A warning to first time buyers

chucknorris

Graham_Devon wrote: »

Important to note, however, that this doesn't necessarily involve spending money you have spare.

It often involves spending on credit and increasing debts. That was part of the problem we've just been through and are still suffering from 5 years later.

Unfortunately there is no known cure for stupidity, in fact it is probably degenerative. You can’t really protect people from their own stupidity, if you close one door they will just find another way of getting into financial trouble.

My spare money at the money goes on additional pension, Isa’s, and the rest into savings (with pathetic rates of interest) waiting for a suitable property to become available. Although due to recent circumstances I am becoming aware that spending also can be a good thing too, to ensure that you enjoy your life as much as possible before you die.

michaels

Don't housing transactions on their own lead to more economic activity (ignoring where the money comes from):
Stamp duty
Agents fees
Legal fees
Removal costs
Renovation/redecoration
Carpets, curtains
etc.

So it is not just a wealth effect from rising prices, more transactions with prices steady would also boost economic activity.

PasturesNew

shortchanged wrote: »

Higher house prices = more perceived wealth = whack more stuff on credit = live beyond your means.

Yes - and rush out to buy new carpets, curtains and a DFS sofa.

PasturesNew

michaels wrote: »

Don't housing transactions on their own lead to more economic activity (ignoring where the money comes from):
Stamp duty
Agents fees
Legal fees
Removal costs
Renovation/redecoration
Carpets, curtains
etc.

So it is not just a wealth effect from rising prices, more transactions with prices steady would also boost economic activity.

But if wealth only comes from everybody moving ..... it's like that Lilliput story - where everybody's income is derived from everybody taking in other people's washing.

Flawed.

HAMISH_MCTAVISH

PasturesNew wrote: »

But if wealth only comes from everybody moving ..... it's like that Lilliput story - where everybody's income is derived from everybody taking in other people's washing.

Flawed.

I've highlighted the word that makes your statement incorrect.

Wealth doesn't only come from buying and selling houses, or everybody moving.

However buying and selling houses, and the economic activity generated when people move, is a vital part of the economy.

Housing market activity is responsible for somewhere around 15% of GDP in most developed economies. That still leaves 85% of GDP being created from other things.

A crippled housing market can easily result in GDP being a few percent lower than it otherwise would be, and funnily enough we've been dragging along with GDP at a few percent below 2007 levels for some years now. Along with all the high unemployment, business failures, reduced personal incomes, etc, that entails.

So to pretend that we should be able to just ignore the housing market's importance to the economy because some people here have an ideological objection to housing related wealth is....

Flawed.

MPD

SAVING_IS_DEAD_MONEY wrote: »

In essence in this country there are more homeowners than renters, in other words more strivers than skivers. So with the successful people already on the housing escalator they have more assets to cash in as and when required to full the economy.

So are you saying

Homeowners = strivers
Renters = skivers

I think quite a few renters may have an issue with that.

Carl31

SAVING_IS_DEAD_MONEY wrote: »

In essence in this country there are more homeowners than renters, in other words more strivers than skivers. So with the successful people already on the housing escalator they have more assets to cash in as and when required to full the economy.

That doesnt make any sense. What youre saying is home owners feel wealthy as they can cash in the value of their house to provide liquidity to the economy. But by doing that, where do they live?

Surely any wealth in a house is only realised on selling which either happens when you die, hence the owner does not benefit, or you move house, which will only provide a cash benefit if the owner downsizes

wotsthat

Would-be buyers should realise that house prices are vastly overpriced - but the Government is determined to push them further,

So what's the logical action to take if this is true? Don't buy because they're too expensive or buy because they can only go one way?

It's the usual focus on price and not the cost of ownership. Not a single mention of the alternative of renting either - not very credible. Of course, there's the incessant waffle about the '90's crash as if that's some sort of template for the future.

The '90's were great for buying a house - in 20 years we'll be talking about 2009 - 2013 in similar terms

wotsthat

Carl31 wrote: »

That doesnt make any sense. What youre saying is home owners feel wealthy as they can cash in the value of their house to provide liquidity to the economy. But by doing that, where do they live?

It's fairly well established that when prices are rising homeowners spend more money because they feel wealthier. They don't have to sell their house.

It's not that complex but the misinformed generally start talking about using the house as a cash machine or stacking up more debt. Unfortunately they can't comprehend that more spending doesn't have to mean more debt.

shortchanged_2

HAMISH_MCTAVISH wrote: »

I've highlighted the word that makes your statement incorrect.

Wealth doesn't only come from buying and selling houses, or everybody moving.

However buying and selling houses, and the economic activity generated when people move, is a vital part of the economy.

Housing market activity is responsible for somewhere around 15% of GDP in most developed economies. That still leaves 85% of GDP being created from other things.

A crippled housing market can easily result in GDP being a few percent lower than it otherwise would be, and funnily enough we've been dragging along with GDP at a few percent below 2007 levels for some years now. Along with all the high unemployment, business failures, reduced personal incomes, etc, that entails.

So to pretend that we should be able to just ignore the housing market's importance to the economy because some people here have an ideological objection to housing related wealth is....

Flawed.

Crippled because it's overpriced aided by numerous props.

The UK housing market is looking more and more like the Eurozone with plenty of can kicking going on.