BoldAsBrass

But you're hung up on the idea that a house is an investment. Say you're 25 years old, ready to start a family and you want to buy a house. Let's say houses were like cars and, over 25 years, become worthless. So, you borrow 90% of the cost of the house, and pay it back after 25 years. At the end the house is yours - you have somewhere to live that is completely yours but - for the sake of argument - it is worth nothing. So what? You're still in a much better position that someone who rented all those years. The idea that you shouldn't take on 90% mortgages because of the fear of negative equity is all based on looking at houses as an investment. We should look at them as homes. When I was young it was common for people to marry in their early 20s (after finishing an apprenticeship) and they usually bought a house (often a 3 bed semi) on a 25 year mortgage which they lived in all their lives - or until they retired (etc. - obviously some variations on the theme - you get my drift.) This fear of negative equity is based on the mad climb of the property ladder with people moving half a dozen times - enriching estate agents and banks in the process and impoverishing themselves.

I don't see anything wrong with 90% mortgages. It is the salary multiples and interest rates that are important. It seems pure, undiluted madness to me to take on a 25 year, massive, debt with variable interest rates. We're in a situation now where, if base rate went up to 5% and mortgage interest rates went up to 8%, millions of people who have taken mortgages out in the last 10 years will be completely stuffed. To take out a 25 year variable rate mortgage now - with base rate at an all time low - is surely evidence of insanity. Yet, where are the experienced voices warning youngsters against taking mortgages out on these terms? The sound of silence is deafening.

Ohhhh, truly beautiful. Wish I could express things so eloquently. Do you have a link to that letter - I need to send it to a few people.

I think there is a tendency on here to think that everyone buys houses as an investment. That phrase 'When buyers are afraid of losing money' is really a bit of a giveaway. I would venture to suggest that 90% or more of buyers do not even consider whether they will or won't lose money. I'm thinking back to when I bought my first property - my thoughts were all about the excitement (yes, excitement! seems an eternity ago) of owning for the first time, what I was going to do to the place, who had offered me second hand furniture, what else did I need straightaway?, could I afford the mortgage? (which, obviously I had checked out before even considering offering) etc. etc. I didn't even consider whether I would lose the £4,600 I put in as a deposit. Later, when I moved in good times and bad, I still never considered losing money - the house was a place where I and my wife and kids lived. Sure, I used to do the houses up in the hope it would add a bit of value - but the thinking was always about where and what the house was (and a bit later on) and school catchment areas etc. I think many people on here, and on HPC, fail to understand the housing market. It is viewed as though it were a stock market and that the people who buy and sell are investors. Which might explain why, despite all the strongly held beliefs that, based on fundamentals, the market must crash (views held since 2003 by some people) it still hasn't really gone down much yet (those last 5 words must be seen in a regional context - I know in some places in the North, Midlands and Wales prices have come down a good bit but, as they had gone up by a factor of 5 to 6 over about 5 years, this is to be expected). A word that is often used on here is 'panic' and phrases like 'when the panic sets in' ... I have to say it's not a word that really applies to the housing market. I used to work in the building industry and, for a few years, for big housing developers. Even in the bust in the late 1980s (which was a real bust) there was no panic - just prices trimmed gradually until a buyer was found and then, in many cases, developments abandoned for a few years. No panic though.

Be helpful if people could give a hint which bit of the country they are in when commenting on their local market. I'm not too far from Guildford in Surrey and I would describe the market as down 10% from peak in 2007 - but flat for the last year or more. Not that many transations - but not stagnant by any means - and, as always, good houses in good areas are still fetching top prices. I'm not saying things won't change - for my kids' sake I hope they do.

Me too. Unfortunately, in the days of serfs and the landed gentry, tithes of 50% - 75% were the norm. I'm paying 2 grand a year for gas and electricity and £1.30 a litre for petrol - cheap energy supplies? Surely it will only be back when cheap labour supplies fail - i.e. when the costs of employing labour in Asia are high enough to make it worth manufacturing in the West again. Even if and when this happens, the jobs will be done by robots. That is true. But one conclusion I think you can safely draw from history is that unless someone tries to change something, the vested interests (that benefit from whatever situation someone else wants to change) make sure things stay just as they are. I do think that if young people want to change the fact that they are being stuffed mightily by my generation, the government and the banks, they need to do something about it.

But you can't live in a bit of silver and many renters use their spare money to save for a deposit on a house - so they don't have to keep paying rent to someone else who does own a house (or at least manages it on behalf of a bank). And, who is to say if you buy silver today it won't have gone down in price when you want to sell it.

Nice if you have the money to buy silver - and pay your rent or mortgage, council tax, income tax, national insurance, VAT, food, clothes, cars, petrol, utilities etc. etc. etc. etc. And, of course, if you happen to get lucky and buy silver at the right time.

When you look at that second chart ... what does it actually mean? When you measure the price of houses in silver surely you can't tell if the house price has gone up or the silver price has gone down. Wouldn't it be more helpful if it showed the actual price of silver and houses too? Doesn't that chart show that, on balance, over arbitrary time periods within the last 40 years, houses have been a better investment than silver? And, of course, they keep you warm and dry.

Oh, indeed, different tithes. But life today is still immeasurably better than it used to be - for most people. But, perhaps for the first time, it looks as though a generation is going to have a lower standard of living - and a harder time of it, generally - than the preceding generation. I remember a chap who used to live next door to my Grandfather, in a village in Bedfordshire. He worked all his life, 14 to 65, at the brickworks. He cycled there, 14 miles each way, every day of his working life. The story was (I don't know if it was bullshit, but you used to hear similar stories regularly in those days) that he never missed a day's work. Snow, hail, frost, rain or heat-wave - he turned up. He lived in a tiny cottage with an outside loo (bottom of the garden, wooden seat with a hole in it and bucket below) and water drawn from a well about half a mile away. The cottage was rented from (via various intermediaries) the Duke of Bedford. (This is when I was a kid in the 1950s). No electricity either. When he wasn't working he toiled in his garden and allotment growing vegetables. Even the front garden of his cottage always had rows of potatoes, runner bean canes etc. Flowers were a luxury that could not be afforded. The ground had to be productive. If I close my eyes I can see him now walking back from the well with two big buckets full of water in his hands. Blokes in those days seemed to be as hard as nails. Even as a kid, and as a young man visting my Grandad, I used to think to myself 'fuck that, that's not living - that's just eternal drudgery'. Our life in a council house with running water and electricity seemed like the height of luxurious debauchery at the time. I realise I have opened myself up for Monty Pythonesque cracks about living in a hole in 't road - but, seriously, people used to live like this - just two generations ago. By comparison being well fed and warm in a centrally heated, double glazed (with running water mind!) house and heading backwards and forwards to work in a nice warm car - with satellite TV and broadband at home and 't IPOD and 't IPAD to hand - well the fact you're being robbed blind by 't government doesn't seem so bad. Strikes me, the nature of human society is that most people get robbed blind and a few do the robbing. Maybe we're all too soft nowadays to do anything about it.

And yet, somehow, we no longer pay tithes to the squire or work in dangerous factories until we drop from exhaustion. And, the French seem to get by without a royal family. No revolution changes things for the better immediately - often things change for the worse for a while. But, look back through history and you'll see nothing changes unless people revolt against the situation they find themselves in.

Maybe it's why they don't teach history in schools anymore. Maybe if young people knew that, in the past, there had been a Peasants' Revolt or knew about the Tolpuddle Martyrs or the French revolution they would realise that you don't actually have to put up with whatever situation you find yourself in. By way of research I just asked my two sons (both young adults) if they had heard of the events I mentioned above - they had no idea what I was talking about. This link makes interesting reading - Government report on home ownership It supports my contention that we are witnessing a structural shift in home ownership with more people renting. And, with rents as high as they are, this is supporting house prices.

Then she'll have to move through no fault of her own. She is a puppet in these matters. No-one. Poorly performing schools should be closed - in that the whole teaching staff should be sacked (and not ever re-employed as teachers) and people who CAN TEACH employed instead. Alternatively, you could hand education over to the nuns - nasty bitches most of them but they certainly turned out the best educated children. Attention deficit wasn't a problem when I was a child. We all paid attention - or paid the price!

But, what if you make a few assumptions? Like, maybe ... The mortgage interest rate is quite high (in modern terms) - so, let's say it stays at about that level for the next 25 years. And, say we have inflation of 3% - in wages, rents and house prices over that term. In 25 years time your monthly rent will be £1524 a month. So, about halfway through the 25 year tenancy, your rent will be more than the repayment mortgage. And you'll carry on paying rent for the rest of your life. Whereas, you could be living in a flat you own outright, worth £444k which is all yours if you decide to sell.

Obviously I understand that. The bit I don't understand is why the downtrodden millions put up with it.

Fair enough - there should be no examples at all. But, when this was first bandied about, there were some statistics bandied about too - showing how many people were receiving huge levels of housing benefit. There weren't that many and, although I agree there should be none and that things must change - to extrapolate this tiny number of poor people on housing benefits living in middle class areas is a bit - well meaningless to be honest. There was a woman on the box a while ago living in a house in (I think) Lambeth. Now, as far as I can tell, it is not her fault that, apparently, the house is worth a million quid and the rent (therefore) is 2 grand a month (I've made those figures up - the story is true but I can't remember the actual figures). She has children in local schools. Your remedy is to force her to move onto a sink estate and move her kids into the local ghetto school?

Yes, you're right. People who have never lived in these sort of places just have no idea. I grew up there so I knew how to live there. I remember the last time I visited my brother - a couple of years ago - I went up to his local high street to get a Chinese takeaway. About 6 o'clock on a Saturday night in winter. I was in there on my own when the door opened and three of them came in. One look and I thought 'here we go' - one of them was the regulation 'wild-eyed, nothing to lose, nutter' and his mates just looked like a lot of people around there - you know if you get into a fight with them they don't know when to stop kicking. I was standing at one end of the counter and they started on the poor Chinese bloke behind the counter. The usual aimless insulting banter born out of the resentment that these people come to our country and make a living whereas they are on some kind of permanent half-life scrapheap. I could see into the kitchen through the serving hatch - the lads in there were getting agitated and tightening their grips on the various choppers and knives in their hand. 'Oh fuck' I thought - 'this is going to kick off'. How I wished I wasn't there and hadn't ventured out of my nice little patch in the Home Counties. Shall I just slip out and forget the food. If I do that will the nutters say 'Oy, mate, aren't you gonna wait for the shite you've ordered?' So I took my mobile out of my pocket and pretended it had rung - moved away from the counter - and started mouthing into it ... "What!! the fucking C*** - is he still there? - right tell the C*** to stay there, I'm coming round NOW!" I turned to the counter and shouted to the bloke behind .... "Keep my food 'ot mate, I'll be back in 10 minutes" The nutters thought I was one of them and had a bit of business to sort out. Needless to say, I did not return for my food. Our political classes and our middle classes have no idea. No idea whatsoever.

Are you under the impression that poor areas are populated by the working poor and that those on housing benefit are all renting nice houses in Kensington? I know there have been a few examples of this in the press - but in the area of West London I grew up in - the whole area is a mix of the working poor and the unemployed poor - some on housing benefits, some not. But all pretty hard up and with some real poverty in the mix. My youngest brother never made it out of there - I hate it there - I feel that it sucks the life out of you just being there. The people mostly have this terrible pale, pinched down-trodden look about them. I'm not sure what you think is going to happen when the housing benefit rules change ... but I'm pretty sure that what you are expecting is the opposite of what will actually happen. We'll move back in time to slums - simple as that. What I don't understand is why, in a country full of unused land, we can't organise ourselves so that everyone has decent accommodation without having to mortgage their soul to the devil for their whole working lives.

Sounds like a recipe for slums to me. I am, unfortunately, old enough to remember the conditions some of my uncles, aunts and cousins endured in Brixton in the post war years. 7 of them living in 2 rooms in the basement of a terraced house. 2 more families on the floors above. Damp, wallpaper peeling off the wall, lino with holes in it, threadbare mats, a smell and a 12' x 12' yard out the back that was always full of washing. No housing benefit in those days. After a visit we couldn't wait to get back to our council house with its 100' back garden and a recreation ground behind it. Seemed like paradise at the time. Now its pretty much a no go area.

Yes, I think you're right. She had a son who was going to do the same as her and they started him off with a flash, new-build, 'executive' flat which they couldn't make money out of and, I think, sold. I'd love to know how many 2 up, 2 down terraces were bought in Newcastle, Leeds, Wigan, Blackburn, Bolton, Liverpool etc. etc. for 15k in the late 90s for which the Government is still handing over £395 a month - every month - year in, year out - in rent. It's pure genius. Let's sell off the council houses and then let private landlords buy up cheap housing and pay them the cost of the house in rent every 4 to 5 years - FOREVER. Where would we be without the government to run things for us?

Street after street after street of terraced houses have been bought in towns like Preston and Bolton - tarted up with a 5k kitchen/bathroom/carpets makeover and rented to DHSS tenants for a guaranteed minimum of £395 a month - more if the local market average rent is higher. So, £4.8k in guaranteed annual income for the landlords. And lots of those houses were bought for 20k 10 years ago. They've already paid for themselves twice and are now real cash cows. There was a program on the box years ago - must have been 2002 ish - featuring a woman in Preston who had bought her council house using Right to Buy in the late 90s. A few years later she wanted to move but decided to rent it out and buy another place for herself. And, off she went. A couple of years later she had 17 properties - all within the same few streets. She bought them all on 15 year repayment mortgages. They'll be paid off in the next few years and, apart from the 70k income they must bring in, she will have - even in today's market - at least 1.5 million quids worth of property owned outright. She was, if memory serves, a hairdresser. She should have run courses on how to become a property millionaire - because she's actually done it - all on borrowed money and with the government (us) paying the rent.

Indeed it does put things in context. Which is why I think the refrain often expressed here of doom, gloom, despair and dire warnings that everything is about to unravel is just a wee bit overdone. There is plenty of scope to increase government income if they start to get tough with certain people. New Labour's answer was endless debt. The Coalition are continuing in the same vein but, if we do have a crisis (which, as far as I can see, will mean a bond crisis) then they'll have no choice but to start to collect the tax evaded and avoided by the rich and multi-nationals. This could yet end up with exchange controls.

House prices may well come down - but not anywhere you'd actually want to live.

Agree with that. Something else that will happen is that in any particular local market, high quality properties will not fall as much as mediocre or average properties. Although I agree with the proposition that house prices are a function of the price and availability of credit - and that the supply/demand argument is a red herring - where supply/demand does matter is the fact that there is always a high demand for nice houses in nice areas and always a limited supply of such houses. Our current planning laws exacerbate this situation as, even houses built only 20 years ago, have gardens twice as big as their contemporary counterparts. Whenever I read this thread I always look at the title 'this HPC will be much, much worse than 1990' and find myself thinking 'that title could not be more wrong - or, in a sense, inaccurate'. In general terms it won't be worse for reasons endlessly expounded (13 year boom instead of 3 year boom, massively increased amount of money lent into market with unthinkable consequences for banking and economy, government absolutely committed to maintaining status quo via low IRs, QE etc. etc) but, also, it will be the opposite of 1990 in that the mid to late 1980s boom was London/South East centric (and so was the bust) whereas London/South East have seen relative muted rises (okay, not true in some parts of London - and these will fall) whereas the big rises have been in Newcastle, Liverpool, Manchester, Leeds, Wales etc. Where prices rose by a factor of 6 over the course of a few years - of course they will fall significantly. But where prices went up by a factor of 2 to 3 over the last 20 years or more, they will barely fall. I bought a house last year for exactly twice what it had previously sold for in 1988. We really haven't had a massive boom around here.

Wage inflation will follow eventually. I guess it depends what you do for a living. I haven't been able to raise my rates for a good few years now - but a friend of mine who runs his own IT consultancy (mainly networking but he does all sorts - basically advises, manages, procures and installs the complete IT infrastructure for people) has got so much work on he's just jacked his rates by 50%. He told me he was hoping a few clients would tell him to get stuffed so he could have the odd day off - no-one did - so he's still working long hours, 7 days a week (and making a fortune). Another guy I know runs a PR agency - he's flat out - it just depends on what you do, who your clients are etc. A neighbour runs a sandwich shop which has given him a good living for the last 20 years. He says he's barely breaking even at the moment - trade has fallen off a cliff. It's like house prices - there is a huge variation in the market.