Is it me? Or has anyone noticed that we are in the largest bubble of all time?

Nerra

olias wrote: »

What the OP means is they weren't in a position to buy a property when they were more affordable, and now they are more expensive, they are out of their reach they are jealous and want something to happen to make them cheaper so they can afford one. They don't care what financial harm this may cause to those who own property, as long as they drop enough in price that they can buy.

Of course once they own, they will want prices to rise and will be patting themselves on the back when they do.

Olias

People need to get out of this mind set that they are some how 'making money' when their house increases in value.

Unless you are investing in multiple properties then you are not making money when your house increases in value.

Here's why...

You decide that your dream house is £200k but right now you can only afford £100k. So you buy a house for £100k and over time house prices increase by 100%. So your house is now worth £200k. This is where most people are disillusioned into thinking they are better off but this isn't true because whilst your house has doubled in value so has your dream house and instead of there being a £100k gap between the two there is now a £200k gap (the dream house is worth £400k).

Your first house is a liability rather than an investment in pure money terms. If it increases in value you can't decide to become homeless in order to release the equity increase.

Obviously if you wanted to downgrade your house then rising house prices would benefit you but I would say this is the minority rather than the majority.
Rising house prices also tend to make people do stupid things like re-mortgage their house to buy a new car etc.

olias

Nerra wrote: »

People need to get out of this mind set that they are some how 'making money' when their house increases in value.

Unless you are investing in multiple properties then you are not making money when your house increases in value.

Here's why...

You decide that your dream house is £200k but right now you can only afford £100k. So you buy a house for £100k and over time house prices increase by 100%. So your house is now worth £200k. This is where most people are disillusioned into thinking they are better off but this isn't true because whilst your house has doubled in value so has your dream house and instead of there being a £100k gap between the two there is now a £200k gap (the dream house is worth £400k).

Your first house is a liability rather than an investment in pure money terms. If it increases in value you can't decide to become homeless in order to release the equity increase.

Obviously if you wanted to downgrade your house then rising house prices would benefit you but I would say this is the minority rather than the majority.
Rising house prices also tend to make people do stupid things like re-mortgage their house to buy a new car etc.

And here is why you are talking absolute twaddle...

In the time I have owned homes, if I had rented instead, I would now have nothing - and have had little spare income to buy anything over the years. Instead I have bought...

Over the last 20 odd years, each house I have bought, I have added value to - kitchen/bathroom/redecoration/landscaping/even full renovation. Each time I have sold at a profit, and held back some of that profit (anywhere from £5k-£35K) and have used the remainding profit as a deposit on a new house and to lower my mortgage. The profit I have held back, I have used to buy cars, have exotic holidays (South pacific, New Zealand, Australia, Indonesia - all several times), buy clothes/furniture/electrical goods, and to do up my new property and add value to it.

By doing that, I have traded up from a 1 up 1 down 'starter' home, to now owning a 4 bed 3 bath home worth a considerable amount. At the same time, I have consistantly lowered my mortgage from 95% in my first house, to 0 now (yes, having only recently turned 40, I am mortgage free!) At the same time as stated, I have had money for all sorts of luxuries, that I would otherwise have been unable to afford.

I intend to do this several more times before I retire. I then intend to downsize considerably and therefore release a considerable amount of equity from my home. I would suggest that this is true of the majority, not the minority as you state.

That is why you are talking twaddle. You can make money from the rising value of your home, and considerable amounts at that.

Olias

Neil_in_Bristol

olias wrote: »

In the time I have owned homes, if I had rented instead, I would now have nothing - and have had little spare income to buy anything over the years.

Typically rent is a lot cheaper than the mortgage payments on a similar house. Don't assume that renters end up with nothing. If they invest the difference, they won't own a house, but they will end up with a big pot of cash instead.

LandyAndy

Neil_in_Bristol wrote: »

Typically rent is a lot cheaper than the mortgage payments on a similar house. Don't assume that renters end up with nothing. If they invest the difference, they won't own a house, but they will end up with a big pot of cash instead.

Is that what renters do? Enjoy the huge array of zeroes on their bank statement in their retirement.

mlz1413

I thought the lates 80's bubble was worse.

Bought a house for £35k that became worth £55k within a year, the bubble burst the house became worth £35k a year later when I sold and thank goodness because it dropped to £25k a year after that.

Of course we also had interest rates of 8% that soared to 15%too, but that is the difference in governments.

Which one is worse? the answer depends on how old you are as anyone who lived through the 30's depression would probably have a different point of view again.

olias

'Typically rent is a lot cheaper than the mortgage payments on a similar house. Don't assume that renters end up with nothing. If they invest the difference, they won't own a house, but they will end up with a big pot of cash instead. '

Yes, if you are talking about a large mortgage on a large house, but in my case, the larger the house, the smaller the mortgage, so my mortgage payments were always there or thereabouts what I would have been paying in rent. But even in your scenario, it would be a very committed saver with a lot of will power, who would put away the 'excess' into savings, month in month out, year in year out. Even assuming they put away £200 pm that would only be £25000 over 10 years. Not an amount to be sniffed at, but not a huge amount either these days.

Olias

Running_Horse

Neil_in_Bristol wrote: »

Typically rent is a lot cheaper than the mortgage payments on a similar house. Don't assume that renters end up with nothing. If they invest the difference, they won't own a house, but they will end up with a big pot of cash instead.

In the early years maybe.

But the mortgage on my nice 3 bed house is half the rent on the most basic 2 bed terrace.

hastie

I have seen some long term projection trends that do indeed suggest that we are seeing the start of a huge drop in prices.
I don't believe them. At the end of the day people have their entire wealth wrapped up in their homes, as long as they can service the debt they will just bide their time.
Some great bargains out their for the bold, however.
This is as good as it gets for the first time buyer.

Mallotum_X

The wealth only lasts as long as others can pay those prices.

Personally I see this bubble deflating slowly over a number of years, unlikely to be a big one off crash but small falls, which when combined with inflation effects will reduce the value, but in a way that causes least pain (to the bankers, government, and lastly ordinary homeowners)

Neil_in_Bristol

olias wrote: »

. Even assuming they put away £200 pm that would only be £25000 over 10 years. Not an amount to be sniffed at, but not a huge amount either these days.

Olias

If I could get a repayment mortgage on my current house for £200 more than I'm paying in rent, I'd jump the the chance. It's more like £600. Even if I hide the money I save under the mattress rather than investing it (which is what you're suggesting us renters are doing, presumably) that would be £75,000 over ten years.

My point is, there's nothing inherently "magical" about investing in property. It's no different to investing in shares, or anything else.

I have three friends who bought houses in 2006 and 2007 and all have ended up with nothing but tens of thousands of pounds of negative equity. It's a particular problem for one who has split up from her husband and needs to move.

I also have friends who have been renting and during the same period have added 30 grand to their savings.