House Price Rises - A Good Thing?

van_persie

chugalug wrote:

...

To answer your question, only those who already had property before the latest boom will benefit.

How do you figure? These people would still have to shell out more to buy a bigger place. You're talking about 'cashing in' on property. Buy low, sell high. Not the same thing.

Their children won't suffer cos they'll borrow on the equity to lend a deposit to their kids or guarantee their mortgages thereby prolonging the agony for everyone.

They'll suffer if HPI continues without a correction (highly unlikely) as property would reach such an absurd amount even MEW-ing would become too risky...

Don't worry though - what goes up must come down despite everything - the only question is when??

I'm not worried in the slightest...;)

van_persie

Jorgan wrote:

As I said, all things being relative, house price inflation at say 2% is not bad. The alternative is stagnation or deflation, look at Japan over the last couple of years. Who would buy if they knew the property would be worth less in a years time?

Ah, the gift of foresight. That's why it's so hard to call the bottom in ANY market.

HPI at 2% would still be cyclical, of course, and would be subject to dip into negative territory now and again.

saver_sam

chugalug wrote:

To answer your question, only those who already had property before the latest boom will benefit.

We purchased our house in 1994 for £48k, its worth £150k now. However if we want to move, we would be looking to buy around £250k and would therefore be making our monthly outgoings alot more (i.e pay £250pm now and would have to pay around £1200 instead), not just in mortgage, but council tax, and utilities too.

Our only option is to hope for a property price drop, a lottery win (yeah right!) or extend the house we have.

meanmachine_2

I wonder if the market can swim along happily at 2-3% per annum.

I honestly wouldn't have a problem with that.

The market would lose speculators/flippers over time, but the economy would tick along OK, as there would be no feelbad factor associated with a crash.

But does the market work like that?

Since deregulation, I've only seen it go up very high then correct.

And if property only went up in line with inflation, and there was no "panic" to buy, wouldn't stagnation set in, followed by a correction? Then, the whole thing goes back on its upward swing.

I don't know. But I just feel it's gone up too high and too fast to suddenly find a brain and become sensible.

Sounds a bit like wishful thinking. If property did start to lose its "sparkle" and began to flatline or even sink slightly, I'd probably lose all interest.

Perverse, or what?

movieman

As I said, all things being relative, house price inflation at say 2% is not bad.

Why is it 'not bad' for house prices to double every thirty years? Who does that benefit?

The alternative is stagnation or deflation, look at Japan over the last couple of years.

I believe you mean the last fifteen years: if I remember correctly their house price crash started about the same time as ours. Which is a good thing if you want to buy a house, as you're paying far less than you would have done in 1990.... it's only a bad thing if you're speculating on price rises.

Would you argue that the deflation of computer prices, so that you can buy today for 500 pounds what would have been a supercomputer twenty years ago, is bad, and that we should be queuing up to pay billions of pounds for PCs instead? If computer price deflation is good, why is house price deflation bad?

Who would buy if they knew the property would be worth less in a years time?

People who want a place to live, rather than speculators who want 'free money' from house price inflation? Just as people still buy computers even though they know that they'll be able to get something twice as fast in two years for the same price.

The simple reality is that housing in the UK is vastly more expensive than it's worth, and the only reasons for that are an insanely oppressive planning system and artificially low interest rates. We have some of the smallest, lowest quality and most expensive houses in the western world.

The only real question is whether prices crash as they did in the 90s, or wages rise to meet house prices, as they did in the 70s.

van_persie

saver_sam wrote:

We purchased our house in 1994 for £48k, its worth £150k now. However if we want to move, we would be looking to buy around £250k and would therefore be making our monthly outgoings alot more (i.e pay £250pm now and would have to pay around £1200 instead), not just in mortgage, but council tax, and utilities too.

Our only option is to hope for a property price drop, a lottery win (yeah right!) or extend the house we have.

This is a perfect example (and similar to my own outlined earlier) of what HPI really means to most of us and why it's not about being a bull or a bear but applying a little basic arithmetic and common sense.

And yet you mention this scenario to people and they look at you blankly repaeating their mental mantra: "House prices up, good. House prices down, bad..."

BobProperty

movieman wrote:

....The only real question is whether prices crash as they did in the 90s, or wages rise to meet house prices, as they did in the 70s.

Thinking about the 70's I don't remember the house prices going up to be matched by rising wages. Inflation reached 25% at one point I think, so I suspect house prices were just keeping pace (or even falling slightly) in real terms. What I do remember was lots of fuss about big oil price rises (caused by those foriegn chaps according to the papers), massive inflation and wage rises to match. I recall one person I knew at the time going from earning about £500-600 a year to over £2000 a year in a period of 2-3 years. And it had almost nothing to do with them getting promotions / futher responsibilities or qualifications. The salary on my first job was increased by 25% between offer and starting work.

So it's a price crash then...:D

Spendless

van_persie wrote:

Consider this.
A young couple bought a 2 bed house in zone 4 London for 100K in 1998.
A large 3 bed house in the same area cost around 130K at this time. 4 bedders around 150K.
Fast forward to 2006 and the family of four now want a 4 bed home.
They get an offer for 250K for their 2 bed home. They are delighted to have 'made' 150K.
But the 4 bed houses are now around 450K. They can't afford it, so go for a 3 bedder at 400K. That's 150K more, not to mention stamp duty.
1998 prices would have meant 'merely' spending an additional 50K for that 4 bed home.

I agree and don't what it is like anywhere else but round here you are contantly seeing extensions being built on especially at side of house over the driveway. I can only conclude it must be cheaper to extend than move to a bigger place.

irnbru_2

movieman wrote:

If computer price deflation is good, why is house price deflation bad?

In that analogy, one is operating in a global market where value-added and production costs are the driving forces. The other is strictly local.

While channel-surfing last night, Evan Davies of the BBC had one of those lightbulb moments - all those cheap imports from China required them to buy more oil. That drove up the price oli which drove up the price of petrol. Who buys the petrol (and cheap DVD players ...)?

Are there any Western European countries which are experiencing HPD?

mystic_trev

BobProperty wrote:

Thinking about the 70's I don't remember the house prices going up to be matched by rising wages. Inflation reached 25% at one point I think, so I suspect house prices were just keeping pace (or even falling slightly) in real terms. What I do remember was lots of fuss about big oil price rises (caused by those foriegn chaps according to the papers), massive inflation and wage rises to match. I recall one person I knew at the time going from earning about £500-600 a year to over £2000 a year in a period of 2-3 years. And it had almost nothing to do with them getting promotions / futher responsibilities or qualifications. The salary on my first job was increased by 25% between offer and starting work.

So it's a price crash then...:D

Same as me...so you're another old git! Through a lot of the 70's "real" house prices droped. Because there was so much rampant inflation it just "looked" that they were going up! Funny old World?