The Equity Ladder

macaque_2

Generali wrote: »

You've got an interesting argument but it is deeply flawed.

A PPR isn't just an investment (in fact IMO it shouldn't be considered an investment at all). A PPR and a share portfolio are completely different things.

PS I was interested to note that you didn't respond to my pretty comprehensive destruction of your OP. House prices are very (too?) high. It doesn't make your arguments right though.

For goodness sakes. My previous post wasn't an arguement. It was just a few self evident truths about investment. There was nothing to be flawed or unflawed.

I did not responsd to your previous post because there was nothing to respond to. It was just garbled psuedo science which you have presumably picked up at a 'property investors roadshow'.

Yes there was a time to make money in property but these things go in cycles. Right now the cycle looks decidedly unsafe. Banks are foreclosing on 'property investors' in ever greater numbers. I think it is silly and dangerous of you to pretend that all is well in the garden when the Telegraph is printing things like this:

Last week two of Britain's biggest lenders, Halifax and Nationwide, admitted that the market was slowing, but they still painted a reasonably rosy picture, saying that values were 10 per cent higher than a year ago. But their conclusions are at stark odds with findings by The Telegraph, which contacted estate agents the length and breadth of Britain. Agents in Leeds, Birmingham and Nottingham report a market that has ground to a halt – where property is proving almost impossible to shift, even with substantial price cuts.

Start thinking objectively or you could get badly hurt.

Generali

Generali wrote: »

1. PPR isn't purely an asset. It's ownership (with or without a mortgage) also has utility to you - eg security of tenure, social acceptance.
2. You pay 2 lots of tax on dividends (income tax as you earn the money to buy the shares, dividend tax as you earn an income from the shares). You only pay one lot of tax on money used to pay off interest on a mortgage (income tax).
3. A repayment mortgage is a very good hedge against inflation. It's a poor one against deflation. In economies with fiat currencies, the former has been far more common.
4. Equity prices are more volitile than house prices (e.g. because they can be shorted, liquidity is better so prices can respond to market sentiment faster, you don't get margin calls on a mortgage)
5. The 'housing ladder' has nothing to do with tenants, good or bad.
6. Equities are more liquid. I refer you to point #1 - a PPR isn't a pure asset. Liquidity isn't important if you're neither selling nor marking to market (e.g. to remortgage).

Think first, post second.

macaque wrote: »

For goodness sakes. My previous post wasn't an arguement. It was just a few self evident truths about investment. There was nothing to be flawed or unflawed.

I did not responsd to your previous post because there was nothing to respond to. It was just garbled psuedo science which you have presumably picked up at a 'property investors roadshow'.

Yes there was a time to make money in property but these things go in cycles. Right now the cycle looks decidedly unsafe. Banks are foreclosing on 'property investors' in ever greater numbers. I think it is silly and dangerous of you to pretend that all is well in the garden when the Telegraph is printing things like this:



Start thinking objectively or you could get badly hurt.

Point out which points you think are garbled and I can help you understand.

You haven't a clue what you're talking about and describing me as 'learning my economics in a socialist comprehensive' or accusing me of posting 'garbled psuedo science' just makes me think that you haven't got a clue where to start debating with someone that knows what they're talking about.

mr.broderick

macaque wrote: »

Well thats not a very intelligent response.

These transaction costs illustrate is the folly of buying and selling too often (unless you can cover these costs by buying at below market value and selling above market value). The old idea of moving up a ladder by increments is less practical today due to higher transaction costs.

The 5% on STR reflects the cost of selling and buying and is therefore a one off cost (not per annum charge). If you look at it on a per annum basis the 5% cost repadily shrinks to zero the longer you stay out of the market (assuming house prices stagnate). The reason for this is that renting is much cheaper than owning these days. Thus if house prices fall by 1% over 5 years, the STR will make a healthy financial gain.

This is all somewhat irrelevant to me as I prefer renting anyway.[/quote]

Ok so why do you want prices to fall?

macaque_2

mr.broderick wrote: »

macaque wrote: »

Well thats not a very intelligent response.

These transaction costs illustrate is the folly of buying and selling too often (unless you can cover these costs by buying at below market value and selling above market value). The old idea of moving up a ladder by increments is less practical today due to higher transaction costs.

The 5% on STR reflects the cost of selling and buying and is therefore a one off cost (not per annum charge). If you look at it on a per annum basis the 5% cost repadily shrinks to zero the longer you stay out of the market (assuming house prices stagnate). The reason for this is that renting is much cheaper than owning these days. Thus if house prices fall by 1% over 5 years, the STR will make a healthy financial gain.

This is all somewhat irrelevant to me as I prefer renting anyway.[/quote]

Ok so why do you want prices to fall?

Where have I said that I want property prices to fall?

The original theme of this thread was to point out that people should give some attention to equities. At the moment the whole nation has been gripped by property fever. Property is an investment and like all investments it goes through cycles. At the moment shares look more attractive. It would also be good for industry.

I believe that the property craze has done a lot of damage to our manufacturing industry. Investment in R&D and the number of patents filed in the UK has fallen catastrophically in recent years. Manufacturing employment has fallen to the lowest level since the industrial revolution.

mr.broderick

macaque wrote: »

mr.broderick wrote: »

Where have I said that I want property prices to fall?

The original theme of this thread was to point out that people should give some attention to equities. At the moment the whole nation has been gripped by property fever. Property is an investment and like all investments it goes through cycles. At the moment shares look more attractive. It would also be good for industry.

I believe that the property craze has done a lot of damage to our manufacturing industry. Investment in R&D and the number of patents filed in the UK has fallen catastrophically in recent years. Manufacturing employment has fallen to the lowest level since the industrial revolution.

Have a day off you're a troller who is desperate for a price crash.
If you are going to continually post threads of this nature at least be honest with yourself.

carolt

As I just posted on the Home Buyers: be very careful! thread:

I think to be fair you should ask that same question of people like CB1980 who seem to be trying their hardest to talk the market up.

Or to put it more charitably, everyone is just expressing their opinions about house prices - if I am not mistaken, this is the House Buying, Renting, Selling & Prices forum, so it seems not unreasonable to post threads on the subject. If Macaque, along with others (including myself) believe house prices are falling or about to fall, this seems a pretty reasonable place to post that.

If you don't like that, visit another forum - on Shop but don't drop, for example, I believe you will find scarcely any discussion of house prices, in either direction......... :rolleyes:

You haven't answered that, Mr Broderick - or do you only believe that people who talk the market up should be allowed to post? You may dislike macaque's opinions or dispute his reasoning, as Generali has done - that is perfectly valid. But to try to deny him the right to post what he sees fit on the subject of house prices on a forum set up for that very purpose seems somewhat...... churlish? shall we say.

mr.broderick

carolt wrote: »

As I just posted on the Home Buyers: be very careful! thread:

I think to be fair you should ask that same question of people like CB1980 who seem to be trying their hardest to talk the market up.

Or to put it more charitably, everyone is just expressing their opinions about house prices - if I am not mistaken, this is the House Buying, Renting, Selling & Prices forum, so it seems not unreasonable to post threads on the subject. If Macaque, along with others (including myself) believe house prices are falling or about to fall, this seems a pretty reasonable place to post that.

If you don't like that, visit another forum - on Shop but don't drop, for example, I believe you will find scarcely any discussion of house prices, in either direction......... :rolleyes:

You haven't answered that, Mr Broderick - or do you only believe that people who talk the market up should be allowed to post? You may dislike macaque's opinions or dispute his reasoning, as Generali has done - that is perfectly valid. But to try to deny him the right to post what he sees fit on the subject of house prices on a forum set up for that very purpose seems somewhat...... churlish? shall we say.

I dont give a monkeys what he thinks or what you think for that matter.

Why would someone who loves renting and would probably never buy continue to try and talk the market down, i am in rented so a corrrection would suit me im just !!!!ed off with the same threads from the usual suspects who are in my opinion trying to singlehandedly change sentiment on here. Is that ok with you carolt?

macaque_2

mr.broderick wrote: »

I dont give a monkeys what he thinks or what you think for that matter.

Why would someone who loves renting and would probably never buy continue to try and talk the market down, i am in rented so a corrrection would suit me im just !!!!ed off with the same threads from the usual suspects who are in my opinion trying to singlehandedly change sentiment on here. Is that ok with you carolt?

If a price correction would suit you, why are you getting so angry and defensive?

As I indicated before, I believe the country needs a house price correction for lots of reasons. The economy is too lopsided at the moment.

Jason74

macaque wrote: »

mr.broderick wrote: »

Where have I said that I want property prices to fall?

The original theme of this thread was to point out that people should give some attention to equities. At the moment the whole nation has been gripped by property fever. Property is an investment and like all investments it goes through cycles. At the moment shares look more attractive. It would also be good for industry.

I believe that the property craze has done a lot of damage to our manufacturing industry. Investment in R&D and the number of patents filed in the UK has fallen catastrophically in recent years. Manufacturing employment has fallen to the lowest level since the industrial revolution.

The second paragraph has some truth to it in principle, but your first misses a fundemental point (the one that Generali has been trying to make to you). This is that to many, a house is NOT an investment. It is a place to live, a home. Or if you want to put it another way, a product that you will gain value from using, rather than one you expect to make a profit from.

I'll use my own situation as an example. I paid x amount for my place about 5 years ago. It is now worth (give or take 10k either way) double the x amount I paid. And do you know what . . . . .I DON'T CARE!. The reason being that I didn't buy it to make money. I bought it because I needed somehwere to live, liked the area, and saw myself living in the property for a long time.

Under such circumstances, what it is worth is almost irrelevant. I bought it for the reasons mentioned above, and also because I like the security that home ownership brings (subject to keeping up with the Mortgage of course). and the fact that in a few years time, I wont be paying a substantial part of my salary to house myself.

A crash in property values will not make a jot of difference to any of those benefits, and given it is just paper money anyway, I wouldn't lose a moments sleep over a significant part of that equity dissappearing as a result of such a crash (and would actually enjoy the fact that others will find it easier to enjoy the same benefits as I have had from my home!) . Indeed, given that the only time I can see myself selling is to by a bigger place in the same area (like I say, I like it here), a crash would make my life easier (provided I kept my job!).

Now you are right in that now MAY be a very bad time to buy a property from a financial point of view. However, if someone is looking for a long term home, I don't see that it matters that much. Naturally if you are buying as an investment, or buying somehwere you don't want to live just to be "on the ladder" that is another matter.

All in all though, you have to realise that not everyone buys property for profit, and comparing property (a commodity with massive "use" value) to equities (which only have a value in their ability to produce profit), kinda misses the point as to why many people buy property.

mr.broderick

Its like groundhog day, i log on to mse to find the latest goss and there you are or others like you quoting links to a 0.00001% drop from the previous month, just bored with you and all like you. Nothing personal.