UK Households wealthier than ever before

HAMISH_MCTAVISH

Makes no difference whether you hold your wealth in gold, shares, classic cars, garlic futures, or houses.

They're all assets.

You still have to sell them or borrow against them to turn them into cash.

So why is GD desperately muddling the issue and claiming assets aren't "real wealth"?

ess0two

HAMISH_MCTAVISH wrote: »

Makes no difference whether you hold your wealth in gold, shares, classic cars, garlic futures, or houses.

They're all assets.

You still have to sell them or borrow against them to turn them into cash.

So why is GD desperately muddling the issue and claiming assets aren't "real wealth"?

Does it on purpose i reckon,no one is that daft intentionally.

Graham_Devon

marathonic wrote: »

You're easily humoured if taking a post out of context is all it takes. I was stating that homeowners with equity in their property have much more options open to them than a renter. This could be potentially starting a business as stated before - and I included a BMW just to prove of the WIDE variety of options, none of which need to be particularly sensible.

I'll give you an example, I've been looking at sites in my locality lately to determine whether, for my next house, it would make sense to build as opposed to buy.

The sites I've looked at cost in the region of £75k. As my current equity in my house stands at £50k, I haven't a hope. My mortgage is on a 2-year deal. Through maximising savings and possible increases in equity, I may be able to draw down enough to purchase the site secured only on my own home - increasing my LTV.

If I were to go for this option, I'd consider keeping the site and paying down my increased mortgage as quickly as possible. With each monthly repayment, the difference between what I'd sell my current house for and my outstanding mortgage would decrease. Were property prices to rise further, this would compound the increase significantly.

I'd then choose a point, where I feel that selling the house and getting a new mortgage would result in enough capital available to build the standard of house that I want, and sell my current house.

The above, in my opinion, is riskier than most people can handle but , if it plays out, could see me in a house worth significantly more than my current house with very little additional borrowings.

Sounds wonderful. Genuinely hope it works out for you, as it's a massive gamble, with all your eggs in one basket.

My original point has now been proven quite well, I think. Were at least now stating what it is....taking out debt.

It's not accessing wealth, which, I think, or hope, we will all agree. It's not financial genius. It's just taking on debt, and anyone can do this, homeowner or not. If you have lived through lots of HPI of course it will be easier for you to take out larger debts....but again, thats all it is....larger debts.

All we appear to be doing now is assuming that a renter has no access to debt - and even if they do, it won't be at "normal" rates. You also seem to to have plans which are based on HPI actually happening, which again, I wish you good luck with.

At the end of the day though....after all the explanations, all the wrangling, were back to the very point. It's taking out debt.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Makes no difference whether you hold your wealth in gold, shares, classic cars, garlic futures, or houses.

They're all assets.

You still have to sell them or borrow against them to turn them into cash.

So why is GD desperately muddling the issue and claiming assets aren't "real wealth"?

Dev this, Dev that...GD this, GD that. Boo hoo.

Prove me wrong on my points Hamish. If it's too much for you, then fine. But constantly trying to smear me doesn't really help with the obvious points I've made.

If you still won't accept that all you are doign is increasing debt, then fine. But it's not me that looks silly...even with your attempts to make me look so.

The more you try to smear me, the more it's obvious I've made a point you aren't up to discussing or accepting.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Dev this, Dev that...GD this, GD that. Boo hoo.

Prove me wrong on my points Hamish. If it's too much for you, then fine. But constantly trying to smear me doesn't really help with the obvious points I've made.

If you still won't accept that all you are doign is accessing debt, then fine. But it's not me that looks silly...even with your attempts to make me look so.

Debt, debt, debt, debt, debt. Debteddy debt debt. Debt.

It's like you have debt on the brain. You're obsessed with debt.

It's a bit weird Graham.... Do you have a debt problem?

Why do you find it so hard to accept the simple facts, without constantly trying to muddle the issue with debt....

It makes no difference whether you hold your wealth in gold, shares, classic cars, garlic futures, or houses.

They're all assets.

You still have to sell them or borrow against them to turn them into cash.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Yawn yawn yawn <snip>

It makes no difference whether you hold your wealth in gold, shares, classic cars, garlic futures, or houses.

They're all assets.

You still have to sell them or borrow against them to turn them into cash.

Great, well done. Obvious point well made.

I'll take just one tiny little issue though if I may. While all that you said is lovely and all that..... I can't raise my family in, sit around the dinner table in, read a bedtime story to the kids in, kick back and watch homes under the hammer in, a classic car, gold, shares, or indeed, garlic.

I don't need shares, garlic, a classic car or gold to function in society. I kinda need a roof.

So it's all a bit academic really. Though I guess I'm just muddling again.

marathonic

Well, I'm not too sure what specific posts your referring to about it not being taking out debt because it is taking out debt.

However, let's assume that a £20k BMW is valued at £10k after a couple of years (and let's assume 100% mortgages are available - purely for simplicity in the calculations, although it makes no difference).

• a renter who takes out £20k debt to buy a BMW has a net worth of -£10k (BMW - £20K loan)
• a homeowner with an £100k mortgage on a £100k house which subsequently rises in value by £20k, which they release to buy a BMW, has a net worth of £10k (£120 House + BMW - £120K mortgage)

How, in the above scenario, has the increase in home equity not made the homeowner wealthier?

They have to pay the repayments on an extra £20k mortgage, albeit at a lower interest rate than the renters £20k personal loan.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Great, well done. Obvious point well made.

I'll take just one tiny little issue though if I may. While all that you said is lovely and all that..... I can't raise my family in, sit around the dinner table in, read a bedtime story to the kids in, kick back and watch homes under the hammer in, a classic car, gold, shares, or indeed, garlic.

So it's all a bit academic really.

Nonsense.

If you have 200K in shares paying a 5% dividend, you have 10K a year in income with which to rent a house.

If you have a house worth 200K, and it rents for a 5% yield, you have 10K a year in income with which to rent a house.

If you choose to live in that house yourself, it effectively pays you a 5% imputed rent, or 10K a year, to live there.

If you sell the asset, be it shares or the house, you no longer have the income, so you need to find another way to pay for your housing needs.

If the shares go up in value, or the house goes up in value, you're still wealthier than you are if they fall in value.

Houses are no different to any other asset when it comes to calculating net wealth. And all assets require you to sell them or borrow against them to convert your gains to cash.

Graham_Devon

marathonic wrote: »

How, in the above scenario, has the increase in home equity not made the homeowner wealthier?

Ignoring the fact that the starting point is all in the homeowners favour....

When they sell, all of that 10k paper wealth will be eaten by selling & legal fees.

If prices fall 10% they will be in a worse position than the renter.

If interest rates go up, they will be in a worse position than the renter.

But at your snapshot point in time, heavily weighted scenario, the homeowner has 10k paper wealth, yes. Which again, in every single scenario of actually needing that cash, is of no use whatsoever and has no relevance on any of the problems they may come across.

A much fairer example, instead of weighting it all in the homeowners favour would be to have given the renter some paper, or physical wealth too. If you only give the homeowner a headstart, it's not really a example, it's merely constructing the answer you want to see.

marathonic

Graham_Devon wrote: »

Sounds wonderful. Genuinely hope it works out for you, as it's a massive gamble, with all your eggs in one basket.

Thanks... If I were to go for the above plan, the biggest gamble, obviously, would be the point where I'd hold both the house and the site. If they continued dropping at the rate Northern Ireland property has been falling, my wealth would drop dramatically - just as it would increase if they rose

Although risky, it's not overly risky compared to other strategies - if I've paid down my mortgage to an extent that withdrawing enough equity to buy a site, with the entire mortgage secured against the house, then I'm off an acceptable risk to the bank, even without the asset (site).