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Some basic facts. 10 years ago one person buys a house for £100K 10 years ago one person buys a house for £250K They both buy their houses in accordance with

by reify 3y ago

Some basic facts. 10 years ago one person buys a house for £100K 10 years ago one person buys a house for £250K They both buy their houses in accordance with the level of income they earn. The person who bought the £100K home could not afford the £250K home. 10 years later house prices have increased by 100%. The person who's home is now worth £200K still cannot afford the house which is now worth £500K even though, on paper he is £100k richer. The person who owns the £200K home can only buy the expensive £500K house if he increases his mortgage which involves increasing their earning capacity. Back in 1982 I bought my first home for £29,500 (cheap as chips) with a 25 year mortgage. The mortgage adviser said that over the 25 year period I would pay back £160,000 in interest. 42 years later that same house is on the market for £360,000. On paper I am considerably richer today than I was 42 years ago. This is meaningless. I have no access to that money. I cannot just sell my home and have loads of cash in my bank account. I would be homeless. I cannot buy a cheaper home because my home was cheap when I bought it and is still cheap. As a 25 year old I loved my new home. I looked around at all the more expensive homes and thought that one day I would buy one of them. Naively misunderstanding that as my home went up in value so would all the other homes around me even the more expensive ones. After working all my life I finally retire. My dream is to sell my home and move to the seaside and enjoy my final years and die in peaceful surroundings. Alas, my home will not sell for enough money to buy a home near the seaside. I remain forever stuck in the home I bought 42 year ago. It is increasingly more difficult for young poeple to buy their own homes. Unless you are earning £120,000 per annum you cannot afford the house that I bought for £29,000 when I was 25 years old. Who really benfits from home ownership? Who really benfits from ever increasing house prices? Who really controls house pricing? Banks and estate agents!

nemo44x 3y ago
You’re totally ignoring interest rates which since 1982 have trended downwards significantly. Combined with inflation this is why properties have gone up in cost. A home will be priced based on the monthly payment the buyers are willing to make and that includes principal, interest, and taxes. As interest goes down, principal goes up. In general this is good as more of the buyers monthly payment goes into equity instead of bank profit. You can sell your home and get loads of cash and buy a smaller place or rent. Many people “downsize” when the kids are grown and often move to lower cost of living areas. Also, your home is an asset. You can borrow against it. Considering you have not had a monthly payment for nearly 20 years you’ve had ample opportunity to save more money and upgrade your property if you’ve wanted.

by reify 3y ago

nemo44x 3y ago

You’re totally ignoring interest rates which since 1982 have trended downwards significantly. Combined with inflation this is why properties have gone up in cost. A home will be priced based on the monthly payment the buyers are willing to make and that includes principal, interest, and taxes. As interest goes down, principal goes up. In general this is good as more of the buyers monthly payment goes into equity instead of bank profit. You can sell your home and get loads of cash and buy a smaller place or rent. Many people “downsize” when the kids are grown and often move to lower cost of living areas. Also, your home is an asset. You can borrow against it. Considering you have not had a monthly payment for nearly 20 years you’ve had ample opportunity to save more money and upgrade your property if you’ve wanted.