Monday, 28 October 2013

Rule two, a house is also an asset, so you don't want to pay too much.

People still celebrate house prices, but they don't celebrate a diagnosis of cancer or osteoporosis, but unless you're a doctor they won't help anyone, likewise unless you're a property speculator no homeowner profits if they pay more for their house any more than any other asset, and nothing will ever cost you as much as your house so why the hell would you want to pay more for it?

This even applies to people who have already bought one. This is because, like share gains, you can't realise them  until you sell your asset.  But you don't need those shares, they are an investment which is convertible to cash. Sell your house for bazillions and where will you live? In another house I'm guessing, and if yours has gone up 200% (as mine has) everything else in the surrounding area you are probably wanting to trade up to has as well (as that's what asset inflation does), meaning the £50,000 difference between your house and the one you are buying in 1990 is now £200,000, but you're not earning four times as much to fill the £150,000 gap so probably won't be able to afford it now.

You've actually lost money now, as everyone does when hit by asset inflation. Unless you are an asset seller for a living the rise in assets such as houses, cars and TV sets is as bad for you whether you live in it or put it in your house. And low interest rates cause all assets to rise as currency and cash investments don't provide returns so people switch to assets, like buying extra houses and making yours cost more as a result.

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