[scholia]

It makes sense to buy a house because, over the long term, the value of houses goes up while the value of money goes down.

Even better, the real cost of mortgage payments keeps going down (thanks to inflation) while the real cost of rents keeps rising. My house would now rent for around 3x my mortgage payments, except I paid off the mortgage more than a decade ago so my rent is zero.

There's always a chance house prices could collapse, but that's unlikely in the UK. First, it's a small island with a rising population so there is real demand, mainly in the south of England.

Second, it's seen as a "safe haven" so foreigners are buying houses in the UK -- new developments are actively marketed in China, Singapore etc.

Third, if you buy a house and rent part or all of it out, the tenants will pay the mortgage for you, and they really have no choice. Governments supporting a "property-owning democracy" (a Conservative Party ideal) have made it harder to rent by selling off social housing, removing rent controls, giving tax allowances on mortgages etc.

Historically, on average, buying a house has been a one-way bet in the UK for around 50 years. It seems pretty much insane to imagine that this will always be true, but it has been true for my entire lifetime.

[lewiscollard]

> over the long term, the value of houses goes up while the value of money goes down

That which cannot go on forever, won't.

> There's always a chance house prices could collapse, but that's unlikely in the UK.

The population in Britain was 58.95 million in 2000 and is currently 64.04 million.[1] In the same time house prices have risen by an average of 153%.[2] It's reasonable to subtract baseline inflation from that at 55%[3], in which you STILL end up with a 98% increase. And I'm not ignoring the silliness in London; nearly every region of the UK has seen near-doublings of house prices since 2000, with a population increase of about five percent.

Simple supply and demand dynamics are not at work here.

> It seems pretty much insane to imagine that this will always be true

Yes, it certainly does. I'm sure there was a crisis not so long ago where lots of people were betting on house prices continuing to go up for the foreseeable future which didn't end too well.

Maybe, just maybe, the problem is too many people thinking of housing as an investment?

[1] http://www.worldometers.info/world-population/uk-population/ [2] http://www.nationwide.co.uk/about/house-price-index/house-pr... [3] http://www.thisismoney.co.uk/money/bills/article-1633409/His...

[gozur88]

>>The population in Britain was 58.95 million in 2000 and is currently 64.04 million.[1] In the same time house prices have risen by an average of 153%.[2] It's reasonable to subtract baseline inflation from that at 55%[3], in which you STILL end up with a 98% increase. And I'm not ignoring the silliness in London; nearly every region of the UK has seen near-doublings of house prices since 2000, with a population increase of about five percent.

>Simple supply and demand dynamics are not at work here.

Price curves aren't linear. If you have a market with inelastic demand, small shortages can produce huge price increases.

[scholia]

> Simple supply and demand dynamics are not at work here.

It depends on your definition of "simple".

I certainly don't think it's possible to relate prices directly to shortage of supply, because things are not that simple.

I also note that, because so many overseas buyers want UK properties, demand is essentially infinite. This decouples prices from the local buyers' ability to pay.

> I'm sure there was a crisis not so long ago where lots of people were betting on house prices continuing to go up for the foreseeable future which didn't end too well.

It didn't end too well for some people who were forced to sell, for whatever reason. But the vast majority of home owners just sat tight and waited for prices to recover. They did. And so far, they always have.

There are obviously going to be local variations due to external events -- floods, factory closures, gentrification and thousands of other things. However, the overall trend is clear.

> Maybe, just maybe, the problem is too many people thinking of housing as an investment?

Maybe, just maybe, the problem is that they are absolutely correct to think that way.

As you point out, if you bought a house in 2000, you've doubled your money and saved a lot on rent, and with very little risk. With interest rates at current levels, where else can you get that sort of deal? (Serious question if you have a serious answer. My shares and savings haven't beaten inflation.)

[mrow84]

> Simple supply and demand dynamics are not at work here.

I think that in this case simple supply and demand is a pretty major factor. There has been consistently limited supply of new houses in the UK (policy driven, as I understand it), and at the same time there is a healthy buy-to-let market, where the buyers are both 'big' investors and relatively ordinary people (often from older generations who rode the wave of increasing house prices and so can afford second homes).

These two factors together reduce overall supply, pushing prices up further and making younger people stay renting for longer, thus reducing their available capital even more (relatively speaking).

Governments of all stripes are utterly dis-incentivised to address the issue in any comprehensive way because driving down house prices would completely screw over a large section of the voting public (i.e. almost anyone who currently has a house).

Mortgage prices are ridiculously lower than rents in this country - you could easily pay half as much in mortgage repayments as you do in rental costs for the same home, at least in the south.