Actual benefit of rising prices - a bulls view

westernpromise

Windofchange wrote: »

Can we all agree that housing is a necessity to life?

Sure, but owning it isn't a necessity. Food's a necessity but not everybody needs to own a farm.

What if the price of bread rose to £10 a loaf?

That happened about 15 years ago: http://www.telegraph.co.uk/news/uknews/1406071/French-give-us-their-daily-bread-at-10-a-loaf.html

but the demand for food is inelastic; you'll feed yourself no matter what the cost, If you can't afford to then either the population will shrink to those who can, or the price of bread will fall to the point at which it's possible to sell it.

Where would we morally say well enough is enough?

You are banging on about this as though some wicked decision has been taken by the powers that be to deny you ownership of a house, and with the stroke of a pen, this wickedness could be erased and then you'd get to buy the house to which you feel entitled. You do know that's not actually how it works, do you?

400k plus for a 1 bed shoe box that the government lends you 40% of the money for because that is probably about how overpriced things are at the moment.

Plenty of those are bought by people who aren't using help to buy. They pay it because they're worth it to the marginal buyer.

I am equally incensed that a car like this
http://www.motorstown.com/images/jaguar-xk-140-dhc-02.jpg

which 20 years ago I could have bought for about £40k, would now cost me at least £150k. Who do you think sets that price?

Should all this go iffy, I wonder how the taxpayer will get their money back?

They will repossess the property, with the state as the preferred debtor ahead of all other claims, just like happens now with any insolvency. If you go bust as an individual today with liquid assets of £52k and debts of £250k, and of that £250k debt £50k is (say) VAT, then the state takes £50k to pay the VAT, and the other debtors share the remaining £2k among themselves, at a penny in the pound. This will include the mortgage lender, who will socialise its loss among other its customers in the form of higher lending rates and lower deposit rates.

westernpromise

Windofchange wrote: »

what is facilitating these buyers to spend 500k on a 1 bed flat?

Being on £150k a year as a trainee recruitment consultant?
http://www.reed.co.uk/jobs/trainee-recruitment-consultant-hedgefunds-150k-2nd-year-ote/30207715

they are being allowed to get into crazy amounts of debt by the establishment who want to tie them into an asset for the next 35 / 40 years.

Tinfoil hat alert. Who is this "establishment"? Have you been reading those losers at HPC?

Talking to her though, having over half a million pounds of debt aged 25 is quite normal.

What's the unfunded rent liability she would have had instead had she not bought? What's the NPV of 40 years of rent?

My point is that they will likely never pay this back.

It may surprise you to learn this, but mortgage lenders pay quite a lot of attention to whether they're going to get their money back before they part with it (I'm the same). The actual instance of UK mortgage default is low:
http://voxeu.org/article/mortgage-delinquency-and-foreclosure-uk

and the worst it's been was in the early 1990s, when we had 15% interest rates and 5% of borrowers 3 months or more behind with their mortgage. At present interest rates, someone borrowing at 3% over 25 years pays off 15% of it in the first 5 of those years. That means that if the property's price were to fall 15% they could sell up and would be in the same position as they were when they bought it.

They are being sold a dream that help to buy is helping them, when really we know it isn't unless they can cash their chips in a few years down the line to some other poor sod.

Sory, who is selling this dream? It's not a dream, it's economic common sense. Do you or don't you think buying is a good idea? Are you under the impression that everyone either buys or doesn't buy as a purely speculative choice, based on expecting prices to go up or down? If so, you are misinformed. Most people buy because over periods of more than a few years it is cheaper than renting. I couldn't give a monkey's what anywhere I own is worth and I haven't the least intention of selling, ever.

I am sad that housing is used like casino chips, fully facilitated by the powers that be.

What a load of utter, utter rubbish.

Take a drive from west London to central at night past nine elms and Vauxhall. 10's of thousands of flats with most of the lights off. So, if it is supply and demand why haven't prices come down? There's no-one living there and they can't all have been brought by the Russians!?

How often do you see cars like this being driven?
http://www.motorstown.com/images/jaguar-xk-140-dhc-02.jpg

Should the owners be forced to drive them?

westernpromise

Thrugelmir wrote: »

Too many people are getting complacent. 3% interest rates for how long?

Over the last 300 years, rates have been over 10% in only 20 of them, and all 20 were between 1970 and 1995. The aberration was then. This is normal. We've had low rates for 7 years and you can lock them in today for 10 more, That's 3/4 of a mortgage term. That sounds pretty long term to me.

Jack_Johnson_the_acorn

Thrugelmir wrote: »

Too many people are getting complacent. 3% interest rates for how long?

I was paying nearer 5% when I bought 5+ yrs ago. It was easily affordable with a 10% deposit. So now rates are even lower I'm taking full advantage by overpaying and hope to be mortgage free in less than 10 yrs.

Some people can't afford to buy a property. Just like some people can't afford to buy all manner of things. That's always been the case and should remain the case.

MobileSaver

Windofchange wrote: »

Can we all agree that housing is a necessity to life? I'd say shelter is behind food and water only as an essential ingredient.

This is the fundamental flaw in your argument; shelter is a necessity but owning your own home is not.

Thrugelmir

economic wrote: »

what does housing crisis even mean? i dont see any homeless people on the streets.

Do you know where to find them?

Windofchange

So the message basically is that ever rising house prices is good from what I have read here? As I have said in this thread, this isn't me feeling entitled to anything. I already share a mortgaged London flat, I have no intention of buying. I was just shocked to see that the flat below us sold last month for three and a bit times what he paid for it in 2003; 229k to 779k. 2 bedder, was a first time buy for him back then.

For those saying there is no intentional supporting of the property market, how do you explain HTB? First time buyer ISA's? If the market isn't being inflated why are these 'supports' needed? These are being used for 1 bed flats remember, not palaces in Kensington. Why would the government need to underwrite 40% of a London property? To me it is an admission that things have got massively overheated but nobody wants to be the one caught standing when the music stops playing.

zagfles

ProDave wrote: »

And just to put that into perspective, when I bought my first 1 bedroom "starter home" for £36,000 in the late 1980's, and interest rates went up to 15%, I was paying £500 per month then. That was more than half my take home pay and I was single then.

By comparison, it's easy now?

Yeah but 15% rates only lasted a couple of years. People might be able to struggle for a couple of years with sky high mortgage payments, but not long term. And rates now can only go up.

zagfles

Windofchange wrote: »

So the message basically is that ever rising house prices is good from what I have read here? As I have said in this thread, this isn't me feeling entitled to anything. I already share a mortgaged London flat, I have no intention of buying. I was just shocked to see that the flat below us sold last month for three and a bit times what he paid for it in 2003; 229k to 779k. 2 bedder, was a first time buy for him back then.

For those saying there is no intentional supporting of the property market, how do you explain HTB? First time buyer ISA's? If the market isn't being inflated why are these 'supports' needed? These are being used for 1 bed flats remember, not palaces in Kensington. Why would the government need to underwrite 40% of a London property? To me it is an admission that things have got massively overheated but nobody wants to be the one caught standing when the music stops playing.

Of course it's being inflated. Any subsidy to buyers will increase demand and hence prices, it's basic economics.

System

Windofchange wrote: »

So the message basically is that ever rising house prices is good from what I have read here?

You have a comprehension problem.