A salutary time capsule of house price predictions - from 1996

wotsthat

economic wrote: »

the longer you own the less the purchase price matters???? are you sure abou tthat? are you one of those who thinks prices will go up for the long term? really really silly statement mate.

Probably badly phrased but yes.

If someone looks at the total cost of owning on day one then the purchase price really matters and will be 100% of the costs . Look at it in year 20 and that initial price will be a much smaller component of the total costs associated with ownership.

The significance of the initial purchase price falls with time.

economic

well not really...

say you bought and prices were 30% lower in 20 years time in nominal terms then suddenly the cost of ownership has become cheaper then the price you paid 20 years ago.

economic

you can not assume prices will just continue going up and up. there are cycles.

wotsthat

mwpt wrote: »

If you read the blog regularly you'd see he made the decision some time back that he disliked how the UK housing market worked and felt it wasn't a place he wanted to remain long term. So he concentrated on increasing his wealth until he could leave. He made the decision that he wasn't going to be buying to live here, so rented instead.

The way I read it he didn't buy because he thought house prices were too high.

mwpt wrote: »

Good luck.

My middle name.

wotsthat

economic wrote: »

well not really...

say you bought and prices were 30% lower in 20 years time in nominal terms then suddenly the cost of ownership has become cheaper then the price you paid 20 years ago.

30% of the initial purchase price in 20 years time will probably be a small number when compared to the other costs of ownership. I purchased about that time ago - I reckon a 100% HPC would probably still see me ahead of the alternate me that rented instead.

westernpromise

economic wrote: »

well not really...

say you bought and prices were 30% lower in 20 years time in nominal terms then suddenly the cost of ownership has become cheaper then the price you paid 20 years ago.

Say I stuck a cricket stump up my bottom, poured treacle over my head and attended fancy dress parties as a toffee apple.

Say prices went up 4% a year for ever because of the collapse of the EU project and President Trump.

Say Martians land and devastate Earth with their heat-ray.

All such what-ifs are idle speculations around things it is simply impossible to control or forecast, so what's the effing point?

The cost of buying today, OTOH, is knowable and fixable, and the NPV of the alternative - a lifetime's future rents - is estimable but not fixable.

What would Martin do? Do that. Or have a read of the Usenet thread from 20 years ago that I linked in the OP. Every reason not to buy you can think of was there. How did it work out?

cells

As I've said before, someone needs to invent house price crash insurance. The type that will never pay out but at least the scared stiff of buying crew can take out to allow them to move on with their lives.

If prices are 15% lower in 5 years time you can sell the house and claim the difference (with an independent valuer confirming the sale price as correct). Would never have paid out in the last 20 years but would have saved some from themselves.

chucknorris

economic wrote: »

you can not assume prices will just continue going up and up. there are cycles.

So don't sell at the bottom, or rather don't sell when you make a loss, sell when you make a profit, it really is (almost) that simple.

Right now I could sell and walk away with more than a decent profit, you have already said on another thread that I am not selling because I just stay in the market forever (insinuating blind faith in the housing market). But that isn't true, I constantly analyse the value of selling, compared to staying in the market, and IMO opinion the value is to not sell (yet), not because of capital values, but because of income. If I did get it wrong and ended up enduring a correction, I would wait to sell at a better time, inconvenient, but not costly. In the 2008 correction, I have lost count of how many posters said to me, 'you should have sold before it happened' our total property value fell by over £1m, but since then they have increased by well over £2m. Guess how many of those posters came back to me and ate humble pie, yep, not one of them.

mystic_trev

westernpromise wrote: »

Say I stuck a cricket stump up my bottom, poured treacle over my head and attended fancy dress parties as a toffee apple.

I'd say you're probably related to Bruno.

chucknorris

wotsthat wrote: »

Probably badly phrased but yes.

If someone looks at the total cost of owning on day one then the purchase price really matters and will be 100% of the costs . Look at it in year 20 and that initial price will be a much smaller component of the total costs associated with ownership.

The significance of the initial purchase price falls with time.

That is true, we re-let a flat this weekend in Battersea for £2,100/month, I bought it for £70.5k in 1991, at the time, if it was £80k it would have seemed to be outrageously over priced. But today it is worth £600k, an extra £9.5k at the time of purchase would now look irrelevant.

The current rental yield based on the purchase price is 35.7% and even if I had paid £80k, it would still be a very healthy 31.5%.