house prices rising efficianados gone very quiet?

"Andy Pandy" wrote

Ronald did *not* say that buying a 200K house will cost less than buying a 100K house. Try reading his reply again...

"Andy Pandy" wrote

I guess, the people who live in a 100K house but who would rather be one of the (fewer) people, lucky enough to live in a 300K house for the same cost. Yep, I reckon they'd care about it.

Do you really need someone to point that out to you?

But is anyone seriously suggesting this? Perhaps the proposition is merely that buying a £200k house will cost less than twice as much as buying a £100k house.

"Ronald Raygun" wrote

Andy seems to be. Well, he's certainly suggesting it. Whether he's doing it "seriously" or not is another matter!

"Ronald Raygun" wrote

Nah, Andy really seems to believe that some people think they'll get to a 300K house quicker by owning a 200K house in the meantime, instead of a 100K one; if the 200K house did cost

This is usenet, we're not only allowed, but encouraged to be non-serious, aren't we?

The thing is, he'd be right. With inflation going the way it has been, you'd simply buy a 200k house and before too long it'd be worth 300k. A 100k house would take a considerably longer, since it'd have to gain

On the contrary. :-)

Excellent!

Nah - some people prefer a smaller house. Others prefer living on the street because they take "property control" measures.

He reckons it isn't a myth that the net cost of house ownership is negative.

If the net cost of house ownership is negative then owning a more expensive house will cost less.

QED.

Net cost - ie outlay minus appreciation in value.

It hinges on whether you think the outlay (mortgage interest, buying costs etc) is less than the appreciation in value. If it is then the net cost is negative, and so the more expensive the property the higher the profit and so the lower the net cost.

Of course from about 2000-2007 this was indeed the case.

But my argument is that based on historical averages, it isn't. As I argued in that 2003 thread which I quoted (damn fine thread that, I remember it well).

"Ronald Raygun" wrote

Exactly - that's why I don't believe him!

"Ronald Raygun" wrote

Ahem, we were talking about **average historic** rates.

Anyway, a "myth" takes many years to create, doesn't it, so there'd be no myth yet if it was only based on recent inflation!

"Ronald Raygun" wrote

When you're comparing a "100K house" against a "300K house", I think you need to do it on the same date.

Otherwise, the person living in the 100K house could say that their current house will be a "300K house" in 10-20 years, so they're *already* in the house which is their ideal house!

"Andy Pandy" wrote

But do you honestly believe that some people think it *is*? [When based on historical averages.]

"Andy Pandy" wrote

Of course. But you asked "who cares", not "who doesn't care"!

Are you suggesting that there are no people whatsoever who currently live in a small house, but would prefer to live in a big house for the same cost?

"Andy Pandy" wrote

Does he? So does he think it's true rather than a myth, or that the myth doesn't exist?

All he mentioned was one particular case when he was lucky...

"Tim" wrote

Andy - Well, have you managed to think of anything that will push the total buying/selling costs over 5% (on a house costing less than 250K) ? ... No??!

What, can't I choose my period of history? :-)

That's OK, recent inflation *has* run for many years.

Aw, shucks!

"Ronald Raygun" wrote

Yes, of course, you can choose any period of at least (say) 20 years. ;-)

"Ronald Raygun" wrote

Yep, so a myth could **start to form** now. But Andy thinks it's been there for a long time already!

I agree with him. The "many" years it takes for a myth to form can be fairly small. It doesn't take long for folk to spot a trend, then to state it as fact, and for the grapevine to do its bit. The only thing which makes such folklore into a myth (in the sense of it being fallacious) is that there are limits to how far into the future the trend can be extrapolated.

"Ronald Raygun" wrote

In that case, you should have no problem pointing to several newspaper articles and TV programmes which say that the 'true' cost of housing is negative (ie a 200K house would cost less than a 100K house). Can you point to any?

You should have little difficulty finding evidence in the media to confirm that house price inflation has been rampant for quite some time.

Just because I agree with him doesn't mean I should be able to prove he's right, I'm just stating my opinion, which is backed up anecdotally by my personal experience, that *over a specific period* (as opposed to in the long term average) the cost *can be* negative, as it has been in my case.

I bought in 93 for 56k (6k deposit and 50k loan), and sold in 04 for 182k (less the 50k loan). After buying and selling expenses that left me with a profit of a little over 120k, from which needs to be deducted the cost of servicing the loan and the endowment, insuring the property and running repairs. A high estimate of the total of those running costs would be 50k, so my net cost of 7.5 years of ownership has been of the order of minus 10k per year.