UK "one of the wealthiest countries on the planet & getting wealthier by the day"

Loughton_Monkey

the_flying_pig wrote: »

......What’s the next step in this chain of reasoning? I mean, honestly, someone help me out here.

Maybe you're complicating things. There's no 'chain' of reasoning in the example you quote. Houses are 'worth' their market value and their market value depends upon something you may have heard about .... location, location, location....

Your house in (say) Hull is probably worth 30% of mine - sitting on the central line to London....

Hence (all other things equal) I'm 'richer' than you. The smelly French or humourless Germans don't enter into it!

But always understand that the value of any investment (including property) can go down as well as belly-up! That applies in Walthamstow as much as Rouen or Munich.

Loughton_Monkey

wotsthat wrote: »

I think it's fairly well established that if someone's net worth increases they spend more. Yes they can't spend housing wealth but they can spend a bigger % of income instead.

It's not impossible to spend housing wealth. A 70 year old can (I believe) get about 40% of value on a lifetime mortgage. On a reasonable house of (say) £250K value an extra £100K to spend is not insignificant.

I will (hopefully) 'spend' a good deal of mine. My retirement plans made real assumptions on the value of my house, investment, pensions, savings etc. and made assumptions that I would spend an inflation-proof 'budget' that represents [what I would call] the 'good living to which I eventually became accustomed'.

That plan informed me that at around age 75, I would be running out of 'cash' and my pension income would continue, but only fund around 60% of my spending. The simple act of downsizing [which we would probably want to do at that age anyway] by about 50% (... and that allows for, say, a house 75% of the size, in an area 25% cheaper, so we are by no means 'slumming it'...) releases more than enough to keep us going to age 90!

Now on the extremely slim chance I live beyond age 90, a house worth 50% of today's valuation, plus 27 years HPI inflation, given (at that age) probably a 60% Lifetime Mortgage, would keep me in G&T [and bubbles for Mrs LM] well after our telegrams from Her Majesty [or His].

Post recession [actually 2010] I re-evaluated my calculations and found that things had gone better, overall, and that downsizing only becomes necessary at age 79, but - as you suggest - because I am 'wealthier' overall, I will probably spend more.

Thrugelmir

chucknorris wrote: »

You should have planned for your retirement much earlier Thrug, it is next to useless thinking about it now after retirement. What is it they say, failing to plan is planning to fail.

It's a reflection of wider society.

Thrugelmir

Loughton_Monkey wrote: »

A. You buy a £20K 'flat' annuity (rather than an escalating one) you have to be a complete muppet to spend the lot every year because it's obvious that the purchasing power diminishes. So you spend only £16K, and increas by inflation.

B. Still not enough? Then try a Lifetime Mortgage.

C. Alternative to B, get your kids in and blackmail them. Either you pay me £1,500 a year 'supplement' to my income, or the house goes to the dog's home.

Still doesn't answer the question as to people can spend more. Option A above, results in even lower level of income.

chucknorris

Thrugelmir wrote: »

It's a reflection of wider society.

I know! But you should know that people who don't plan won't (or are at least very unlikely to) get.

chucknorris

Thrugelmir wrote: »

Still doesn't answer the question as to people can spend more. Option A above, results in even lower level of income.

If you don't plan ahead and create opportunities to be able to spend more, then you will not be able to.

Loughton_Monkey

Thrugelmir wrote: »

Still doesn't answer the question as to people can spend more. Option A above, results in even lower level of income.

I'm not sure anyone has suggested that a specific person can simply spend more as a result of a £7.5K increase (in your example, say) in his house. But...

My option A was simply an observation - nothing to do with houses - on your example. Even then, to answer your question flippantly, I would say "live much longer than your life expectancy" would have you spending more than the level annuity would allow.

Then, there's this:

Loughton_Monkey wrote: »

......As for the house, it is still wealth or 'net worth'. At the very least, the owner reaps a reward (just like a pension, really) in being able to live in it rent free. The full value can be fully materialised, and eventually will be, but (agreed) not necessarily by the owners themselves [but their heirs].....

So in your case, you die tomorrow. Your heirs have £7,500 more to spend.

Finally:

Loughton_Monkey wrote: »

.....That plan informed me that at around age 75, I would be running out of 'cash' and my pension income would continue, but only fund around 60% of my spending. The simple act of downsizing [which we would probably want to do at that age anyway] by about 50% (... and that allows for, say, a house 75% of the size, in an area 25% cheaper, so we are by no means 'slumming it'...) releases more than enough to keep us going to age 90!

Those of us who plan their wealth, which might include an element of 'over-housing' that allows for downsizing can literally and truthfully claim that each £7.5K by which my house increases, gives me more money to spend now. [But agreed, I must take the reverse and spend less when it 'crashes' by £15K].

the_flying_pig

Loughton_Monkey wrote: »

Maybe you're complicating things. There's no 'chain' of reasoning in the example you quote. Houses are 'worth' their market value and their market value depends upon something you may have heard about .... location, location, location...

does that really go any way towards explaining why the UK is "one of the wealthiest countries on the planet" [see thread title]? the UK has better locations than other countries, and we're able to monetise this by selling our locations to foreigners, something like that?

Loughton_Monkey wrote: »

...Your house in (say) Hull is probably worth 30% of mine - sitting on the central line to London...

but unless i'm missing something really obvious this would mean that i'd paid )(say) 30% of what you did & hence would have (say) 30% of the amount of mortgage debt?

Loughton_Monkey wrote: »

...Hence (all other things equal) I'm 'richer' than you. The smelly French or humourless Germans don't enter into it!...

given its title comparisons with other countries are the whole point of this thread.

Graham_Devon

chucknorris wrote: »

If you don't plan ahead and create opportunities to be able to spend more, then you will not be able to.

I thought the basic principle laid out was that if your house goes up in value, you can spend more income.

Now you are talking about what they shold have done earlier which sidesteps the question on the point raised entirely.

HAMISH_MCTAVISH

the_flying_pig wrote: »

i'm missing something really obvious .

Indeed.

You seem to exist in some strange parallel universe where you can selectively ignore both asset values and capital letters.