Budget 2013 live....

the_flying_pig

HAMISH_MCTAVISH wrote: »

Correct.

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

why persist with this ridiculous mini debate? of course a house is an asset. so's a car, so's a piece of jewelry, so's a pair of shoes, & so on.

it's the next steps in your 'chain of logic' that are obviously wrong - blithely assuming that using taxpayer cash to in increase the amount of private secto debt, thereby driving up asset prices, is unambigously a good thing, that the potential upsides of this obviously outweigh the potential downsides.

dryhat

Wild_Rover wrote: »

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

Tell your relative I will pay all his bills until he dies if he signs his house over to me.
His house then will become an asset in your eyes and everyone is happy.



This is a genuine offer, by the way.
(subject to valuation of course)

HAMISH_MCTAVISH

Wild_Rover wrote: »

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.

Again, an asset does not need to provide income.

You are confusing valuation, or the change thereof, with income.

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.

Yes it did.

Because you must provide yourself with shelter in order to survive.

Your choice is therefore to buy or rent.

By not renting, or paying a mortgage, your net income has increased.

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.

No.

You have the additional net income from not renting or paying a mortgage.

How you choose to spend it is up to you.

It will increase your spending power, and/or increase your savings.

Either way, you are better off than the alternative, ie, that you were renting or paying a mortgage.

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.

No.

It is still an asset.

It's just an asset that has holding costs and has not yet been converted to cash.

dryhat

HAMISH_MCTAVISH wrote: »

It is still an asset.

It's just an asset that has holding costs and has not yet been converted to cash.

Correct McT

See my post above

HAMISH_MCTAVISH

dryhat wrote: »

Tell your relative I will pay all his bills until he dies if he signs his house over to me.
His house then will become an asset in your eyes and everyone is happy.



This is a genuine offer, by the way.
(subject to valuation of course)

Common in France.

Doesn't always work out so well....

http://www.nytimes.com/1995/12/29/world/a-120-year-lease-on-life-outlasts-apartment-heir.html

dryhat

HAMISH_MCTAVISH wrote: »

Common in France.

Doesn't always work out so well....

http://www.nytimes.com/1995/12/29/world/a-120-year-lease-on-life-outlasts-apartment-heir.html

Fantastic story.

But generally, that french system of en-viager is good I reckon.

HAMISH_MCTAVISH

dryhat wrote: »

Fantastic story.

Isn't it just?

One of my favourite examples of how business deals can go pear shaped despite making informed decisions using the best available data.

I use it in management training courses regularly.

But generally, that french system of en-viager is good I reckon.

I'd agree.

John_Pierpoint

StevieJ wrote: »

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?

It might well have started before that. I had two colleagues in the 1970's.
One got into that mess, where he used one credit card to pay the the other, that cost about 10% apr when the two were Barclaycard & Access, if I remember correctly. I kept on chivvying him that the carousel would stop when one or the other came up against its credit limit, so he found a bent solicitor, who fixed him up with a mortgage doubled to £10k.

The other installed a cheap [STRIKE]B&Q[/STRIKE] kitchen but presented his building society with a fake invoice for fitting luxury kitchen and went out and bough a boat with the increased mortgage.

However I think it was during "no more boom and bust" Brown that the entitlement culture really got going. "I am entitled to drive a Beamer, so I will mew the house and buy another one."

It was not B&Q what was that other warehouse company that went bust again for the final time in the global economic crisis ?

The point is that houses, cars, and even golf clubs are wasting assets, but can be hired out to generate an income. They are not in themselves an investment. They don't of themselves generate added value, just transfer value. A bit like all those people working for the government with the exception of health and education.