Budget 2013 live....

PaulF81

Mr._Pricklepants wrote: »

The HPI nutters (aka savvy investors) have quitened down because they are probably looking at how to make some extra dosh from this scheme once the t's have been crossed and the i's dotted.
There's no time to waste on internet forums when you need to position yourself for the coming HPI rollercoaster.

On the contrary, there are some over on the other side who think pumping a years worth of mortgage lending into the economy is somehow going to cause a 20-30% fall in prices, as apparently, "everyone in the meeja is now talking about prices being too high".

[Deleted User]

HAMISH_MCTAVISH wrote: »

Sorry, but you're wrong.

You don't need a Porsche. You do need a place to live.

So your choice is rent or own. It's that simple.

And by not paying rent to someone else, it most certainly is adding a pound coin to your wealth and spending power.

Or rather, many hundreds of pound coins a month, for the rest of your life.

As the money you're not spending on rent is diverted to savings, investments or spending.

Nearly true, but not quite. Your last statement is true ONLY IF the money not spent is diverted to savings or investments (but not spending). As the outcome is dependent on what you actually do with the unspent cash, the definition of the house as an asset is not necessarily true.

I still have to pay out "real" money to live here. The fact that I am not also paying a landlord or a lender as much as I possibly could does not change that fact. We all have 2 main aspects to our financial lives - income and expenditure. Assets add to income; expenditure on assets can create additional income. The house you live in is not an asset.

Unless you create assets, it makes no difference what you spend your excess money on. If my understanding of your position is correct, you believe that if I own a house, it must be an asset. With no rent/mortgage, if I spend all my "spare" income on consumables, is my home an asset? No, it only removes money from my bank account, so is a liability.

It is ONLY if I take the unspent rent/mortgage money and use it to create income generating assets that I am better off.

WR

HAMISH_MCTAVISH

Wild_Rover wrote: »

We all have 2 main aspects to our financial lives - income and expenditure. Assets add to income; expenditure on assets can create additional income. The house you live in is not an asset.

WR

An asset does not need to generate income to be an asset.

Gold bullion is a prime example of this. Fine art is another.

If you held a million pounds worth of Gold bullion, or had a Rembrandt hanging on your wall, the storage/security costs would be significant.

Yet they generate no income.

Is it therefore an asset or a liability?

Every economist, banker, government, accountant, and indeed almost anyone else, would decide these are assets....

John_Pierpoint

Yes parasitic assets, able to counteract the effects of parasitic taxation by inflation, unless the wealthy rentier strata of society finds themselves in hard times- think Bernie Madoff victims.

A house obviously is an asset as you could let it to someone else and go and live in a caravan. In the "Major" recession, "redundant" people often did. In fact this is the major motivation for many BTL landlords hoping to be in profit by the time they retire.

[Deleted User]

A bar of gold bullion puts no income in your account unless you sell it or borrow against it to create income. Neither do diamonds, cars, golf clubs or anything else. I agree these are all things that can be sold, but simple possession of them adds no cash to your account. All you have is a possession that you can sell, many of which (including a house!) cost you money to retain.

WR

StevieJ

John_Pierpoint wrote: »

A society which has gone from borrowing 2 years of GDP from the future for private current consumption, to borrowing 5 years of GDP under a "socialist" government. That makes the wasteful extravagant government deficit spending look almost prudent.

Surely that is a reflection of the growth of the UK financial sector, most of the increase in debt being a reflection of the jiggery pokery of the banks rather than 'current private consumption' or govt debt? BTW that increase has occurred since 1987, so you class Maggie and Major as part of that socialist govt?

wotsthat

Wild_Rover wrote: »

A bar of gold bullion puts no income in your account unless you sell it or borrow against it to create income. Neither do diamonds, cars, golf clubs or anything else. I agree these are all things that can be sold, but simple possession of them adds no cash to your account. All you have is a possession that you can sell, many of which (including a house!) cost you money to retain.

WR

Imputed rent doesn't add money to your account.

You should be comparing yourself to your double i.e. the Wild Rover that isn't mortgage free and rents. One of 'you' has a bigger discretionary spend than the other (the one that's mortgage free?). That's because one is benefiting from the ownership of an asset.

HAMISH_MCTAVISH

Wild_Rover wrote: »

A bar of gold bullion puts no income in your account unless you sell it or borrow against it to create income.

Correct.

However as pointed out an asset does not need to generate income to be defined as such.

All you have is a possession that you can sell, many of which (including a house!) cost you money to retain.

WR

The difference is that a house does generate a yield, whether imputed or realised.

Your spending power, and/or your savings/wealth, will increase through the simple act of living in a house you own outright versus paying rent/mortgage costs to live in it.

It is paying you to live there.

[Deleted User]

I don't agree with you, and you don't agree with me. All over the world, there were huge organisations that thought they owned assets. Then they found out that their assets actually produced no income, and we all know how well that ended up.

The month before our last mortgage payment we had £x per month of income to spend on everything. The month after we paid our last payment, we had the same amount. Full ownership of the property did not increase our income. If I use the non mortgage money to buy, say shares that produce dividends, the effect will be that I will have more income to spend. If I spend the non mortgage money on Mars Bars and hookers, I will have no more money to spend. Therefore the ownership status of the property is not relevant unless the "freed up" mortgage money is spent creating income generating assets.

I am not one of those who believe that renting is better than buying. I simply believe that the "my house is an asset" view is not necessarily correct. A relative of mine is in the position of being a pensioner on the basic state pension, but lives alone in a large property. He says his house is an asset, yet as he lives alone (no lodgers) it gives him no income and costs him a fortune to heat, maintain, insure and pay a larger Council Tax than he needs to. Ownership of this "asset" is costing him hard cash out of a relatively low fixed income. It is in his case a liability and is actually diminishing his standard of living. In his case, owning a large property rather than owning or renting a small flat makes his ownership of a large "asset" clearly not in his best interests. Yet in theory it is an asset. Not in his case.

WR

Thrugelmir

Wild_Rover wrote: »

Nearly true, but not quite. Your last statement is true ONLY IF the money not spent is diverted to savings or investments (but not spending). As the outcome is dependent on what you actually do with the unspent cash, the definition of the house as an asset is not necessarily true.

I still have to pay out "real" money to live here. The fact that I am not also paying a landlord or a lender as much as I possibly could does not change that fact. We all have 2 main aspects to our financial lives - income and expenditure. Assets add to income; expenditure on assets can create additional income. The house you live in is not an asset.

Unless you create assets, it makes no difference what you spend your excess money on. If my understanding of your position is correct, you believe that if I own a house, it must be an asset. With no rent/mortgage, if I spend all my "spare" income on consumables, is my home an asset? No, it only removes money from my bank account, so is a liability.

It is ONLY if I take the unspent rent/mortgage money and use it to create income generating assets that I am better off.

WR

I agree with the gist of what you are saying. However an unencumbered asset does a value. That can be realised for cash.

The greyness in your argument. Is that properties are not uniform objects. If people optimised their living space i.e. number of bedrooms relative to the occupants of the house. Then a different matter. As all a couple would need is a one bed flat. Why live in a 4 bed detached house. Expending money unnecessararily.