Climbing the Housing Ladder to retirement?

Thrugelmir

CLAPTON wrote: »

30 years ago was 1980

houses selling for £600-700 k today then cost about £30k
i.e. a gain of about 20 times

You may well have considerd it would have been absurb in 1980.

I really have no idea what will happen in the next 30 years but if the same rate of inflation happens then yes a house costing 300,000 today could easily to 3million or more.

So no, not a windup just a statement of checkable historical fact

Some history for you.

1980Inflation peaks at 20% mid-year. Unemployment. increasing fast, tops 2m late '80. Attained self-sufficiency in oil. Interest rates start to come down - MLR reduced to 16% in July and 14% in Nov. Sterling over-valued - reaches peak £1 = $2.39 at end of year. Effective exch. rate up 18% since'79. NEGATIVE growth.1981Inflation down to 12%, continued NEGATIVE growth. Investment down 11 % since '79. Sterling dropped below $2 mid-year as USA takes the monetarist lead with interest rates peaking at 14%. Effective exchange rate down 11% from 1980 peak. Record surplus on balance of payments account of £6.Sbn due to high ER and NSO surplus. MLR down to 12%. EEC budget refunds of £700m and £900m in 1980-81.Start of govt's privatisation plans - Nov.'81 sale of half Cable & Wireless (oversubscribed 6 times), Feb.'82 Sale of Amersham International (over- subscribed 23 times), Nov.'82 sale of 51% of Britoil (under-subscribed 5 times).Government claws back much of '79 tax reduction by not indexing personal allowances, continued fiscal contraction to reduce the PSBR. Aug.'81 - Changes in monetary management, RAR abandoned, MLR suspended, new arrangements for B of E's open-market operations introduced.1982Inflation continues to drop, unemployment to rise. Growth rate of GDP recovers slightly. £ continues to depreciate against $, whilst effective ER stabilises at '81 level. Balance of payment's surplus of £4.6bn for year. Bankruptcies of firms at record level of 11,131 in 1982. NSO production up to 2m barrels a day. PSBR down to 3.8% of GDR Task force sets sail to the Falklands in April - initial cost of war to government - £800m. Substantially more over the long-term.1983RECOVERY? Re-election of Tory/monetarist government Growth of money supply inside target ranges for first time in 4 years. Jan.'83 - inflation below 5% and unemployment. tops 3m. £ goes below $1.50. Balance of payments falls into deficit on current account. First ever manufacturing deficit. Manufacturing output 15% below'79 level. Back to positive growth while rest of world is still in recession. Sept.'83 Start of YTS at cost of £1bn to government Nov.'83: Start of miners strike over pit closures (to last for a year).1984Concern about oil prices. Strong $ (because of high US budget deficit and high US rate of interest and concern about level of government spending and borrowing meant £ fell throughout '84 from approx. $1.45 to $1.20. Fell very sharply in December. Growth 2.7%, but lower due to coal strike. Inflation crept up to 5% partly due to drop in £. Unemployment continued to rise - 3.05m by end of '84. Balance of payment's current account just in surplus £0.1 bn. Interest rates up to 12% in July but fell to 9.5 % by Dec. Sale Of BRITISH TELECOM in November.1985Sterling reached low of $1.05, but recovered gradually to end year at $1.44. Growth increased to 3.5% (after coal strike?), while unemployment levels out at 3.1m. Inflation edges up to 5.9%. Restructuring of taxes in Budget but no cuts in rates. Target for £M3 suspended. Reintroduction of MLR in Jan. to try to help exchange rate control. Current account surplus of £3.5bn mainly thanks to good growth in invisibles.1986Price of oil drops by nearly 50% and government admits concern for exchange rate as a target (substitute for money supply targets?). 'Big Bang' deregulation of stock exchange in October. Flotation of British Gas (using 'Sid') and TSB. £ relatively weak ended year at $1.43. Growth continues reasonable at 2.5%, with Inflation at 3.3%. Deterioration of current account (deficit of £10bn). Unemployment stable at 3m. lp cut in basic rate (first cut since '79) in Budget and various measures to widen share ownership (PEP's). Big year for merger and takeover activity (29 names wiped off UK Top 500 companies list - Guinness takeover of Distillers, Habitat merged with BUS etc.). Increase in government expenditure announced in Autumn Statement.1987GENERAL ELECTION YEAR - INCREASED MAJORITY FOR TORIES. High growth rate - 4% - mainly from consumption and export growth. Unemployment down to 2.65m (9.8% of workforce) by Dec'87. Current account deteriorates further to deficit of £2.5bn. Oil balance stable at £4.0bn surplus. Inflation up from '86 at 4% average for year, but rising at end of year (nearly 5 %). High growth led to higher tax revenue than expected and so PSBR was only £1.0bn. Budget knocked 2p off income tax, but put nothing on excise duties. The world's favourite airline (BA) was privatised in Feb. - comfortably over- subscribed. Last remains of BP in government hands also flogged - but flopped disastrously because October 19th - BLACK MONDAY - Footsie index fell 250 points - 11 % in one day. Overall, shares lost 35 % at their worst from the '87 high point. Merger activity dropped off in light of crash but BA was allowed by MMC to merge with British Caledonian. Sterling strengthened overall through year to end year at $1.81 - an average of $1.61 through year.1988Increasing rate of growth - 4.5% for the year. Fuelled by strong expansion in consumer demand. BUT problems starting to show - Balance of Trade plummets to £20bn deficit, inflation edges up to 6.4%. Interest rates edge up for most of the year from 8.5% on Jan.1st to 13% by end of Nov. with 2 reductions to ease pressure on the £. £ strong for most of the year and fluctuated between $1.87 and $1.70. Ended year at $1.85. Unemployment falls by 50,000 per month - 7.6% at end of '88.British Steel privatised December - comfortably over-subscribed, but prices didn't rise much at first. British Aerospace buys Rover Group with government loss of around £700m in debt write-offs and sweeteners". Coal industry announces further 20,000 job losses and 10 pit closures. Merger activity builds up again after a fall in '87 because of Stock Market Crash. George Bush wins US Presidential election. Budget cuts basic rate of income tax by 2p to 25p in £, and top rates from 60p to 40p (at cost to revenue of £4.25bn). Independent taxation of husbands and wives introduced, personal allowances increased at twice rate of inflation and all excise duties increased. Oil prices fall during year to $12-$13 per barrel and so oil balance declines further to £2.5bn surplus. Not enough to help visible balance as non-oil balance plummets to £22bn deficit. Main problem is high demand growth and insufficient domestic capacity growth and so interest rates go up to try to 'slow-down' economy and contain inflation.1989Growth fell to 2% for the year - lowest rate since 1982. Higher growth from '88 helped reduce unemployment further to 1.67m or 5.9% of workforce. Balance of payment's worsens further still to visible deficit of £24bn. Invisibles only add £4bn, so current account deficit of £20bn. High consumer demand still causing problems, but slowed down slightly during year as rate of interest goes up. Oil balance now only £1bn surplus. Inflation nudges up further to 7.5%. Buoyant demand though gives government a large budget surplus of £14.3bn (3% of GDP). So we now call PSBR, the PSDR (Public Sector Debt Repayment).Strong $ (tighter US fiscal policy) & concern over UK economy put £ under pressure during year and so £ dropped during year from $1.82 at start to finish at $1.61. Interest rates continued to rise from 13% to 15% in October to try to contain balance of payments and inflation and helped support £. Budget was boring compared to '88 with few major changes except to National Insurance.Markets got concerned in middle of year over policy differences between Thatcher and Lawson and disagreement (mainly over EMS and rate of interest policy) culminated in Lawson resignation on October 26th. Madrid EC summit adopts Delors plan for Economic and Monetary Union.

Cleaver

1980Inflation peaks at 20% mid-year. Unemployment. increasing fast, tops 2m late '80. Attained self-sufficiency in oil. Interest rates start to come down - MLR reduced to 16% in July and 14% in Nov. Sterling over-valued - reaches peak £1 = $2.39 at end of year. Effective exch. rate up 18% since'79. NEGATIVE growth.1981Inflation down to 12%, continued NEGATIVE growth. Investment down 11 % since '79. Sterling dropped below $2 mid-year as USA takes the monetarist lead with interest rates peaking at 14%. Effective exchange rate down 11% from 1980 peak. Record surplus on balance of payments account of £6.Sbn due to high ER and NSO surplus. MLR down to 12%. EEC budget refunds of £700m and £900m in 1980-81.Start of govt's privatisation plans - Nov.'81 sale of half Cable & Wireless (oversubscribed 6 times), Feb.'82 Sale of Amersham International (over- subscribed 23 times), Nov.'82 sale of 51% of Britoil (under-subscribed 5 times).Government claws back much of '79 tax reduction by not indexing personal allowances, continued fiscal contraction to reduce the PSBR. Aug.'81 - Changes in monetary management, RAR abandoned, MLR suspended, new arrangements for B of E's open-market operations introduced.1982Inflation continues to drop, unemployment to rise. Growth rate of GDP recovers slightly. £ continues to depreciate against $, whilst effective ER stabilises at '81 level. Balance of payment's surplus of £4.6bn for year. Bankruptcies of firms at record level of 11,131 in 1982. NSO production up to 2m barrels a day. PSBR down to 3.8% of GDR Task force sets sail to the Falklands in April - initial cost of war to government - £800m. Substantially more over the long-term.1983RECOVERY? Re-election of Tory/monetarist government Growth of money supply inside target ranges for first time in 4 years. Jan.'83 - inflation below 5% and unemployment. tops 3m. £ goes below $1.50. Balance of payments falls into deficit on current account. First ever manufacturing deficit. Manufacturing output 15% below'79 level. Back to positive growth while rest of world is still in recession. Sept.'83 Start of YTS at cost of £1bn to government Nov.'83: Start of miners strike over pit closures (to last for a year).1984Concern about oil prices. Strong $ (because of high US budget deficit and high US rate of interest and concern about level of government spending and borrowing meant £ fell throughout '84 from approx. $1.45 to $1.20. Fell very sharply in December. Growth 2.7%, but lower due to coal strike. Inflation crept up to 5% partly due to drop in £. Unemployment continued to rise - 3.05m by end of '84. Balance of payment's current account just in surplus £0.1 bn. Interest rates up to 12% in July but fell to 9.5 % by Dec. Sale Of BRITISH TELECOM in November.1985Sterling reached low of $1.05, but recovered gradually to end year at $1.44. Growth increased to 3.5% (after coal strike?), while unemployment levels out at 3.1m. Inflation edges up to 5.9%. Restructuring of taxes in Budget but no cuts in rates. Target for £M3 suspended. Reintroduction of MLR in Jan. to try to help exchange rate control. Current account surplus of £3.5bn mainly thanks to good growth in invisibles.1986Price of oil drops by nearly 50% and government admits concern for exchange rate as a target (substitute for money supply targets?). 'Big Bang' deregulation of stock exchange in October. Flotation of British Gas (using 'Sid') and TSB. £ relatively weak ended year at $1.43. Growth continues reasonable at 2.5%, with Inflation at 3.3%. Deterioration of current account (deficit of £10bn). Unemployment stable at 3m. lp cut in basic rate (first cut since '79) in Budget and various measures to widen share ownership (PEP's). Big year for merger and takeover activity (29 names wiped off UK Top 500 companies list - Guinness takeover of Distillers, Habitat merged with BUS etc.). Increase in government expenditure announced in Autumn Statement.1987GENERAL ELECTION YEAR - INCREASED MAJORITY FOR TORIES. High growth rate - 4% - mainly from consumption and export growth. Unemployment down to 2.65m (9.8% of workforce) by Dec'87. Current account deteriorates further to deficit of £2.5bn. Oil balance stable at £4.0bn surplus. Inflation up from '86 at 4% average for year, but rising at end of year (nearly 5 %). High growth led to higher tax revenue than expected and so PSBR was only £1.0bn. Budget knocked 2p off income tax, but put nothing on excise duties. The world's favourite airline (BA) was privatised in Feb. - comfortably over- subscribed. Last remains of BP in government hands also flogged - but flopped disastrously because October 19th - BLACK MONDAY - Footsie index fell 250 points - 11 % in one day. Overall, shares lost 35 % at their worst from the '87 high point. Merger activity dropped off in light of crash but BA was allowed by MMC to merge with British Caledonian. Sterling strengthened overall through year to end year at $1.81 - an average of $1.61 through year.1988Increasing rate of growth - 4.5% for the year. Fuelled by strong expansion in consumer demand. BUT problems starting to show - Balance of Trade plummets to £20bn deficit, inflation edges up to 6.4%. Interest rates edge up for most of the year from 8.5% on Jan.1st to 13% by end of Nov. with 2 reductions to ease pressure on the £. £ strong for most of the year and fluctuated between $1.87 and $1.70. Ended year at $1.85. Unemployment falls by 50,000 per month - 7.6% at end of '88.British Steel privatised December - comfortably over-subscribed, but prices didn't rise much at first. British Aerospace buys Rover Group with government loss of around £700m in debt write-offs and sweeteners". Coal industry announces further 20,000 job losses and 10 pit closures. Merger activity builds up again after a fall in '87 because of Stock Market Crash. George Bush wins US Presidential election. Budget cuts basic rate of income tax by 2p to 25p in £, and top rates from 60p to 40p (at cost to revenue of £4.25bn). Independent taxation of husbands and wives introduced, personal allowances increased at twice rate of inflation and all excise duties increased. Oil prices fall during year to $12-$13 per barrel and so oil balance declines further to £2.5bn surplus. Not enough to help visible balance as non-oil balance plummets to £22bn deficit. Main problem is high demand growth and insufficient domestic capacity growth and so interest rates go up to try to 'slow-down' economy and contain inflation.1989Growth fell to 2% for the year - lowest rate since 1982. Higher growth from '88 helped reduce unemployment further to 1.67m or 5.9% of workforce. Balance of payment's worsens further still to visible deficit of £24bn. Invisibles only add £4bn, so current account deficit of £20bn. High consumer demand still causing problems, but slowed down slightly during year as rate of interest goes up. Oil balance now only £1bn surplus. Inflation nudges up further to 7.5%. Buoyant demand though gives government a large budget surplus of £14.3bn (3% of GDP). So we now call PSBR, the PSDR (Public Sector Debt Repayment).Strong $ (tighter US fiscal policy) & concern over UK economy put £ under pressure during year and so £ dropped during year from $1.82 at start to finish at $1.61. Interest rates continued to rise from 13% to 15% in October to try to contain balance of payments and inflation and helped support £. Budget was boring compared to '88 with few major changes except to National Insurance.Markets got concerned in middle of year over policy differences between Thatcher and Lawson and disagreement (mainly over EMS and rate of interest policy) culminated in Lawson resignation on October 26th. Madrid EC summit adopts Delors plan for Economic and Monetary Union.

On initial glance that looks like a pretty comprehensive view of the 80's. Then you realise that there isn't a single mention of any John Hughes film, Bros, Sonic Youth or the Rubik's Cube so I would question how valid it really is.

CLAPTON

Thrugelmir wrote: »

Some history for you.

so that's a 'yes I agree with you' is it?

Thrugelmir

CLAPTON wrote: »

so that's a 'yes I agree with you' is it?

Not is this instance. :beer:

treliac

dopester wrote: »

The delusion virus. It seems to be the most potent amongst the baby-boomer generation at around 45 years+, most detectable when their minds think over the value of their homes. It wrecks your head and makes you believe the craziest things... until new realities are forced to be recognised.

I think your age group is too restrictive. There are plenty of OAPs now who are hanging on, mentally, to the value of their house - for whatever reason.

But, in truth dopester, don't you think you are too harsh on individuals? Whatever has gone wrong has done so through no fault of home-owners or mortgage-holders, sitting in their little houses - whether they've done well from the deal or otherwise.

Some have had it easy but most have had a struggle of some sort.

If and when you buy the house you are hoping and waiting for, what will you do when its value goes up over the years (that's still the most likely scenario given enough time)? Maybe you won't celebrate - as I've said before hpi aren't of automatic benefit - but neither will you turn any of it down and, even more importantly, you won't blame yourself for whatever fortune comes your way.

Envy and blame really don't help anyone, especially when the causes are out of our control.

dopester

Harry_Powell wrote: »

Is there not a risk though Dopester, that you're putting all your eggs into one basket with the deflational spiral theory. If you protect yourself and it occurs then you could save a lot of money. However, if you're over cautious then you could lose out financially and have a much poorer retirement/lifestyle as a result?

Surely it's better to take a middle ground with any strategy? It's like STR - these guys felt strongly that the market would turn, but they forgot that they would have to be very accurate with their predictions, not once but twice. Once in selling the house close to peak (there are many instances where people STR'd as far back as 2001 only to see house prices fly out of their reach) and again in buying back into the market in the trough (already we have seen 10% average gains; it might be that prices fall back but it might also be that prices continue to rise beyond 2007 peaks).

I just don't think it's prudent to gamble your future livelyhood on a single idea and a single strategy.

You're right Harry. It is a something I regularly put to myself Harry. Am I being too stubborn and should I take a middle ground position.. to give myself some protection if I'm wrong about how future events will play out (deflation)?

Whilst I'm single-minded about house prices falling in the future months and years, it doesn't mean I don't weigh-up the views and information interpreted by other members of the forum... and have to consider what if I'm wrong... and what might be a balanced middle-ground position for me to take.

It isn't my livelihood though. It's the purchase of a house. The answer I always come back to is; I'm all-in for one direction only. I'm going to ride this out for better or worse. Stubborn? Yes. If I can't buy a house in an area I want to buy in at a price that represents affordability into the future, then I don't ever want a house.

If things go on to see me cheated by the system and at the expense of those who overreached in the expectation the economy is always a wonderful party and the money doesn't run out - so be it.

If market disciplines are broken/overridden to support house prices, and even to kick-them-on from here... such as with forced inflation, or default, or currency wipeout.... I might be left with nothing. Nothing except for the glowing satisfaction that I did the right thing in theory - only to be mugged to support those who got it wrong. Glowing satisfaction isn't much of a consolation though.. at all, is it.

Even though such a scenerio would totally suck, with no home of my own.. seeing them being even more expensive in 10 years time, my savings perhaps inflated away... I'd rather that happen that sell out the integrity of my position and buy a middle-ground position at these levels.

Also any middle-ground position taken now, with the purchase of a home, would actually put me pretty much full-in.. in terms of capital spent, debt taken on, and knowing that I my work may require me to relocate to somewhere distant in the future.

If the middle ground position was a lot cheaper than it is now.. then maybe... but I'm not living in Salford or any other dog-end area to take an 'affordable' middle ground position now. Even those types of areas, whilst cheaper than national average prices, still strike me as being well over-inflated.