house prices rising efficianados gone very quiet?

"M Holmes" wrote

And what was the average rent (as %) over the same period?

For a time, but the effect would vanish when they quit buying. The government can't support the whole market because taxpayers will refuse to pay enough to let them.

FoFP

Don't have numbers on that I'm afraid.

FoFP

How about the government removing the restriction on residential property in SIPPs?

(Not convinced it would be a good idea but from the government's POV it might be cheaper initially)

Tim.

I don't think our interests are at all aligned with the government's. As far as we're concerned, things are going swimmingly. The three major problems in the housing markets are:

1. Prices bid up too high through excess credit.
2. Reckless lending by banks and other financial intermediaries.
3. Reckless borrowing by idiots caught up in the bubble.

Side-effects of this were too many people being involved in the various aspects of housing and finance, and too much of the country's investment cash tied up in property.

The credit bust though is lowering prices; forcing banks to lend less and more carefully; forcing people to borrow less and save a sizeable deposit before doing so; reducing the number of folks working in finance and property; and finally, reducing the percentage of investments tied up in property.

Left to itself, the system seems ready to cure our problems.

The government however wants to win an election in two years. It would rather the bad old ways were kept working until then and may well blow a wad of our cash trying to make that happen.

really, we should do what we can to stop them. The sooner we get to an economy where folks save for what they buy, and housing is priced to fit into that regime, the better.

FoFP

"Andy Pandy" wrote

That's because I was expecting everyone to be paying the cost of their own house.

We know that you'd like everyone to pay the average cost of bringing up children, and those with more kids to enjoy more of the benefits of bringing them up, while childless people enjoy none of those benefits.

If you're now suggesting that everyone should also pay the average cost of a house to the state, with the state paying back each person the cost of their own house (big or small), then yes, I would introduce the 'factor' of "the joy of living in a 200k house minus the joy of living in a 100k house".

But I wouldn't consider that to be a 'fiddle'. Why, would you?

For a start you've not accounted for the loss of investment income from the deposit. Bit of an amateurish mistake.

Secondly the calculations are obviously highly dependant on the value you choose for the buying/selling costs.

Thirdly, as per point 2, it is likely someone renting would be able to rent less property (ie a room in a shared house) than someone buying.

I was faced with this choice in the late 80's. I chose to rent a room in a shared house, a colleague of mine decided to buy a one bed flat. Guess who lost most money?

Er, not for the same cost, that's the point. For a much greater cost.

Well quite, but it's not to a lot of people including most thick property journalists.

Why do you think there's the concept of a "property ladder"? The concept of a ladder is that in order to get to the top rung you go up one rung at a time. You don't save energy for a bit, then jump 10 rungs at a time.

However, we can see that in the case of property, it's not the best/quickest way. It's quickest to stay as low as possible and save for the rung you aspire to. A bit more like a catapult.

So why do you think people refer to the "property ladder" not the "property catapult"?

You could just have agreed with me in the first place. See, it's really not that hard, as I proved earlier.

Er, yes, that is exactly what I am suggesting. That's what the whole concept of the "property ladder" is based on. That you aren't "paying" for the larger property (ie losing money), you are "investing" (ie making money).

Now you've gone from politician to Jeremy Paxman!

So won't they let you adopt? Was IVF too expensive? What was the problem?

What, even if the house pays back the state all the subsidy it received, so it was all revenue neutral?

Oh no Tim, not at all. Just double counting.

"Andy Pandy" wrote

You're right, I didn't look at the minor effects - but it's not amateurish to ignore the smaller effects, otherwise we'd be here forever doing the calcs. But, as you can't seem to manage to see how small it is yourself, I'll show you:-

Opportunity cost of missed investment income: [Assuming 5% gross return & 40% taxpayer] = (100% - 94.768%) x [(1 + 5%x(1 - 40%) )^2.794 - 1] = 0.45%.

So, less than half a percent : added to 8.5% is still below 9%. Next!

"Andy Pandy" wrote

Yep, and as I said, I reckon the 5% I used is on the *high* side. That means buying is **even better**.

And **even if** you bought at over 250K, incurring an extra 2% SD(LT), that still makes the total under

"Andy Pandy" wrote

As I said before, "Obviously there may be specific periods when that's true". But we'd moved on from there, and are now discussing **historic averages** -- remember?

"Andy Pandy" wrote

Why don't you want to consider the case of "buying a far bigger property" for the same cost as renting a smaller one? Is it because it shows your argument is false?

"Andy Pandy" wrote

Can you name any 'thick property journalist' who has suggested that it costs less to own a 200K house than to own a 100K house? Can you quote an article they've written saying that?

"Andy Pandy" wrote

I guess it's because most people's earnings, which restricts the size of house that they can afford, tend to go up steadily rather than in one big jump.

"Andy Pandy" wrote

I agree it's unlikely to be the *quickest* way, but many people might consider it the *best* way...

You see, if someone aspires to live in a 300K house, then (if they could already afford it) they'd probably prefer to live in a 200K house than a 100K house. They'd even probably be happy to take a little longer to get to the 300K house, if they can live in a 200K house in the meantime instead of a 100K house.

"Andy Pandy" wrote

Perhaps because they'd like to live in the best house they can afford, even before they get to their "ideal" house?

"Andy Pandy" wrote

But I *didn't* (and still don't) agree with your comment that "based on historical averages, none of the above are sensible financially".

"Andy Pandy" wrote

Do you believe they think it'd cost even less to buy a 10million house?!! Get real!

"Andy Pandy" wrote

Don't be silly. The property ladder is just about going up the rungs as you can afford it. It doesn't suggest that it costs *less* to own **more expensive** houses!!

"Andy Pandy" wrote

I don't know - I haven't tried to adopt.

"Andy Pandy" wrote

I've never considered IVF. Why - how much does it cost?

"Andy Pandy" wrote

What problem?

"Andy Pandy" wrote

Yes, of course. Even if the house did pay it all back, you'd still have some people enjoying living in bigger houses and only paying as much for them as those living in smaller houses. Why do you think that would be fair?

What are you double-counting?

I reckon it's higher.

Getting close though.

This is where I first did the calculations and worked out I'd be better off that he was *assuming average house price growth*

The main issue was it's harder to "buy" a room in a shared house, so he was forced to buy more property than I rented.

I also had the "joy of living with people" factor, whereas he was living alone.

I was highlighting the mistakes people make. As above.

You really don't live in the real world, do you? It's a common myth in the UK that the money you spend on ownership of your house is not a cost, but an investment which will likely recoup you more than your outlay. This myth is so commonly propagated via TV programmes and some newspaper articles that if you've never come across it I suggest you take a bit more notice of things going on around you.

Well, why would you want to miss out on your "joy of bringing up children" fiddle factor?

Perhaps you don't really want children, so maybe you should have a "joy of no brats under your feet" fiddle factor?

Oh, so they should pay back twice, is that what you're saying? It really is a silly little analogy to your failed arguments last time.

"Andy Pandy" wrote

What makes you think I want to miss out on it?

"Andy Pandy" wrote

What *are* you on about?!!

"Andy Pandy" wrote

Who do you think should pay it twice? You're the one who introduced the house paying it, after the owner already had (paid an average).

Why do you say it's a myth? It worked for me. Just lucky, I guess, eh?

Congratulations! When's it due?

It really isn't that hard...

Which would make it revenue neutral. So where's the problem?

How come you never get involved in the mathematical nitty gritty these days?

Remember this classic? I think we addressed all this then....

"Andy Pandy" wrote

Yep, of course. Who else is gonna be able to afford to buy a house for their kids while they're at Uni?

"Andy Pandy" wrote

Already being utilised to the max, of course.

"Andy Pandy" wrote

What do you think will make it higher?

The biggest cost of buying is usually the SD(LT), which is 0% or 1% when buying below 250K. The biggest cost of selling is usually the estate agents, which is rarely over 3% and often much less.

So what do you think is going to push it over 5%?

"Andy Pandy" wrote

Yes, but even if it was a bit in favour of renting, that wouldn't mean that buying was "not sensible financially".

"Andy Pandy" wrote

Well, if you buy *without* a mortgage then that's not a myth, it's the truth -- the return on your investment is usually (on average) close to earnings increases. That's not that bad.

On the other hand, if you buy *with* a mortage, then because average mortgage rates are close to average house inflation, it only costs you a little over the 'fixed' costs of buying/selling. Which, when averaged over a reasonable number of years living in the house, comes out quite low - and certainly much less than the cost of renting.

Heck - it's even better to buy when you're only going to be living there for 2.5 years (as seen above).

But none of the above means that it costs less to buy a 200K house than it costs to buy a 100K house, and I still don't believe that any sane person would think the 200K house would cost less than the 100K one.

"Andy Pandy" wrote

I don't believe that there is a myth that says buying a 200K house will cost less than buying a 100K house. And as you seem unable to quote any such newspaper article or TV programme, you don't seem to be persuading anyone to believe you.

"Andy Pandy" wrote

The problem is that some people would have more of the benefits than others (eg some have a big house, others have a small house), but without paying any more for the extra. Do you think that's fair?

See Ronald's reply. And I think he is quite sane.