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If Inflation Rises, Bricks & Mortar Beat Cash?

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I was just thinking about the graph that is on the hpc homepage of real houseprices.

In the event of high inflation, is one actually better off with a tangible asset as even if it loses money in real terms you still have a house. Money in the bank in a high-inflationary environment disappears rapidly - not least when you pay 40% of your interest to HMG.

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One would hope that in the event of high inflation interest rates will rise accordingly, which would mean a better rate of growth for your money.

Either that or we turn into a banana republic.

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You have to pay the mortgage and debts with high interest rates during simple high inflation so you lose out. Considering house prices are vastly over inflated already that makes the situation even worse.

If you own the house 100% after buying it 25 years ago then it doesn;t matter either way because the savings from not having to pay rent or mortgage are large enough to take high inflation.

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I was just thinking about the graph that is on the hpc homepage of real houseprices.

In the event of high inflation, is one actually better off with a tangible asset as even if it loses money in real terms you still have a house. Money in the bank in a high-inflationary environment disappears rapidly - not least when you pay 40% of your interest to HMG.

As long as house prices are rising at a lower rate than your savings interest, you are better off leaving your money in the bank. General inflation is irrelevant, only house price inflation.

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You have to pay the mortgage and debts with high interest rates during simple high inflation so you lose out. Considering house prices are vastly over inflated already that makes the situation even worse.

If you own the house 100% after buying it 25 years ago then it doesn;t matter either way because the savings from not having to pay rent or mortgage are large enough to take high inflation.

Agreed; going on from that, fixed long term rates would be extremely valuable in an inflationary environment, as would outright ownership of property. As always, it will be the "middlers" who lose out - those who have a middling mortgage and middling equity, or have middle-term fixed interest rates. The super-rich always survive, and the poor remain poor - it is the middle-classes that always bear the brunt of financial upheavals.

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If I thought for one moment we were about to see rampant 70s-style wage* inflation over the next few years, I'd buy now without thinking twice. Whilst I'm sure we'll see a few things go "wheee!" in price over the next 6-12 months, wages ain't gonna be one of them, and as demand starts to fall off (especially US demand), expect to see some of that wheee! replaced by splat!.

* In the context of housing, the one that matters.

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If I thought for one moment we were about to see rampant 70s-style wage* inflation over the next few years, I'd buy now without thinking twice. Whilst I'm sure we'll see a few things go "wheee!" in price over the next 6-12 months, wages ain't gonna be one of them, and as demand starts to fall off (especially US demand), expect to see some of that wheee! replaced by splat!.

* In the context of housing, the one that matters.

Wages are falling in real terms for a lot of people

Edited by Ash4781

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If I thought for one moment we were about to see rampant 70s-style wage* inflation over the next few years, I'd buy now without thinking twice. Whilst I'm sure we'll see a few things go "wheee!" in price over the next 6-12 months, wages ain't gonna be one of them, and as demand starts to fall off (especially US demand), expect to see some of that wheee! replaced by splat!.

* In the context of housing, the one that matters.

You may enjoy the anomaly of seeing rampant food and commodity price inflation coupled with hard-asset price deflation. Piling into bricks and mortar will not necessarily help - all it will do if you can own outright is keep a roof over your head.

One for the economists: financial/intangible assets get wrecked in an inflationary environment. Could it be that the financial/intangible aspect, or, if you like the investment premium that has attached to property will be wrecked in the same way as bonds if we get high inflation? In other words, property as it currently stands is in part a tangible asset and in part a financial asset and therefore it will not obey the simple rules of inflation which predict that intangibles are devalued and tangibles become more valuable. Rather, property now has a split personality and....etc etc....or I am talking nonsense?

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Agreed; going on from that, fixed long term rates would be extremely valuable in an inflationary environment, as would outright ownership of property. As always, it will be the "middlers" who lose out - those who have a middling mortgage and middling equity, or have middle-term fixed interest rates. The super-rich always survive, and the poor remain poor - it is the middle-classes that always bear the brunt of financial upheavals.

You'd think if it were that bad for the middle classes they'd give away all their money and then only live like the poor instead of having to 'bear the brunt of financial upheavals'.

Evidence of middle-class stupidity - or perhaps the imbecility of your argument?

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You'd think if it were that bad for the middle classes they'd give away all their money and then only live like the poor instead of having to 'bear the brunt of financial upheavals'.

Evidence of middle-class stupidity - or perhaps the imbecility of your argument?

Or even your lack of abilty to think.......

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  • 295 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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