Property Porn A Nation Hypnotised? Blog Discussion

A question about : Property Porn A Nation Hypnotised? Blog Discussion

This is the discussion to link on the back of Martin's A Nation Hypnotised By Property Porn? Property isn't as safe as houses blog. Please read the blog first, as the discussion follows it.

Read Martin's A Nation Hypnotised By Property Porn? Property isn't as safe as houses Blog

IMPORTANT NOTE FROM MARTIN! PLEASE READ

Folks I know this is a highly polemic and emotional debate for many people. Please even if you disagree with someone - dissect their arguments politely, refrain from calling them names or saying they're 'stupid' there is no need to call names or be rude. Please be courteous even if you have diametrically opposed positions.

Martin

Best answers:

• Hi - I saw your spot on breakfast TV yesterday and thought you made a number of good points. I lost my home to my ex when we split up in 2003 and I decided then that the property ownership thing wasn't the thing for me any longer.
  Result? I have a capital sum stashed away, a BMW motorcycle that I would never have owned otherwise, some nice toys at home (like the Qosmio laptop I'm composing this on) and a generally comfortable lifestyle. Spending the kids inheritance? Yes, but so what, they're more than capable of generating their own.
  One other point which you didn't make but which I think's important. When I owned my own property, when things went wrong (or needed maintenance) I had to either do it myself (not my forte) or pay someone else to do it. Now, when there's a problem, it's the landlord's responsibility to sort it (and, because I'm renting privately rather than through an agency, he does).
  Also, the first flat I had after my breakup was brilliant initially, then the neighbours from hell moved in above me. After six months of the Council wringing their hands and doing the best part of nothing and with life becoming increasingly intolerable, I moved. This would have been nigh on impossible (and expensive as well) if I'd had the misfortune to have bought the place.
• As martin says in his article, part of the problem is that the public have been "hypnotized" by the huge number of property programs which "guarantee" massive profits on property and convince people to buy, buy, buy. Surely this isn't a balanced view!
  I know there is a petition to persuade carol vorderman to stop selling people bad debt, is something similar due for property programs?
• For months now MrJudi and myself have been crawling round newish type houses looking for something 'better' than the house we have. However, i keep asking myself, what is better? Ok i could find something newer, in probably a nicer area, but do i want the debt?
• Much of Martins advice on renting rather than buying at many multiples of income is unlikely to apply to a country undergoing mass immigration. It not property porn shows that make any difference - they are a byproduct of this huge change.
  Looking on the ground, rents are rising swiftly, and property is still rising at double digit rates. The U.K. of a decade ago, with controlled migration, and peoples wages being able to buy them a piece of thier own country, a home - no longer exists.
  For all the saving and frugality on this site, a saver could never beat the decade of double digit gains that anyone having even one property has enjoyed. In fact, the mass of frugal savers on this site, have helped keep interest rates lower than they would otherwise be, encouraging even higher property prices.
  To get 'real' - A city of people the size of Birmingham in population, has to find houses every two years under the continuation of the most massive immigration in history.
  Far from renting being a way out of falling property prices, a large section of the population are under the grip of rising rents. The poltical classes, funded by landlords and business interests, are now changing the occupancy laws in even greater favour of landlords, beyond even the limited rights under the AST.
  As much of the immigration is very low skilled, in any demand slump, due perhaps to US imbalances, rising rates etc.. we will see unemployment tend to rise, hence the population register and national ID card scheme in 16 months time which gives town hall officialdom unlimited access to an individuals financial records and movements.
  Rising rents and rising taxes are almost certain. I just do not see why this property boom could ever let up.
• Hi tonyhamm
  I get suspicious when someone posts something verty one-sided, giving no credence to the other side of the argument. Martin has given a pretty balanced view in his blog that property prices can do down as well as up ... and they have done before in the late 80s and early 90s. Most economic indicators would suggest that houses are becoming unaffordable for many people and I don't believe that is sustainable. Sure, interest rates are at a historical low and there is net immigration into this country but a never-ending property boom is a physical impossibility in my book.
  I also disagree with your comments about the law changing in favour of landlords. Far from it with the introduction of HMO legislation with its costs, licensings schemes etc.
  As someone who owns 3 properties I would like to see house prices continue to grow at double digit growth but I don't think the will.
  Clariman
• Martin, I think you miss out the obvious that the rent is comparable to the interest costs on the mortgage plus maintenance costs.
  The presenter mentioned if you bought a house, after 25 years you would own it, concluding renting is dead money. But currently you would have to pay far far more to buy a house than to rent. Infact, the average rents are around the same as the interest charges on a mortgage. Also, what about the huge amount of people buying on interest only mortgages?
  So, the only way a renter in this situation would lose out if house prices were to rise.
  But what about a steady market? Many people choose to rent as it is infact cheaper to buy the very same house. Looking at national averages rents are around 5% of the value of a home (Source RICS), so if you're buying at todays prices and the mortgage interest is above this (plus the loss of income on your deposit), you are paying extra to own the home.
  Also, renting allows people to invest in other areas which has easily outperformed the housing market or cash in the bank. This is the main reason why people sell to rent.
  I also kind of disagree when you say no one knows what will happen. They are all sorts of reasons to predict something, such as interest rates, in that myself and others have discussed interest rate futures on here, which is valueable to anyone considering a fixed mortgage vs a variable mortgage.
  Remember, if something is unsustainable, it won't be sustained. That I can guarantee.
• Martin, I've seen the video of your breakfast tv appearance, which was most impressive, you are such a motor mouth it really makes me chuckle how you maximise the soundbite slot available to you to get across some simple ideas that people need to pay attention to.
  Your blog is also excellent - I really have to hand it to you as a wordsmith.
  "If you don't own a home, you're seen as the underclass " . . . this is sad and reminds me of the comment Margaret Thatcher made in the 1980's that anyone finding themselves sitting on a bus in their 30's could consider themselves a failure. With regard to the 21 year olds you met, I feel desperately sorry to think that they could feel like failures in the same way. Good on you for challenging an assumption that is rotten to the core.
  Well said that man, I do hope as many possible people in their mid-twenties find the time to listen to you. I bought my first home at 24, and although it didn't financially ruin me I look back and realise what a financial burden it was to bear and think I would have been much better waiting a few years to develop my career.
• The issue of immigration does, in my opinion, play a part in the housing market, but more when it comes to the rental market. Arguably, economic migrants are not going to be in a position to come up with the 5-10% deposit needed. Therefore their housing needs would need to be met from the rental market.
  If we couple this with the continual rise in BTL purchases - with some people using the equity in an existing BTL - the result is a reasonable market for LL's to make money from BTL, creating an arguement for higher rents (too many tennants and too few rental properties = higher rents). However, the reverse could also be argued - namely everyone seems to have bought into the BTL market as a way of making money (house prices always go up and the (stupid) renter is paying the mortgage for me...).
  So, where does the market go from here? Everyone has got their opinion - my concern is on the BTL market. If house prices continue to rise and more properties are bought for BTL then, unless the LL want to pay more and more of the mortage costs himself, rents would have to rise. However, there's (probably) more than enough rental property to ensure that there is a reasonable degree of competition from other LL's - some of which will have bought the property a number of years ago when prices were lower. Some BTL'ers - facing void periods - will then try and cash in their equity, only to find that most of their potential market won't be able to afford because they've been priced out. The prices get cut to make a sale...and the correction begins.
• If I buy my home, and maintain my mortgage payments for 25 years, at the end of the term I own the property. At all times in home ownership history, over a 25 year cycle, the value of the property has always grown. I can not say with any quantification that the growth has outstripped inflation, but it would certainly appear to be the case. Just for the sake of assumption, a 30 year old would buy their home on a 25 year mortgage, and assuming that any upward moves in property that the loan term remained the same, they would then own a property clear of any debt at 55. This would mean at current retirement age, with 10 further years of work and income without the burden of either a mortgage or rent.
  Contrast this with a 30 year renting their home until retirement, they would have to provide sufficient retirement income to continue paying rent until beyond their working life.
  Can someone with a more financially astute brain enlighten me as to how this is a financially viable option, because I can not come to terms with paying for someone elses retirement, rather than taking responsibility to provide my own home and shelter, that will give me an equitable asset.
• inmypocketnottheirs-
  I know a few people who jumped on the BTL bandwagon who are having problems renting their properties out simply because they didn't know enough about the rental market. The older landlords I know (well I have rented from them) have either sold lots of their properties off for a good profit or can ensure their rents are slightly under the market rate for the area to ensure a good supply of tenants. These older landlords also generally manage the properties themselves.
  The average age of a first time buyer is now 34 according to some studies and according to every study or survey is over 30. Luckily all us people in our 30's will be retiring when we are 67 so we can take out long mortgages even though we may have problems funding them when we are over 50 due to not being in permanent long term employment, and having not taken out repayment mortgages.
  While lots of people factor in that they will get payrises as their age increases and their career progresses, they don't factor in the fact that they arel likely to have children.
  Also you need to consider is that if you don't currently live in Scotland, are elderly and need residental care the local authority and government will make you sell your house -that you worked hard to pay for, to fund this care if your family can't pay for it or you don't have enough other savings.
  If you are lucky enough not to need residental care when elderly and manage to stay in your house until you die your heirs, if you don't leave your house to a surviving spouse, will have to pay inheritance tax on your house. Very few estates especially in the South East escape this and while the government claims otherwise lots of basic rate tax payers are hit.
  If you rent, and rent when you are retired depending on your income (or lack of it) you will be means tested. As the elderly are in a vunerable group the government will pay your rent.
  So if you are basic rate tax payer I would buy a house if it worked out cheaper than renting which at the moment unless you need a 2+ bed place often isn't, sell it a few years into retirement and p*** the money up the wall.
  Basically I agree with Martin- don't over stretch yourself to buy a property. The last recession enabled a lot of people I know to buy their first property at ages ranging from 20 to 40. (The older they were the bigger property they brought.)
• Excellent post from WhamBamBoo - it's definitely all in the timing, not pounds per week. Of course all the poperty shows extrapolate straight-line econimics so property never goes down (or even stays level) as they disappear from the box when things turn sticky (as in the early 90s).
  However, it's not just property-porn, it's the same with the "change your life" progs - without exception you can start almost any business without knowing anything about the market (or even the language for the overseas editions) and everything turns out all right mid-way through part 4. Makes you wonder how real life businesses ever manage to fail - and most of them do.
  Regardless of the "what's going to happen" predictions (which at least half of us will get wrong), IMHO it's still sensible to preach the "don't put all your eggs in one basket" mantra and to remember that asset values and cash-flow are entirely different things.
• Have just read this entire thread and wish to ask:
  Has the Bank of England ever been independent before? I used to think that if the BoE say inflation next year will be 2% - it will be 2% - they'll make sure it happens. But inflation has been above their last few targets. Not so confident now (but don't be too alarmed - they're not that far off!)
  In UK we are so dependent on foreign imports which means we are susceptible to costs of rising materials and energy. Inflation may be harder to predict - higher inflation will force BoE to increase interest rates. I think we'd all agree that interest rates are not going to get out of hand over the next few years, but like someone said earlier in these posts, a 2% raise in rates might send large shockwaves through our economy as people (used to lower rates) struggle to afford repayments. But, people are more savy these days regarding interest rates, no?
  I feel (& hope) that house buyers have factored into their calculations at least a 1%-2% rise over the next few years - afterall isn't 7% the average interest rates we've had in the UK for many years?
  Having just looked at my own position. If interest rates went up anymore than 1% over the next year or so I'd have to go out and dig ditches or consider selling. If lots of people feel like this then there would be a glut of houses on the market & prices would fall.
  Therefore, is this going to happen? We need to consider: How serious do we take the IMF warning on borrowing levels in the UK? (I can't get my little head round that). Are there any more global problems that will upset stability -eg shutting down of gas pipelines in Russia or restrictions on oil output - international governments seem to be powerless to stop these shockwaves.
  On a pessimistic note, I think the suits in the BoE do their best to even out an unpredictable world. Maintaining stability/decency throughout the world is harder these days - given our high dependancy on the outside world.
  I think this is why there's been a (well sort of) reluctance to invest in the stockmarket - people have bunkered in & spent their money or ploughed it into good ol' dependable bricks and mortar. Ofcourse fuelled by these fancy property programmes we're all raising the bar - but how much of the UK public is maximising the potential of their home? I reckon it's getting close to exhaustion.
  On the other hand, more and more people are coming here. Popular areas like London - one of the Globe's Capital's now - (or am I just saying that coz I live here...who knows?) may remain stable. Maybe the suits at BoE will factor in all the jolly undecent people/events throughout the world - let's hope they've got the world's best mathematician on board who has a formula that factors in caos.
  Are you convinced? I've got no idea...I don't mix in these circles.
  Don't get me wrong - I've been optimistic about property for some time & have been bullish according to some of my more 'conservative' friends, but property is genuinely perplexing me at the moment. This headache may be signs of a bear market (maybe time to stay wise/get out)?
  Like Martin says though - cannot tell for sure!