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Johnny Cash

Will Property Fall More Than The Value Of Your Money?

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Over the last couple of years the resilience of the housing market has made me a little less bearish about property prices.

Ive had my eyes opened to the lies told by the government about the inflation figures and would say that the real rate of inflation is probably double the figure known as the CPI. This means as a higher rate tax payer that I struggle to make my savings even keep pace with inflation. Any money in a safe place is probably having its value eroded away and to get any return which beats the real rate of inflation I have to take risks with my capital.

As far as I know, property prices have only dropped once in recent history in nominal terms (early to mid 90s). The graph on the main page of this websute shows property prices in real terms ie inflation adjusted which means that each time real prices have dropped it has been caused more by high inflation eroding the value of your house.

If inflation is set to take off again and assuming that the figures will be falsified by the govt and that interest rate rises will lag behind its a pretty safe bet that the value of any savings you may have will be eroded away further and faster. Maybe property isnt such a bad hedge against inflation after all? If it keeps its nominal value its probably doing at least as well as my savings and Ive got somewhere of my own to live into the bargain.

Looking forward to being put back on the 'bear' straight and narrow!

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Looking forward to being put back on the 'bear' straight and narrow!

Don't hold your breath. That inflation-adjusted chart is a bit of a sacred cow around these bear-infested parts... :ph34r:

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Johnny Cash.

There is NOTHING in recent history comparable to the level of debt, leverage and speculation (in monetary terms) than exists now.

Nothing long term either in this country at least.

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Johnny Cash.

There is NOTHING in recent history comparable to the level of debt, leverage and speculation (in monetary terms) than exists now.

yes it's indeed different this time.

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yes it's indeed different this time.

Not different this time - just unlike anything in recent history. Perhaps more like 1929.......????

Regards,

crude

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Over the last couple of years the resilience of the housing market has made me a little less bearish about property prices.

Ive had my eyes opened to the lies told by the government about the inflation figures and would say that the real rate of inflation is probably double the figure known as the CPI. This means as a higher rate tax payer that I struggle to make my savings even keep pace with inflation. Any money in a safe place is probably having its value eroded away and to get any return which beats the real rate of inflation I have to take risks with my capital.

As far as I know, property prices have only dropped once in recent history in nominal terms (early to mid 90s). The graph on the main page of this websute shows property prices in real terms ie inflation adjusted which means that each time real prices have dropped it has been caused more by high inflation eroding the value of your house.

If inflation is set to take off again and assuming that the figures will be falsified by the govt and that interest rate rises will lag behind its a pretty safe bet that the value of any savings you may have will be eroded away further and faster. Maybe property isnt such a bad hedge against inflation after all? If it keeps its nominal value its probably doing at least as well as my savings and Ive got somewhere of my own to live into the bargain.

Looking forward to being put back on the 'bear' straight and narrow!

This is why I have some money tucked away in gold and the stock market.

Property prices have only dropped once in nominal terms because the wage inflation allowed people to increase the price of house purchases even when, in real terms, prices were falling. Wage inflation at present is well below your supposed "real" inflation, so prices can't be sustained except by irrational behaviour, which of course can't last.

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Guest muttley

If inflation is set to take off again and assuming that the figures will be falsified by the govt and that interest rate rises will lag behind its a pretty safe bet that the value of any savings you may have will be eroded away further and faster. Maybe property isnt such a bad hedge against inflation after all? If it keeps its nominal value its probably doing at least as well as my savings and Ive got somewhere of my own to live into the bargain.

I don't follow you.

If you own a 200k house and after 1 year it holds it's nominal value, then it's worth 200k.

If I put 200k in a high interest account at 5%, then after 1 year I have 210k. Even with inflation above the 5% my cash has been earning, I've done better than you. In fact I can by an identical house to you and have 10k left over.

With a nominal fall in house prices this is better for me, even before you include gearing.

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http://www.in2perspective.com/nr/2006/08/h...king-prices.jsp

Perhaps the most alarming news, from Home.co.uk, is that asking prices have fallen even further behind the rate of inflation. In real terms, asking prices are going backwards at an annual rate of 4.7% relative to the Consumer Price Index (CPI). Historically, periods of high inflation spell disaster for house prices, since the main weapon in inflation fire fighting is interest rate rises.
Edited by Realistbear

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I don't follow you.

If you own a 200k house and after 1 year it holds it's nominal value, then it's worth 200k.

If I put 200k in a high interest account at 5%, then after 1 year I have 210k. Even with inflation above the 5% my cash has been earning, I've done better than you. In fact I can buy an identical house to you and have 10k left over.

With a nominal fall in house prices this is better for me, even before you include gearing.

Yes this is what i think , and i'm certain we're right , in this current inflationary enviroment at the moment i'd rather take my chances with my cash and rent , rather than own a house .

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follow my link in my signiture.......:) no wage inflation..

see gordo's freeze of the public sector wages and promise that rates would rise to combat private sector wage puh inflation..

inflation has been ruled out.

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I don't follow you.

If you own a 200k house and after 1 year it holds it's nominal value, then it's worth 200k.

If I put 200k in a high interest account at 5%, then after 1 year I have 210k. Even with inflation above the 5% my cash has been earning, I've done better than you. In fact I can by an identical house to you and have 10k left over.

With a nominal fall in house prices this is better for me, even before you include gearing.

Where did you live rent free for a year? How much is the typical rent on a £200K house? £1K? So £12000(ish) rent in the year, which makes you how much better off?

As an investment you may be right but if you still need somewhere to live its not so clear, hence the irrational obsession with wanting to own property even though it could be cheaper next year or the next, or the next...

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Where did you live rent free for a year? How much is the typical rent on a £200K house? £1K? So £12000(ish) rent in the year, which makes you how much better off?

As an investment you may be right but if you still need somewhere to live its not so clear, hence the irrational obsession with wanting to own property even though it could be cheaper next year or the next, or the next...

Rent is no more a waste of money than mortgage interest is.

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Where did you live rent free for a year? How much is the typical rent on a £200K house? £1K? So £12000(ish) rent in the year, which makes you how much better off?

As an investment you may be right but if you still need somewhere to live its not so clear, hence the irrational obsession with wanting to own property even though it could be cheaper next year or the next, or the next...

We're paying c. 10K a year for a flat that would be worth at least 235K. Bear in mind also that maintenance comes for free.

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Guest muttley

Where did you live rent free for a year? How much is the typical rent on a £200K house? £1K? So £12000(ish) rent in the year, which makes you how much better off?

As an investment you may be right but if you still need somewhere to live its not so clear, hence the irrational obsession with wanting to own property even though it could be cheaper next year or the next, or the next...

The figures were intended to show that inflation eats away at house prices in exactly the same way that it eats away at cash deposits.

I pay £1,300 pcm for a 350k house.

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Rent is no more a waste of money than mortgage interest is.

I wouldn't argue with that as paying a 'reasonable' sum for somewhere to live (rent/mortgage interest) is clearly not a waste of money. My point was that you wouldn't necessarily be better off if you put £200K in the bank for a year rather than a stagnantly priced house if you needed somewhere to live of a similar quality. You don't get something for nothing, a principle bulls and bears should remember

The figures were intended to show that inflation eats away at house prices in exactly the same way that it eats away at cash deposits.

So all our gigantic debts will be inflated away as the value of our money increase against it? I'm generally optimistic about the whole thing but if it all goes HPC tits up, then property will be nigh on worthless and so will the money in your pocket. But chances are we'll still all end up with somewhere to live even if its not in the style we are accustomed.

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Over the last couple of years the resilience of the housing market has made me a little less bearish about property prices.

As far as I know, property prices have only dropped once in recent history in nominal terms (early to mid 90s). The graph on the main page of this websute shows property prices in real terms ie inflation adjusted which means that each time real prices have dropped it has been caused more by high inflation eroding the value of your house.

IMHO

We are unlikely to see great drops in nominal terms, I'm of the opinion this thing is going to be a long, slow, painful erosion of real values a la Japan '90's.

However, rest assured the CLNB market will see more aggressive erosion in both real/nominal terms. As an example I have been monitoring my own local CLNB carbuncle, I can only find 5 re-sells despite many coming on the market over the last 18 mths.

Crown Heights

84 Alencon Link,

RG21 7TY

26-Sep-2003 £190,995

28-Jun-2005 £165,000 (14% off new)

Crown Heights

139 Alencon Link,

RG21 7TW

28-Nov-2003 £213,995

29-Jun-2005 £183,000 (15% off new)

Crown Heights

27 Alencon Link,

RG21 7TN

20-Apr-2004 £199,995

22-Dec-2005 £160,000 (20% off new)

Crown Heights

123 Alencon Link,

RG21 7TW

31-Oct-2003 £211,995

22-Feb-2006 £168,000 (21% off new)

Crown Heights

47 Alencon Link,

RG21 7TN

20-Apr-2004 £190,000

09-May-2006 £160,000 (16% off new)

Until I can get a blog together I've been posting my anecdotes on this, and it's sister carbuncle "Victory Hill", on the "House prices in your area" forum:

http://www.housepricecrash.co.uk/forum/ind...showtopic=21392

Edited by BTLOptingOut

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So all our gigantic debts will be inflated away as the value of our money increase against it?

It sounds like you're confusing increases in the cost of living with wage inflation. The two do not go arm and arm at the moment... ;)

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Guest muttley

IMHO

We are unlikely to see great drops in nominal terms, I'm of the opinion this thing is going to be a long, slow, painful erosion of real values a la Japan '90's.

Japanese property fell 40% in nominal terms over 14 years. Not my definition of a soft landing.

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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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