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The Argument No Bull Can Refute

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'Long term houses only go up in value(sic).' Bzzt. Let's shed some economic reality on this, and explode a few myths propogated by filthy shylocks. In a global marketplace for most people wage inflation is going to be either very low or non existent. I can guarantee that for most people here the growth in house prices has far exceeded the growth in the wage they are paid. In fact house prices have been inflating at an increasing rate against wages. Extrapolate this as a longer term scenaio and it just can't work. Something has to give, either house prices have to fall dramatically to being them back into line with what people earn, or wages will need to start inflating very substantially. Globalisation has us locked into a race to the bottom, and no company will tolerate an environment of high wage inflation, they'll do the sums and decide to move whatever they can off shore. If companies are prepared to move jobs paying little more than minimum wage abroad then just imagine how motivated they will be to do the same for high paying jobs. High wage inflation could well be the straw that breaks the camels back. Simply put, there is no way most people are going to see high wage inflation. So long-term HPI won't be happeneing because there won't be the inflation in wages to allow it to happen.

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'Long term houses only go up in value(sic).' Bzzt. Let's shed some economic reality on this, and explode a few myths propogated by [description of lenders deleted]. In a global marketplace for most people wage inflation is going to be either very low or non existent. I can guarantee that for most people here the growth in house prices has far exceeded the growth in the wage they are paid. In fact house prices have been inflating at an increasing rate against wages. Extrapolate this as a longer term scenaio and it just can't work. Something has to give, either house prices have to fall dramatically to being them back into line with what people earn, or wages will need to start inflating very substantially. Globalisation has us locked into a race to the bottom, and no company will tolerate an environment of high wage inflation, they'll do the sums and decide to move whatever they can off shore. If companies are prepared to move jobs paying little more than minimum wage abroad then just imagine how motivated they will be to do the same for high paying jobs.

That's spot on, and well worded!

Edited by Timm

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It's quite easily refuted by the answer that a landlord and a renter class will emerge.

Without the means to pay rents large enough to service the debts undertaken by these landlords. For those landlords that own outright they'll have nothing more than an expensive house eanring them a nominal rental income. They will find it hard to sell because the pool of buyers will have been reduced to the landlord class, and who wants to buy a house when the returns are going to be utterly miserable.

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and explode a few myths propogated by filthy shylocks.

Very pleasant.

As for your main point that HPI cant last you wont find many people disagreeing with you on this site. As for your economic arguments, you should employ them in an investment bank and earn a very good wage.

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BoomBoom

I don't think anyone expects a majority of the countrys HP's (bar the trendiest parts of London) to keep inflating forever. There will at some point be stagnation and maybe a slight correction. But I don't think it will happen before 2009. But I could be wrong.

Bulls probably won't argue with your statement but will when bears suggest 50% drops.

Edited by enworb

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'Long term houses only go up in value(sic).' Bzzt. Let's shed some economic reality on this, and explode a few myths propogated by filthy shylocks. In a global marketplace for most people wage inflation is going to be either very low or non existent. I can guarantee that for most people here the growth in house prices has far exceeded the growth in the wage they are paid. In fact house prices have been inflating at an increasing rate against wages. Extrapolate this as a longer term scenaio and it just can't work. Something has to give, either house prices have to fall dramatically to being them back into line with what people earn, or wages will need to start inflating very substantially. Globalisation has us locked into a race to the bottom, and no company will tolerate an environment of high wage inflation, they'll do the sums and decide to move whatever they can off shore. If companies are prepared to move jobs paying little more than minimum wage abroad then just imagine how motivated they will be to do the same for high paying jobs. High wage inflation could well be the straw that breaks the camels back. Simply put, there is no way most people are going to see high wage inflation. So long-term HPI won't be happeneing because there won't be the inflation in wages to allow it to happen.

Your argument seems to rely on the old low-wage-inflation argument. But you ignore the fact that this in itself leads to low mortgage interest rates, and so prices can afford to drift higher than normal in relation to incomes.

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It's quite easily refuted by the answer that a landlord and a renter class will emerge.

Until the renter class are so numerous that they elect a government who nationalises the housing stock.

(Particularly if that housing stock is not owned by domestic nationals)

Scary, huh?

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Something has to give, either house prices have to fall dramatically to being them back into line with what people earn, or wages will need to start inflating very substantially.

People are moving away from a single salary household to duel earning which has an affect. (This is why House prices have historically risen on average faster than wages?). Obviously the rise in economic migrants also effects everything with population

The rise in single people and getting married later also creates a divide, with singletons / migrants buying flats / renting & families / couples with houses / renting.

What may happen next is children having to pitch in more and more as they grow older and stay at home longer, not able to afford to move.

Effect = rise in household earning which impacts on house prices (not that i'm saying this will continue indefinately)

Its all not good, the government have created this environment with 10 years of policies, it's not simple to "fix", and it's not done this country any favours

Edited by skhudy

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Until the renter class are so numerous that they elect a government who nationalises the housing stock.

(Particularly if that housing stock is not owned by domestic nationals)

Scary, huh?

But something like 70% of households in the UK are owner-occupied. That will not go down significantly. So your theory of a small "landlord class" renting thousands of houses each to poverty-stricken "renters", until the renters rise up in revolution just won't work.

Renters are the minority, not the mass.

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To many people on this site Globalisation seems to mean low-paid call-centre jobs.

But to some people it means swanning about the world in a jet plane using their high skill-sets to best effect wherever they're needed.

Maybe thats another reason why the rich are getting richer and the poor are getting poorer, with the consequence that top end property is rocketing skywards even faster than low end.

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This is the way I see it (I`m no economist, but I think I`m not far wrong with this).

Short - Medium term, there must be some sort of correction. 10% HPI (or even a more modest 5%) can`t really carry on for much longer. As previously stated, wages aren`t going to rocket any time soon in the UK, and interest rates look like they are slowly having an effect.

Longer Term, and this is the argument that the bulls often fall back on, HPI will come back into line with wages and people`s ability to afford/banks willingness to lend.

Think of house price influences like elastic bands. These bands are wages, interest rates, supply and demand, lenders "generosity" and sentiment. All of these bands will either stretch or contract. At some point, the wage band might be long, interest rates will be short, and lenders may be dishing out the money (maybe the past few years ?), so HPI will be high. Eventually the wage band will contract, interest rates will stretch, this will have a negative impact upon sentiment and the lenders money supply. Like most elastic bands, they can be stretched, but will usually return to normal size.

It`s very easy at the moment to think that houses are money making piles of bricks. Over the long term (and I`m looking at my parents house), it does appear that HPI is still higher than wage inflation. My father couldn`t buy the house that he has just retired in (the same house that he has lived in, all of his working life) if he was starting over again, unless he was a very well qualified "professional", rather than a worker on a modest income. So, over the past 40 odd years, it appears that the only way is up for house prices. However, I do question if he really has "done well" out of his house, because it`s hardly worth a huge fortune, it isn`t going to put an awfull lot of money in his pocket if he downsizes. All that has happened is that there has been a large shift in the quality and size of property that a person on average wage can afford. If this proccess carries on, only higher earners will be able to afford the smallest properties. I can`t see this happening, something`s got to give, unless we end up with a pile of broken elastic bands !

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People are moving away from a single salary household to duel earning which has an affect. (This is why House prices have historically risen on average faster than wages?).

I love this particular argument, especially when it is combine with "everyone will live on their own so we need more house " :-)

It is not possible for houses to continually rise faster than wages because eventually there would be no money left over.

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But something like 70% of households in the UK are owner-occupied. That will not go down significantly. So your theory of a small "landlord class" renting thousands of houses each to poverty-stricken "renters", until the renters rise up in revolution just won't work.

Renters are the minority, not the mass.

If rents were reasonable and renters got proper terms and conditions, I think renting would be very popular like it is in just about every other country in Europe.

As usual, what everyone forgets, when buying, is that unless you can sign a check for your "bought house", it belongs to the bank, who rips you off with interest payments for the majority of your working life (which usually eat up any profit made over the term of the mortgage, so the owner breaks even or worse) - and your responsible for the maintenence as well. :lol:

The house is paid just in time for you to get wheeled into the retirement home and guess what, the government takes it back to fund your care.

Only someone with no brain would think this is a great deal. :blink::blink:

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I love this particular argument, especially when it is combine with "everyone will live on their own so we need more house " :-)

Where did i say everyone will be living on their own? read further down and I said

The rise in single people and getting married later also creates a divide

with singletons / migrants buying flats / renting

families / couples buying houses / renting.

All the people I know living on their own are renting or have bought flats, most of the couples I know have bought / rented houses

The way I see it the total number of households (be it singletons or couples / families) has increased dramatically the last decade.

Also if houses are overpriced, flats are way overpriced for what they are!

Edited by skhudy

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If rents were reasonable and renters got proper terms and conditions, I think renting would be very popular like it is in just about every other country in Europe.

As usual, what everyone forgets, when buying, is that unless you can sign a check for your "bought house", it belongs to the bank, who rips you off with interest payments for the majority of your working life (which usually eat up any profit made over the term of the mortgage, so the owner breaks even or worse) - and your responsible for the maintenence as well. :lol:

The house is paid just in time for you to get wheeled into the retirement home and guess what, the government takes it back to fund your care.

Only someone with no brain would think this is a great deal. :blink::blink:

Is this that's your general opinion of homeownership?

No mortgage in far less than 25 years = early retirement and 6 months/year living in the West Indies to me...and a house (or 2 or 3) for my children.

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However, I do question if he really has "done well" out of his house, because it`s hardly worth a huge fortune, it isn`t going to put an awfull lot of money in his pocket if he downsizes. All that has happened is that there has been a large shift in the quality and size of property that a person on average wage can afford. If this proccess carries on, only higher earners will be able to afford the smallest properties. I can`t see this happening, something`s got to give, unless we end up with a pile of broken elastic bands !

I bought my first home in 1975/6. When we last moved, in 1994, I had the princely sum of about 70k in equity. By the time I'd paid the buying and selling fees for the next move, I probably had about 65k.

I didn't consider this to be a huge sum after you take out 18 years of interest payments, repairs and maintenance, despite being called lucky for living through a high wage inflation period.

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"The Argument No Bull Can Refute" - cant refute? But youve based it on an assumption that may or may not be true. Hardly falsifiable.

To many people on this site Globalisation seems to mean low-paid call-centre jobs.

But to some people it means swanning about the world in a jet plane using their high skill-sets to best effect wherever they're needed.

yeah too true, my company has recently gained a foothold in the US, we've got clients in Bermuda, across Europe, looking at making our first deals in Japan etc. If this is globalisation then oh noes how scary! My company has doubled its work force in recent years :)!

Its typical HPC logic though, many bear arguments rely on the idea of historical evidence, cycles, etc. History always repeats blah blah. Yet now we have someone saying that the historical trend for longterm increasing wage/house inflation etc is going to change.

Make ya mind up - you cant have it both ways?!

Edited by Orbital

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"The Argument No Bull Can Refute" - cant refute? But youve based it on an assumption that may or may not be true. Hardly falsifiable.

yeah too true, my company has recently gained a foothold in the US, we've got clients in Bermuda, across Europe, looking at making our first deals in Japan etc. If this is globalisation then oh noes how scary! My company has doubled its work force in recent years :)!

Its typical HPC logic though, many bear arguments rely on the idea of historical evidence, cycles, etc. History always repeats blah blah. Yet now we have someone saying that the historical trend for longterm increasing wage/house inflation etc is going to change.

Make ya mind up - you cant have it both ways?!

It doesn't count of the business exists only in your mind

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"The Argument No Bull Can Refute" - cant refute? But youve based it on an assumption that may or may not be true. Hardly falsifiable.

yeah too true, my company has recently gained a foothold in the US, we've got clients in Bermuda, across Europe, looking at making our first deals in Japan etc. If this is globalisation then oh noes how scary! My company has doubled its work force in recent years :)!

Its typical HPC logic though, many bear arguments rely on the idea of historical evidence, cycles, etc. History always repeats blah blah. Yet now we have someone saying that the historical trend for longterm increasing wage/house inflation etc is going to change.

Make ya mind up - you cant have it both ways?!

It doesn't count if the business exists only in your mind

Edited by BoomBoom

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Your argument seems to rely on the old low-wage-inflation argument. But you ignore the fact that this in itself leads to low mortgage interest rates, and so prices can afford to drift higher than normal in relation to incomes.

Spot on,

Joking, don't be silly.

In a global economy we are competing against a great deal of people with much more favourable exchange rates and a great deal of these people are hungry.

This has resulted in massive off shoring of jobs and DVD players for £18 from ASDA.

We react by entering into a period of what can only be described as hysteria when we see free money can be made from buying houses from each other for exponentially increasing amounts.

This not just so patently obviously unsustainable it is laughable.

Low inflation is not only crucial in a truly global economy it is vital to our economic future as a country.

To listen to people on here who think that wage inflation will pay us out of this mess makes my stomach churn. We compete or we die and if anyone thinks that we are going to be fine if we all turn to our bosses and ask for more money to pay for our homes then I think a few will be surprised at the outcome.

Things should have been allowed to get cheaper.

We became stupid and greedy, and we were manipulated into being this way.

The city has made a great deal of money, but that money has been supported by selling mortgage backed equities and other debts to the true global economies.

This is not a good thing, we didn’t even internalise this debt, we sold it abroad like a commodity.

And we celebrated our wealth as we slid into debt and we celebrated our powerfull city bankers as they sold this debt abroad.

Eventually people really have to wake up and smell the coffee.

If an idiot can make this sort of money this quickly then there is a flaw, there are in fact several large and very obvious flaws.

These times will make a large amount of people wealthy, but this wealth comes from others loosing.

Wage inflation? It will happen, but too slowly and it will be resisted and slowed massivly by interest rates.

(A £200,000 mortgage is £9,000 a year at 4.5% at 6% it is £12,000 do the math (interest only))

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Where did i say everyone will be living on their own? read further down and I said

The rise in single people and getting married later also creates a divide

with singletons / migrants buying flats / renting

families / couples buying houses / renting.

All the people I know living on their own are renting or have bought flats, most of the couples I know have bought / rented houses

The way I see it the total number of households (be it singletons or couples / families) has increased dramatically the last decade.

Also if houses are overpriced, flats are way overpriced for what they are!

Yes, indeed they are. This will come as no surprise to most posters here.

I bought my first home in 1975/6. When we last moved, in 1994, I had the princely sum of about 70k in equity. By the time I'd paid the buying and selling fees for the next move, I probably had about 65k.

I didn't consider this to be a huge sum after you take out 18 years of interest payments, repairs and maintenance, despite being called lucky for living through a high wage inflation period.

You sold in a trough. Otherwise you might have had more equity. Let me guess, your house was worth more pre-late 80s crash?

It doesn't count of the business exists only in your mind

:lol:

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If rents were reasonable and renters got proper terms and conditions, I think renting would be very popular like it is in just about every other country in Europe.

As usual, what everyone forgets, when buying, is that unless you can sign a check for your "bought house", it belongs to the bank, who rips you off with interest payments for the majority of your working life (which usually eat up any profit made over the term of the mortgage, so the owner breaks even or worse) - and your responsible for the maintenence as well. :lol:

The house is paid just in time for you to get wheeled into the retirement home and guess what, the government takes it back to fund your care.

Only someone with no brain would think this is a great deal. :blink::blink:

Gotcha!!

I was only commenting the other day on here about the petulant "I didn't want a stinking house anyway" posts we get on HPC, and how silly it makes the site look...and we have a prize example :lol:

When houses are sensibly priced, you can own your house before you're 40 if you so desire. Stop being so melodramatic :rolleyes:

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