£1.2tn given to old from young

[Deleted User]

I don't see that he's wrecking the thread. He's trying to explain a point of view that others (including me) weren't grasping. Sometimes you have to go around in circles a bit before the penny drops.

The thread is entitled £1.2tn given to old from young. Someone mentioned that that £1.2tn was tied up in property and thus (so he implied) that it was hypothetical money. It didn't really exist. Graham_Devon has tried to explain why he believes thist to be the case. He didn't convince me but I think he was perhaps missing the point that had been made - or maybe I was just picking him up wrong?

ukcarper convinced me with this:

Take my house I paid 60k on it back in the 80s and paid the bank say 60k in interest but it’s now worth about 270k therefore 270k-60k-60k=150k is not in circulation
Mind you just had a thought must be less than that in real terms, as I haven’t taken into account inflation.

So this £1.2tn that has supposedly been given to the old by the young. Is it actual money that's in circulation or is it merely a hypothetical sum that will only ever be realised when old people sell their homes? I would say the latter.

But provided that the old DO sell their homes before house prices crash then the young have indeed given the old this money. The old have largely paid off their mortgages and own their homes outright. They are doing nothing to increase the value of those homes. The young on the other hand are jumping through hoops to raise enough money to buy houses, thus pushing prices up and up. And the oldies are the ones doing least and gaining most.

But what a position to be in. And IF house prices do keep rising as some predict there's still time for the youngsters to get a bit of the action. I remember 10 years ago thinking house prices couldn't go any higher and they've doubled since then.

WelshGandalf

Deleted_User wrote: »

OK, just spotted your edit:

But my question to you is that in that respect does property differ from any other investment?

Say for example you'd paid 60k for gold, silver, rare paintings or other investments. If those investments had increased in value to 270k would an extra 210k (the amount that it had increased in value) be in circulation prior to you selling it?

This is what I'm trying to establish. Is property any different from any other asset in this respect? And does it matter to owner or economy that capital gains aren't realised until you sell?

The difference is that housing is an essential commodity, unlike those other things you mentioned. Speculators/investors buying them up and increasing the price can, and does, have a large effect on society at whole - since everyone needs somewhere to live. Same sort of thing - but to a lesser degree - applies to oil, for example.

As a society we're in danger of regressing hundreds of years, when we had rich landowners and then the lowly people who rented from them. In large swathes of the country, as a young person you need a large sum of money (inheritance, gifts/loans from parents who own property) or to be in the top 10% of wage earners to buy your own place. Owning a property is thus steadily becoming a matter of if your parents owned one too. It's all very sad and depressing and completely unrecognized by the politicans

ukcarper

Deleted_User wrote: »

I don't see that he's wrecking the thread. He's trying to explain a point of view that others (including me) weren't grasping. Sometimes you have to go around in circles a bit before the penny drops.

The thread is entitled £1.2tn given to old from young. Someone mentioned that that £1.2tn was tied up in property and thus (so he implied) that it was hypothetical money. It didn't really exist. Graham_Devon has tried to explain why he believes thist to be the case. He didn't convince me but I think he was perhaps missing the point that had been made - or maybe I was just picking him up wrong?

ukcarper convinced me with this:


So this £1.2tn that has supposedly been given to the old by the young. Is it actual money that's in circulation or is it merely a hypothetical sum that will only ever be realised when old people sell their homes? I would say the latter.

But provided that the old DO sell their homes before house prices crash then the young have indeed given the old this money. The old have largely paid off their mortgages and own their homes outright. They are doing nothing to increase the value of those homes. The young on the other hand are jumping through hoops to raise enough money to buy houses, thus pushing prices up and up. And the oldies are the ones doing least and gaining most.

But what a position to be in. And IF house prices do keep rising as some predict there's still time for the youngsters to get a bit of the action. I remember 10 years ago thinking house prices couldn't go any higher and they've doubled since then.

I probably will downsize in the future and if I’m lucky I might be able to unlock 20% of the value of my house. But the remaining 80% with got to my children or if I’m unlucky care home charges so you could argue I’ve just borrowed it.

StevieJ

Harry_Powell wrote: »

lol, can you imagine! :rotfl:

On reflection, sounds like more ally than adversary, not sure if that is good or bad

ukcarper

WelshGandalf wrote: »

The difference is that housing is an essential commodity, unlike those other things you mentioned. Speculators/investors buying them up and increasing the price can, and does, have a large effect on society at whole - since everyone needs somewhere to live. Same sort of thing - but to a lesser degree - applies to oil, for example.

As a society we're in danger of regressing hundreds of years, when we had rich landowners and then the lowly people who rented from them. In large swathes of the country, as a young person you need a large sum of money (inheritance, gifts/loans from parents who own property) or to be in the top 10% of wage earners to buy your own place. Owning a property is thus steadily becoming a matter of if your parents owned one too. It's all very sad and depressing and completely unrecognized by the politicans

But aren’t people living in the investor’s property. The anomaly is that the people renting these properties are paying the rent but wouldn’t be able to get a mortgage to buy the property because of salary multiples but then if you relax salary multiples the prices will increase.

How would you go about stopping HPI

StevieJ

WelshGandalf wrote: »

The difference is that housing is an essential commodity, unlike those other things you mentioned. Speculators/investors buying them up and increasing the price can, and does, have a large effect on society at whole - since everyone needs somewhere to live. Same sort of thing - but to a lesser degree - applies to oil, for example.

As a society we're in danger of regressing hundreds of years, when we had rich landowners and then the lowly people who rented from them. In large swathes of the country, as a young person you need a large sum of money (inheritance, gifts/loans from parents who own property) or to be in the top 10% of wage earners to buy your own place. Owning a property is thus steadily becoming a matter of if your parents owned one too. It's all very sad and depressing and completely unrecognized by the politicans

Are you saying that 70% of the country will be land owning gentry BTL doesn't seem to be the flavour of the moment and I can't see that 70% figure changing that much.

dopester

Deleted_User wrote: »

But by the same token you can't buy a 50k car using the money under your matress without taking the money out from under the matress or using products secured against the money under your matress.

The only difference I see between buying a house and a car is that the car depreciates whereas the house (over the long term) doesn't.

So if you spend your money on a car then you'll get the use of that car for a number of years and then nothing. The car is gone and the money has gone. You will get something for it if you sell it within a certain number of years but much less than you paid for it.

If you spend your money on a house then you'll get the use of that house for life and if at some time in the future you choose to sell it then it will typically be worth substantially more than you paid for it.

Personally I really wouldn't bet against a £20K new car bought today being worth more in 10 years time than a house with a current market-value of between £40K to £100K. In some hard hit areas.

The transfer is to do with market value isn't it? And values are changeable. They change depending on what prices those who are currently selling/buying/transacting at.

Only the baby-boomers who cash in, via selling, to downsize or rent for example - get a slice of the £1.2 trillion they've seen their homes increase in value during Labour's HPI run. (Overall house prices have risen more than £1.2 during Labours run though).

Others owners who don't sell, have seen increases in market value of their homes, which I suppose they can MEW on to release - but otherwise just a sort of comforting thought about it's market value to cherish. It exists in the thought of implied market value of an asset, but not a realised money until it is sold.

The house I'm living in was last sold in the mid 1980s. The owners bought it at £37K. The baby-boomer owner has seen it rise in value to to £350K-£390K peak due to, year on year, people in the area buying at ever higher prices.

Even though the owner did very little to the property over that time, apart from new carpets (replacing a few times over the years), fresh wallpaper, some double glazing, new kitchen... it's main increase in x10 value gain came only because others have been repeatedly transacting at ever higher prices over the years.

The same can happen in reverse. All houses can lose value whenever those who are selling/buying/transacting at lower prices than have been seen in an area in previous months/years for comparable property, to bring the down the value of owners homes who are not even on the market for sale. It doesn't require many transactions to begin going through at lower prices to drag down the value of an areas homes; 2 bed, 3 bed - mansions - fancy apartments. It is how markets work.

So all of you taking the value of your HPI mega boosted valued homes as being almost unchangeable on the down valuing... better hope Gov and market manipulators keep on delaying the market correction. Keep hoping for easy mortgages, and real borrowing demand for those mortgages... in a severely weakening, deflationary-vortex economy.

[Deleted User]

StevieJ wrote: »

Are you saying that 70% of the country will be land owning gentry BTL doesn't seem to be the flavour of the moment and I can't see that 70% figure changing that much.

I think the argument is that over time it will become harder and harder for the young to buy and so as the oldies die off that 70% of home owners will begin to reduce. Which I would agree is not a good thing.

However, the counter argument is that schemes will be introduced to allow people to buy - eg. though part buy/part rent etc.

Harry_Powell

dopester wrote: »

Personally I really wouldn't bet against a £20K new car bought today being worth more in 10 years time than a house with a current market-value of between £40K to £100K. In some hard hit areas.

The transfer is to do with market value isn't it? And values are changeable. They change depending on what prices those who are currently selling/buying/transacting at.

Only the baby-boomers who cash in, via selling, to downsize or rent for example - get a slice of the £1.2 trillion they've seen their homes increase in value during Labour's HPI run. (Overall house prices have risen more than £1.2 during Labours run though).

Others owners who don't sell, have seen increases in market value of their homes, which I suppose they can MEW on to release - but otherwise just a sort of comforting thought about it's market value to cherish. It exists in the thought of implied market value of an asset, but not a realised money until it is sold.

The house I'm living in was last sold in the mid 1980s. The owners bought it at £37K. The baby-boomer owner has seen it rise in value to to £350K-£390K peak due to, year on year, people in the area buying at ever higher prices.

Even though the owner did very little to the property over that time, apart from new carpets (replacing a few times over the years), fresh wallpaper, some double glazing, new kitchen... it's main increase in x10 value gain came only because others have been repeatedly transacting at ever higher prices over the years.

The same can happen in reverse. All houses can lose value whenever those who are selling/buying/transacting at lower prices than have been seen in an area in previous months/years for comparable property, to bring the down the value of owners homes who are not even on the market for sale. It doesn't require many transactions to begin going through at lower prices to drag down the value of an areas homes; 2 bed, 3 bed - mansions - fancy apartments. It is how markets work.

So all of you taking the value of your HPI mega boosted valued homes as being almost unchangeable on the down valuing... better hope Gov and market manipulators keep on delaying the market correction. Keep hoping for easy mortgages, and real borrowing demand for those mortgages... in a severely weakening, deflationary-vortex economy.

Surely though, the baby boomers are 'cashing in' simply because their kids have left the nest and they're downsizing. Every generation will do this, and every generation will benefit from HPI.

Or are you trying to tell me that over the course of a typical mortgage period (35 years), we won't see any HPI?

dopester

Some of you baby-boomers are going to be knocked out as much as the people who thought their lush grand New York homes were worth $1m before the onset of the Great Depression...... that credit crunch and correction from speculative craziness, where some such homes went on to sell for as low as $100K.

All your core-belief in long-wave inflation, and 18 year cycles only with a few gentle corrections, ignoring larger correcting cycles.

The longer the market correction is resisted using clumsy policy making to deny it, more likely the worse the correction will be - perhaps to a level of entire system breakdown. If it hasn't reached that point already due to debt-levels... and if the market creditors won't accept a UK liquidated option to trade their positions into (to buy cheap positions in the future).