House prices....

motorguy

x12yhp wrote: »

Ok.... but most people are not rich rich. Most actually dislike the fact that rich people just seem to get richer simply because they are rich. However that is just what you are supporting.

Sadly, that is life. The rich are perceived to get richer. Whilst we may not like that, thats how it is. Its really about taking risk though isnt it? There are those of us who are happy to keep plodding along and accept their lot. There are those of us who will take chances and risk and *maybe* do well out of it.

x12yhp wrote: »

If the simple matter of owning a property is expected to gain the owner a profit then the more properties you own, the richer you get. Of course the more money you have, the more properties you can own. Thus the more money you have, the more money you can get.

I think that was clearly the mentality from around 5 years ago. That hasnt been the case for a long time now.

x12yhp

pgilc1 wrote: »

I think that was clearly the mentality from around 5 years ago. That hasnt been the case for a long time now.

I think it still is the case for the rich. If you can afford to go and buy houses outright then they will make you money over the medium to long term. If you have to spend someone else's money in the hope of a fast return... then it wont work anymore.

My sentiment was really that houses are the ultimate hypocrisy for the average Joe. (S)He hates the way the rich get richer yet is willing to go one step worse by not just gambling his own dosh to get rich but gambling someone else's (i.e. debt). The blatant ignorance of this annoys me!

A.L.D.A

In normal times the housing market is dominated by sensible people who just want a house to live in. Investment opportunity is much less important than location of schools, and the size of the bedrooms. Paradoxically in the current market those paying cash to invest probably form a higher percentage of overall sales than normal. (just a guess)

saverbuyer

x12yhp wrote: »

I think it still is the case for the rich. If you can afford to go and buy houses outright then they will make you money over the medium to long term. If you have to spend someone else's money in the hope of a fast return... then it wont work anymore.

My sentiment was really that houses are the ultimate hypocrisy for the average Joe. (S)He hates the way the rich get richer yet is willing to go one step worse by not just gambling his own dosh to get rich but gambling someone else's (i.e. debt). The blatant ignorance of this annoys me!

Its leveraged risk that’s the problem and the system that makes it tax efficient to do so. I can buy 10 BTLs all on leverage borrowing and I’m then able to offset the tax on the rent received on mortgage interest.

I can‘t do this on my own mortgage. The exchequer is rewarding reckless borrowing and giving unfair advantage to someone risking money that isn’t there own.

To top it all of the actual productive parts of the economy then has to pay the housing benefit given to these leveraged “risk takers” through housing benefit.

So we get taxed for our own shelter, pay for others profits and take all the risks as a society if it goes wrong and reap none of the rewards as you would usually expect with an “investment”.

HB needs to be cut. It supports this reckless “investment”.

saverbuyer

A.L.D.A wrote: »

Here is a useful site http://www.measuringworth.com/ppoweruk/ It was a fair sized house in poor condition with reasonable garden. I have just measured one for a lady that would be in similar condition but a bit larger and better structurally. I think it was bought for around £170,000, but needs work done to it.

For everyone who was burnt someone gained! All I can say is I have clients who are currently buying up cheap sites and cheap houses to rent. I have also clients who are now grounding their business proposals on rental income rather than sale. It may be they are deluded, unrepresentative and mistaken, I neither know nor care. That is what some are doing. May be they will lose money, who knows.

We are not the ROI and our build totals were never that great. We peaked in 2006 and declined from there. When I last looked we were completing around 6000 units a year. That is disastrous.

In the time of budget cuts I wouldn't like to be basing my i"investment" returns on low interest rates and ever increasing housing benefit payments.

A.L.D.A

saverbuyer wrote: »

In the time of budget cuts I wouldn't like to be basing my i"investment" returns on low interest rates and ever increasing housing benefit payments.

I was not trying to make any point about investment. Buying a house has never been easy and I doubt if it ever will be.

Last week I was visiting a house, double fronted, detached, which was purchased for less than the figure I mentioned. Both the new owners in a good job (well above average income) They are finding it difficult to raise the money to repair. Nothing to do with affordability they could well afford the mortgage (even IF it was 100% loan) and the base rate was 10% !!!!!!!!!!! Loan to perceived value rather than affordability seems to be the criteria in this instance.

In the current market liquidity is the problem. We have gone from one extreme to the other. There is very little pressure to increase base rate for the foreseeable future, I think when they do is when you will see demands for wage increases really taking off. Paradoxical really. Indeed with all the rises in fuel, utility bills and travel costs there has to be a right head of pressure building which will eventually play out in wage demands. What matters is the difference between the interest rate you are paying or getting and the rate of inflation.

If they do embark on QE 2 or is it 3 I hope they ensure that its effects are much better dispersed throughout the economy.

saverbuyer

A.L.D.A wrote: »

I was not trying to make any point about investment. Buying a house has never been easy and I doubt if it ever will be.

Last week I was visiting a house, double fronted, detached, which was purchased for less than the figure I mentioned. Both the new owners in a good job (well above average income) They are finding it difficult to raise the money to repair. Nothing to do with affordability they could well afford the mortgage (even IF it was 100% loan) and the base rate was 10% !!!!!!!!!!! Loan to perceived value rather than affordability seems to be the criteria in this instance.

In the current market liquidity is the problem. We have gone from one extreme to the other. There is very little pressure to increase base rate for the foreseeable future, I think when they do is when you will see demands for wage increases really taking off. Paradoxical really. Indeed with all the rises in fuel, utility bills and travel costs there has to be a right head of pressure building which will eventually play out in wage demands. What matters is the difference between the interest rate you are paying or getting and the rate of inflation.

If they do embark on QE 2 or is it 3 I hope they ensure that its effects are much better dispersed throughout the economy.

I really don't understand the anecdote about the couple in the house they want to do up. I can understand the banks approach in this case. They are only willing to lend up to the value they think could be obtained on a forced sale. Surely the solution to this would have been the couple in this case (earning well above average salaries) save before they bought the place to pay for repairs. Cub the lifestyle and pay for things now rather than try to obtain credit. It’s all about the bank getting their money back. They must think it would be difficult, so I agree with their attitude to this risk. They could very well afford a 100% loan but the bank is reluctant (quite rightly) to advance the repair money which mightn’t add value thus making it a 100% LTV.

What do you mean liquidity? People can borrow money now at 90%-100% LTV IF THEY MEET AFFORDABILITY CRITERIA. Lenders are lending. Just not at silly multiples. At realistic values, not at silly EA asking prices.

There is real pressure to increase interest rates. It’s called inflation over two times the official target. From savers not borrowers. There is zero evidence of wage inflation meeting real inflation anytime soon. The net result is we all get poorer and house prices continue to drop.

If we embark on QE3 we are going to see further inflationary pressure with little chance of matching wage rises. This is not the 70s and 80s.

A.L.D.A

Saverbuyer

I have seen the attitudes of Banks oscillate from one extreme to another often enough over the years to doubt their wisdom.

The point is that the couple bought a house at a very good price even by historic comparisons. The banks is taking no risk whatsoever as the pair of then are unlikely to be unemployed, one of them alone could afford this house. The way forward would be a personal loan, I think. There is a liquidity problem, I am running into similar over and over.

They did save and they took an opportunity to obtain a good property in a reasonable location when it arose. In the long run they and their family will benefit.

On the rest we will never agree, with regards interest rates, the Feds announcement this week, BOE statements etc. They need to get growth and if that means flooring interest rates for a prolonged period and more QE that is what they will do. Ask yourself this, who is borrowing the most money? So why do you think future policy will favour savers? THey will do what they can to keep the cost of government borrowing down and reduce the governments need to borrow by trying to re-inflate the economy. Difficult balancing act. Historically most small savers tend to get a poor deal. It is the way of the world.

x12yhp

They need to get growth going but the more they try the more risky the situation created. The line between growth and uncontrolled inflation is tough to define, ideally there is a broad and blurred region and that enables policies to control the situation... they have time to act when things start to move too far. However, this is analagously the 'speed' of the economy, the true situation needs to consider the 'inertia'. That is the speed times the mass (i.e. the amount of money). As we all know, it is easy to stop a fly buzzing about at 10mph... it is not easy to stand in front of a truck moving at 10mph and get it to stop! The economy is the same. Every attempt to boost the economy is result in a greater and greater mass and resulting inertia. To return to previous words, this 'sharpens' the region between growth and inflation. Every attempt to boost the economy this way makes it harder to control when it actually starts moving. The only real control present is the rates. So the greater the inertia, the greater the necessary change in rates to control it. Too much inertia and it becomes impossible to control and you have hyper inflation. I do not subscribe to this since I do not consider the policy makers to be this reckless but I do believe there is a very strong chance that we will need a sharp increase in rates once things start moving... This is as bad for house prices as the lack of growth.

Double edged sword.

A.L.D.A

x12yhp

I have always been a great believer in keeping an eye on money supply.

BUT growth rates for M4 money supply are falling?

http://www.bankofengland.co.uk/statistics/m4/2010/sep/M4SA.GIF