House Prices Up....

pop_gun

MobileSaver wrote: »

Who mentioned a "free market?"



We live in a capitalist society and so that is exactly what the government should be doing. You have three choices; be angry at the system and do nothing, be angry at the system and try to change it or embrace the capitalist society we live in and join the party.

The central bank doesn't benefit from low interest rates. Neither do savers.
Because we've torched the savers, the government has had to step in with various schemes like help to buy. You can't generate wealth through debt. House prices are only where they are because of low interest rates, the government replacing saver's deposits and the bank's lax lending multipliers.

The goal of buying a home is to eventually own it. Regardless of price. But with house prices arbitrarily going up (no price discovery) the banks will have to relax their lending criteria even further. The government will have to put in more cash for help to buy and mortgages will take longer to repay.

Employment is uncertain for everyone. Good job opportunities are scarce. If I brought a home in Greater London and lost my job. The tenants I bring in to pay the mortgage could end up losing theirs.
Where would I be then?

I don't care if house prices quadruple in London. I wouldn't consider London. As I said in another thread I will eventually buy outside London.

To many the economic system is geared towards wealth transfer. You can see this through the paltry returns on your money. Whether stock market, bonds or savings account.
Having mortgage holders spend their entire lives (along with their children) repaying a mortgage, is part and parcel of the same grand scheme.

chucknorris

pop_gun wrote: »

To many the economic system is geared towards wealth transfer. You can see this through the paltry returns on your money. Whether stock market, bonds or savings account.

The stock market IMO provides very decent returns, the dividend income from the ftse 100 is just under 4%, and the first £5k of dividend income is tax free.

pop_gun

chucknorris wrote: »

The stock market IMO provides very decent returns, the dividend income from the ftse 100 is just under 4%, and the first £5k of dividend income is tax free.

That 4% is decent in today's atrocious market. But 10 years ago you'd expect 5% on your ISA with roughly the same amount tax free.

chucknorris

pop_gun wrote: »

That 4% is decent in today's atrocious market. But 10 years ago you'd expect 5% on your ISA with roughly the same amount tax free.

But 10 years ago inflation was much higher (RPI was almost 4% higher)! So you would be much worse off, and as I said the first £5k of dividend income is tax free, in addition to your ISA, as it was only introduced this tax year, and of course you also have the possibility of a capital gain too.

EDIT: I don't think you can recognise a good deal when you (don't) see it.

westernpromise

pop_gun wrote: »

But with house prices arbitrarily going up (no price discovery) the banks will have to relax their lending criteria even further.

You have read this expression somewhere and you think using it makes you sound intelligent, but unfortunately, you have no idea what it means.

pop_gun

chucknorris wrote: »

But 10 years ago inflation was much higher (RPI was almost 4% higher)! So you would be much worse off, and as I said the first £5k of dividend income is tax free, in addition to your ISA, as it was only introduced this tax year, and of course you also have the possibility of a capital gain too.

EDIT: I don't think you can recognise a good deal when you (don't) see it.

I already stated it's a good deal by today's standards. Though my point was in a properly functioning market it wouldn't be considered anything to write home about.

The RPI was almost 4% higher, but since then the BoE has created £375bn in QE. Some of which has found it's way into the property market and pushed prices up. Most went into the stock market and it, too, rose. But since wages have remained stagnant, coupled with welfare cuts, the average person's ability to purchase goods and services has decreased.
This is why we hear economist talk about helicopter money from the central banks and politicians going on about people's QE. These measures are thought necessary because asset prices (due to QE) have risen far beyond the ordinary citizen's means to acquire them.

cells

pop_gun wrote: »

I already stated it's a good deal by today's standards. Though my point was in a properly functioning market it wouldn't be considered anything to write home about.

The RPI was almost 4% higher, but since then the BoE has created £375bn in QE. Some of which has found it's way into the property market and pushed prices up. Most went into the stock market and it too rose. But since wages have remained stagnant, coupled with welfare cuts, the average person's ability to purchase goods and services has decreased.
This why we hear economist talk about helicopter money from the central banks and politicians going on about people's QE. These measures are thought necessary because asset prices (due to QE) have risen far beyond the ordinary citizen's means to acquire them.

all the money from QE went to the government which spent the majority of it on the old, the sick and the children

asset prices arent much higher than 10 years ago. In nominal terms the FTSE is roughly where it was 10 years ago and the same is true for houses in most of the country. In real terms both are lower.

pop_gun

westernpromise wrote: »

You have read this expression somewhere and you think using it makes you sound intelligent, but unfortunately, you have no idea what it means.

Instead of commenting on any of the points I've raised or the general substance of my post, you've sought to highlight a particular term I've used and cast aspersions on it's use.

Even worse you don't explain why it's wrong to adopt that terminology.

You must really believe everyone on here has the same limited mental capacity as yourself. I mean how low do you want to be perceived?

westernpromise

pop_gun wrote: »

Instead of commenting on any of the points I've raised or the general substance of my post, you've sought to highlight a particular term I've used and cast aspersions on it's use.

Even worse you don't explain why it's wrong to adopt that terminology.

You must really believe everyone on here has the same limited mental capacity as yourself. I mean how low do you want to be perceived?

My comment was accurate. What do you think "price discovery" means? Where does price discovery occur in, say, the long gilts market?

By what mechanism has "£375bn in QE...found it's [sic] way into the property market and pushed prices up"? Please describe the transmission mechanism.

Otherwise it'll be clear that you're another know nothing blowhard HPC refugee who has mistaken himself for a finance industry savant.

"Price discovery"...jeez...

chucknorris

pop_gun wrote: »

I already stated it's a good deal by today's standards. Though my point was in a properly functioning market it wouldn't be considered anything to write home about.

But it is something to write home about! 4% tax free on about £125k (£5k tax free/.04 = £125k) is an extremely good deal, and it is in addition to an ISA. It is equivalent to 6.67% (if the net return was 4%) to a higher rate tax payer. You also were comparing it unfavorably to 10 years ago, but it is much better than it was 10 years ago.

Even beyond the first £125k (that approx. provides tax free dividend income) IMO the stock market is now a much better proposition than investing in London property, due to the better tax treatment.