Can you imagine the destruction in the UK if the property market crashed

James_Green_1982

triathlon wrote: »

I don't know why but -30% fall seems to be the magic number and has been for close to two decades now, and at a guess it has been quoted a few hundred times if not more by various people, It started with Professor Oswald and then Motley fool forum and then the good old Housepricecrash.com cult where there are old members still banging on and still quoting that figure having gone from young men to now middle age men and older.

Honestly, it is tragic

Didn't houses in the UK fall by about 30% (on average) in 2008?
So maybe that's the effect on prices of reducing taking mortgage lending?

I got a mortgage on a second property (before my first was paid off) in 2009 - so mortgage lending certainly wasn't shut off - only reduced from the previous high levels.

James_Green_1982

lisyloo wrote: »

The irony is that even my house did fall 30% I’d still be better off than renting, have my own place that I can personalise and be secure in, not pay a mortgage and have equity if I want to downsize in my dotage.
What’s not to like?
)

That's probably true - but it would depend on the reason for the house price fall.
Major financial instability often leads to political instability. So in such a situation, renters may be better off than home owners. For example, if new property taxes were brought in or tenants were granted secure tenancy at a fixed low rent etc, etc.
In the Great Depression, many people who owned their own home and land ended up homeless as they could not afford to pay the property taxes - so the govt seized their land.

lisyloo

James_Green_1982 wrote: »

That's probably true - but it would depend on the reason for the house price fall.
Major financial instability often leads to political instability. So in such a situation, renters may be better off than home owners. For example, if new property taxes were brought in or tenants were granted secure tenancy at a fixed low rent etc, etc.
In the Great Depression, many people who owned their own home and land ended up homeless as they could not afford to pay the property taxes - so the govt seized their land.

There are risks with every financial decision, but high property taxes and low rents to the point that renting becomes better long term is at the unicorn end of the spectrum.

Whereas Owning your own home in retirement has got to be one of the most sensible financial actions someone can take.

James_Green_1982

lisyloo wrote: »

There are risks with every financial decision, but high property taxes and low rents to the point that renting becomes better long term is at the unicorn end of the spectrum.

Whereas Owning your own home in retirement has got to be one of the most sensible financial actions someone can take.

Yes, I agree statistically you are probably going to be right.
But I just thought I'd point out that real estate is a politically dependent asset - ie it depends on the government to support your ownership of it.

lisyloo

James_Green_1982 wrote: »

Yes, I agree statistically you are probably going to be right.
But I just thought I'd point out that real estate is a politically dependent asset - ie it depends on the government to support your ownership of it.

As someone coming up to retirement I’m very much aware of this in particular in relation to pensions.
The rules e.g. lump sum, tax relief, annual contribution limits, LTA, retirement age, taxes in retirement e.g. NI?
are all at risk of changing.

All one can do is plan with contingency and awareness of the risks.

I’m just not sure how renting in retirement works very well.

The only way I can see to achieve a comfortable retirement (if you don’t have a gold plated scheme available) is have your accommodation free and also the possibility of freeing up equity as well.

My experience of the psychology of spending if that people tend to spend their remaining available bank balance.
So putting money into a pension and mortgage means the money is safeguarded (with the caveat of known risks e.g. capital loss).
In my experience the people I’ve known who didn’t take a pension or didn’t buy a home (e.g. had forces accommodation), did not in most cases safeguard the cash they saved, instead it was just frittered away with nothing to show for it.

It’s only in my 50s have I appecreciated the snowball effect e.g. pension and house earning more than I am.

Also whilst I appreciate houses are not liquid assets, they can be sold.
So if government policy changes one can change strategy.
I review my asset balance constantly.

Herzlos

I can't see any government changes that'll make it better to rent forever than to pay a mortgage for 20-40 years and then have free accommodation. Everyone should be aiming to be rent/mortgage free by retirement as that'll be the biggest expense saving they can make.

andrewf75

lisyloo wrote: »

I’m just not sure how renting in retirement works very well.

I don't think you can to put it bluntly. Unless you own your home you can't retire simple as that.

It works in other countries because rents are relatively low and pension contributions are probably higher, but here with sky high rents meaning that those stuck renting are highly unlikely to have decent pensions, its a ticking timebomb.

herbertpug

AG47 wrote: »

{snip}

Take Milton Keynes for example, a relatively new town/city. Plans were for a 'new city' for 250,000 people. Next few new cities could each be for 500k people and still the small island argument is nonsense.

{snipp
.

Didn't Milton Keynes drop 4.5% in the yoy ons figures today?
Milton Keynes £252,339 £264,139 -4.5%

phillw

Herzlos wrote: »

I can't see any government changes that'll make it better to rent forever than to pay a mortgage for 20-40 years and then have free accommodation. Everyone should be aiming to be rent/mortgage free by retirement as that'll be the biggest expense saving they can make.

Well there is an argument that after paying off a mortgage you have all your capital in an asset that requires maintenance. So you have an opportunity cost and the maintenance, which generally is offset by an appreciation of the asset. However it doesn't have to work out that way.

If the government introduced rent control and property tax to be paid by the owner then it could make it more worthwhile to rent. I'm not saying it would, but it could.

lisyloo

phillw wrote: »

Well there is an argument that after paying off a mortgage you have all your capital in an asset that requires maintenance.

I’ve always found maintenance to be quite low.
E.g. in my current house I’ve spent about £2k on a new boiler after 14 years, so I think this cost is often exaggereated.

But don’t forget the much larger cost of a free place to live.

So you have an opportunity cost and the maintenance, which generally is offset by an appreciation of the asset. However it doesn't have to work out that way.

Being fee to live in is fairly major though, don’t you think?

If the government introduced rent control and property tax to be paid by the owner then it could make it more worthwhile to rent. I'm not saying it would, but it could.

How would this work? as we’d have no private landlords if it’s not profitable.
Property prices would probably fall.
I still can’t see how it could work out better to rent over long term as I’m hoping for 45 years rent free.
I think it’s highly unlikely but as I said those of us with property can sell it whenever we like (yes we might have to take a haircut but on an owned propety it’s 100% profit).
Property shouldn’t be regarded as liquid but neither is it permanent, so us house owners can change our strategy if we need to.

I think what you are saying just isnt feasible when I consider my home is now rent feee for 45 years (estimated).