BoldAsBrass

Yes, mildly offended by that.

I guess we're not going to agree on this. My eldest son is nearly 23. He has about 15k to his name. I'm trying to imagine the conversation ... "Dad, I've decided to invest my 15k (all the money I have in the world - acquired from savings accounts my parents put money into all my life, topped up with birthday and Christmas money from parents, grandparents, aunts etc - topped up with a recent present from an Aunt who was terminally ill) into gold." "Hmmm, so you're not worried that the gold price could halve tomorrow? Or that it can be an extremely volatile market and, when you want the money for something useful (as opposed to owning a bit of shiny metal) that you might not get back all the money you put in? I'd say son, with the benefit of a bit more knowledge of how the world works than you, that you would be nuts to risk your money in that way. Better off hanging on to it until the day you want to settle down and use it as a deposit on a house ... or use it to start a business."

Only if they were barking mad. If I had done that 30 years ago I would never have bought a house and never have acquired the only bit of money I've ever acquired. Again, if you'd been watching it over the last 30 years you would never have bought property in the mid 90s and missed out on spectacular property gains.

... and you didn't need somewhere to live. And if you looked at a gold chart and thought 'wow, it's at an all time high'

I'm trying to make the point that if you think of house prices in terms of gold - a young person should buy NOW! But they can't because all they have is money (not gold) and they haven't got enough of it to buy a house. So, the house/gold thing is completely irrelevant. I bought my first property just after gold went from nearly $800 to $250 - at which point houses suddenly looked expensive compared to gold. If I hadn't bought then, I'd have had to wait 30 years for the same thing to happen again. 30 years in which I've lived my adult life, raised my children, had a roof over our heads etc. You really can't live your life waiting for some relationship between gold and property to occur.

Yes, society began to unravel a bit in Tottenham the other night. I think I'm right in saying that 'community' was not the main beneficiary. The tax and spend institutions won't 'fade' - they'll do the opposite - they, and their police force, will loom ever larger in our lives.

My eldest son is 22. "Son, when the time comes to think about buying a property for the first time, make sure you bear in mind the relationship between the price of houses and the price of gold." "Okay Dad - I've had a look and, just now, houses are pretty cheap compared to the gold price - way below the average in fact." "There you are then son, now is the time to buy." "But Dad, I can't afford a house because I haven't got enough gold/money or money/gold to buy one?" When I STRed I thought that the housing market, being seriously overvalued in my area by 2003, was going to crash in the same way it did in 1988. I didn't realise - and nor did anyone else at that time - that the correct course of action was to sell your house, buy gold, wait, wait, wait and wait a bit more until gold went up enough to make the waiting worthwhile, sell your gold and buy a house - and have a load of extra money too. Of course, what could have happened is that house prices corrected (as they started to do in 2004/2005 and the fool Gordon Brown had not done everything he could to re-inflate the borrowing boom and keep the house price boom going) and that, after a few years housing could have moved back to normal affordability levels and the credit crunch of 2008 would never have happened and, likewise, the boom in gold in gold. Things could just as easily have panned out like that. As I said in my original post, if you want investment advice, ask me and do the opposite. Right now I'm thinking of taking 100k out of my offset mortgage account and buying gold with it. You have been warned.

Yes, but what's the point? You make house buying decisions directly based on the relative relationship between the price of gold and houses? You live in a tent and buy gold until the time is right? Which, for much of my lifetime, would have meant living in a tent all along. The point I was trying to make was that, for the average person, the relationship between the price of gold and houses is of only academic interest. Interesting it may be, but not something the average person will ever be able to take into account. If I had listened to the gold bugs when I sold to rent in 2003 - if I had had the nerve to put my STR fund into gold and wait (and wait, and wait) I would have doubled my money (I guess, I haven't checked the numbers ... all I know is that gold has gone up a lot lately). But I didn't. I waited 7 years in rented accommodation and bought back into the property market. The only thing that stopped things being a bit of a disaster is that in the first few years the interest on my STR fund more than paid the rent so I saved some money up and, in the area I live, house prices now are about the same as they were in 2003 (the boom had pretty much happened here by 2003). So, you know who not to come to for investment advice! I am willing to make predictions if asked to allow you to do the exact opposite and, no doubt, make money.

Do you think the world is going to turn into some sort of big kibbutz? Surely most people's first aspirations are enough money to provide somewhere to live, food and clothes. Oh, and a car, phone, gas, electricity, broadband ... and income tax, national insurance, VAT, council tax etc. etc. ad infinitum, ad nauseam. If we have some sort of crisis ... you see us all suddenly turning the local park into small 'victory gardens'. Where I live it would mean the park being shared by several thousand people. You envisage some sort of rural utopia as a result of this crisis? I can't say I'm wild about the idea but I foresee a lowering of living standards and, in due course, social unrest.

Don't understand. Who thinks like that? The majority of my money is 'saved' in my house but, all other things being equal, I'm going to need somewhere to live until I depart this mortal coil ... so why would I ever think of my house in terms of gold? Sure, I might think what it will be worth when I retire and if I can downsize to fund some of my retirement (I can't stop myself thinking like that - sometimes - but I won't really care if prices do go down because so will everything else and I may be a bit worse off but, so what, I was going to have to give a wedge to my children and maybe they won't need it) but one thing I won't be doing is selling my house and buying gold with the money. I agree it probably won't. I was just trying to make the point that if you stuck that chart under the nose of a 'dispassionate' (uninvested in the gold or property markets) investor, they would look at the chart and say 'Gold's had a good run, housing has had a bad run ... the chart shows these things go up and down like a yo-yo, we're at an extreme now so, all other things being equal, I would expect things to start to head back towards the average at some point'. What did they say when you said 'My investment in gold has doubled, your investment in property has, at best, stagnated and has probably gone down. I can now buy twice as many properties as I could have 5 years ago'? Do they still trot out the old property mantras?

Just as an aside ... how long does someone have to wait before a prediction becomes out of date? In the sense that ... I'm sure you've all heard of Bill Bonner and his various missives ... he has been saying for many, many years that gold would go up and property would go down and the world was heading to hell on a debt handcart. Maybe I have been receiving emails from his various outlets for what - 10 years? So, was he right all along or was it just inevitable he would be right one day. When I STRed in 2003 - if I had followed his general thinking and put my fund in gold - I guess it would have doubled. As it was I waited 7 years and bought back in to property. Oh me of little faith eh?

Apart from investors who already have somewhere to live and need to decide whether, for example, property or gold is a better investment at any point in time ... what is the point of thinking of house prices in terms of gold? One might think that if, historically, houses are cheap in gold (which they are) then, either house prices are going to go up or gold is going to go down - to head towards the average. A dispassionate investor, looking at a chart of house prices priced in gold, would buy houses now as they are so cheap - particularly in the states.

I'm under the impression, although I cannot quote a source, that private sector debt in the UK is reducing. I know I have read that, overall, mortgage debt is being paid down. And, from what I can see, the government is doing something - unlike Brown and Co. - who could not get their heads far enough into the sand.

Unfortunately, he sounds a bit hysterical - yet he is talking, on the whole, sense. Whereas the other guy is spouting the usual nonsense - and he comes over as sane and measured. However, his blanket assertion that selling prices are 40% below asking prices is just wrong - makes him an easy target. In my area sales are few and far between but those that do sell are going for between 5% and 15% below asking. He could make the point that the market is underpinned by unmanageable debt - certainly unmanageable when interest rates rise. He could make the point that the government has thrown the kitchen sink at keeping the housing market up - and has failed. He could make the point that the only way the market can be sustained is by trying anything and everything to entice youngsters into taking on suicidal debt levels at the lowest base rate for 300 years. He could make the point the market is unsustainably overvalued. He could make the point that the economy would be far healthier if people had to pay less for housing - by way of smaller mortgages and/or smaller rents. But he lets that go too.

Many people would say - sell up and rent - and, when prices go down, your money will go further. I'd say, hmmmm, people have been saying that (and acting on it (I did)) since 2003. When I STRed everthing was fine at first. The interest on my STR fund easily covered renting a similar house to the one I sold and paid for a couple of holidays too. Then, of course, as soon as it became noticeable that house prices were falling, they slashed interest rates to reverse the process. Suddenly the STR fund is not covering the rent ... and rents keep rising. Then, of course, a banking crisis. And suddenly I'm a lot more worried about losing my money in the bank than I am about falling, or rising, house prices. Having watched the shenanigans over the last 8 years, I would advise you not to sell and rent.

From that Guardian article: '"It's a tough love approach," he said. "It's treating customers fairly, not nicely, because if you can't afford your mortgage you are only increasing your indebtedness. If we allow you to increase your indebtedness, that's not really fair to you."' What would have been fair was to not allow people to take on debts they could not afford in the first place. I know people have to take responsibility for their own actions - but the bloody banks should take responsibility for their stupid, greedy and indolent lending practices during the boom years. They, above all people, must be regarded as knowing that it could not last forever and they should pay the price for their irresponsible lending.

I heard a phone-in on a radio show recently - the subject was 'renting or buying - which is better' and it wittered on about how people on the continent rent all their lives (but not under 6 month poxy tenancies) etc. A bloke rang in, very pleased with himself, he'd rented a cottage for 17 years (so far) from some big landowner - might have been his boss - lowish rent - didn't seem to have any prospect of being slung out - he thought people who tied big mortgages around their necks were nuts - let the landlord take the strain - do the repairs etc. It was, of course, very one-sided and about as far from typical as you can get - nonetheless the presenter had the wit to ask him what would happen when he retired. He said 'I'll go on housing benefit'. Which, I must admit, pulled me up short, as they say. I'd always assumed that if you rented you would be on the street promptly if you retired and could not pay the rent but, of course, that is not the case. So you rent while you work and the rest of us are expected to pay your rent when you retire. Maybe the bloke is not so daft.

There must be a lot of people in rented accommodation that will have no way of paying the rent when they retire or get too old to work. What's going to happen to them?

There was a phone in on Radio 2 about this the other day and some chap rang in very pleased with himself. He rented a cottage on an estate somewhere (up North I think) - the rent was low, he'd been there for 18 years, didn't have to worry about bothering himself with repairs etc. The host of the show asked him how he was going to pay the rent when he retired - and he said 'housing benefit'. So in this new 'renting' society we are developing, people are going to work for 40 odd years and pay their rent - and then expect other people to pay their rent for 20 years in retirement. What about the landlords - don't they have to do anything? Just borrow some money from a bank, buy a property and get other people to pay you rent forever. Which makes the whole argument about buying/owning nonsensical. The fact is that most property is paid for by way of a mortgage (in the first instance). It is academic whether Fred buys it, lives in it and pays the mortgage off or Fred buys it, Pete lives in it and Pete pays Fred's mortgage off for him. And then, even when Fred's mortgage is paid off, Pete carries on paying Fred rent forever - or at least until the day when Pete can't pay anymore because he is old (retires) or sick - and the rest of us chip in and pay Fred. It is truly nuts. If Fred owns the property outright and Pete is now too sick or old to work and pay Fred rent, why the hell should I pay tax so I can pay rent to Fred. F*** Fred, he owns property outright that has nothing to do with me, why should I pay him rent so Pete can live in it when he's old?

Shortly after the start of the great house price crash / recession of the late 1980s, I decided to downsize (to get the mortgage down). This involved moving about 20 miles further away from London - to an area we didn't know at all - but where house prices were a lot lower. And, of course, this was (can you IMAGINE this) before the internet! So, agent rings up and tells us about a fantastic house new on the market (blah, blah, etc.) and I duly took time off work to go and view it with my wife. The garden was very short - about 30 feet I guess and at the end was the ubiquitous leylandii hedge. We were standing at the bottom of the garden looking back at the house, chatting to the agent, when a noise of massive intensity and volume happened instantaneously. I, literally, hit the deck in terror. As a train spotter when I was a lad, I realised after a second or two of trying not to piss my pants what it was. Standing about 10 feet from an express train doing 100 m.p.h. that you cannot see coming is an extremely intense experience. My wife had almost dropped our son when it happened and was standing there hugging him to her as if her life depended on it. My son was bawling like a banshee and I, as I say, was shaking like a leaf. I said to the agent 'why the **** didn't you warn us about that?' and he said 'If you tell people about it it puts a lot of people off!' Yet people buy them. Baffles me.

My youngest son has a new girlfriend - I was chatting to her parents the other day - and, as it does, the subject of houses and house prices came up (I think I might have started it asking them how long they have lived there - just making conversation) and for some reason they volunteered the fact they have a 315k mortgage! Now, they are in their early 40s whereas I will be 60 next year ... but a 315k mortgage - at historically low interest rates - in a pretty stagnant economy ... wow, I wouldn't be able to sleep at night. I said something like 'wow, that's a big mortgage' and they sort of collectively shrugged their shoulders and said they were desperate to bring their kids up in a nice area. I mention this as an aside ... it seems an awful lot of people have mega mortgages and the much trumpeted rises in interest rates really will hurt a lot of people - and leave them with even less disposable income - or on the street. And the people who got us into this mess got off scott free.

He said he was in the South East - not too far from London (I think). There are (amazingly) lots of pleasant towns within an hour of London where lots of houses are in the 500k to £1m range. He, presumably, has sold 9 this year and has made £60k - 70k net and it's only the middle of May. I have no reason to think he is exaggerating - he's only claiming 9 sales but probably operates in somewhere like Gerrards Cross or Esher or Tunbridge Wells. Maybe he specialises in the top end of the market as some of them do. I know a one man agent in a pretty grotty town in Wiltshire where the average price is about 200k. Flats are 100 - 150k. Terraces 150k to 225k. 3 bed semis 200k to 275k and detacheds (mostly estate boxes) are 250k to 300k. He rents a bit of his office out to a bloke who runs a lettings business - and they answer each other's phones etc. He's been running his agency for 25 years now and seems to survive okay. Even in these dire times he is selling an average of 3 a month. Which at 1.5% keeps his head above water and makes him a living. He has a secondary position shop and a tiny ad in the local rag - which he doesn't always run. He gets a lot of repeat business because he is actually good at his job and has integrity. People who buy or sell through him use him again - even if it's 10 years later. The boom in house prices has, in a way, saved the industry. Transactions are low but they're earning two or three times the commission they were in 1997.

It's worth a look at the estateagenttoday web site from time to time. It has a forum (of sorts) (news items with comments section). Every now and then you get a news item that provokes an outburst of candour. One such news item is entitled "House sellers cutting more off their asking prices" A few of them actually admit things are dire and vendors haven't twigged what is going on. One of them (in that story, I think) even mentions transaction levels of a QUARTER what they were a few years ago. Another admits he's sold 9 houses this year but claims to be making an average 12k commission - states overheads of 8k a month including staff so says he is happy enough.

Like regional house prices, wages have huge variation by sector. Many people have had no real, or nominal, wage increases for years. When I do a bit of software contracting - rates are the same as 10 years ago. If you drive a bus or lorry for a living - wages now are the same as 20 years ago. For a lot of people globalization has meant static wages for a long time - as jobs have disappeared to the Far East - the demand here for semi-skilled jobs in enormous. If you have 10 people applying for every job, wages will, at best, stay still. The reality at the moment is that many semi-skilled admin jobs have hundreds of people applying for them.

What risk free interest rate do people here expect ... hope ... think it is reasonable to get on their savings? In instant access accounts? In accounts where you tie your money up for a year? In accounts / bonds where you tie your money up for 5 years? In the same way that a houseowner's equity is (in crude terms) someone else's debt (because when a house is sold the deposit paid on the first house in a chain + the debt to buy the first house in the chain + the additional debt taken on in each link of the chain is the amount the vendor at the top of the chain gets for his house) - a saver's interest is paid by a borrower (with, of course, our mates the banks in the middle of the deal). So, given that your (risk free) interest is paid by other people borrowing - what is a fair interest rate?