Wednesday, Apr 17, 2019

Average house prices increased by 0.6% in the year to February 2019

BBC: House price growth at six-year low

Does that mean you made a loss?
Conservatively inflation is 2%, So you made a 1.4% loss as you would have for that in a savings account
Loss of interest/ Opportunity cost of the money paid for mortgage
Additional costs:
You would need to pay for Home and content insurance: £200 to £1000
Repairs: £1000 or so.
Please add any additional home ownership costs that you may know. Like if you need a new mortgage or move deals etc.
Summary: You kind off need 4-5% annual house price growth to keep you in the game, with this level you are looking at thousands of pounds of losses every year

Posted by deepak @ 11:05 AM (1514 views)
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1. khards said...

I gu as the flip side is how much would total rent be each year?

Thursday, April 18, 2019 10:52AM Report Comment

2. tenyearstogetmymoneyback said...

It depends entirely on what you do with the house.
It wouldn't surprise me if the depreciation on my six year old car was higher than my bungalow.
However, I bought the car as i need to get to work, and I bought the bungalow because i needed somewhere to live, especially after finding out the uncertainties of renting (three moves in three years despite always being fully up to date with the rent etc.)

As many people have pointed out, people should buy houses to live in, not as a financial speculation. I doubt if anyone ever buys a new car (even the McLaren F1) expecting it to appreciate.

Monday, April 22, 2019 08:05AM Report Comment

3. deepak said...

Total rent: I've accounted for the cost of housing as the interest on the property. These further capital expenditures need to be carried out to keep the property in decent living standard. So you are still better off renting a well managed house. You are not tied up with high debts, immobility for new opportunities.

Saturday, April 27, 2019 05:19PM Report Comment

4. deepak said...

In UK, people do not buy housing to live in. The high cost is kept to keep the living and status quo up and running.
A 10% fall in housing would be around, £200 Billion would wipe out the complete capital of all the bank in the UK. For example Barclays Market cap is 27.7 Billion, RBS 38.11 Billion. (figures just checked on yahoo finance at 27-Apr-2019)

If the prices don't go up, after some time the problem is not the individuals or companies any more. Its the bank's problem when too many people/ companies can't pay. And we know what happens when banks start to have trouble.

Saturday, April 27, 2019 05:26PM Report Comment

5. tenyearstogetmymoneyback said...


What you haven't taken into account is all the equity people have in their houses.
Back in the 1990s when my "ten years to get my money back" occurred I was 25% down at one point and unable to sell.
No problem for the building society as I was still in positive equity, while I saw my equity drop down from 40% to about 15%

The people who did have a massive problem were the Conservatives at the 1997 election. They lost by 253 seats. I suspect politicians remember that.

Monday, April 29, 2019 07:40PM Report Comment

6. deepak said...


I take it that calculations of Equity in house would be the following

Equity in house = Notional/ Deemed Market Value of house - outstanding charges (mortgage and interest) - opportunity cost of money paid (The money would have earn't you interest or other income if invested)

Here "Value of House" is a notional market value which you may get. Trumped up by the negative interest rate policy. So any asset is going up.
A good example would be the billion dollar valuations of loss making technical companies.

Outstanding charges: Mortgage and interest are constant and goes up unless you are paying towards capital. Interest only mortgages and endowment mortgages words should suffice how principal would never get paid.

Also you mentioned the key difference from the 90s to now (2000 onwards). The deposits were high. You lost the money you had, you had earned. The banks didn't loose any money. Hence it was not a banking crisis.
We now had 125% mortgages, 95% mortgages pushed by Government policy. Now the individual has not got enough the in the game for the losses to be absorbed by them. Hence it now is a banking problem

Also another key difference was the house would be then by an average of £35000-£40000. With 40% paid for and long term jobs with guarantee a standard.
Now the same house of £350,000-£400,000 with 5% at best paid in and no job guarantee.

Also to add, the deemed market value is based on not house bought in the 90's for £35,000. That house value in today's market is based on some other much younger person choosing to buy that house of £350,000. If that person goes, so goes the market value of the house bought in the 90's.

Skating on thin ice??

Sunday, May 5, 2019 07:41PM Report Comment

7. tenyearstogetmymoneyback said...

I think the only thing we can agree on is that things are likely to be different each time.

Back in the 1990s I was very pleased to have fixed my £40K mortgage at 11%.
So interest was about £366 a month while the endowment policy was about £40.

Back then there was no such thing as an interest only mortgage. The Building Society insisted on keeping the endowment (life insurance) policy themselves as security. Buy to let Mortgages were also virtually unheard of. I remember going to the building society in about 2000 to deposit some money, seeing a leaflet and wondering what it was about.

Job security certainly wasn't great in the 1990s. In fact in engineering it hasn't been since the mid 1980s.

To see some real figures look at the house prices for BH25 5UF. You could probably spot mine. Bought in 1989 for £65500, sold in 1999 for £70500. What it doesn't show was trying to sell in 1996 and the only people interested trying to underzump me to £48000.

It is interesting to see that whoever owned next door between 2006 and 2013. I wasn't expecting to see that.

Things were very different again in 2011 when I took out a mortgage to buy this place. Despite having a 45% deposit it needed a two hour interview to get it and the bank employee insisted on reducing the term by one year to make absolutely sure it would be paid off before I am 65. A bit different from Northern Rock's borrow 125% just three years earlier.

Finally the most recent data I could find on Mortgage numbers

Monday, May 6, 2019 08:57AM Report Comment

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