House Prices Double Every Seven Years

Thanks, Cliff, for crunching the numbers.

Fools should know that the fall between 1988 and 1995 was entirely predictable five months before it started. House prices then, as now, were becoming unaffordable at the very time a plump butterfly, Chancellor Lawson, flapped it wings. He announced in his March budget that double mortgage interest tax relief for unmarried couples would end, in August, for new buyers only. It was entirely predictable that cohabiting couples would rush to buy, inflating prices further. Then the pool of buyers was doomed to dry up. I made money betting on a fall in house prices.
I'm taking bets again. A different butterfly has given notice that CGT will drop for short term investment from 40% to 18%. The straw landlords of the Borrow-to-Let brigade must be hoping that prices hold a little longer. From April 6 the market will be flooded with sellers, and devoid of buyers as they try to take whatever gains they have made. I'll wager that the fall over the next seven years will be bigger than 88-95.

if you're investing for the long-term, then surely property still represents good value. Especially if its your own home as well. I still prefer the thought of money going to pay off a mortgage, and owning a house once its paid off, rather than simply paying a landlord rent, with little or nothing to show when you move out.

"retirement master-plan could come unstuck!" - Says it all really - don't pay into a pension pay into bricks, let future generations pay more for an ever shrinking overvalued pile of bricks to fund your pension. So basically steal your kids future so they can bust a gut paying your pension! A truly noble master-plan!

My wife and I bought a house with three self-contained flats in Germany two years ago, we secured a rate with a German bank of 3.85% on a 100% mortgage fixed for 26 years, and the rental income covers all normal running and maintenance costs, although we have invested an extra £5000 in improvements. With predictions that the German property market over the next 10 years will begin to turn the same way as the UK one has over the past 10 years, we are hoping to get a really good return on our investment when the mortgage is paid off or else have a secure and regular retirement income from rent. Investing in property is surely the most sensible thing to do to secure your children's future, not make it less certain! Doe anyone else have German property investments and what are your thoughts?

Surely to compare housing returns as a percentage is largely meaningless. I pay about 30% more than my brother who rents. So to look objectively as house prices returns, only the percentage paid over renting should be used, as if I didn't buy I would have to rent. When we look at the 30% of payments figure, the return is quite acceptable. We could then look at the return on a tracker fund for the balance and compare shares and houses.
I have bought and renovated, monthly payments about 30% above my brother, plus another 20,000 (over 4 years on renovations). I have a house my family are happy in, we have a vegetable garden, can repair my car in my garage and have a bbq when we like. My brother has been moved on and stopped from having a vegetable garden, planting apple trees and has had his lease not renewed as he did his own car repairs (without oil strains)the owner didn't like it.
House prices tended to follow the economic cycle, they are too high now, but when they drop back they are worth buying. My kids will have my house as their inheritance and in another few years it will be mortgage free. The it wil be about 30-40% less than the rent on a similar property.

Well done Cliff on looking at the true picture. On one hand the property market is dependent on simple supply & demand economics, with supply (nationally) insufficient for demand (nationally). This is how the buy to letters justify their investments. Agreeing with ngata, waterfly and miguelathome wholeheartedly, would like to add; the current uplift is based on 'puff'. As we have seen 'unreal' money. If the supply of lendable money is depleted or better tested to ensure its lent to those who can pay. Those who wish to buy but have lower sums to offer will force the prices down. As those who must sell are forced to accept lower sums, this is passed on to their purchase and (at last) we see realistic pricing.

Some property yes, but keep a mixed portfolio. I smile inwardly when the BTLs say 'oh no, wouldn't risk the stock market'! Mmmmmm I've made 65% in the last three years, and no maintenance costs and tenant hassle!

This sounds like a good investment, the german government seem to be dragging their heels as far as introducing a property based pension solution as part of the "Riester Rente"(State subsidised Pension), which is supposed to replace the housing subsidies (Eigenheimzulage) which fell away at the beginning of 2006, but I think legislation will be introduced in the next few years. This will encourage the german public to buy their own homes which so far they certainly haven't been as active as the British. Another tax legislation in Germany which certainly speaks for an increase in property investment is the new tax laws coming into effect in 2009 "Abgeltungssteuer". This enforces a blanket 25% tax on all profits made on shares, bonds , Investment fonds, and some life insurance policies but not on property or property trusts. So german small investors should see a chance of avoiding these extra taxes through an investment in property.
The only thing I can think of which speaks against an investment in German property is the possible demographic problems Germany may face in future years of a falling population, but thats more a really long term view.
I hear quite often of British and Americans who are buying property in Germany at the moment, the trend hasn't really kicked in with the German public although I do notice in the city I live in - Berlin - that new estate agents offices are opening up all over the place. I myself have recently bought a flat in Berlin and would be very pleased if the returns would match those of the british boom over the last ten years.

Fact: £1000 invested in the UK stock market in 1983 would have generated a better return than the same £1000 invested in bricks and mortar for the same period (source: a Fool article in 2007).

The UK housing market is predicated on greed: the greed of estate agents, property developers, the media (who generate millions in advertising revenue from said estate agents, property developers etc)and the buying public who happily acquiesce in this always sun-tinged con.

And for every pessimistic 'the housing market's going to crash' article, there will be 10 more talking it up. I'm in the PR and communications business, so I should know.

I shudder when I see advertising, aimed at UK investors, promising guaranteed rental income and double-digit growth. Who says? Who believes these claims, claims that would have every regulatory watchdog in the land coming down on the perpetrator like a ton of bricks? How can advertisers / developers get away with making such claims and on what historic basis do they make them?

Nowhere in the world would people beggar themselves (and I include myself)chasing some notional pot of gold at the end of an equally notional property-always-goes-up in value rainbow other than in the UK and, increasingly, to rely on property as a cash-cow to fund everything from holidays to retirement. What a gamble!

Why do we suspend all reality when buying the over-priced asset that is British property? Share tipsters will tell us to avoid a particular stock and we'l generally follow that advice, but merrily ignore that level of caution when buying something that is probably overpriced by 50%!

Personally, I am hoping for a return to sanity. Whether that is a full-blown housing crash or similar catastrophe, so be it. Then perhaps we can go back to doing sensible, grown-up things like putting money into the bank or a pension.

Or perhaps an era where families are happy to live together under one roof, without the pressure to 'get on the housing ladder or the opportunity will be lost for ever', forcing our children to get into a debt cycle which will be with them for decades.

Doesn't sound like a very sensible investment to me.....