An Excellent Quote

[OLDFTB]

Lifted from a Telegraph online discussion on Debt:

"This country is built on lending - it allows clever people to succeed and ignorant ones to fail"

Never a truer word spoken!

[dnd]

Lifted from a Telegraph online discussion on Debt:

"This country is built on lending - it allows clever people to succeed and ignorant ones to fail"

Never a truer word spoken!

'Clever' is a matter of opinion - property speculation has it's risks - but in the main it's still a no-brainer

[winkie]

Lifted from a Telegraph online discussion on Debt:

"This country is built on lending - it allows clever people to succeed and ignorant ones to fail"

Never a truer word spoken!

Clever people see that they can repay.

Ignorant ones over extend a can therefore fail to repay.

[Keith.G]

"This country is built on lending - it allows clever people to succeed and ignorant ones to fail"

...continuing...

And the clever onesare those who sell their assets at overvalued prices, repay their debts, and invest elsewhere,

BEFORE the resulting debt bubble collapses/

When does that start?

tomorrow, maybe

Or if you are talking about property investing take a long term view and never sell

(then you'll never be caught out by selling only to see prices continuing to increase)

[29929BlackTuesday]

Lifted from a Telegraph online discussion on Debt:

"This country is built on lending - it allows clever people to succeed and ignorant ones to fail"

Never a truer word spoken!

Remember - only those entrepreneurs who have SUCCEEDED tell you about it! The other 99% who went bankrupt keep quiet!

Eg: you get a false idea of the danger of being a soldier because the memoires are written by those who didn't get their livers shot out.

[Keith.G]

"are talking about property investing take a long term view and never sell"

LOL.

Tell that to:

+ the Japanese in 1990,

+ The Dutch 300 years ago,

+ the Americans now

What is more true is: "In the long run, we're all dead"

Those who fail to learn from history (of Bubbles) are doomed to repeat them

You have selected rare examples (all outside of the UK!) What are the dutch properties worth now compared to 300 years ago (tee-hee)

The truth is we don't know for sure how things will go but it's likely that values will be greater in 10 years or so

I agree that it seems the short to medium term will hopefully become more sane in terms of affordability

[Without_a_Paddle]

"Outside the UK"

So what.

Are humans different here? They are simply ahead of us in the bubble-bursting process.

I think you are very parochial, if you think "it will be different this time"

In fact, you simply need to look back 16-17 years to see the prior cycle here.

Let me guess: You are 30 y.o. or younger. You have alot to learn

So have you, doc.

You called the crash FIVE YEARS too early...

[Immigrant]

So have you, doc.

You called the crash FIVE YEARS too early...

And that's assuming there is a crash, starting very soon. It's by no means a given.

[JJJ]

What are the dutch properties worth now compared to 300 years ago (tee-hee)

Depends whether you buy them as bulbs, or as flowers.

[Keith.G]

"Outside the UK"

So what.

Are humans different here? They are simply ahead of us in the bubble-bursting process.

I think you are very parochial, if you think "it will be different this time"

In fact, you simply need to look back 16-17 years to see the prior cycle here.

Let me guess: You are 30 y.o. or younger. You have alot to learn

Precisely my point regarding Holland which you didn't answer - Long term, the values increased

I'll suppose from your examples that 'they' are the Americans, but they had become used to extremely low IR's and may not have such an under supply of housing compared to ourselves

What I'm actually saying is the LONG TERM trend in property values in the UK seems to be upward.

if you had bought property at any time in the past and held on to it or traded up in the mean-time the chances are you'd have a good investment today, even if values fall back a few percent.

[Keith.G]

Having said that I think it's inadvisable to buy when IR's are rising unless you get a good reduction

[ParticleMan]

What I'm actually saying is the LONG TERM trend in property values in the UK seems to be upward.

if you had bought property at any time in the past and held on to it or traded up in the mean-time the chances are you'd have a good investment today, even if values fall back a few percent.

You seem to be confused over the distinction between price and value; you also don't seem to understand opportunity cost, capital costs, or replacement cost for that matter. Fiscal myopia of this degree will lead you to wildly misprice risk - be careful you're not already.

[Keith.G]

You seem to be confused over the distinction between price and value; you also don't seem to understand opportunity cost, capital costs, or replacement cost for that matter. Fiscal myopia of this degree will lead you to wildly misprice risk - be careful you're not already.

No, you are making wild assumptions about my knowledge. Obviously there can be a direct link between price & value - perhaps you are trying to over complicate matters

I'm making a very simple point which is that over time price/values have tended to recover after a crash

If you had bought property even at the height of the 80's boom and held on to it thru the crash then it would be worth more now. Whereas if you has mis-timed selling such a property you could certainly have made a loss

[ParticleMan]

I'm making a very simple point which is that over time price/values have tended to recover after a crash

If you had bought property even at the height of the 80's boom and held on to it thru the crash then it would be worth more now. Whereas if you has mis-timed selling such a property you could certainly have made a loss

That's the trouble with simple points, they lead to gross misgeneralisations; and given that few can claim sector diversity in their residential real-estate portfolio, each mistake is expensive.

So in order; price is not value; a high priced property before a crash is precisely likely to be the worst value at the point of impact and also the most likely to have the longest road back to its previous price.

Second; if you had bought such a poorly priced property - for instance, a flat above a pub, chippie, or in a tower block, there's a chance that like for like the same property might still be depressed, pricewise, even now.

Reiterating this, the pursuit of price alone, ignorant of value, will lead you to sustain heavy real losses; the capital invested may be returned, eventually, with no nominal loss - but inflation alone will make you the loser, as will disparity in price growth between holdings of lesser and greater quality; the price differential between your poor value holding (f.e. the tower block unit) and a siginificantly better asset (f.e. a fully detached freehold with conversion potential) is not a constant; indeed some properties are sufficiently poor value that a resale will never recoup capital sufficient to cover the cost of replacement (repurchase of a similar asset) - let alone remaining in step with "better" properties in the same market

Finally, you're also making the classic mistake of comparing a discrete holding "if you had bought property" with a moving index "the average selling price is higher now"; this is purest farce, particularly in a market this illiquid, and repeatedly ignoring the difference between the two will make others wealthy to your cost.

For every complex problem, there is a solution which is simple, obvious, and wrong.

[Keith.G]

That's the trouble with simple points, they lead to gross misgeneralisations; and given that few can claim sector diversity in their residential real-estate portfolio, each mistake is expensive.

So in order; price is not value; a high priced property before a crash is precisely likely to be the worst value at the point of impact and also the most likely to have the longest road back to its previous price.

Second; if you had bought such a poorly priced property - for instance, a flat above a pub, chippie, or in a tower block, there's a chance that like for like the same property might still be depressed, pricewise, even now.

Reiterating this, the pursuit of price alone, ignorant of value, will lead you to sustain heavy real losses; the capital invested may be returned, eventually, with no nominal loss - but inflation alone will make you the loser, as will disparity in price growth between holdings of lesser and greater quality; the price differential between your poor value holding (f.e. the tower block unit) and a siginificantly better asset (f.e. a fully detached freehold with conversion potential) is not a constant; indeed some properties are sufficiently poor value that a resale will never recoup capital sufficient to cover the cost of replacement (repurchase of a similar asset) - let alone remaining in step with "better" properties in the same market

Finally, you're also making the classic mistake of comparing a discrete holding "if you had bought property" with a moving index "the average selling price is higher now"; this is purest farce, particularly in a market this illiquid, and repeatedly ignoring the difference between the two will make others wealthy to your cost.

For every complex problem, there is a solution which is simple, obvious, and wrong.

As I supposed - you are overcomplicating matters

[ParticleMan]

As I supposed - you are overcomplicating matters

Ok, simple, rational thought seems innapropriate, so lets try another tack; this is your assertion, so cite your data; how many years after the height of the 80's boom did it take before 90% of properties had in fact sold at higher price? If we're still waiting, perhaps 80%? Maybe 50%? Or is this theory of yours completely baseless?

[IamSpartacus]

Ok, simple, rational thought seems innapropriate, so lets try another tack; this is your assertion, so cite your data; how many years after the height of the 80's boom did it take before 90% of properties had in fact sold at higher price? If we're still waiting, perhaps 80%? Maybe 50%? Or is this theory of yours completely baseless?

Your question is nonsensical - only a small proportion of houses are bought or sold at any point in time. You'd have to wait 50 years or more before 90% of properties bought in the 80s boom were sold again. Hence you have to use average selling prices a guide to what they could sell for were they put on the market.

[ParticleMan]

Your question is nonsensical - only a small proportion of houses are bought or sold at any point in time. You'd have to wait 50 years or more before 90% of properties bought in the 80s boom were sold again. Hence you have to use average selling prices a guide to what they could sell for were they put on the market.

Hey, you're preaching to the choir, but my question is just a test-case for KG's theory as expressed - they seem keen to keep this deviod of the variables you rightly mention.

Simple. Obvious. Wrong.

[MarkG]

The truth is we don't know for sure how things will go but it's likely that values will be greater in 10 years or so

How? Are wages going to double or more over the next ten years to make today's price to earnings ratios return to normal levels?

[IamSpartacus]

How? Are wages going to double or more over the next ten years to make today's price to earnings ratios return to normal levels?

At current 4% wage growth they'd be 48% higher in 10 years time.

[Keith.G]

How? Are wages going to double or more over the next ten years to make today's price to earnings ratios return to normal levels?

Well, I don't actually claim to have a crystal ball...

Hey, you're preaching to the choir, but my question is just a test-case for KG's theory as expressed - they seem keen to keep this deviod of the variables you rightly mention.

Simple. Obvious. Wrong.

Ok, so put simply: How many people do you think sold during the HPI thinking values would not go any higher - maybe thinking there would be an imminent crash?

How successful do you think people have been when they have consistently traded up over the past 2 or 3 decades?

Which would you rather be?

[Keith.G]

Give it all the analysis you like but property has proven a good investment for many time & again - Are you actually saying it won't prove to be again in the future using your 'crystal ball'?

[Van]

KeithG, even the price of baked beans go up over time. Just because prices rise over time, doesn't make them a good investment or even a good non-investment if they are overpriced. That's true for any asset. High prices mean lower (and even negative) returns.

People who say "it'll go up over time" are those with their heads in the sand who normally end up selling near the bottom of the market when the consensus that "it'll go up over time" has changed to "it'll take 20 years to for the market to recover".

[Keith.G]

KeithG, even the price of baked beans go up over time. Just because prices rise over time, doesn't make them a good investment or even a good non-investment if they are overpriced. That's true for any asset. High prices mean lower (and even negative) returns.

People who say "it'll go up over time" are those with their heads in the sand who normally end up selling near the bottom of the market when the consensus that "it'll go up over time" has changed to "it'll take 20 years to for the market to recover".

You obviously have a crystal ball!

I'm not suggesting people buy right now by the way! I'd advise to see how the market reacts to any further rises and people having less spending power due to rising energy costs

Despite that I still say there is evidence to show that property has been a great investment especially for B2L - Sure you may buy a unit that's not such good value as others but you have to look at the overall portfolio

For example say you bought in 1991, 1999, 2003, 2005 and hold on to the properties they will all be paid for in 15 years and you'll have a good income!

I think that's a more real world example than your beans!

[IamSpartacus]

KeithG, even the price of baked beans go up over time. Just because prices rise over time, doesn't make them a good investment

Tell that to shareholders of Heinz or Tesco...