Buying A House? Would you pay £20k for a £5k car?

TheChicken wrote: »

I believe that if all first-time-buyers started to make offers of the Actual value of the house using Land Registry Records and a simple sum, House prices can be changed to once again reflect their true value.

Good luck with that. Let us know how you get on.

daft analogy with a car though, cars in pretty much all cases are seen as depreciating items that no-one expects to hold anything close to its original value as it is to all intents and purposes a perishable product, (ignoring the house prices only ever go up mantra) a house is a purchase that in the majority of cases(and certainly long term), will hold or increase its value over time

shouldn't this post be in the house prices forum?

They will love it....

Attempting to apply a simple inflation indexing to property has a number of problems, the most obvious being the practical; how do you ensure that every prospective buyer only offers a maximum of the inflation-indexed price? If only one buyer defects (even by only a pound, because for whatever private reason they have they really want that house) then the seller is likely to accept their offer rather than that of their competitors and consequently that'll reset the expectations of other sellers.

Secondly, the only inflation figure that could be used in valuing homes for sale is... the housing inflation figure. Any other inflation index won't fully reflect the relative supply and demand of homes versus other goods. Even a national housing inflation figure won't truly reflect the local supply/demand balance (whether at a regional, county, city or street basis).

In some ways, it's surprising that the prices paid for housing increase at all, since the majority degrades over time once it has been built (unless, like artwork and antiques, it has particularly rare and sought after features or craftsmanship).

Ultimately, the value of a home is determined by what the best-funded buyers are prepared to pay for it, and what the seller is prepared to accept. These values will be different for every buyer and seller, because everyone has different priorities; some rational ("I want a home with a greater degree of security than a rental property", "buying a home in this street gets my kids access to a great school, and funding a place at a comparable fee-paying school would cost even more", "I think the value of this home will appreciate in value" and "I want a home that I can customise to my requirements with minimal hassle") and some irrational ("OMG, if I don't buy now, I'll NEVER BE ABLE TO! Arrrgh! PANIC!" and "The bank is prepared to lend me stupid amounts of money, which I don't know how I'll ever repay or even afford the monthly repayments, but I don't need to worry about that whilst I'm on the three-year teaser rate")