16 Apr 2010, 9:03pm
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  • Priced Out – the value of houses can go down as well as up

    I bought my first house in 1989. Bad choice – the guys in the office said prices were overrated and Lawson’s boom and canning of mortgage interest relief was going to artificially inflate prices.

    I was young and knew everything, so not only did I buy the house at the top of the market, but I also took out an endowment mortgage, despite my parents warming me up to the fact there’s no point for a single bloke with no dependants that was my youthful self. That’s the advantage of being such a clever cocky young pup, you get to pay for your very own mistakes too 🙂

    So when I spin PriceOut’s calculator with my 1989 figures it doesn’t look like things are so different now!

    What amazes me as I see the children of colleagues whinge about housing is that they expect of buy a house in their early twenties.

    What’s up with that – you may need to switch jobs a couple of times first to find your vocation, and having a house round your neck could seriously hamstring your job choices of several years. Spending patterns are different too – the large debt of student loans doesn’t help new graduates get their personal finance straight as this young whistleblower reveals.

    So I feel some of their pain, but it isn’t really all the intergenerational duff legacy it’s being spun out to be – this has happened before. I had to eat a £21k loss ten years later on selling that house – getting on for a 40% loss in numerical terms, more in real terms due to inflation. It happens to other people too – but you don’t normally get people telling you they lost a packet on a house.

    Those that made money, of course, bore the pants off you in the pub about how well they did. It’s the same effect that means that mates tell you when they sold shares at a profit but keep schtum about the ones than bombed.  Nobody likes to back a loser.

    I remember feeling aggrieved and hard done by at the time that it was such a push to buy a house, especially when I was paying 15% mortgage rates for the pleasure, so perhaps this gripe is just part of the human condition. That’s not to say that there aren’t other intergenerational legacies, some of which aren’t good. However, buying a house has always been a git if you’re in your twenties, and can still be out of reach in your early thirties if you’re unlucky with the market cycle.

    There are some things to be said for some of PricedOut’s aims. We do have too many people and too few houses in the UK. Fair enough excluding the main residence from capital gains tax, but buy-to-let and second homes too? Why should property be different from any other business capital asset, after all since it is physically impossible to be two places at once there’s only a need for one CGT exemption.

    […] a whole years gross salary twice due to various life events, one of which was being a dipstick and buying a house in 1989 at the top of the […]

    […] the classic bugbear, housing. I bought my first house at 29, and it really wasn’t a good move at all. Look at my age – older than many Gen Yers are trying to get a house nowadays, it took […]

    […] Less than 20 years later, I had paid off the mortgage on the house I bought after that, despite nursing a shocking loss on the first […]

    […] on at a higher price than the market would normally set. It took me 10 years to recover from the cock-up of buying a house at a price inflated by stupid government intervention, Nigel Lawson, you know who you are. I wouldn’t do that […]

    […] few gnarly veterans do however warn that prices can go down as well as […]

    […] any debts in my 20s, and my savings went towards putting down part of a 20% deposit on a house I stupidly bought at the height of the Lawson boom. For all the good those savings did me I could have drunk it all in the Television Centre bar and […]

    […] the benefit of not having housing costs until you experience it. In my twenties I perpetrate the biggest misallocation of financial resources in my whole life by buying a house at the peak of the market, signing a mortgage […]

    […] as he gets older, or there’s a little bit of the there but for the grace of God since I screwed up with the toxic UK housing market too, though I don’t have 4 […]

    […] It’s residential housing, better known as buy to let. Now the good thing about this capital performance is that it’s generally on the up. The bad thing about it is that you can get slaughtered in it for ten years at a time. I should know, I’ve been there. […]

    […] pension in a company with a normal retirement age of 60. I’ve had rotten luck in other areas – buying my first house in the Lawson boom and writing off half of it to negative equity.  I trashed over £10k chasing momentum in the […]

    […] was accumulating assets (housing post 1999, share investment post 2004), some of it was pure waste (housing pre-1999, share investment pre 2004) and much was trashed in […]

    […] had a rough experience with negative equity early in my house owning career. This has made my vision of a house very different to that of most of my fellow Britons. I do not […]

    […] the case. I had already accumulated significant capital, unlike everybody else in Britain is seems I paid down my mortgage rather than going on holidays and buying cars with the increased house prices. And indeed lived […]

    […] the young Ermine, because I stopped borrowing money to buy consumer durables after that, with one ghastly, stupendous and horrific exception, buying a house. By staying put I passed the criteria of the first box, but only in retrospect. I […]

    […] observe that buying a house soon after that on such a high income multiple still classifies as the most stupendous personal finance mistake I have ever made, although some social trends 4 may mean income multiples need to be considered for a couple rather […]

    […] 80% mortgage in one of these pump-up-the-market fiascos in ’89 – I had 20% down and I bitterly regretted it. House prices don’t always go up. If you have only got 1/20th of the cash to buy a house and […]


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