Climbing the Property Ladder

ss70

princeofpounds wrote: »

CFA trademark doesn't exist in the UK. I can assure you there are thousands of CFA charterholders in the city.

What you are saying is a like saying 'American law doesn't exist in the UK so why say you are an american lawyer?'.

If you want me to be really pedantic I can tell you I hold a charter from the CFA Institute, this having no connection to the Royal Charter system in the UK.

And still you choose to ignore any of the mathematics or substance of the argument. Can only assume you are more interesting in personal baiting than actually discussing anything, which makes a conversation kind of pointless.

Your argument is equally non existent has your chartered rubbish. We'll be hearing of chartered paper boys next.

princeofpounds

Your argument is equally non existent has your chartered rubbish. We'll be hearing of chartered paper boys next.

Ok, reasoned and well-laid out argument of the day. You win!

ss70

princeofpounds wrote: »

Ok, reasoned and well-laid out argument of the day. You win!

You are not chartered:rotfl: and your maths has not proved anything.

Sneckie07

princeofpounds wrote: »

The long run is a very specific construct in economic models. It doesn't mean 'a long time in human experience'.

Yes, over a specific period of time house pricing can out-inflate wages (like 98-08). Or wages can out-inflate housing (like 90-98). Interestingly, the main reason this happens is because of affordability changes due to interest rates (or liquidity more generally to be more precise). So if house prices out-inflate wages it is normally because the mortgages are more affordable and/or available, which mitigates the 'more expensive' effect.

This certainly means that the 'ladder' doesn't work for periods of time - again, as I have emphasised over and over it can just as easily be a 'snake'. I have just demonstrated how it works when it is working, which was most of post-WW2 Britain in the 20th century, and why everyone from the boomer generation perceives leveraged purchases to in fact be some kind of benign ladder. The Japanese would probably disagree on that one!

But over The Long Run inflation of wages and prices by definition must move together. Imagine prices that inflate 9%p.a. and wages that inflate 6%. Within 50 years all houses would be triple the original ratio in terms of price, within 100 they would be 16 times more expensive, within 150yrs they would be 66 times more expensive.... that is clearly ridiculous and if you take it to the mathematical limit (which is the long run, a very specific economic term) then the house price to earnings ratio would be infinity. That's reductio ad absurdum.

So wolfplayer, whilst everything you say is correct, it has absolutely no application to either a model of leveraged house purchases, or even to a long run simulation of the effects of such a purchase.

Great post, thanks.

Fire_Fox

kriss_boy wrote: »

Me too, free stamps from the post office, free sweets from haribo, a £10 voucher from ASDA because I spotted a typo on their tin foil packaging. You name it- Ive written to them about it!!!

I just complained to an online sports shop because I bought two badminton rackets and to make order up to £50 to get free postage I added a bunch of shuttlecocks.

The shuttlecocks arrived with an invoice saying the rackets were out of stock and the money for them had been refunded.

I love the irony of that- no rackets to hit the shuttles with!!!

:rotfl: You are now officially my guru. :cool:

I tend to reserve my efforts for the big stuff: my coffee table was free and my triple wardrobe £50 delivered. I had £450 of water charges written off after they threatened to debit £19,518.33 from my current account! :eek:

Turnbull2000

OP.

The "property ladder" is primarily a function of earnings growth, with equity through capital repayments being a secondary factor. House price rises are not the true mechanism of upsizing, despite popular belief. No doubt it's already been pointed out that price rises mean the cost of up-sizing increases too.

Since the 10% or higher pay rises common in the 70's, 80's and part of the 90's have ceased, many will remain in their starter home for many, many years. This issue is quite not apparent yet, but it will be soon.

moggylover

ss70 wrote: »

GO BACK TO THE MATHS, equity is larger yes, but the overall cost to change is much larger! Therefore no ladder.

It USED to be linked to the fact that as one got promotions and so forth at work ones income increased and allowed you to climb "up the ladder";)

lowtidesurf

Thankfully me and my Girlfreind are in the position to buy our first home now and luckily it is big enough for us to live in for-ever. 3 bed with a large garden.

Us saving and spending a little more now has resulted in us saving moving costs in the future.

Just hope we dont have more then 2 kids.

Phirefly

kriss_boy wrote: »

So I guess I am trying ascertain what size of property we could afford to own in a few years time.

Do we follow in the footsteps of friends and buy another property or two before landing our ideal 'family home', or would it be possible to save for a couple of years and skip those rungs.

We are in a comparable position and while I can why others have jumped on your terminology and reasoning - I can see where you're coming from.

We bought in April 2007 with a view to thinking about moving to the "next rung" in about 2010. In this context, by next rung I mean that next-size up, 3 bed semi, bit nicer area kind of home.

We've had a massive rethink. We're teetering on the edge of NE. I haven't yet made any huge overpayments opting instead to save every penny in high interest accounts. Our fixed rate ends in April '10 when I plan to drop onto the SVR while closely monitoring the rates. If I feel that rates are rising and I desperately need to find a fix, and the only way I can do that is by ploughing our savings into this house then so be it. If not, all to the good.

We're now planning to sit tight for 2-3 years, save hard, work harder, and build a sizeable deposit and "skip those rungs" as you say. Its going to get hard when our friends start to buy those 3 bed semis but we're keeping our eyes on the prize. If in 2-3 years our current house still hasn't risen in enough to warrant selling, we'll hang on to it and let it. The point is, we're not going to rely on selling our current house in order to buy the house we ultimately want to have.

I'm not saying this is the approach you should take, just that this is one you could consider.