Hypothetical situation regarding dollar vs peso

bigbadwolf said:
You are missing very basic things. The same holds for the British and American property markets. That doesn't mean prices have not taken a sharp nosedive in the last two years. And why stop at '95 if you want to make this type of argument? A bit arbitrary. You could use '85, '75, or even '65. This is the kind of argument used by fund managers: our fund has increased in value 135% in the last ten years. This is a meretricious argument. What matters for financial decisions is what's happening now and what's been happening in the recent past. You may have bought a property for $5,000 fifty years ago. But with regard to a decision to keep it or sell it, you will look not at the appreciation in value over that period but what's been happening in the last one year and what your prognosis is for the next year or two.

Rising real estate prices (in real terms) involve a transfer of wealth from one group to another. In the long run such real increases (not nominal increases) tend to lead to asset bubbles and are unsustainable. I've seen two already in the UK -- one in the mid '80s and one lasting a little over a decade from 1996 to 2007. Likewise in the USA. Any time there is a steady real increase in property prices, either it follows a long period of decline and stagnation, or there is an asset value puncture ahead of it (or both).

A major chunk of the reason why rising real property prices must ultimately lead to decline and stagnation is that the rise itself depends on a new generation of suckers to be buying in at the bottom level. A kind of pyramid scheme, loosely speaking. When young people either cannot not borrow enough or cannot service the loans, when young married couple are borrowing five times joint earnings in the UK for a tiny maisonette, when people like new teachers, policemen, firefighters, social workers cannot afford to buy a property (and concomitantly even find rents beyond their means), then the writing's on the wall.
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Country A is not country B and I leave it with that
 
bigbadwolf said:
You are missing very basic things. The same holds for the British and American property markets. That doesn't mean prices have not taken a sharp nosedive in the last two years. And why stop at '95 if you want to make this type of argument? A bit arbitrary. You could use '85, '75, or even '65. This is the kind of argument used by fund managers: our fund has increased in value 135% in the last ten years.
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I used 95-05 because it's more or less a 10 year investment that I might have made. I'm not old enough to have bought before then. Most people actually have many more years invested in their house, 20, 30 or more. You still did pretty good. If you bought last year, you shouldn't be selling next year. You'll have to wait at least 10 years to see.


This is a meretricious argument. What matters for financial decisions is what's happening now and what's been happening in the recent past. You may have bought a property for $5,000 fifty years ago. But with regard to a decision to keep it or sell it, you will look not at the appreciation in value over that period but what's been happening in the last one year and what your prognosis is for the next year or two.
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Not really. Your home is not a "fund". Most people stay in their homes 10, 20, 30 years.

Rising real estate prices (in real terms) involve a transfer of wealth from one group to another. In the long run such real increases (not nominal increases) tend to lead to asset bubbles and are unsustainable. I've seen two already in the UK -- one in the mid '80s and one lasting a little over a decade from 1996 to 2007. Likewise in the USA. Any time there is a steady real increase in property prices, either it follows a long period of decline and stagnation, or there is an asset value puncture ahead of it (or both).

A major chunk of the reason why rising real property prices must ultimately lead to decline and stagnation is that the rise itself depends on a new generation of suckers to be buying in at the bottom level. A kind of pyramid scheme, loosely speaking. When young people either cannot not borrow enough or cannot service the loans, when young married couple are borrowing five times joint earnings in the UK for a tiny maisonette, when people like new teachers, policemen, firefighters, social workers cannot afford to buy a property (and concomitantly even find rents beyond their means), then the writing's on the wall.
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I don't believe everyone should own the property they live in. It's not always the best choice.

Where is the above scenario where people can't afford rents happening? Have rents gone up so much that people can no longer rent? I have not heard of this happening. Can you please send me links you might have??? That is worrying.
 
mini said:
I don't believe everyone should own the property they live in. It's not always the best choice.
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Most of the times though. I would think that a government should always work on getting as many people as people as a homeowner. It's better for the area, it's a good way to build up wealth and it gives people a good sense of security

Sometimes it's better to rent though. If you are an expat, if you are a starter, just have been married, prices are going down or if you live in political unstable country

I think the current situation in Argentina where almost a whole generation has no acces to buying a home is a disaster waiting to happen. Just wait 30-40 years when they retire. Many won't have a property like there parents had. That is going to be a disaster

In many countries in Europe it's cheaper to buy then to rent and in some countries you are plain stupid if you are there longterm and dont buy
 
BlahBlah said:
England is not Europe. There are still plenty of places in Europe where houseprices are not going down or just slowly
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I'm sorry, I misread. I thought you said England is not in Europe.

It's true that the UK is one of the most extreme examples, but prices have and are dropping over most of Europe.
 
Some a lot, some not. It all depends on where you live, what you buy and more importantly if you can afford it. The last thing is not a problem now in most of North Europe outside of the UK and Ireland
 
BlahBlah said:
Some a lot, some not. It all depends on where you live, what you buy and more importantly if you can afford it. The last thing is not a problem now in most of North Europe outside of the UK and Ireland
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This is a general and unsubstantiated assertion. Which North European countries are in "most of North Europe?"
 
harpo said:
It's true that the UK is one of the most extreme examples, but prices have and are dropping over most of Europe.
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*Shrug* -- that's what I see. Except for the case of Switzerland, given by Mini. There may be another such example or two, though I wonder.
 
BlahBlah said:
Most of the times though. I would think that a government should always work on getting as many people as people as a homeowner. It's better for the area, it's a good way to build up wealth and it gives people a good sense of security

Sometimes it's better to rent though. If you are an expat, if you are a starter, just have been married, prices are going down or if you live in political unstable country

I think the current situation in Argentina where almost a whole generation has no acces to buying a home is a disaster waiting to happen. Just wait 30-40 years when they retire. Many won't have a property like there parents had. That is going to be a disaster

In many countries in Europe it's cheaper to buy then to rent and in some countries you are plain stupid if you are there longterm and dont buy
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"I think the current situation in Argentina where almost a whole generation has no access to buying a home is a disaster waiting to happen. Just wait 30-40 years when they retire."


What about inherited wealth? The same people who might not be able to afford a house today will certainly inherit their parent´s home or homes and their other assets. Or, their grandparent´s assets. Not only in Argentina but all over the world. We are on the cusp of the biggest transfer of wealth ever seen.
 
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