I came across this on google the other day, what are your views or explanations about it?

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Philip Murtagh

Thanks for posting that. It certainly gives pause for thought.

I guess if what Mr Beck says is true then we're all in for armageddon. However, two points spring to mind that I am unqualified to answer. Firstly, how do those figures compare with the UK market and secondly, the phrase 'there are lies, damn lies and statistics' springs to mind? Don't forget, this guy gets paid for grabbing the attention of viewers and what better way to do that than by sensationalising a story. With the right spin, you can get data to tell you what ever you want so I'd hold on before you go leaping from the nearest multi-story car park.

No doubt Mr Pridham will be able to inject a sence of proportion into this debate.

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If you can fill the unforgiving minute
With sixty seconds worth of distance run,
Yours is the Earth and everything that's in it.

Just dropping the forum and saw this thread, cannot watch the video (I'm in a training session) but I can guess where he is coming from. If I'm taking advice from someone on property I want to know how much property they have done themselves. He seems to be more of a commentator Glenn Beck - Wikipedia, the free encyclopedia and likes to stir things up...

Here is a post I made previously on stagflation Stagflation - are we headed for it?

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Parmdeep Vadesha
Managing Director
Vadesha Properties Ltd

“the species that survived were not the most intelligent –they were the most adaptable to change” Charles Darwin

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Hi

I watched the video.

First impression: 1 minute 25 sec. This 100 line is "adjusted for inflation". What figure of inflation? The one that makes the excursion look ridiculous? I lived through the 1970s. My salary automatically went up 15% a year for 4 years and with promotions at 10% too, I felt really rich 4 years later earning more than twice my starting salary. What figure did they use for the 1970s? 17% per year. Because that is what real inflationn was between the two global oil price shocks of 1974 and 1978. Oh, by the way, we just had another one that kicked off when Iraq was invaded by the terrorists (sorry, I meant the Americans).

American houses rarely stand up for more than 50 years, so if you have an interest only mortgage, the asset will be worthless 50 years later. Only the land value remains. America has sh*t loads of it and Europe does not. So when an entire city in America goes out of favour (Buffalo, for example) you will find duplexes for $25K in 1995 and for $25K in 2010.

On the other hand, us Brits have to put up with draconian planning laws designed to squeeze more and more people into smaller and smalller properties. Did you know that only 11% of our land is developed, and 89% of it is protected from development?

Take a look at the Nationwide property price charts from the 1930s. There is a small caveat in the heading of the "inflation adjusted prices" that show the massive overbought peak of 2007. It says "adjusted for inflation at 2.9% per year. Try taking the raw data (as I did) and drawing that chart in Excel and see what happens when you put in inflation at 4% per year. That peak is just below the long term inflation adjusted average.

As with stock, bonds, precious metals and many other investments, there are two elements to the investment - the operating income and the capital value. Stocks return a gross operating income (dividend) of between 2% and 4% depending on the level of the FTSE100 and the market cycle. Right now it's about 3.8%, which means there is less expectation of short term capital growth. Gold has no operating income, in fact bullion has a negative income - you have to pay to store it. And you had to wait an awful long time since it was priced at $800 an ounce in 1980, down to $300 an ounce during the 1990s and 2000s, but it sure did take off in the last two years (to $1,900 an ounce recently) and, surprise, surprise if you back calculate today's price to either 20 or 30 years ago price you will get a range of annual return on investment that will reflect what real inflation over those years has been.

If you keep property for the long term, and you buy it at the absolute peak, you will probably return 3% a year less on that property than if you had bought it at the absolute low for the duration of the investment. since lows to highs cycle at about 10 to 12 years for property, you don't always have the luxury of waiting.

In summary, I laugh at these sort of shock videos. I have bought at trough, and I have bought at peak. The only thing that matters is that your investment can return a positive cash flow after ALL costs. That is difficult at the best of times, but it should put some sobering thoughts around no money down investments. If you can buy a flat today for £50K that you would have paid £100K for at the peak, you are probably making a good investment (I was offered one last month, but I could not justify adding it to our portfolio). But even at any price if you can't find good, stable, long term tenants, property is not a good deal at any price.

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Gerry Pridham said in his last post on this thread;

But even at any price if you can't find good, stable, long term tenants, property is not a good deal at any price.

Property investment summed up in 23 words!

The only time when purchase price is the overriding factor is if you are buying to flip. If you are buying to let ignore Gerry's advice at your peril.

Colin Parker
ONEPORTFOLIO

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