW reasons that I personally approve of) - good news.

5/ It means that they can MEW a deposit for a BTL & do even better out of property - good news.

6/ It means they can consolidate all those expensive credit cards & hire purchase loans into a lower rate MEW (not that I approve) - good news.

7/ It means that they now have a higher implied return from their equity in the property - good news, but they wouldn't realise.

I'm sure I could keep going until sunset if I really tried.

Now it's your turn. Why is it bad news for Homeowners?

I was with you, TTRTR, until items 3 and 7! There's no advantage at all with those, IMO.

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Oddly enough on the contrary, most people here would accept that house prices going down are bad for homeowners - I've seen various bits of advice to potential FTBs along the lines of "Why would anyone buy an asset knowing it might fall in price"?

So it's a bad thing for homeowners if prices fall, but still not a good thing if they rise? Confused?

Personally I think that there are a few complex aspects to this. If you intend to take your money out of the property market or downsize or if you're a speculator with multiple properties, then fine, big rises are good for you. But for most people, neither big falls nor big rises are particularly good. Big rises take the next step up the ladder out of reach. Big falls cause negative equity.

But gentle rises may be helpful in terms of improving your equity to loan ratio and so forth. And for someone like me having just bought, modest falls might be the best thing as it would be my best chance of moving on. But big falls would make this harder if it eats too far into my equity. So a degree of stability is probably more genuinely advantageous to many than huge swings up or down.

In that respect, for a homeowner with a single residence who intends to stay that way, house prices don't operate quite the same way as a normal investment (for that reason I tend to disagree that you can always judge property prices by the "buy low, sell high" rule).

Edited by Magpie

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Mmmm...

1/ It means they were right to buy when they did - good news.

2/ It means the risk they took on has subsided - good news.

3/ It means should they want to move, they'll have a larger % deposit for their next place (yes we know they'll pay more for the next place though) which means they may have the opportunity to pay a better interest rate - good news.

4/ It means that they can safely MEW to make improvements to the property (1 of the few MEW reasons that I personally approve of) - good news.

5/ It means that they can MEW a deposit for a BTL & do even better out of property - good news.

6/ It means they can consolidate all those expensive credit cards & hire purchase loans into a lower rate MEW (not that I approve) - good news.

7/ It means that they now have a higher implied return from their equity in the property - good news, but they wouldn't realise.

I'm sure I could keep going until sunset if I really tried.

Now it's your turn. Why is it bad news for Homeowners?

I'm a houseowner, I have been for 31 years. My house would probably sell for £700k, and I own 40% of another property worth 220k. I think it's bad news for me - why?

a) I have 3 kids all with good, well-paid jobs. I would rather they didn't have to borrow crippling amounts to live in undesirable properties

B) Although the value of my house has risen, unfortunately it is still the same house, and that 1 round the corner that I wanted to save up for and buy would now cost me 1.3million (plus taxes)

c) Ever since I was a homeowner myself I've always hated smug git acquaintances, many of them lazy and unproductive, crowing about the value of their properties

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See below for my response, particularly the second half. The notion that rising house prices is advantageous for owner occupiers is twaddle for the majority of people.

How High/Rising House Prices Means That We are All Getting Less and Less for Our Hard Earned Money – Estate Agents, Mortgage Lenders, TV Property Presenters, etc. are getting RICHER and RICHER whilst We (Joe and Jane Public) are getting POORER and POORER:-

1) Imagine the following leaflet with 2 photographs:

The FIRST PHOTOGRAPH would be of a typical property that could have been bought for 3.5 times the average working adult income in the year 2000 (a reasonable 2/3 bedroom semi-detached house).

The SECOND PHOTOGRAPH would be of a typical property that could be bought for 3.5 times the average working adult income in January/February 2006 (a 1 bedroom flat or studio flat). Underneath the two photos would be the statement/question - Now tell me what's so good about high/rising house prices?

Also Imagine:

2) A GRAPHICAL REPRESENTATION (possibly bar charts) of rising house prices from 2000 - 2006 along with the increasing amount of earnings that an average earner would have to pay each month for their mortgage (depending on when they purchased their house, (i.e. bought a house in the year 2000, or 2001or 2002 or 2003 or 2004 or 2005 or 2006) along with a bar chart showing the decreasing amount of earnings they would have available to put into their pension, paying bills, spending on improving their day to day quality of life. In addition imagine a bar chart showing the increasing amount house buyers have been putting into the pockets of Estate Agents, solicitors, surveyors, etc. as house prices have risen. Again, this might be followed by the statement/question - Now tell me what's so good about rising house prices?

3) The overall effect, of the above 2 leaflets, would be to show how your money buys less and less as house prices rise, that you have less money for your current and future quality of life and that the mortgage lenders, Estate Agents, TV Property Programme presenters, etc. have got richer and richer as we have become poorer and poorer.

What If You are Currently A House Owner?????

You might be thinking that high/rising house prices are a good thing for you. After all this is what Estate Agents, mortgage lenders and TV Property Programme presenters keep telling us. But it is not true! Don’t be taken in by their spin.

The truth is that high/rising house prices make it more and more difficult (i.e. will cost you more money) for you to step up to the next rung of the property ladder. This is despite the money you will have made from your current house increasing in value.

For example:

Imagine you bought a house for £50,000 and would like your next step to be up to a house that cost £100,000 at the time you bought your £50,000 house.

You might think it fantastic if your £50,000 house doubles in value to £100,000 over a period of 3 years. However, the house that you want to move to will also have doubled in value from £100,000 to £200,000. So although you will have made £50,000 out your house doubling in value you will have to find an extra £100, 000 in order to move up to the house you want. If there had been no house inflation then you would have only had to find an extra £50,000 to move up the property ladder. As you can see high/rising house prices are a major DISADVANTAGE to current home owners. It is not only FTB’s that are missing out. The people who are gaining from this situation are the Estate Agents, mortgage lenders and TV Property Programme presenters – ALL AT OUR EXPENSE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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See below for my response, particularly the second half. The notion that rising house prices is advantageous for owner occupiers is twaddle for the majority of people.

How High/Rising House Prices Means That We are All Getting Less and Less for Our Hard Earned Money – Estate Agents, Mortgage Lenders, TV Property Presenters, etc. are getting RICHER and RICHER whilst We (Joe and Jane Public) are getting POORER and POORER:-

1) Imagine the following leaflet with 2 photographs:

The FIRST PHOTOGRAPH would be of a typical property that could have been bought for 3.5 times the average working adult income in the year 2000 (a reasonable 2/3 bedroom semi-detached house).

The SECOND PHOTOGRAPH would be of a typical property that could be bought for 3.5 times the average working adult income in January/February 2006 (a 1 bedroom flat or studio flat). Underneath the two photos would be the statement/question - Now tell me what's so good about high/rising house prices?

Also Imagine:

2) A GRAPHICAL REPRESENTATION (possibly bar charts) of rising house prices from 2000 - 2006 along with the increasing amount of earnings that an average earner would have to pay each month for their mortgage (depending on when they purchased their house, (i.e. bought a house in the year 2000, or 2001or 2002 or 2003 or 2004 or 2005 or 2006) along with a bar chart showing the decreasing amount of earnings they would have available to put into their pension, paying bills, spending on improving their day to day quality of life. In addition imagine a bar chart showing the increasing amount house buyers have been putting into the pockets of Estate Agents, solicitors, surveyors, etc. as house prices have risen. Again, this might be followed by the statement/question - Now tell me what's so good about rising house prices?

3) The overall effect, of the above 2 leaflets, would be to show how your money buys less and less as house prices rise, that you have less money for your current and future quality of life and that the mortgage lenders, Estate Agents, TV Property Programme presenters, etc. have got richer and richer as we have become poorer and poorer.

What If You are Currently A House Owner?????

You might be thinking that high/rising house prices are a good thing for you. After all this is what Estate Agents, mortgage lenders and TV Property Programme presenters keep telling us. But it is not true! Don’t be taken in by their spin.

The truth is that high/rising house prices make it more and more difficult (i.e. will cost you more money) for you to step up to the next rung of the property ladder. This is despite the money you will have made from your current house increasing in value.

For example:

Imagine you bought a house for £50,000 and would like your next step to be up to a house that cost £100,000 at the time you bought your £50,000 house.

You might think it fantastic if your £50,000 house doubles in value to £100,000 over a period of 3 years. However, the house that you want to move to will also have doubled in value from £100,000 to £200,000. So although you will have made £50,000 out your house doubling in value you will have to find an extra £100, 000 in order to move up to the house you want. If there had been no house inflation then you would have only had to find an extra £50,000 to move up the property ladder. As you can see high/rising house prices are a major DISADVANTAGE to current home owners. It is not only FTB’s that are missing out. The people who are gaining from this situation are the Estate Agents, mortgage lenders and TV Property Programme presenters – ALL AT OUR EXPENSE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Yes, yes, of course you're right.

but you have to agree that it's good if you already live in a big house, and want to trade down to a smaller one.

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Yes, yes, of course you're right.

but you have to agree that it's good if you already live in a big house, and want to trade down to a smaller one.

Who actually does that though?

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1/ It means they were right to buy when they did - good news.
That's a circular argument. You're saying that HPI is good news because of HPI. :blink:
2/ It means the risk they took on has subsided - good news.
The risk is in meeting your monthly payments, not whether your house will double/half in value.
3/ It means should they want to move, they'll have a larger % deposit for their next place (yes we know they'll pay more for the next place though) which means they may have the opportunity to pay a better interest rate - good news.
Low price + higher interest rate is better than high price + low interest rate.
4/ It means that they can safely MEW to make improvements to the property (1 of the few MEW reasons that I personally approve of) - good news.
Being approved for a larger debt is a good thing?
5/ It means that they can MEW a deposit for a BTL & do even better out of property - good news.
Agreed that can be a good thing under certain conditions, but it isn't risk-free.
6/ It means they can consolidate all those expensive credit cards & hire purchase loans into a lower rate MEW (not that I approve) - good news.
Extracting the equity you've paid into your home to pay-off other debts might help some people in the short term, but is it a good thing or an act of desperation?
7/ It means that they now have a higher implied return from their equity in the property - good news, but they wouldn't realise.
Exactly. What percentage will ever liquidise the value in their home? It's going to be a very small number.
Now it's your turn. Why is it bad news for Homeowners?
1. Moving up the ladder becomes more expensive - period.

2. Many people have had to extract their own equity (and take on more debt) to help their children buy a home.

I still don't know why homeowners think HPI is a good thing.

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Speaking to a friend the other day who has "made £50K in the last 2 years" thanks to house price inflation.

There was no question in his mind that this was a 'good thing' - he'd heard so on the news.

Please explain...

Speaking as a house owner I think HPI is a BAD THING I can't wait for a crash I don't care and hope house prices fall 90% suits me fine. It's all relative It's just poor misguided mortgaged owners who think that it's a good thing.

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Mmmm...

1/ It means they were right to buy when they did - good news.

2/ It means the risk they took on has subsided - good news.

3/ It means should they want to move, they'll have a larger % deposit for their next place (yes we know they'll pay more for the next place though) which means they may have the opportunity to pay a better interest rate - good news.

4/ It means that they can safely MEW to make improvements to the property (1 of the few MEW reasons that I personally approve of) - good news.

5/ It means that they can MEW a deposit for a BTL & do even better out of property - good news.

6/ It means they can consolidate all those expensive credit cards & hire purchase loans into a lower rate MEW (not that I approve) - good news.

7/ It means that they now have a higher implied return from their equity in the property - good news, but they wouldn't realise.

I'm sure I could keep going until sunset if I really tried.

Now it's your turn. Why is it bad news for Homeowners?

Of course they were right to buy near the bottom of a peak.

What about now TTRTR?

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In answer to the original question, not that I own a home yet but...

homeowners consider HPI to be a good thing because they compare it to 'not owning' or renting.

Being part of the tide of HPI means that those homeowners have been shielded from the huge burden HPI places on FTBs and those who dont own.

So rather than saying "My £100k house increased by 50% in the last year, I am 50k richer." what they really mean is..."Thank goodness I own a property because if I didnt then it would now cost me 50k more to buy the same house."

So, I can understand why they think it is good but they get muddled about the expressing their delight.

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The best thing about rampant house price inflation is laughing at your renting friends inadequacies. (behind their backs of course).

Nothing gives me greater pleasure than to lie awake at night gloating at the less able who failed to grasp opportunities when they arose. It proves to me that I am better than they ever will be.

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The best thing about rampant house price inflation is laughing at your renting friends inadequacies. (behind their backs of course).

Nothing gives me greater pleasure than to lie awake at night gloating at the less able who failed to grasp opportunities when they arose. It proves to me that I am better than they ever will be.

A refreshingly honest post.

I suspect a lot of people feel equally smug - success being relative etc.

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The best thing about rampant house price inflation is laughing at your renting friends inadequacies. (behind their backs of course).

What about people who were at school / uni in the late 90's / early 2000s - why are they inadequate?

Nothing gives me greater pleasure than to lie awake at night gloating at the less able who failed to grasp opportunities when they arose. It proves to me that I am better than they ever will be.

You make me laugh :D

Edited by OzzMosiz

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The best thing about rampant house price inflation is laughing at your renting friends inadequacies. (behind their backs of course).

Nothing gives me greater pleasure than to lie awake at night gloating at the less able who failed to grasp opportunities when they arose. It proves to me that I am better than they ever will be.

The trouble is, even though you don't actually believe that, some muppets will.

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What about people who were at school / uni in the late 90's / early 2000s - why are they inadequate?

I don't have any friends who were at school / uni in the late 90's / early 2000s.

All my friends (both of them) are same age as me. Therefore failing to get on the property ladder is a definite sign of laziness, stupidity, fecklessness and several other foibles which I can't be bothered to think about.

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For society as a whole excessive HPI is a divisive factor in many communities; it creates an atmosphere of haves and have-nots which always brings out the worst in everyone. Some deserve their wealth, many do not. My main gripe with HPI is the fact that the housing market is not really based on supply and demand; the price is more affected by the amount of credit available in conjunction with the price fixing activities of EAs, developers, and credit providers. As such it is wide open to abuse.

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I don't have any friends who were at school / uni in the late 90's / early 2000s.

All my friends (both of them) are same age as me. Therefore failing to get on the property ladder is a definite sign of laziness, stupidity, fecklessness and several other foibles which I can't be bothered to think about.

You really should've called yourself Ironic Steve :lol:

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  • 335 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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