HPC are having a mass breakdown

triathlon

vivatifosi wrote: »

I don't understand the obsession with HPC, or it's obsession with here. MSE is a huge website, HPC is a tiny backwater in a dark and dusty corner of the internet.

If people from here didn't routinely go over there to see what they were up to, their numbers would drop off a cliff.

Why perpetuate it?

I do get your viva

But what I am mainly watching out for, and you really do not want to underestimate them, is that they are hijacking every comments board come blog in the UK by swamping them with their twisted views hoping to get people on their side, whatever that is.

That is no exaggeration, BBC, mumsnet, property 118 and tribe, every major comments section in broadsheets, all swamped

Crashy_Time

vivatifosi wrote: »

I don't understand the obsession with HPC, or it's obsession with here. MSE is a huge website, HPC is a tiny backwater in a dark and dusty corner of the internet.

If people from here didn't routinely go over there to see what they were up to, their numbers would drop off a cliff.

Why perpetuate it?

Unfortunately the sub sub forum that you are posting on isn`t :rotfl: it is populated by about six people who were banned from HPC years ago, and who just babble away to each other every day...about a website they were banned from years ago....:rotfl:

Crashy_Time

triathlon wrote: »

I do get your viva

But what I am mainly watching out for, and you really do not want to underestimate them, is that they are hijacking every comments board come blog in the UK by swamping them with their twisted views hoping to get people on their side, whatever that is.

That is no exaggeration, BBC, mumsnet, property 118 and tribe, every major comments section in broadsheets, all swamped

I heard they were also influencing the bond markets....shhhh....don`t tell anyone!

triathlon

Crashy_Time wrote: »

I heard they were also influencing the bond markets....shhhh....don`t tell anyone!

Crashy, I live in a home that you dream about every day and have done so for the last 15 years.

Being clever, how is that working out for you?

jamesmorgan

I do find it fascinating how views around home ownership seem to polarise into two extreme camps - or possibly not, as confirmation bais seems to cloud individual views to only see facts that support their own position. We are either told that a crash is just around the corner, or that anyone how does own their own house must be an idiot.

The facts, as is often the case, seem to present a picture in the middle of these views. According to Natiowide, HPI over the past 10 years has been around 15% (1.4% annualised). This compares to RPI which has annualised at 2.8%. So no crash, but HPI has been lagging in real terms. There are many reasons to buy your own home, but it has not been a stellar investment over the past 10 years. In comparison the FTSE100 total return over the past 10 years has been around 6.5% annualised.

If I had had £500K ten years ago and invested it in the FTSE100, it would be worth approx £930K today. If instead I had bought a house it would be worth approx £575K (and that is before you take off maintenance costs). Even if the investor had rented a property at £2000/month (total cost £240K over 10 years), they would still be left with £690K.

Whilst there are many varied reasons to own your own home, the recent 10 year history does not suggest that making money is one of them. My guess over the next 10 years is that HPI will tick along at around the same level as RPI. It is a bit boring, but you are unlikely to either lose a lot of money or get super-rich owning your own home. Renting is fine until you want to put down roots and stay somewhere for 5-10 years. At the point, you might as well buy.

chucknorris

jamesmorgan wrote: »

The facts, as is often the case, seem to present a picture in the middle of these views. According to Natiowide, HPI over the past 10 years has been around 15% (1.4% annualised). This compares to RPI which has annualised at 2.8%. So no crash, but HPI has been lagging in real terms. There are many reasons to buy your own home, but it has not been a stellar investment over the past 10 years. In comparison the FTSE100 total return over the past 10 years has been around 6.5% annualised.

If I had had £500K ten years ago and invested it in the FTSE100, it would be worth approx £930K today. If instead I had bought a house it would be worth approx £575K (and that is before you take off maintenance costs). Even if the investor had rented a property at £2000/month (total cost £240K over 10 years), they would still be left with £690K.

Depends where you bought, it can vary significantly, as it happens we actually bought a house 10 years ago in Tottenham Hale for £243k, but spent about £15k refurbishing it, so say about £260k, it is worth slightly more than double that now, so it has increased by 100%. But we only invested a total of about £65k, so the actual return on capital invested is 400%. If you add the rental profit over the last 10 years of approx £110k (we have a low margin tracker of just 0.38% above the base rate), the total return is 569%.

I'm not really a property bull though, I think that it is best to be diversified, I have almost as much invested in equities as I do in investment property, and in a few years time I will have quite a bit invested in bonds too.

I have to say though that buying a house (as in a home, not investment property) isn't just about a financial return, even if equities did make more than property, there is no way that I would opt to rent my home.

westernpromise

jamesmorgan wrote: »

I do find it fascinating how views around home ownership seem to polarise into two extreme camps - or possibly not, as confirmation bais seems to cloud individual views to only see facts that support their own position. We are either told that a crash is just around the corner, or that anyone how does own their own house must be an idiot.

The facts, as is often the case, seem to present a picture in the middle of these views. According to Natiowide, HPI over the past 10 years has been around 15% (1.4% annualised). This compares to RPI which has annualised at 2.8%. So no crash, but HPI has been lagging in real terms. There are many reasons to buy your own home, but it has not been a stellar investment over the past 10 years. In comparison the FTSE100 total return over the past 10 years has been around 6.5% annualised.

If I had had £500K ten years ago and invested it in the FTSE100, it would be worth approx £930K today. If instead I had bought a house it would be worth approx £575K (and that is before you take off maintenance costs). Even if the investor had rented a property at £2000/month (total cost £240K over 10 years), they would still be left with £690K.

Whilst there are many varied reasons to own your own home, the recent 10 year history does not suggest that making money is one of them. My guess over the next 10 years is that HPI will tick along at around the same level as RPI. It is a bit boring, but you are unlikely to either lose a lot of money or get super-rich owning your own home. Renting is fine until you want to put down roots and stay somewhere for 5-10 years. At the point, you might as well buy.

If you've only got £100k to put down and you put it into the stock market you'd now have £149k (I presume the 6.5% includes reinvestment of dividends).

If you put £100k down and bought a £400k property with a £300k mortgage you'd now have a £460k property. So your £100k equity stake has turned into £160k before considering the dividends.

These would be the rent. If we say you get a very conservative 3% return on the property's value after letting and management fees, that's around £130,000 in rent over 10 years .

If we look at your costs, you've forgone probably 1%pa interest on the £100k cash (I'm not comparing it to stock market returns because those are not secured deposits). So that's £10k. 10 years ago, you could have borrowed the £300k at BoE rate + 0.79% for 20 years (I know this because I did). So your mortgage cost would have been £39,000 over the same ten years. If we call that £50k of cost, you have £80,000 profit. It has cost about £2,000 to £3,000 a year to maintain the property, probably, so you have cleared about £55,000.

In total, you've made about £115,000 out of the property compared to £49,000 out of the shares. That is broadly why people do this.

If you have an occupational or other pension you may well think you already have enough exposure to equities anyway, so putting your £100k nest egg into even more of them is not very smart. In my case I let out the flat I previously occupied in order to rent myself, in an area where the schools were better, so it was essentially a hedge. When I later bought, having a property whose price had also gone up meant I didn't lose out. Had they fallen, I'd be buying cheaper as well.

lisyloo

There are many reasons to buy your own home, but it has not been a stellar investment over the past 10 years. In comparison the FTSE100 total return over the past 10 years has been around 6.5% annualised.

Does that take into account gearing?
What I mean by that is (for example) my equity/deposit (which is the amount avaialble to invest in the FTSE if I was renting) is £50K, but my house is worth £500K.
I think you need to compare HPI on £500K with the FTSE gain on £50K or am i wrong?

chucknorris

lisyloo wrote: »

Does that take into account gearing?
What I mean by that is (for example) my equity/deposit (which is the amount avaialble to invest in the FTSE if I was renting) is £50K, but my house is worth £500K.
I think you need to compare HPI on £500K with the FTSE gain on £50K or am i wrong?

No, you are correct, my post above covered that too.

jamesmorgan

You need to compare apples with apples and not oranges. If you are going to gear your house price purchase, for comparison purposes you need to gear with stock market investment. With interest rates so low, this can be done very cheaply with spread betting and comes with the benefit of no taxes on any gains. Of course, gearing any invesment comes with risk.

It is somewhat of a fallacy to compare a geared investment on houses with a non-geared stock market investment. It is one of the reasons why the hype around home ownership investment is so pervasive. I recognise that some people will argue there is no risk with geared housing investment because 'everyone' does it. if you don't fully understand the risks with your investment decisions you need to tread very carefully.

I also recognise that certain individuals will argue that they have done well in the housing market because of local conditions in their area. This is like arguing that if you had bought one individual high performing stock rather than the FTSE100 you could have done much better.

Let's be clear, I'm not advocating not buying property. Just saying that you need to have balanced view when comparing invesment performance with other asset classes.