Monday, July 9, 2007

Nice comment article about social consequences of high prices

Dinner table chat about house prices turns nasty

"At a gathering of my wife's family last weekend I was sharply reminded of the generation gap when it comes to property. The over-35s are winners with their cushion of equity, which grows vast the nearer they are to pensionable age; the under-35s have debts that make them feel fearful at becoming losers in the property jungle."

Posted by benedict @ 12:24 PM (665 views)
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26 thoughts on “Nice comment article about social consequences of high prices

  • Make sure it is red wine with the meal. The best poisons have a slight tint, which can be seen through white wine or water.

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  • Surely an after dinner digestif of amaretto is the best approach, it’s coloured and it already has a marzipan taste perfect for masking cyanide.

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  • george monsoon says:

    This article is very true, especially when I get involved in arguments about property prices. My wife has actually apologised on several occasions for my ranting and on one occasion I actually threw a punch at a blinkered [email protected], but the story is always the same. Those who have been homeowners for more than a few years and are converting all that lovely equity into cash to fund holidays, extensions, new cars.. etc.. sit with their heads burried deep in the ground, refuse to acknowledge the posibility of a crash in houseprices, or even contemplate that this might be necessary if any first time buyers ever want to buy a home of their own. I have been dismissed as a loon at work and in my private life for pointing out that property must crash in value, otherwise our nation is going to become a two class society, the have everything’s and the have nothings…. We are already at the point of dinnertime arguments between otherwise good friends, so how much worse do things need to get before this becomes all out war and “let them eat cake” comments are dished out from the have all’s. I am 40, and still unable to afford to buy a house. I know this is old news but I feel strongly that it is valid to re-itterate the point for this article, in that most of my income is swallowed by constantly increasing bills, allowing little leeway for saving anything at all. fortunately I have avoided the killer credit cards by only paying by debit card, however for large items such as the car and essential household appliances, and furniture, I have to buy these on credit because I simply cannot afford to purchase them outright. I live in the Northwest of england where my wage is considered to be “above average” and combined with my wife’s, which is also above average, we should have the buying power to obtain a decent semi detached, if not detached property. That would be true if the same rules that applied for the 50 years prior to 2000 were still true, but alas the government and banks have put paid to any chance of me even obtaining a small 2 up 2 down terrace. ….. and… this argument only holds water if I choose not to have children with my wife. For this reason I believe house prices should crash so that I can afford a modest property on 3.5 times my wage, not combined, so that should I have a child in the near future, I would be able to pay the bills when my wife has to look after the child.

    Rant over.. for now !

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  • tyrellcorporation says:

    This last line is annoying and essentially spoils an otherwise ok article.

    ‘Right-wing policies have created a world we don’t like. The pendulum is swinging back.’

    Labour have been in power for a decade and this is their mess. The Conservatives under MT did more to promote home-ownership than any other party… Right-wing policies have not created this mess it’s been created by cheap credit courtesy of lax monetary policy and an inflation measuring system that deliberately doesn’t include HPI.

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  • bidin'matime says:

    George – sorry to be nosey, but I have to ask this question – why didn’t you buy a house 10 years ago when they were cheap?

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  • can’t have a situation where new families cannot buy a house…..prices have to fall.

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  • george monsoon says:

    I have to be completely honest here, I did buy a small terraced house in 1996 (the prime year to buy) on the strength of one wage at 3.5 times salary at the time. Unfortunately several years later (2000), the marriage failed and because the house was only valued at 4 thousand more than when I bought it, I decided to hand over the house to the ex wife because I did not want to uproot my children. Divorce costs a lot of money and I could not save for several years following the divorce and by the time I was financially stable (around 2004) I was already priced out because the houses by this point had at least doubled in value.

    Now I have re-married and enjoy a comfortable, although not altogether secure life and I am looking to set up a family home of my own, much like the thousands of other first time buyers who are probably not as financially well off as myself.

    So, just to add to my comments above, I have known afordable housing and I am disgusted that I can no longer achieve the status of Homeowner due to bad monetary management by the people running the show.

    hope this answers your question.

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  • George, you need to just chill a little mate. No point causing social tension as you’ll never convert them…and they’ll just end up hating you when you turn out to be correct…and you’ll end up annoying your wife because you alienate the social circle. I don’t argue with people like this any more. I just politely ignore what they say and change the subject, but if pressed give them a calm history lecture pointing out along the way that people have always said “this time is different” together with pointing out why their implicit assumptions are not sustainable in the long term. And if they continue to spout rubbish, I just switch off and feel all smug and warm on the inside. Not that there is any guarantee I am right, but generally these types tend not to understand exponential functions and what the long term implications would be if things continued in a manner compatible with the underlying assumptions of their arguments. Of course there are economic scenarios in which buying a house now could still be a good idea; I just that they are less likely than the alternatives, and I’ve yet to have anyone on “the opposing side” come back at me with them.

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  • George M. All good things come to those who wait. It is going to come down and is as we speak. And you will have the benefit of wisdom to know when to buy at the right time in the next cycle. I am huge believer in cycles and every dog having its day. Don’t worry about being the outcast at dinner parties. Most people are apathetic and ignorant and think people like us are bores because we care passionately and can’t bear to put up with this massive injustice anymore. I’m on the ladder but I feel utter dispair over the lies and spin this Gov. put out to mask the fact that they have let this run completely out of control. It destroys stability for the haves as well as the have nots, when we all start losing our jobs. But! sites like this are gaining huge popularity and starting to educate in a very down to earth way, the extent of the corruption. They inspire sensible debate and stimulate interest which otherwise wasn’t there before. In turn this will put pressure on the powers that be, as more and more people wake up to what is really going on and the press get behind the story. You may be in for a wait yet, but your time will come and you won’t envy all the stupid people who crashed and burned from trying to keep up with the jones’s.

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  • I think d’oh is right but it’s hard to keep quiet especially when you sit with people who you like and they discuss re-mortgaging , building an extension, we need a new car, a new roof, a new kitchen etc and it’s the cheapest way of raising money…..help!!!!!!!!!. Dinner out last week culminated in a major ratatatat once others learnt I got out of property 12 months ago. my comments were then assumed to be those of a ‘have not’ rather than a ‘want not’. Unfortunately you then have to tell people the hard facts. Oh well more desert for me if I manage to get my spiel out before the end of the main course. Haha.
    Consequently no more dinner parties for me or at least not without me having had a 2 hour read of this site and the odd rant to allow me to get to coffee without me needing a fix of sanity. Absurdly at the end of any conversation you feel like the only positive sane person in the group. And George I sympathise having been through a divorce , sold on the slimmest of margins and then 18 months later 1992 picked up a lovely little home due the transference of wealth from some other poor sole. After all the bank manger in 1989 said borrow up to the hilt . you can’t go wrong in property. Luckily I borrowed up to my neck rather than eyeballs and managed to come out of it with my ed’s still in tact.

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  • In a few years time you won’t be able to give property away and interest rates will be up around 10%. I’ve already heard several stories of home owners having remortgaged and changed to an interest only mortgage and now have their backs to the wall and will have to sell on the next rate hike they’ve used up all their bullets and are screwed. There is a smell of fear in the air the party is over, once the dust has settled it may not be that easy to buy a house because credit will be so difficult to obtain. I get fed up of hearing people say that interest rates will fall next year it won’t happen and if it does you can kiss Sterling goodbye.

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  • dohousescrashinthewoods says:

    I agree, I try not to stir too many from their slumber. Some are willing to listen and I’m happy to talk, but for the rest, let sleeping dogs lie. As the saying goes, it’s like throwing pearls before pigs – they will trample them and then turn on you to boot.

    Focus on getting yourself ready to make the most of the situation. Unfortunately we can’t help everyone – it is for each of us to make our own best bet.You don’t need to be responsible for them, however much you would like to help.

    Also, focusing on the galling situation will prevent you seeing the opportunities. That sounds trite because it is, but it is also true. I was once in a job working for a company that I hated with such vehemence that I couldn’t escape. Eventually I stopped trying to make people listen. I stopped wearing myself out trying to do something about it, accepted the fact I wasn’t going to change it, worked with it just enough to plan my escape and within 6 months was out.

    That job was nearly two years of hell and the single worst experience of my life, but now it’s like a bad dream and I’m actually better off for it. So seriously, if they are interested, people will ask you. In the meantime, better to quietly bear an insult. When you are standing in the lifeboat and being jibed by first-classers drunk on the titanic, you don’t need anyone to agree with you. Just watch, wait, and quietly offer help anyone willing to listen.

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  • george monsoon says:

    sound advice, thanks.

    I must admit, of late I have been letting of the odd sigh of compliance, just to keep the peace, after all there is no guarantee that my argument will come to fruititon, given the governments past record on controlling the situation.

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  • dohousescrashinthewoods says:

    Agreed, mrmickey. No one will want property in five years. That will be the time to buy a “home”. It will be much harder to get credit, but that’s my we need to get savvy about a strategy to be credit-worthy in those days.

    Alternatively, once the really bad bit is over, banks may loosen up in an effort to drum up business and it might actually get quite easy to borrow again, only every “sensible” dinner-party bore won’t touch property with a barge-pole.

    So perhaps we sit tight, save what little we can (anything better than nothing) stay out of debt (big plus) and wait for homes to be easy picking when investors are busy abusing some other so-called commodity.

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  • vfr – yes, it is often hard to keep one’s mouth shut.

    What I find the most difficult is dealing with close friends who I care about whose partners are pushing them into buying – I have a Spanish friend who has just completed on a house in Spain after strong pushing from his wife. He’s always said to me that the moment he buys is the signal the market has peaked; he may turn out to be correct.

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  • so what have done.

    1. Moved out of the UK.
    2. Kept sterling on the basis of increased rates
    3. Bought an old farm to grow veg on.
    4. own a small falt 40 mins from the airport preparing for a inward repo property raid. Mind you by then easyjet will be mince meat.
    5. started stashing silver dollars.

    well 1-4 r true so far. just need to start planting some root vegetables and look out and wait for the opportunities.

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  • I’ve just had exactly the same happen with friends who have bought in Portugal by borrowing more on thier UK property. Yikes and really like this guy. Only found out after the event so could say little.

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  • wage slave says:

    George,

    I am in a similar situation to you, having got divorced on 2001 and then watched house prices accelerate ahead of me.

    I was a home-owner during the 1989 / 1990 crash too, and if this one plays out in a similar way there is a lot to be said for keeping your credit worthiness intact (which it sounds like you’re doing). You will get the opportunity to buy again post crash and need to be in a position to take advantage. There will be plenty of bargains around.

    I’ve also stopped boring all and sundry with my prophesies of doom, but what amazes me is that most who experienced the crash don’t seem to remember it now.

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  • Jesus, you guys need seats on Kilroy.

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  • have been reading the comments on the site for some time and find them interesting and have now decided to chip in with my two penny.

    The housing market is becoming big topic of conversation with lots of people around the country and it amazes me the amount of people that think that a housing price crash is impossible. I could undersand it if all these people were too young to remember the last one, but many of them are indeed old enough to remember the last crash. On the one hand you have to say that nothing in life is a certainty then it follows that a house price crash is not a certainty either. But looking at the facts there
    are lots of economic factors/variables that effect the economy and the housing market, and at any one time there will always be a few factors that have the potential to cause big economic/housing problems.
    Well at the moment quite a lot of dark clouds seem to be emerging on the economic front that have the effect to have a big impact.

    It has been said that house prices will increase so that buyers will need mortgages 10 times there salary. Well this one can be dealt with easily. If lots and lots of people are struggling to pay there mortgages now based on multiples used when people took out mortgages a couple of yers ago, how will they pay the mortgage based on higher multiples of say 10 times income?

    The facts are that house prices are actually already falling in the South West, West Midlands and Wales. I believe it may still be the case in scotland but not 100% on Scotland. The rate of growth in other regions is consitantly reducing. Project forward. Where does this tell you we are likely to be heading??

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  • tipping point says:

    People have more of their wealth tied up in houses then any thing else. It is the most obvious symbol of someones success. Those with property will never admit to it loosing value because their pride won’t let them believe it. They will do everything in their power to pay their mortgage even if it means working more, never going on holdiay and eating a diet of lentals. To sell and loose means social failure. Not really something you want to accuse your diner party guests of, especially if like most middle class people they live with the permant cloud of redundancy over their heads.

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  • bidin'matime says:

    We had a family BBQ yesterday – from time to time I joust with my brother, who has three investment properties, but I have to say that, since about 4 years ago when I first told him to think about selling, he’s been proved right in hanging on, so we don’t let it come between us. However, yesterday he announced, un-provoked, that they are going to sell one of their houses. Now, for him to be thinking of selling, things must be starting to bite…

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  • Justgotoutofproperty says:

    I have just managed to sell my home after owning property for some 20 years. I am one of the fortunate ones in that I now have a fairly large sum of money to invest and with interest rates rising my returns will pay for my rental property. I intend to go back into home ownership when prices have corrected themselves. The one common factor that i’ve found when talking to people about my strategy is that they all consider me to be gambling with my future.. They all seem to be of the opinion that property prices will never fall and that interest rates will soon be under control. I have now given up explaining my actions and will just sit back and wait for the inevitable….

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  • I propose we build a machine that will allow us to take a short journey to the starts, we would need to approach the speed of light… time onboard would dilate and slow… when we return the crash will have happened… if we get our calculations wrong we’d likely return too late… global warming would have taken its toll… the only other option is to find a worm hole that can carry us through to a parallel universe – one where property is available to all…

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  • Oh dear, the wicked streak in me now tells these people to remortgage and go for a fixed interest rate. For a while they will be happy that they chose wisely and put one over on the banks. Until the interest rate is still high as they come down to earth at the end of that period. I want the crash to come now before I’m too old to laugh. Pour as much petrol as you can, tell people you admit you are mistaken but don’t have the wherewithall to correct the mistake. Encourage them to buy a house for you to rent off them, they will be so busy feeling superior to that cranky old fart that they won’t see the crash until you offer to buy the house off them for half price… Begger your neighbour, its what they are doing now in reality.

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  • sold 2 rent 1 says:

    2 quotes from above.

    “They will do everything in their power to pay their mortgage even if it means working more”
    “No one will want property in five years”

    Just like now where priced out people have no choice about owning property – in 5 years time it will be unemployment that will prevent people from owning property not choice.
    Remember there is no HPC without recession or even depression.

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