Why Hpc Enthusiasts Puzzle Me.

[Guest X-QUORK]

Brassfarthing,

I don't think anyone here would argue that house prices can never go up again, it's just that many believe there will either be a substantial correction, or a long period of stagflation which will erode house prices before we see the upside again.

From the tone of your posts you seem like a reasonable sort of person, but I think you're completely out of touch with the reality that many non-property owners find themselves in today.

Personally, I could just about afford to buy a 2/3 bedroom terrace here in Oxfordshire, but at between £170-£190k I think they're way over priced, so I'm choosing to wait a while and see what happens. Renting is so much cheaper than owning at the moment anyway, and don't forget that for the new home owner, the majority of their repayment mortgages are interest repayment i.e dead money.

Seriously, if you were a single 30 year old on say £27k a year (average-ish salary), would you buy at the moment? And if you're answer is yes, please explain how and what kind of property?

[null_nil]

If prices dropped by a significant margin, say 20%, it just wouldn't matter to me, and this is what you hardliners don't understand.

Ok i understand that. But you don't understand that it would matter to me - I don't want to buy a showbox, but a house I deserve with a normal price.

[DICKDASTARDLY]

"There may even be a full-blooded crash ahead. But for most people, this just won't

matter" Go and tell that someone who lost thousands in the nineties crash and spent the next ten years getting there finances straight.

[brassfarthing]

Brassfarthing,

You've gone to a lot of trouble to write this long diatribe (I'm sorry but I haven't read anywhere near all of it but I get the gist from the heading and first sentence) so soon after joining. Why?

If you couldn't understand why people on here speak as they do, why bother to join and put up with more of it?

What's your game? Isn't there a forum somewhere called 'House prices in the UK always go up - you simply must become a home owner at any price!' Have a look. If you can't find one, start one. You'll find plenty of people to join you. Have a nice time.

p

I've lurked for a long time, on and off. It fascinates me. It's a bit like reading the forums on an Islamist website, where people talk about the inevitable triumph of Islam over the west, and how it isn't long before good will triumph over evil once again.

I was reading a thread earlier about the current turbulence in the equity markets, and I just thought: "Some of these guys really do believe that there is a crash to end all crashes on the way. One we'll never recover from".

I decided to express my own view, which is different.

I think the main difference between us is that I don't feel that anyone owns me or has control over me, whereas most of you do seem to think that. And to be fair, I probably did used to think that myself. Then I got rid of my credit cards and loans (apart from mortgage) and have felt totally in control of my own life ever since.

Those who wibble on about the crash-that-we'll-never-recover-from really will get left behind, though the question: "Does it actually matter if I get left behind?" is legitimate. I'm not sure that it does. What's the worst that can happen? You have lower monthly outgoings but no later-life nest-egg. No big deal really, perhaps.

[FreeFall]

I've got great sympathy with FTBs and I agree that something has to change (eg the much discussed 50 or 100 year mortgages) and people have to be more resourceful, but every generation thinks they've missed the boat. In 85 when I bought my first flat, I was distraught that it was £42K when a year earlier it had been only £30K. That's it, I thought, I've missed out. I was earning £9K at the time and my partner even less, so it was still a huge amount of money to us at the time, but in retrospect it was the best purchase we ever made.

So you bought at about 3 times joint income when interest rates were about historical average. These days FTB's need to borrow about 5 times joint income when IR's are at historical lows. Can you guess what will happen to these poor FTB's when rates go up?

I'm so sick of hearing people say "it was always hard buying a property - we had to miss out on blah blah blah..." If they took a few minutes to sit and really consider the plight that Joe Average FTB is facing now in buying a property they'd shut up quick time.

[brassfarthing]

Exactly, I couldn't agree more. The problem is this...

On my wage I'd have to borrow seven times my salary on interest only to afford the most basic of homes. If IRs go up only slightly I won't be able to afford the repayments. A rise in IRs would also likely result in a fall in house prices so I'd be stuck with a loan I couldn't afford to pay, secured against something that wasn't worth enough to cover the capital. That's why I'm so keen for a HPC... basically so I can buy something that I know I'll be able to afford to keep. If I could afford to buy a home right now and not worry about the consequences I would do. Frankly I couldn't care less what the value does, but I do care that I can afford to stay there whatever the future holds.

I do sympathise, BB, but maybe you should think of ways of increasing your earning potential then? We always complain about the costs, but why not think creatively about how to raise our funds? I don't know what you do obviously, but you might want to ask yourself: "How could I double my salary?"

Serious question.

[A Fool & His Borrowed Money]

I just don't know if there will be a crash. I suspect it's more likely to be a period of stagnation and perhaps a drift downwards.

That's what happens in a House price crash, a drift downwards spanned over several years.

[onrollover]

They will only have a lot to lose if they HAVE to sell up at that point. Agreed that you may want to move some distance over 25 years, but if there's an extended bottoming out of the market it is only likely to restrict you for about 5 years max, and probably less. If your job forces you to travel extensively and stay in one place for a long period then property ownership probably isn't right for you except as a BTL investment while you rent.

I've got great sympathy with FTBs and I agree that something has to change (eg the much discussed 50 or 100 year mortgages) and people have to be more resourceful, but every generation thinks they've missed the boat. In 85 when I bought my first flat, I was distraught that it was £42K when a year earlier it had been only £30K. That's it, I thought, I've missed out. I was earning £9K at the time and my partner even less, so it was still a huge amount of money to us at the time, but in retrospect it was the best purchase we ever made.

I just don't know if there will be a crash. I suspect it's more likely to be a period of stagnation and perhaps a drift downwards. Depends on other areas of the economy and unpredictable events like bird flu. If that occurs, who knows what will happen in the world economy.

Finally, I don't mean to sound unsympathetic to people who are genuinely struggling. I feel really sorry for people who are fresh out of university with huge debts. In my day, we had full grants and subsidies. But there are quite a lot of people on here who get very triumphalist when the markets have a bad day, as if this is the the first sign of the end of capitalism. I think that's a pointless and negative attitude. As I said earlier, the truth is that the odd correction here and there just doesn't matter that much. In fact, it's absolutely expected behaviour, as history makes plain.

This isn't just about house prices, their are alot of knock on effects to the level of borrowing in the UK today. There is a massive question mark over what happens if economic conditions change and people can no longer afford it.

Just so you get an idea of the scales here I thought I would convert your figures using an inflation calculator into todays value and compare.

In todays money your wage was £18,264 thats alot less than me and my partner, (the average wage in the UK is about 21k).

The house in todays money was £85,234 that is a multiple of your salary of about 4, which is quite reasonable, I would comfortably buy a house for that, in fact at those prices I probably would buy a nice big comfy house. The average house today costs about £179k that would be close to ten times your salary! (though more like £210k in my area, and that gets you 2 bed terrace).

In todays prices you simply would not have had the option of buying, let alone worrying if it will go up or down. If it had gone down you could probably have lost several years salary.

Even worse, you can't expect inflation to erase the debt, and interest rates are very low, and could possibly go up.

[cupidstunt]

you might want to ask yourself: "How could I double my salary?"

Serious question.

and perhaps you should ask - have I got my head stuck up my @rse?

Serious question.

[Robbrent]

like the metaphor, CAS, but only time will reveal the truth, or otherwise, of your claims. I absolutely agree that we may be on the verge of a period of no HP inflation or even a dip, but history tells us that eventually it will go up again. We'll see.

Agree that interest-only deals are very undesirable. Your mortgage has got to be paying off the capital

I am a home owner, who finds this site interesting, but I differ from your point of view (it was a good post by the way), the way I see it is that the whole bloody economy is wrapped up with HPI, namely the retail sector, which has grown out of all proportion, funded by a massive credit expansion.

I fear we may enter a slump that we may not be able to climb out of, because we have become a nation of shopkeepers, all funded by cheap credit, we don't make much anymore.

Saying all that there is a degree of inevitability about the whole thing, I get a kind of dread feeling ,

[Mags]

but why not think creatively about how to raise our funds? I don't know what you do obviously, but you might want to ask yourself: "How could I double my salary?"

Serious question.

How do teachers double their salary?

How do nurses double their salary?

How do doctors double their salary?

How do dentists double their salary?

You're in fairyland if you think that the answer to this is to earn more money and pay higher and higher prices. Just think about it... apply a little intellect... you're coming over as totally ignorant on the subject.

and perhaps you should ask - have I got my head stuck up my @rse?

Serious question.

either that or an umbrella

[CrashedOutAndBurned]

Even utterly disinterested homeowners should care.

Isn't it dangerous that your new nextdoor nighbour who has a similar level of job to you paid two times as much for the house as you and is paying 100s more a month for the same level of accomodation?

Isn't it dangerous that so many people are carrying so much debt just for a home?

Isn't it dangerous that bankrupcy is at record high and that young people are the worst affected?

Isn't it dangerous that so many businesses think they can improve on 'bumper sales' built on nothing but unsustainable consumer debt?

Say your business is selling, making, administering, transporting, Product X. If people's purchasing power is so wrecked they can no longer buy Product X, even many happy homeowners' jobs will be on the line.

[last ninja]

I was gonna post something but there's a ******ING GOOGLE AD ON TOP OF TH E******ING INPUT BOX AND I CAN"T EVEN SEE WHAT I"M TYPING

[ʎqɐqɹǝʞɐɥs]

and perhaps you should ask - have I got my head stuck up my @rse?

Serious question.

[boom_and_bust]

Hi,

I am a triple homeowner. Just the one in the Uk but if prices fell I guess, on paper, I would lose money. My daughters earn far above avearge wages and are struggling to potentially afford even the most basic of anything in any area and for which, if I am honest, I would be worrying for their safety. This was a poltically motivated property boom in many respects. You can attempt to tug at heart strings on either side of the debate but it is politicians, lax bank lending and personal clambering of property speculation that has bought us to an unsustainable situation. There just is no way the current situation can survive indefinitely, the biggest planks of support in the past decade - the dollar and the BoJ interest rate are wobbling already. Things should have been better handled, easy to say but the fact of the matter is that other nations have handled asset prices better than the people we pay and elect to perform the role here.

Boomer

Edited May 24, 2006 by boom_and_bust

[brassfarthing]

That's what happens in a House price crash, a drift downwards spanned over several years.

Well, I wouldn't describe that as a crash at all, just an extended period of consolidation and mild decline before a recovery.

A crash is surely a sudden, sharp, unpredictable fall eg the FTSE in 1987?

[AFineMess]

I do sympathise, BB, but maybe you should think of ways of increasing your earning potential then? We always complain about the costs, but why not think creatively about how to raise our funds? I don't know what you do obviously, but you might want to ask yourself: "How could I double my salary?"

Serious question.

This is an option for some people. I am currently gaining additional qualifications and planning my next career move very seriously - I hope to double my income over the next 2-3 years. It is not an option for many people. In fact, I could afford to buy a place right now - just not one I think I will be comfortable in, or one that I could afford if rates rise. Many people can't even do that.

It's not only that it's hard to get on the ladder - I'm sure it has always involved some sacrifice and risk taking. It's that if you do buy property now, at times of historically low interest rates, with house prices stretching affordability even at those low rates, it will only take a small rise in rates relative to where we are now to make the repayments completely unnaffordable.

If you can afford to sit out drops in capital value, that's fine. If you can't afford the repayments when rates rise (remember, we're talking long term here - not just the next 2-5 years), then you would be a fool to blow your deposit to get a 1 bed flat in a sink estate. I believe they say you should factor interest rates of 12% when assessing your risk. Even if you think they might only go up to 6 or 7% right now, it would ruin many people who have stretched themselves to buy now.

You appear to have the luxury of sitting out drops in capital value, and don't have any worries about repayments. I completely agree with you that houses are for living in - but the question is not one of speculation - it's one of reasonable risk or sheer ability to buy at all.

Edited May 24, 2006 by AFineMess

[brassfarthing]

This isn't just about house prices, their are alot of knock on effects to the level of borrowing in the UK today. There is a massive question mark over what happens if economic conditions change and people can no longer afford it.

Just so you get an idea of the scales here I thought I would convert your figures using an inflation calculator into todays value and compare.

In todays money your wage was £18,264 thats alot less than me and my partner, (the average wage in the UK is about 21k).

The house in todays money was £85,234 that is a multiple of your salary of about 4, which is quite reasonable, I would comfortably buy a house for that, in fact at those prices I probably would buy a nice big comfy house. The average house today costs about £179k that would be close to ten times your salary! (though more like £210k in my area, and that gets you 2 bed terrace).

In todays prices you simply would not have had the option of buying, let alone worrying if it will go up or down. If it had gone down you could probably have lost several years salary.

Even worse, you can't expect inflation to erase the debt, and interest rates are very low, and could possibly go up.

Interesting figures, thank you.

[Mags]

Well, I wouldn't describe that as a crash at all, just an extended period of consolidation and mild decline before a recovery.

A crash is surely a sudden, sharp, unpredictable fall eg the FTSE in 1987?

Not when it's a HPC!

[brassfarthing]

and perhaps you should ask - have I got my head stuck up my @rse?

Serious question.

So someone offering a different perspective has their head up their @rse? A bit of gratuitous abuse that makes you look like an intellectual coward. All you've done is confirm my suspicions about SOME of the people here. You don't feel in control of your own life.

[Rachel]

I do sympathise, BB, but maybe you should think of ways of increasing your earning potential then? We always complain about the costs, but why not think creatively about how to raise our funds? I don't know what you do obviously, but you might want to ask yourself: "How could I double my salary?"

Serious question.

how about, i would like to have some time to live?

i would rather rent then work 50-60 hours a week to afford a 1 bed flat in the shitiest part of town..thank you,

i'm not a speculator, i would just like to have my own little place that i can live in. Is that really too much to ask? You make it sound like we're all work-shy envious freeloaders...

[boom_and_bust]

Hi,

For house prices to be sustained at current levels would require an-across-the-board hike (doubling) of wages across the economy. The BoE and Treasury have repeatedly stated that they will continously act to keep general wage level increases at a level around pervailing inflation, lower infact that annual HPI if we believe the figures. Infact, the government is proud to boast how the open door labour policy with the EU and the rest of the world limits UK wage inflation. So that is not going to work for most people. What do you suggest then?

[Mags]

So someone offering a different perspective has their head up their @rse? A bit of gratuitous abuse that makes you look like an intellectual coward. All you've done is confirm my suspicions about SOME of the people here. You don't feel in control of your own life.

Oh ffs! Get real! Open your eyes and look at the figures!

[nimmmm]

I think that people are being unfair on BF. I think it was an MP who recently described the website as an economic doomsday cult (but I may be wrong). I can completely understand where BF is coming from. His posts are moderate and intelligent.

However, the reason that I like the site is for the largely informed debate about the economy and house prices generally. I am a firm believer that the market is in a bubble. Even the Bank of England governor accepts this: "The level of house prices still seems remarkably high relative to those measures that put it into context," said King (11 May 2006) (http://www.in2perspective.com/nr/2006/05/mervyn-uk-house-prices-are-overvalued.jsp). I believe that many people on this site are in agreement with me, with that head ruling their heart, that house prices are grossly overvalued. I think that we also feel that virtually no bubble in history has ended with a "soft landing", and the bubble is likely to burst.

So take it any way you want to. Even if I buy, I would be more than happy for houseprices to nose-dive because so many are now excluded from buying somewhere to live for a reasonable price.

Edited May 24, 2006 by nimmmm

[Mags]

His posts are moderate and intelligent.

How is suggesting that people double their income moderate and intelligent?