nationwide down 1.9%

Generali

justpurchased wrote: »

Did anyone say anything of overstretching. Also Neverdespair girl stated her parents purchased a house in 1983 for arround £73K it is now worth arround £1M. What would £73K in a bank do over that period(but if you had £73K then you would of paid for the house in cash)!
I could not rent a equiverlent property as mine for less than my mortgage. My Rent would be £1300 Mortgage is £1000 (repayment before anyone starts), So I can afford to save £600 a month i could only do £300 if I rented.
renting is not cheaper for everyone.

If you put £73,000 in a savings account paying the base rate and not paying tax you'd have £477.5k today.

If you'd invested in Berkshire Hathaway shares you'd have £7.75 million (and you'd have had the dividends to spend each year too).

If you'd bought a index tracker in the S&P 500 and reinvested the dividends you'd have £1.3 million (assuming 0.5% in fees each year).

Of course you'd be pretty rich in 1983 if you had £73,000 in cash so the lesson we learn from this is if you want to be rich in 2008, the best way is to be rich in 1983 and find a good investment for your money.

justpurchased

Generali wrote: »

If you put £73,000 in a savings account paying the base rate and not paying tax you'd have £477.5k today.

If you'd invested in Berkshire Hathaway shares you'd have £7.75 million (and you'd have had the dividends to spend each year too).

If you'd bought a index tracker in the S&P 500 and reinvested the dividends you'd have £1.3 million (assuming 0.5% in fees each year).

Of course you'd be pretty rich in 1983 if you had £73,000 in cash so the lesson we learn from this is if you want to be rich in 2008, the best way is to be rich in 1983 and find a good investment for your money.

But you cant live in shares so your argument is flawed, as You would have to add 25 years rent.
Also who does not pay tax!

Generali

justpurchased wrote: »

But you cant live in shares so your argument is flawed, as You would have to add 25 years rent.

It wasn't an argument, merely an answer to a question.

It's very hard to compare renting with buying in investment terms as it all depends on the period of time and the discounting rate that you use.

justpurchased

Generali wrote: »

It wasn't an argument, merely an answer to a question.

It's very hard to compare renting with buying in investment terms as it all
depends on the period of time and the discounting rate that you use.

Good answer. It is hard to just class a house as an investement but generaly if you do not sell it in negative equity (which the majority dont) it usualy shows a healty return.

Generali

justpurchased wrote: »

Good answer. It is hard to just class a house as an investement but generaly if you do not sell it in negative equity (which the majority dont) it usualy shows a healty return.

There was a piece a few years back in the Economist which showed the relative returns from owner occupation, shares, bonds, cash and BTL. OO was the clear winner over the long term with BTL showing a loss according to their calculations.

ManAtHome

justpurchased wrote: »

It is hard to just class a house as an investement but generaly if you do not sell it in negative equity (which the majority dont) it usualy shows a healty return.

AKA the next generation's debt...

lostinrates

neverdespairgirl wrote: »

£100k salary in London seems like a lot to me - while I don't earn that myself, OH and I certainly do between us, and we feel as if we have lots of money.

.

I have to admit I could, with little difficulty spend four times that in a year and still feel like:o I could spend more. But we've coped very well on less than half that this year. We could not have overpaid a mortage this year and would be living above a chip shop:D

neverdespairgirl

harbinger13 wrote: »

. It is only in hindsight that we conclude 2005 to 2007 were the super bubble time.

Nope, OH and I concluded it at the time.

Cleaver

dopester wrote: »

Provided you both keep your jobs and/or don't suffer pay-cuts.

Worst case scenario: we both lose our jobs, we can't even get a job at McDonalds, and the bank takes our house and we're left with nothing. We'd move back with one set of our parents pretty down about things but [probably then start all over.

Reality is for most people (most being 80%?) that they are at a point in their career which is higher paid than when they bought their house. If I lost my 40k job in my industry, and simply couldn't find another job at that level of pay, I'd go tail between my legs and get a 20k job in my industry, where I was 5 years ago. Which is still more than enough to pay the mortgage on my house.

I remember being a first time buyer with my missus and thinking how scary it was to be buying at a time when we just knew house prices would come down. Then we worked out how much we'd earn if we both had to take jobs stacking shelfs, realised this would be enough to always pay our mortgage and therefore, even though we'd be living on beans on toast, we could cope.

Everyone on this forum is right: there will be some idiots out there who took more money than they could afford, will fall on bad times and will end up in a lot of trouble. I just think this will be the minority. The rest of us will go for a couple less meals out a week, get their hair cut at home, holiday in France rather than the Bahamas for a few years and generally cope with things.

seraphina

Cleaver wrote: »

Everyone on this forum is right: there will be some idiots out there who took more money than they could afford, will fall on bad times and will end up in a lot of trouble. I just think this will be the minority. The rest of us will go for a couple less meals out a week, get their hair cut at home, holiday in France rather than the Bahamas for a few years and generally cope with things.

So most people may only go out half as much - the next thing you know, your local restaurant/gastropub can't afford to stay open. There's a dozen people out of work and looking for jobs. You have one week away in the UK instead of weekends away and a foreign holiday - ferry companies start reducing their capacity, and laying off staff. Tourist areas in the UK find that they have more availability - people aren't going for weekends away. Oh look, there's a few B&Bs gone bust...

The point is, even if most people tighten their belts in the manner you describe, that's very bad news indeed for the UK economy, given that it's so heavily based on consumer spending.