Is inflation starting to hit the housing market?

wotsthat

Graham_Devon wrote: »

Every single person who is pro house prices appears to have (or say they have) more than one house. Wotsthat a holiday home in Cornwall. ISTL several houses apparently. Hamish 2 houses, and ready to buy more and it's the best time to buy but he won't buy.

I've said, on more than one occasion, that I think slowly deflating prices (in real terms) is the best thing that can happen. However, I'm in a position where I'll benefit if prices go up, down or sideways.

This didn't happen by accident, following a visit from the money fairy, or being so jammy to be born in the very late sixties.

I decided my life was going to be different to that of my parents fairly early on and took the necessary steps starting with leaving school with some decent qualifications and then working 6-7 days week until I was about 30 and getting a degree at the same time (because "sniff" I couldn't afford to go to university full time). Luck's always a factor but I think also I've been really good at learning from mistakes (and there have been plenty).

I'm sure your story is similar but you just didn't get the breaks?

...and you're right I don't know how much a pint of milk costs - my butler buys it.

wotsthat

IveSeenTheLight wrote: »

[*]Which of these would you like to fix in order to hedge against inflation?
[*]How would you prioritise / re-evaluate your sepnding budget?
[/LIST]

I suspect Graham is only pretending not to know but just in case..

Graham, if you had a choice of inflation proofing one item in your budget you should generally* choose the item that makes up the biggest proportion. In the example it's housing.

Mr._Pricklepants

Graham_Devon wrote: »

Every single person who is pro house prices appears to have (or say they have) more than one house. Wotsthat a holiday home in Cornwall. ISTL several houses apparently. Hamish 2 houses, and ready to buy more and it's the best time to buy but he won't buy.

I only have one house.
But then again, I'm not 'pro' houseprices rising, I just accept the fact they are expensive and will keep rising.

IveSeenTheLight

So quick to intially try and shoot down the point, yet when more detail given the silence speaks volumes.

Just in case Graham or any "anti property price increases" posters wish to take up the mantle

IveSeenTheLight wrote: »

I'll persevere and dig out the typical household costs, prioritisation and ask you again which ones you would fix to hedge against future inflation if you could

Ok here we go
http://forums.moneysavingexpert.com/showpost.php?p=58376153&postcount=27

IveSeenTheLight wrote: »

Very Good.
Now, forgetting about the percentages for a second, what would most people priorities lie in order of necessities

For me: -
Food......118
Housing...238
Fuel and light...42
Household services..63 (Not sure what this is for given Fuel and Light are above)
Motoring...137
Clothing and footwear..44
Leisure goods.....36
Leisure services..64
Catering...47
Fares & other travel..20 (Motoring is above)
Household goods..65
Alcohol.....60
Tobacco...28

Taking clothing downwards, that's 36.4% that could be reallocated to higher priority on the list.

So from the above list (remember these are values out of 1000), two questions: -

1. Which of these would you like to fix in order to hedge against inflation?
2. How would you prioritise / re-evaluate your sepnding budget?

Graham_Devon

It's quiet because you are not even talking about what others were talking about ISTL.

The point was simple. Wages are not rising above inflation at the moment. The mortgage only gets easier to pay so long as wages increase more than your outgoings do.

It's that simple.

Trying to turn it into what you want to turn it into takes one very simple fact and makes it into something it was never intended to be. Further, what you are turning it into relies on you having the choice (and therefore the cash) to make a decision on which way you go. It's so far from the reality of most families that its not worth discussing. Were back to a "would you prefer to rent or buy if you had a pile of cash" scenario.

Jegersmart

IveSeenTheLight wrote: »

LOL,
We are aware, arguably more aware than some "anti house price people" who struggle to understand that by securing the costs of housing, it lowers the risk to disposable income going forward

Let's take a simple example.

Year 1
Wages £25,000
Mortgage interest £1,000 per month
Rent = £1,000 per month
Utililities £100 per month.

Year 5
Wages £28,137 (3% per year)
Mortgage interest = £1,000 (I'm showing a worst case interest only, not capital repayment option)
Rent = £1,103 (Only 2.5% inflation)
Utilities = £146.41 (10% yearly increase)

Year 10
Wages £28,137 (3% per year)
Mortgage interest = £1,000 (I'm still showing a worst case interest only, not capital repayment option)
Rent = £1,248 (Still only 2.5% inflation)
Utilities = £235.79 (10% yearly increase)

Where can you get a 10 year fixed rate mortgage?

J

Harry_Boyle

Jegersmart wrote: »

Where can you get a 10 year fixed rate mortgage?

J

http://www.money.co.uk/mortgages/10-year-fixed-rate-mortgages.htm

Norwich are doing the best deal at the moment, fixed at 3.99% for 10 years.

Harry_Boyle

Graham_Devon wrote: »

It's quiet because you are not even talking about what others were talking about ISTL.

The point was simple. Wages are not rising above inflation at the moment. The mortgage only gets easier to pay so long as wages increase more than your outgoings do.

It's that simple.

I don't see the point of the discussion TBH. You could use this logic with any item that you buy. Our council tax has been the same for the last 3 years, but our other costs have gone up. With your logic I can state that inflation is making it more difficult to pay my council tax.

The reality is that the council tax is the same price as it ever was, inflation is making our petrol, food and utilities more difficult to pay.

It's like saying that inflation on a tin of beans is making my piano lessons more expensive. It's the ridiculously flawed logic, that's termed as 'junk science'.

My cat is black.
My cat is deaf.
All black cats are deaf.

p.s. the mortgage doesn't 'only' get easier to pay if you have wage inflation. It also gets easier if you get a better interest rate and if you make overpayments. People keep making this point but you keep ignoring it because it completely undermines your argument.

System

IveSeenTheLight wrote: »

So quick to intially try and shoot down the point, yet when more detail given the silence speaks volumes.

Just in case Graham or any "anti property price increases" posters wish to take up the mantle

I might be being really stupid here but isn't your point that the person with a mortgage sees no inflation increase on their repayments?

So, adding inflation to more things in your example and using a higher amount for utilities would have made your example even better in favour of the person with a mortgage.

What does wage inflation matter? This has nothing to do with how easy the mortgage is to pay.

Graham_Devon

Harry_Boyle wrote: »

I don't see the point of the discussion TBH. You could use this logic with any item that you buy. Our council tax has been the same for the last 3 years, but our other costs have gone up. With your logic I can state that inflation is making it more difficult to pay my council tax.

The reality is that the council tax is the same price as it ever was, inflation is making our petrol, food and utilities more difficult to pay.

It's like saying that inflation on a tin of beans is making my piano lessons more expensive. It's the ridiculously flawed logic, that's termed as 'junk science'.

My cat is black.
My cat is deaf.
All black cats are deaf.

p.s. the mortgage doesn't 'only' get easier to pay if you have wage inflation. It also gets easier if you get a better interest rate and if you make overpayments. People keep making this point but you keep ignoring it because it completely undermines your argument.

You are in agreement with myself then. It's wotsthat who stated that inflation makes the mortgage easier to pay. I stated what you have, in a nutshell.

Better change you're mind

I was actually going to use you as an example earlier in the thread, after telling us you combat inflation by bringing your purchase for season tickets forward.