In real money, British house prices are down by 70%

As far as advocates of sound money are concerned, the UK housing market peaked in 2005. Since then it has fallen by more than 70%.

Yes, 70%. House prices are now at levels last seen in the early 1990s, at the bottom of the last bear market. The average house price is currently 25% below its average of the last 40 years.

“But, but, but,” I hear you say. “The housing market has barely fallen. The latest Nationwide and Halifax data has been showing year-on-year price rises. The crash never really came. This is insane. You’re talking rubbish.”

Am I?

House prices haven’t risen – sterling has fallen

Certainly, data from Nationwide, Halifax, Rightmove, the Land Registry and any other reputable source you care to mention, shows that house prices rose dramatically between 2005 and 2007. There was a sharp correction of perhaps as much as 20% in 2008-9. But since then the market has rallied. There are even reports that prime London property is now changing hands at record prices.

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For example, Nationwide reported an average UK house price of around £151,757 in early 2005, rising to £186,044 by October 2007. That then fell to £147,746 by February 2009. But it was back at £167,802 by last month.

However, all this data measures our housing market in our own national currency. And we all know what has happened to that.

As I said in my opening sentence, for sound money advocates, it’s a very different story. The supply of gold cannot be increased by quantitative easing. Nor is deficit spending on the current scale possible under the discipline imposed by a gold standard.

Long-time readers know I like to post the charts of mathematician Tom Fischer, now Professor of Stochastic Financial Mathematics at the University of Wuerzburg, Germany. These charts show how many ounces of gold it takes to buy the average UK house. He has recently updated them.

Here is the chart since 1968:

The average house price is now around £168,000. Gold is around £825 an ounce. So it would cost you just over 200 ounces of gold to buy the average house. That’s the same as in 1994, at the bottom of the last housing bear market.

The average house price back then however, was between £60,000 and £65,000 – one third of where it is now. That gives you an idea how much sterling has depreciated since then, and thus how savers have been robbed. You have your modern, government-sponsored system of money, credit, boom and bust to thank for that.



Special FREE report from MoneyWeek magazine: When will house prices bottom out – and how will you know?

  • Why UK property prices are going to fall 50%
  • When it will be time to get back in and buy up half price property

Interestingly, just as it does now, the average UK house cost just above 200 ounces of gold in 1970. Back then, a sterling buyer would pay £4,874 for the average house. If ever you needed an example of how gold maintains its purchasing power over extended periods, while that of fiat currencies evaporates, there you have it.

How low will the house price / gold ratio go?

The cost in gold of the average house over the past 40 years is 275 ounces. We’re already below that. But that doesn’t mean we can’t go any lower. At the peak of the market in 2005, the average UK house cost an unprecedented 700 ounces. In London it was almost 1,100 ounces. At the bottom of the market in 1980, when gold spiked to $850 an ounce, the average UK home cost just 50 ounces. It also spent several years around the 50 ounce mark during the 1930s.

Fischer is convinced we’re going back to 50 ounces for the average UK home. I have a slightly more sober, long-term target of 100 ounces, although I wouldn’t rule out 50. Once the ratio hits 100, I’ll look at rolling my portfolio out of gold and back into housing.

I’m confident we’ll get there within the next three years. Gold need only rise by a third from here (from £825 to £1,100 an ounce), and house prices fall by a third (£168,000 to £110,000), to give you a 100:1 ratio. Both look very possible given the underlying fundamentals.

Or, as is more likely in my view, gold could double from here to £1,650 per ounce, while nominal house prices stay the same. I’m sure those up top would rather see this latter scenario, with nominal house prices remaining unchanged. People will believe that the so-called value of their houses is unaffected, so they won’t be too upset. All the while the value of their money is destroyed. But we have so few savers, who cares about that? As one of my correspondents puts it, “nominal house prices remain unchanged, so the muppets are happy”.

It’s all an example of confiscation or appropriation through the stealthiest tax of all – the inflation tax. And right now, it’s a policy that’s being pursued worldwide more vigorously than ever before. As governments try to inflate away their own and everybody else’s debts, we’ve already seen artificially low interest rates, quantitative easing, and multiple bail-outs. All we need now is another deflationary bust – that would get them really printing.

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122 Responses

  1. 26/05/2010, Bob Roberts wrote

    Ah, so when Moneyweek has been telling us all not to buy houses because they are going to fall what you really meant was that we all should speculate in gold if we wanted to buy a house?

    Meanwhile, back in the real World this article is just ludicrous as the vast majority of people have their money/savings in Sterling and house prices simply have no fallen anywhere near the levels that Moneyweek has been predicting for years.

    Frankly, this sounds like depseration and clutching at straws. I see it as an admission by Moneyweek that house prices simply are not going to fall in the ways you have been saying.

  2. 26/05/2010, Toby wrote

    But who’s to say gold isn’t in a bubble right now?

  3. 26/05/2010, Richard wrote

    What about the price of houses in tea or digestive biscuits?

    Nonsensical article. Why not pick any other random volatile commodity you like to explore the relationship / lack thereof with house prices?

  4. 26/05/2010, Keith P wrote

    I thought the traditional commodity by which to measure the value of other items was Mars Bars. Spread your bets, buy gold, houses and mars bars.

  5. 26/05/2010, Steve P wrote

    Muppets? The general public may not be the sophisticated monetry whizz kids like you and your self regarding friends, but it is poor journalism to sneer. Most people get a limited amount of financial information from official sources, they do not have an inside track to the financial world. If they had access to the information you do, no they would not be happy. But houses are bought by the majority as a home to bring up their families. You see everything in terms of profits, others see things in terms of rewards.

  6. 26/05/2010, Salazar wrote

    Money Morning’s angle on the UK economy is relentlessly bleak. Bad news is good news. Everybody knows that UK house values (and the prices of UK goods in general) have declined drastically in euro and dollar terms and spectacularly against the price of gold. But most of us are not buying or selling our houses in euros, dollars or gold. We’re buying and selling in sterling. And within the UK economy rising house prices relative to low savings rates make housing a good investment. The article focuses on the high and rising price of gold but gold (a pretty useless metal except to jewellers) is attractive only because currencies aren’t and because expectations about world economic recovery are low. This won’t last – nothing does in economics.

  7. 26/05/2010, Jabbar wrote

    I wish this article was more meaningful! We donot live by Gold, or do not value our properties against gold. We simply value things including properties against our cost of living. Gold is mostly a useless metal. It can shine, but it cannot store real values. Prices of gold goes up and down not because of its store value but becasue of fear and speculations against supply and demand in the market place. The truth is that one day when correct realisation reappears, the bottom will fall off.

  8. 26/05/2010, Bob Roberts wrote

    I have been thinking of cancelling my Moneyweek subscription for some months now but this article is the final straw.

    Between MSW buying a house last week, after years of articles about the coming decline in house prices, and now a ludicrous statement that UK house prices are cheaper as long as you got rid of all your sterling and plonked it in speculative gold, I am beginning to think that I am been taken for a mug.

    You need to get your act together MW!

  9. 26/05/2010, Mike Spenser wrote

    Great article Dom, But some of them lately are by Phil Space.

  10. 26/05/2010, Edward wrote

    Really poor effort. Would have made more sense to overlay the price of gold relative to GBP during the time in question, so at least the relationship between the two “currencies” would be apparent. I don’t have the data in front of me, but if my recollection is correct gold (at least in USD terms) declined at a steady rate until the early 2000′s (i.e. until Gordon dumped our gold…) and has rallied strongly over the last 5 years, as GBP has declined.

    That being the case, of course you are going to see a sharp decline in the relative price of a (price falling/constant) GBP denominated asset.

  11. 26/05/2010, silvertothemoon wrote

    Fantastic article and well written.

    Wake up and smell the coffee, people. You are being robbed by inflation.

    This is the financial equivalent of a leaking fuel tank on your car and is eroding away you wealth. Fix the leak.

    Buy Gold, Buy Silver.

    Don’t let inflation tax take away your hard earned wealth.

  12. 26/05/2010, pjd8175 wrote

    Whilst this article is academically of interest – it speaks more of the value of gold (and the bubble in Gold prices), a specialist investment class, which has little bearing on the real lives of the man on the street.

    The reality for us “muppets” is that we earn and save in pounds, and have little choice in this matter – and the price of houses by most historic earnings multiples and comparisons of debt levels/availability, is 20%+ overvalued.

    Surely the real debate here, is that the machine of agents/ advisors who have a vested interest in perpetuating the ever increasing house price – who have gone largely unchallenged over the years, by consumers ill-equipped to agrgue against them. The volume of house sales remains low, so any trend seen over last 2-3yrs is rather notional – when interest rates increase and volumes are back to normal – the real clmate of house prices may become apparent.

  13. 26/05/2010, nick costin wrote

    Yes Richard, many would prefer to invest directly in tea and / or digestive biscuits. Trouble is, they have quite a short shelf life, plus the £10000 worth of tea would require, roughly, the entire volume of a single garage.

    ….. and yes, gold is in a bubble now……… just as houses were when they were a third of the price they are now.

  14. 26/05/2010, stocks72 wrote

    I agree with Richards and Bobs comments, this is really a nonsensical article.
    Dominic, what about covering more in your articles the BRIC countries ?? what about Brazil ???

  15. 26/05/2010, Astounded at the reaction wrote

    Amazingly this article is absolutely correct and quite possibly genuinely meant as a warning.

    I couldn’t care less about house prices (I’ve no particular axe to grind either way) as everything reverts to the mean eventually – yes everything including houses. And are they not supposed to be for living in.?

    Governments all over the world are printing vast quantities of fiat currency and piling on mountains of debt and that means it’s a certainty gold will increase in value.

    Your timing’s a bit out Dominic but thanks for the sound advice nevertheless.

  16. 26/05/2010, LIBER wrote

    More interestingly would be to see house price to earnings ratio.

  17. 26/05/2010, Ed wrote

    Dominic, interesting analysis from an economics point of view but not exactly practical information as many readers here have already expressed unless we all emerge from this crisis by reverting back to gold back notes. A history lesson perhaps.

  18. 26/05/2010, Roger wrote

    According to this, if you had gold, sell them and buy houses, push all these young people to live in rubber sleeping tubes rather than houses. What a nonsense.

    Housing should be measured against income.

    However, it does reveal something about the British pound. If you moved your pounds into Russian Rubbles, Chinese Yuan or even USD a few years ago, you must feel much richer today. Is this is a long term thing we do not know.

  19. 26/05/2010, dogfm wrote

    Great perspective – looking at UK house prices from a global perspective, do you have any data you can share on US, China & Australia.
    Seeing as how US mortgage lending set the latest crisis off (perhaps) data on the Septic Tanks would be good.
    As China is trying to coll its property speculators it would be interesting to know whats going on there too

  20. 26/05/2010, pjd8175 wrote

    Whilst I agree houses are for living in, and we should measure our analysis of their price with this in mind – we should nevertheless not be thinking of un-necessarily beggaring ourselves for the next 25yrs by paying too much for them now – especially as any increase in interest rates from here will be exaggerated by their current historic low levels. Are we in a temporary period of house price exuberance before the realities of rising interest rates, capital gains tax reform, low real yields, wages/employment, illiquidity/transaction costs are remembered…. and we ceased to be sheltered from them by the Govt policy of the recessionary 3 yrs…More pressing questions than gold price

  21. 26/05/2010, Smith wrote

    Unlike some of the other posts, I think it’s perfectly valid to look at house prices in terms of gold. Gold is a far better long term measure of value than paper notes issued by central banks. It’s really quite surprising that so many people are still fooled by the steady confiscation of wealth by inflation.

  22. 26/05/2010, Gary wrote

    Sorry, this is utter tosh. What you mean is that for your average oligarch that has his or her wealth in gold then the rise in the value of gold means that they can now buy more houses.

    But for the rest of us mere mortals that live, earn and spend in the UK in pounds sterling, houses are still utterly and ridiculously overpriced.

    I just hope nobody reading your article is dumb enough to think that this is a good time to buy a house as a result of your analysis. Really, I’d have expected this kind of piffle from the Daily Express, not MoneyWeek.

  23. 26/05/2010, Neil wrote

    Very interesting article – you don’t get a more macro view than this!

  24. 26/05/2010, Peter wrote

    This is a timely reminder that for many people, all it it needs is a growing list of zeros on the end of their bank balances for them to think they are getting richer.

    Sadly governments know this and have set economic policy accordingly, stealthily destroying people’s savings.

    Thinking of the value of real goods in gold is always a good way of seeing through this dishonesty (which is why most politicians hate gold so much!).

  25. 26/05/2010, TCH wrote

    I agree with Bob Roberts, a preposterous article – who in their right mind would effectively advise to put all their savings into gold, the ‘barbarous relic’ (yes it has had a good run recently but for 20-odd years from the early 80′s onwards it fell in nominal terms). Mr. Frisby’s articles are consistently deranged and he single-handedly brings down the credibility of MoneyWeek as a whole. I too like Bob Roberts had been wobbling on whether to cancel my MoneyWeek subscription and this article has therefore done me a favour in making my mind up, “well done, Mr. Frisby and keep sneering at us proles and with a little luck your whole readership will get the message soon”.

  26. 26/05/2010, pjd8175 wrote

    Compared to the last major period where Govt’s used inflation to price down their debt positions, in the 1970s – The difference this time round is that wages/employment levels are not following inflation trend (or even closely)…who’d bother being a saver ?

  27. 26/05/2010, cooldude wrote

    Another very interesting article from Dominic. Having followed Dominic’s articles for a few years I know he is not trying to be smart or clever at other people’s misfortunes, he is simply pointing out that gold (and silver) are carrying out their traditional roles as reliable stores of value. What is really happening is that all unbacked currencies, not just Sterling, are losing value in relation to Gold. This is due to the worldwide exercise in moneyprinting that is currently underway across the globe which naturally reduces the value of these currencies in relation to gold whose supply increases at a rate of 1.5% per annum. Rather than get upset I would urge people to look into the history of money and begin accumulating the only currency which has passed the test of time. It’s never too late too start this and, with Harrod’s selling over the counter, a fairly simple matter.

  28. 26/05/2010, Unclebob wrote

    Great article

    Spot an analysis of how the country’s finances have been destroyed over the last 15 years and how that wool is effectively pulled over the average voters eyes.

    Reading between the lines there definitely seems a political undercurrent to the comments after all how many ‘men in the street’ read your column.

    I am guessing this is uncomfortable reading for some, may even be as an undeniable a truth as the “there is no money left” note.

    Especially as there is the pain to come to pay for vote buying party we still cannot afford. Thanks gordo…

  29. 26/05/2010, Unclebob wrote

    As for the ‘bubble’ arguments.

    In case you have not worked it out all investments are ‘bubbles’ based on supply and demand within the market.

    There are no exceptions to this, but gold is unique in having almost universal demand and a huge historical context re the worth of money.

    That makes it an ideal standard to compare house prices against.

    As for earnings, sorry poster but you don’t get it, if you compare earnings to gold you get the same result, unpleasant that may be but against gold we are earning 70% less than before the crisis.

    You can always sell your house rent and buy gold after all.

    Have fun with your investing.

  30. 26/05/2010, Chris wrote

    Thansk for the update. I sold my gold and bought a house in Feb 09 after seeing a 100% increase in my investment’s value in pounds. I could have held on as Dominic points out that the ratio will continue down for some time but I really wanted a house. I am no financial whizz and my savings were made only just enough for the deposit by the gains I achieved with gold so this clearly is something anyone with a bit of money to save could do instead of it sitting in a useless savings account.
    Dominic’s advise among others helped me double my money in a two year period and it was the chart he shows here that directly informed that choice since my savings were always going towards a home. Without articles like this I may never have made that connection and would still be sat on the same amount of money which would be worth less and not enough for a deposit.
    Thanks Dominic!

  31. 26/05/2010, Simon wrote

    So all I need to do is convince my work to pay me in gold and a mortgage lender to lend to me in gold and then I’ll be fine.

    Excellent.

    Joking aside, this is an interesting piece, but surely the problem is that one speculative bubble, the gold price, has overtaken the previous speculative bubble, house prices.

    There’s one big problem, which is you can’t borrow from the bank with leverage to buy gold instead of a house and pay it back over 25 years.

    And in all honesty, while it would be very useful and nice to have £350,000 worth of gold, you can’t live in it and it doesn’t even pay an income, so you can’t use it to pay your rent.

  32. 26/05/2010, Unclebob wrote

    Simon

    choosing when to buy into a speculative bubble and when to sell out of a speculative bubble is investing.

    If you can buy near the bottom and sell near the top then you will be insanely rich as that is the difficult bit.

    Light on when the bubbles exist, what drives them and ways to assess and look at them is what investment analysis is all about.

    As for being paid in gold and your mortgage lender lending in gold, well back in the day that was what happened.

    Now money is backed by the governments and that raises a whole level of complexity beyond the comments section of MoneyWeek

    Good luck to all.

  33. 26/05/2010, Danielle wrote

    For the people that are making silly remarks such as “let’s look at the ratio of houses to mars bars” I guess the article proves its point that the average consumer is unintelligent with the world of finance. Having said that I do think that all indicators should be considered, such as salary to house price ratio. currency, but also the real cost of gold taking inflation into account. I feel that the government will desperately try to contain house prices and by bailing out the banks with tax payers money they have done just that. History does repeat itself and I fear it will again but it might be worth baring in mind that some ratios can and will suddenly break off to new and unchartered territory. Watch this space for that….My daughter is 21 this year. I fear for her future. Maybe we should be like Germany and rent houses or take out 100 year mortgages. I do think cash will be king once again….. Either that or we will go back to trading salt.

  34. 26/05/2010, Edith, London wrote

    unfortunately we all need to live in a flat or a house. Would be great if we could all live in a gold bar!

  35. 26/05/2010, tb wrote

    Pt1.. one of those ones where the response is; yeah, so the value gold has rocketed lately. I s’pose a gold bug would define assets being priced in gold as being the only ‘real’ measure of value, but kind of a moot point as UK property values haven’t gone down anything like 70% relative to net household income. UK property is priced and leveraged in sterling, owed for the most part by sterling income earners, so not sure what relevance the rocketing up of another asset has here. The value & perceived value of a nation’s fiat currency can of course be a very touchy subject, and not without good reason — but returning to a gold standard? (which I think this article may be angling at).

  36. 26/05/2010, tb wrote

    Pt 2.. If you are a person out there who is early in the process of thinking that a gold standard may be a good idea, please – for your own sanity – read about & understand the 1920s experience, as this may save you from falling down the cranky road to dogmatism (and remember, governments would be just as able to break out of a gold standard as they would be to run roughshod over a fiat currency).

  37. 26/05/2010, Not My Voice wrote

    At first, i didn’t agree as it to implied the Prof Rodrigues ‘Bubble’ had ended. However;

    “…we’re going back to 50 ounces for the average UK home. I have a slightly more sober, long-term target of 100 ounces, although I wouldn’t rule out 50.
    And
    “.. it would cost you just over 200 ounces of gold to buy the average house.”

    In other words, the house prices could halve or shrink to a quarter of what they are now. Now THAT is more in line with Rodrigues.

    Houses are bought with pounds. the average working person, will have a mortgage, in sterling – not gold. As redundancies and unemployment continue, there will be less sterling to buy houses.

    Only a certain type of person has enough disposable income or cash to ‘invest’ in gold. – not the typical working person in Britain. Those thinking in terms of gold, will already be well off and are not the average buyer or FTB. There is little merit to discuss the house prices in gold when thinking in a recession hit economy.

  38. 26/05/2010, Alex wrote

    As others have said a totally pointless article, you might as well calculate the number of loaves of bread or jaffa cakes it would take to buy a house over the past 40 years, everything has inflated, including wages.

    Given that you are not Dr Who and so can’t go back in time to 1970 and buy a house then using your wages today I fail to see much of a point in your article.

    Yes MW, there has been inflation over the past 40 years……stunning insight.

  39. 26/05/2010, 51ck-6-51x wrote

    Domnic,

    As much as I am with you in believing houses are way over-valued in sterling, for a REAL valuation how about valuing in units of labour (after all that is the base of how one accumulates wealth) – if you do you will see that house prices have hardly even stumbled so far.

    Gold may do well as a long term measure but it’s price to volatility relationship makes it fairly useless as a short term measure – for gold an exponentially weighted moving average would be desirable in your analysis, unfortunately that would also result in a delay in the information provided, probably back a few years – maybe even to 2005!

  40. 26/05/2010, Frank wrote

    Population growing,not enough houses,will property lose its value?Erm let me think about this

  41. 26/05/2010, littledavesab wrote

    Have MW thought of doing an article on the options for UK home owners who want to HEDGE against the possibility of a drop in house prices – that would be a drop in GBP terms I guess rather than in currencies? I get for currencies just buy gold + possibly some silver.

    Ps Simon – post 31 re Nope you do not want to BORROW in gold you want to borrow in GBP or some other deflating paper currency. If you borrow in a hard currency you will end up like Greece – fried!

  42. 26/05/2010, sam wrote

    when more people agree with the article than make jokes about houses priced in mars bars*. Then gold will be in a bubble.

    If someone really wants to do it, I’m pretty confident you will find that house prices are on the way down and Mars bars are about to get much more expensive.

    I do think that the article is badly put together but it does make sense. The problem is also that most people see their houses as a savings account and not a consumer item. As a saving/investment. property is below average.

  43. 26/05/2010, pgjeh wrote

    Although a person living in Britain has little choice but to be paid in sterling and buy goods and services in sterling, he or she does have a choice in how they invest their savings. Leaving the money in the bank is not without risk or consequence. Property, like currency, is one of the 5 major markets in which someone can invest and it can be priced in any way the investor/speculator wishes. Profit comes from the accurate prediction of how different, compared asset prices change. Sterling has a relevance in the UK, because as well as being a speculative market in its own right, it is the medium through which investments is made.

  44. 26/05/2010, DC wrote

    If the average house price measured in gold is the same as it was in the 1970′s, does that mean that you invested in gold the real value of that investment unchanged?

    How does this compare to an investment in equities with dividends reinvested for 40 years?

    What would the cost have been for storing gold over this time?

  45. 26/05/2010, Acton Boy wrote

    Hmmm … So much negative comment on this article, it makes me restless and itchy to buy some more gold, just from the contrarian point of view!

    Will I be buying into a speculative bubble ? I think yes, but it has a long way to go yet.

    If in a few years Frisby comes out with an artical about selling gold and it gets a similar negative reaction, then will be the time to think about selling and looking for a new home for my money.

    Thanks to everyone for the comments, it’s really helped.

  46. 26/05/2010, redmond wrote

    as the teacher would say `must do better`

  47. 26/05/2010, Simon wrote

    The gold bubble has got further to go before it pops, but it is a bubble and I’m always amused by the suggestion that it is the best bubble to get into above all others.

    If goldbugs concede that gold is in a bubble, isn’t advocating getting into gold now similar to advocating getting into UK property in 2004? (Both would deliver say another three years of rises thanks to herd behaviour, but judging the peak is tricky.)

    Intriguingly, can you also spin this chart round and say that if you had bought 200 ounces of gold for the majority of this period you would not have been able to buy an average house with it, whereas the average house could have more often than not bought you more than 200 ounces of gold – thus making the house overall the better investment?

  48. 26/05/2010, thelostdecade wrote

    Dominic, when did governments commence this inflation tax strategy? Your conclusion and history suggests it was relatively recently, but the chart suggests otherwise.

  49. 26/05/2010, JoeK wrote

    Born and raised in the UK but now live in Canada. I sold all my UK assets, house included, in 2006.

    From my perspective, this analysis is perfectly fine. If I were to move back to the UK tomorrow I could afford 35-45% more for a property than when I left. That’s simply a reflection of how the world sees the relative value of UK assets.

    The key term here is relative.

    This is important because each pound sterling of income is related to the amount of work you put in. Since your currency is worth less, you now have to work 25 to 35% harder to have the same purchasing power as you had a few years ago, relative to the rest of the world. I don’t know about you, but that sounds to me like a significant reduction in standard of living. I’m surprised that so many posters seem happy with that state of affairs.

  50. 26/05/2010, Confused wrote

    Try as I might, I really am struggling to see the point of this article! True there is always a rush to gold in tough times, and as a result, as has been pointed out, currencies weaken. What is not taken into consideration here though is that the gold market is global. The UK house price market is not. When you see the likes of Soros spouting on about gold going into a bubble, and indirectly implying that he is investing heavily, gold prices rise. Joe blogs buys a house, it doesn’t make any difference.

  51. 26/05/2010, First time buyer wrote

    This is all great but what does it us about where house prices in terms of sterling are going. As a first time buyer should I be rushing out to buy a house because they are so cheap in relation to gold? Does this mean that other downward pressures on house price, ie. income to price ratio, interest rates and unemployment will have no effect because the house price to gold ratio is so low?

  52. 26/05/2010, Nick wrote

    Excellent article Dominic and the precise truth. However the truth is sometimes unpalatable as can be deduced from some of the caustic comments above.

    Listen up folks! Why do we pay to read MW? It is for fundamental advice on wealth retention and guidance for profit opportunities. Using this premise, Mr Frisby is carrying out his fiduciary obligations to the letter.

    Historical perspectives are useful particularly when the process of robbing us all by inflating away value in fiat currency is happening BEFORE OUR VERY EYES.

    If you only take one thing from MW in the next 3-5 years, buy gold and silver and you will protect yourself and your family from a poorer future.

  53. 26/05/2010, jj wrote

    Here in the U.S. all govt incentives are given to housing.Meanwhile,factories close and jobs go overseas.So,we have plenty of houses with no jobs so citizens can afford them.Wish Obama and others in govt didn’t think housing buyers were the good guys and stock buyers capitalist pigs.

  54. 26/05/2010, thelostdecade wrote

    JoeK – from an international perspective the jist of this article indeed has some relevance, in fact you could reach the same conclusion with a number of different fiat currencies. The use of gold and property merely creates confusion where there should be none.

  55. 26/05/2010, Mars Bar wrote

    I think Dom has done it this time this must be to most commented article on MW for a long time and all for the wrong reasons, when will MW just admit they got the housing thing wrong rather than trying to justify it in other terms to the ridicule of Mars bars and Jaffa cakes :) There is something call a stoploss I think you have gone way past yours…

  56. 26/05/2010, Notanewmember wrote

    The truth is jeered and shunned.

    Dominic is someone who’s not “hyper needing to be liked.”
    (James “LUCKY” Dines)

    A major contrarian indicator.

  57. 26/05/2010, vs-trader.blogspot.com wrote

    Similar chart could have been produced by comparing the house price in terms of Google, Apple or even Microsoft Share and the message would have been that house prices as x% lower compared to Google/Apple or Microsoft.

    That would be moronic won’t it?

    However in the moronic comparison of house prices with price of Gold (or even other assets) the message is simple. Any perceived rise in value is actually an illusion.

    It can also point out that “investing” in property may not be such a sound investment in any case as the case is made out to be. If the value of property is going up simply because the currency is falling in real terms compared to Gold, then may be it is a better investment to short the currency – especially when a lot of future earnings will be in the currency which is falling in value.

    And the only stable way of shorting the currency is to buy Gold (or other hard assets).

    That does not imply you should sell every thing and buy a ton of Gold (if you can).

  58. 26/05/2010, Howard wrote

    I don’t understand why people are suggesting that MW have got it wrong on house prices? I can only assume you are the ones with a large mortgage and a public sector job who believe this new Con-Dem government isn’t going to make large cuts – everything returns to its long term average and house prices look to have a long fall ahead to reach that.

    At Frank in post #40; What housing shortage? If you’re short of them where you are then come to Leeds where there’s a spare few hundred.

  59. 26/05/2010, Daniel A. wrote

    Like many here, I thought this article was so ridiculus and stupid as to be beyond the pale. From a simplic economic perspective Dominic is correct, but most of us live in the real world with savings and not sitting on a pile of Kuggarands under our mattresses.

    In my view, the whole capitalist system is on the verge of collapse. The problem is one of insolvency. Bill Bonner is right there. However, the economic solution, i.e. slash spending, cut jobs, let reposessions take their course, will lead to a social crisis and that is what the world governments fear. If, as is possible, the dollar, euro and pound collapse, then civilisation as we know it goes too. Gold may be the winner, but it is a pyrrhic victory when society unravels and civil unrest ensues.

  60. 26/05/2010, Ken wrote

    When Harold Wilson made his pound in your pocket comment in relation to his devaluation of the pound he was widely ridiculed for trying to dupe the country.
    How depressing, 40-odd years later, that now even a large part of the readership of this sort of financial website apparently would go along with Wilson’s lie.
    Hope to see plenty more challenging articles like this on the MW website.

  61. 26/05/2010, Notanewmember wrote

    “If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

    -Joseph Goebbels

  62. 26/05/2010, Notanewmember wrote

    The Big Lie – There is low inflation!

  63. 26/05/2010, Tony wrote

    All well and gooid to compare gold to an investment property bought to let. Nevertheless no cmment about rental return, overheads such as maintenance and transaction costs. Despite all these costs a property can generate a return over time. Alternatively one requires a roof over their heads. If you sold the family home then you would need to pay rent and finance that outflow until the gold investment paid off.
    The article is searching for news to fill a void.

  64. 26/05/2010, Shocked wrote

    I am shocked at the stupidity of some of the comments on here. For example, one person repeatedly saying he is letting his MW subscription go because of this. Well, what was the point in having it, if he didn’t read the magazine? Which he clearly hasn’t otherwise he would display such ignorance about gold. And if you measured housing in Mars Bars then you would see that house prices in mars bars have not gone up by as much as they have in pounds, because the fall in the purchasing power of sterling – which is the point of the article. Mars Bars cost about 5p in the 70s . They now cost about 50 or 60p. I know Mars bars are a little bit larger than they used to be , but that is still a 1000% rise. Gold, however, buys you as much Mars Bar as it it did in the 70s. We have no choice but to use sterling, yes, but nobody questions what the government has done to our money, as Rothbard says, and they should. Muppets, rise up and revolt.

  65. 26/05/2010, Michael wrote

    Far out! Another way of interpreting the data is that gold is now totally out of control. Don’t forget, at the fundamental level a house is useful (& so of intrinsic value) to a human. Gold is not. Not sure about the whole gold vending machine thing. All sounds a bit “.com’esque” to me. PHAU up 25% in the last 3 mnths? Phew! Personally, I sold last week. Sure gold might edge higher but MW is a mag about investment, right, not speculation? Anyway, given this article takes us into the world of fantasy, remember when fur was trendy/valuable? Then one day some glitterati turned against it, claiming its husbandry was unsavoury. Only takes a few of those with the media’s ear to take a dislike to cyanide and some of the other environmentally toxic agents synonymous with gold extraction & who knows what might happen? Think the big men are above shorting the thing then paying a few glitterati to go to work? Gold has no intrinsic value, is risky and currently trades at record prices. Go figure.

  66. 26/05/2010, silvertothemoon wrote

    Lots of negativity above, probably from people who have just bought property and refuse to accept that they have made a huge mistake (financially).

    We are all so used to inflation, that we forget that it is there.
    I’m earning more money now than i’ve ever earned in the past, yet the money i earn vanishes quickly due to the increased cost of basic essentials.My money just vanishes, as if by magic! That ‘magic’ is inflation (the ultimate stealth tax)

    Gold and Silver in physical form are the best hedge against HyperInflation and Fraudulent Financial Activities by the Banks.

    Gold is and always will be Stable in the long term. It has been proven throughout history. Fiat currency and Property are unstable, due to inflation. It is proven above, but only those with an open mind can see it….
    Why bother to subscribe to Moneyweek, if you dispute the advice given by experts?

    Well done Moneyweek. Keep up the good work. :D

  67. 27/05/2010, TC wrote

    All this talk’s making me hungry.

    Now where’s that mars bar…

  68. 27/05/2010, Nicky Boy wrote

    I think the people who are criticising this article are doing so on one massively valid point which is this;

    There does not need to be ANY patterned correlation between gold and house prices in the UK. In other words just because gold carries on appreciating compared to the average house price there is no indication you can get from this on when to buy a house. Unless this is made clearer this article, IMO, does not make any sense. Hence the mars bar example from other readers…

    or am I missing something?!

  69. 27/05/2010, confused... wrote

    I have been following moneyweek for the last 2 to 3 years so… i have kept away from buying a property based on the advice in moneyweek and other reports.. With this article i am not sure what the author is suggesting – is it right time to buy or to wait… I am not against the analysis, but the lack of clarity for the readers on the delivered message…..

  70. 27/05/2010, Andrew Wise wrote

    Should’ve sold my house in 2008 and started building a hut out of gold bullions!

  71. 27/05/2010, Goldfinger wrote

    When everyone is talking about investing in gold is it really the right time to invest in it?

  72. 27/05/2010, Stephan wrote

    To all the MW apologists: Few here would dispute the fact that property is a poor investment right now. They aren’t disagreeing with Dominic because they’ve just sank all their money into property, and “don’t want to hear the truth” – it’s because measuring property against gold is fairly pointless.

    Yes – gold has appreciated against Sterling (and thus all assets held in Sterling), and should continue to prove more resilient than fiat currencies. But on a UK level, house prices are still massively overpriced relative to household wealth, income, etc. Gold doesn’t enter the picture here – and the appreciation of gold against house prices does nothing to make housing in the UK more affordable to British families. The asset class itself hasn’t really been corrected at all. Which does lead you to wonder when (if?) it will.

  73. 27/05/2010, Mickey Mouse wrote

    Dominic Frisby would sell gold to his granny on her death-bed.

  74. 27/05/2010, Alex wrote

    “Mars Bars cost about 5p in the 70s . They now cost about 50 or 60p. I know Mars bars are a little bit larger than they used to be , but that is still a 1000% rise. Gold, however, buys you as much Mars Bar as it it did in the 70s”

    …..hmm okay, maybe we should be valuing houses in terms of Eggs? I can’t see that egg technology has moved on much, it’s still one egg per hen per day, whereas Mars Bars have probably depreciated due to better production techniques.

  75. 27/05/2010, NickT wrote

    I think this is a good article because it shows a macro-view, and highlights the perils of a falling currency. As some one who has never bought a house, (my job entitles me to subsidized rent) my miserable “house” savings have suffered – except for the “gamble” on buying physical gold in 2007. Thank you MoneyWeek.

    I recall Mr King commenting that houses seemed over-priced by any measure and I wonder if he included measuring house-prices against gold.

    Thanks for the thought-provoking article.

  76. 28/05/2010, We buy all houses wrote

    Buying a house is all about comparison. In order to compare homes it is wise to have a system. Most likely, you have narrowed down your search to homes similar in price.

  77. 28/05/2010, Kieran O'Donnell wrote

    “…Mars Bars or digestive biscuits?”

    Because they go stale and lost thier value in days.

    “Gols is a useless metal”

    Say that to Silicon Valley engineers or dentists, or even central banks, because they keep their reserves in deckchairs and umbrellas.
    Gols has no value? Say that to the millions on Zimbabweans who ended up having to buy food and essentials in gold, or perhaps the Germans after WW2 when the people with Gold kept their savings intact, whilst those with it in banks and cash lost everything. Or perhaps the Argentinians in 1999-2002 when the banks were shut and no-one could get at their money, or the North Koreans who, just a few months ago, woke up monday morning to be told by the Government to “drop two zeros off their savings and exchange old notes for new ones”.

    The truth is, you really are all muppets, and you’ll only realise that fact when it’s too late.

  78. 28/05/2010, Jamie wrote

    Reckless lending by the banks has fuelled this property bubble to the verge of sovereign debt default, as countries attempt to prevent chaos by bailing out financial intuitions exposed to toxic ‘top-of-the-market’ vehicles such as mortgage-backed securities.

    Watch LIBOR and bond rates in PIIGS countries – Greece, Spain, Portugal etc – continue to rise as no-one has the appetite to take on the risk of such governments debt without a large premium.
    Gold will return to its true role as a inflation-proof ‘pure currency’ to which one turns in times of financial instability as a store of wealth. Property will return to its true role as a form of shelter rather than speculative punt for investors.

    Houses priced in GBP are a poor measure of true worth, as it all depends on how much cash the BoE quantitatively-eases, and thus government intervention, but priced in inflation-proof gold they are only going down.

    Excellent article.

  79. 29/05/2010, Aussie wrote

    You blokes should consider a real investment buy a house in Australia or any property over here they just never go down and the aussie dollar she’s just cookin’ along in 12 months she went from 60 us cents to 93 cents struck a snag last week dropped to 81 cents nothin’ to worry about good oportunity for the boys to jump in! Gold! you are better off buying Aussie gold miners there’s more kick in them or any Aussie miner and here you only pay tax on your minning investments if you make a “Super Profit”. Good Luck All.

  80. 29/05/2010, kiwichick wrote

    a) gold production globally peaked 10 years ago
    b) oil production has not increased since the 4th 1/4 2004
    c) oil production from the north sea peaked 10 years ago and is constantly declining
    d) in the last great depression the human population was 2 billion
    e) the sustainable population @ average western standards of living is 1 billion and is constantly falling

  81. 29/05/2010, Ian Chapple wrote

    The basis of the problem is monetary policy, low interest rates and printing money, make debt repayment easy. We are in a huge world experiment in which savers are being penalised and borrowers rewarded. This is what is propping up house prices. They will revert to the mean (3-4 times average income) when interest rates do the same. Gold is rising, priced in all currencies because of the fear of long term inflation. The coincidence of these two factors and their relative timings determine how things will play out.
    Dominic is right, buy gold now if you do not want to lose your savings, but watch interest rates and move back into houses when they start to rise.

  82. 29/05/2010, NVP wrote

    buy a house made of gold and you hedge your position (?)

    nice article and looks like it served its purpose

    NVP

  83. 29/05/2010, anothernick wrote

    Firstly, thank you Dominic for the sound and very, profitable advice.
    It was actually my strong mistrust of government that caused me to first buy gold on the 7/7/05.
    I think I took out my subscription to Money week Dec that same year. It was MWs advise that gave me the confidence to add to my hoard on the dips in 2006. But it was Dominic,s fantastic UK house/gold chart that got me to sell my property in June 06 and then the 2nd flat in July 07. Yes at the peak in UK house prices. I left the UK sone after.
    I currently live in southern Japan. I,ve been looking at building plots in large towns at government auctions for cash. Bye something when nobody wants it. Another MW recommend.
    Personally I,ve given up trying to get people to see the merits of bullion, gold or silver. You either get it or you don,t.
    Muppets as far as the eye can see. Just don,t be one of the muppets at the end of the queue outside the bullion dealers on 21/12/12.

  84. 29/05/2010, Bronco Bill wrote

    Micky Mouse said “Dominic Frisby would sell gold to his granny on her death-bed”. I am sure Dominic has more sense than that and will not be selling his gold yet to anyone, granny or not.

    I believe the Money Week magazine is excellent value for money for those who take the time to understand what is being said. We can all hope for the best, but it may help to prepare you should the worst happens.

  85. 30/05/2010, Amazed wrote

    Never knew there were so many ostriches in the U.K.

    But to be fair if I had a 500,000 pound mortgage and therefore no savings to invest in gold, I would be sticking my head in the sand too.

  86. 30/05/2010, James Hakansson wrote

    I do not understand the sarcastic comments above.

    Every one take a deep breath…. relax…..

    It’s very simple, if you have spare cash put some of it in to gold.

    If you want to buy a home, don’t. Wait. Be patient.

    Wait until the UK property market has really bottomed out and has started to climb again before buying.

    Keep hold of your gold until it well and truly falls below its 90 day moving average then sell.

    If it turns out to be a blip and begins consistently climbing again, get back in quickly, prefereably before it reaches the price you sold at and ride gold up some more.

    Good luck to you all!

    I just hope there are some decent buy to let mortgages out there when the next UK property bull market arrives!

  87. 30/05/2010, Peter Dykes wrote

    The muppets are out in force today which you can see from the above comments. Gold is NOT a mere commodity but real money, as it has been for 5000 years.You cannot just ‘legislate’ its monetary role away and replace it with fiat, especially when you print such ridiculous quantities of this said fiat. Nor is gold in a bubble, but just reflecting the devaluation of the fiat currencies, which are all bad, though some are worse than others, such as the pound. Now, assuming it is real money then Dominic’s figures are correct, and we would be best to heed the warning rather than using ‘PRETENDAWAY’ to fool ourselves into believing absurdities such as “we live in the UK and we use sterling so house prices are much the same, and therefore we haven’t lost anything.”

  88. 30/05/2010, Peter Dykes wrote

    Your average house owner has lost on the nominal value and also the real value, say 70% as Dominic realistically says, but when you own a house you must also factor in annual depreciation, maintenance costs, massive realtor exit costs, legal costs for purchase and sale, property taxes or rates, and continued likely devaluation as inflation rates increase. Highly unattractive. Eventually house prices will appear to rise with ever increasing inflation, but this will be an illusion and only a nominal increase.

  89. 30/05/2010, Peter Dykes wrote

    However, and this is when it gets interesting, there comes a point, if you can get the timing right, and get a mortage at all(?),
    that inflation is sufficiently high so that the pound is losing value at such a rate that your house – still a valuable asset – is being paid back with rapidly depreciating rubbish paper; but if you have a fixed rate mortgage you still pay back at the SAME RATE, but your house is going up in value, even if only nominally, but still UP, so that you end by owning a house paying far less than you imagined possible in real money, which is the money you originally contracted to pay. In the TWILIGHT ZONE there are many bizarre happenings.

  90. 30/05/2010, Peter Dykes wrote

    Of course this will hurt the BANKSTAS -and we certainly can’t have that – so maybe they will work out some way of thwarting happy mortgagees on fixed rates. The only thing they can’t stop is the remorseless rise in gold already being heavily purchased by the cognoscenti, but soon in panic by the hordes. As we hear, huge premiums such as $1800 an ounce in Greece are being paid, and also premiums in Germany because it is hard to get. Eventually, maybe gold will be UNOBTAINABLE except in paper form, or even illegal – but not illegal in China where the government ENCOURAGES citizens to buy gold. Wonder why? So, who are the capitalists and who the communists now in our TWILIGHT ZONE?

  91. 30/05/2010, S. Danger wrote

    What a load of ****, it doesn’t take much brains to dismiss this
    article. I always wondered is there any actual intrinsic value in the
    yellow metal? Can’t eat it, can’t build with it, can’t grow crops on it, can’t produce anything more useful than jewelry etc etc. Is not much more valuable than any other symbolic currency – apart from the fact that is finite. But I can think of a million other commodities that are finite, and actually have some real utility, eg water, energy, labour etc.

    The only meaningful comparison for real people is with how much they earn, and an average house still costs 10 times an average salary! Unless they start paying us in gold coins, yeah that will be REAL progress…back to reality, please.

  92. 30/05/2010, Peter Dykes wrote

    The reason matters get worse and worse, especially in a rabidly socialist country like the UK, is because of comments like the above. Until the voters wake up and try to understand the real issues they will never hold their politicians to account, and they will continue to use palliative measures that buy themselves time in power, rather than boldly confronting the issues and aggressively trying to improve the appalling mess we are in.

  93. 30/05/2010, Amy37 wrote

    I can see that some have already been rather critical of this article. I think that rather than calling it “real money” one could have looked at house prices against various commodities such as gold,oil,wheat and maybe also to foreign buyers as in London the fall in the exchange rate has lead to foreign buying of UK property.
    Looking up the rally in the price of gold I can only agree with the analysis of the notayesmanseconomics web blog who concluded.

    “My view is that at this moment in time the rally in the price of gold which is particularly marked against the Euro but true against most currencies is that people are uncertain and to an extent afraid. I do not forecast either rallies or falls in its price from here but do suggest that its price has become a measure of what people feel about the world economic situation and what it is telling us is not good.”

    I guess though house prices fall relative to an index of fear/uncertainty does not make such a good headline!

  94. 30/05/2010, Stephen Lewis wrote

    You can aim to make money, by being a trader or a gambler (you choose your description, it’s a free country) and try to guess the market. You’ll find lots of advice in MW. Or you can aim to protect your hard-earned savings from inflation. The choice is a life-style one, an emotional one. Either way, in the long run there will be inflation, because the government’s in charge, inflation helps debtors, & there’s no bigger debtor than the government. All you can hope to do is to keep pace with inflation, by buying what can be bought, house, gold, long-living-companies’ shares, land, property, anything that is except the government’s paper money.

  95. 30/05/2010, David Smith wrote

    Thanks for the reference to the notayesmanseconomics web blog
    Amy. I enjoyed his thoughts on the recent rise in the gold price and his thoughts on inflation’s rise in the UK. I was not aware of the adverse impact of the change in our inflation target in 2002 or how may time we have missed our current target…

  96. 30/05/2010, Flier wrote

    I rather thought the intelligence of the average mw reader was higher than is apparent from the majority of the above posts.they have either failed to understand or completely misread the article.these seem to be the type of investors that buy high and sell low and are clueless to why they are losing money.
    I suggest that some of these posters read mw properly and try to comprehend the contents within,or as some people have said,cancel their subscription and buy the sun,they may just understand the information in this wonderful and incitefull paper.
    I think a lot of people do not like to be informed that they have made a lousy investment when they thought they were being so clever.
    Good article by dominic,at least appreciated and understood by some of your readers.

  97. 30/05/2010, anothernick wrote

    There is another one of Dominics Muppets. Poster No. 91.
    I actually think he or she is a paid agent of the banksters. Given the job of trawling the internet trying to trash the merits of gold. They always use the really dumb arguments that you cannot eat gold, or live in it or grow crops on it.
    Keep up the good work Dominic. Many people see though this obvious false propaganda.
    Browns bottom stank to high heaven. I,d love to know who the actual buyers were.
    9/11/01 and 7/7/05 were both inside jobs. We are all controlled by lies and fear. Rise up and take control of your own finances. Cut the banks and government out. Buy gold. Before its too late.

  98. 30/05/2010, Patrick R wrote

    Money week is only giving an opinion which you can take or leave. From my point of view, I would rather have the information, which enables me to make decisions, than to exist in blissful ignorance. Over the last few years, I bought a flat in turkey off plan to get my money out of sterling, I also bought gold shares on MW`s recommendation. I am not rich but sleep a lot more comfortably because my decisions were informed and they have paid off.
    My advice to anyone with any cash is to buy gold shares or agriculture shares. two of my favorites are cey and sunkar resources. Take Dominics advice even if you only have small savings.
    good luck

  99. 30/05/2010, 4caster wrote

    Banks and Building Societies will still lend against houses, albeit at a price. Try borrowing from a bank to buy gold to store in the bank’s safe deposit box. They will laugh you out of the door. Yet for the last six years, and I suspect for a few more years, the gold would have proved greater security than a house.
    When the banks start lending against gold, or the Bank of England starts buying it, then I shall sell mine.

  100. 30/05/2010, Pete A wrote

    The price of Mars bars is about to go to the moon, er I mean…

  101. 31/05/2010, silvertothemoon wrote

    i’ll say it again. Well done Dominic. Good article. :)

  102. 31/05/2010, GO wrote

    Any article which causes so much passionate responses by pointing out the facts has to be doing something right in my book. In derivatives pricing it’s a common technique to derive the value of a security using another asset. Its called a change of numeraire, Google it and see.

    Had the same article suggested house prices in USD has fallen significantly would some of the responses have been so scathing? Or would readers just have decided that a) maybe should have moved free capital to USD currency or assets like stocks and b) will the trend continue.

    I’d very much like to see a similar house price chart in terms of oil. Only if DF has the stomach for the complaints that will come back.

  103. 31/05/2010, Dan de Lyon wrote

    1.You can’t eat paper money or grow crops on it. Houses built with it would get soggy in the first rainstorm.
    2.You can’t see the pound as a standard against which the price of house, gold or anything else rises or falls, simply because the pound is what your income and wealth is measured in. That is no more realistic than seeing the Earth as the centre of the Universe around which everything else revolve ssimply because Earth is the planet you are standing on.
    3. You should never let your readers think you are suggesting they are muppets.

  104. 01/06/2010, Steve Netwriter wrote

    Dominic,
    Good article. I think you should reflect on the number of gold negative replies and reconsider your gold/house exchange level.
    We are obviously at the very early stages of the financial asset to real asset move.
    Steve

  105. 01/06/2010, Andrew Beckett wrote

    Articles like this underline how absurd the gold bubble has become – fuelled by Monkeyweek journalists with a vested interested in this largely pointless metal. The gold bubble will soon pop and the bulls will get badly burned.

    As for the UK housing market, I do believe it will continue to fall vs the pound, dollar and euro. But will it fall vs a shiny metal – who cares?

  106. 01/06/2010, Simon wrote

    Hmmm. I definitely see Dominic’s point and the guy from Canada pointing out that he could buy 35% more house now than a few years back brings it home.

    The thing is when my parents bought their family home in 1983/4 it cost less than £80,000 – it could now be sold for £1.2m.
    And they got to live in it for more than 25 years.

    At that point gold was about $400 – it’s now £1,200. Had they bought gold instead of a house, they’d have had nowhere to live or spent a fortune on rent.

    It’s all about timing and risk, but maybe it’s time to buy neither.

  107. 02/06/2010, Edinburger wrote

    The OTT response to Frisby’s academic piece from worried house owners shows that, deep down, you all KNOW that the Government has not saved you from economic reality and you are very worried.

    You are right to be worried. You are like passengers on the Titanic, sipping cocktails in the bar and, furiously, paying no attention to the large white objects floating past the port holes.

    Anyone who has been involved in any area of residential property knows that a sustainable property market – at all levels – is overwhelmingly dependent upon prices being affordable to first time buyers. They are not. They are at least 20- 25% overpriced on any objective view.

    A lot of jobs are going to go – soon. Interest rates are going to rise – soon. The value of your house is going to fall (in sterling terms !) – soon. Better get prepared for it .

  108. 02/06/2010, Gerrard wrote

    Excellent article that really gets to the truth of the matter. And with the planned CGT increases on BTLS house prices look set to dilute even further.

  109. 02/06/2010, Let's be Frank wrote

    I would recommend to anyone who thinks Dominic’s position is ridiculous to read Peter Schiff’s “Crash Proof 2.0″ and Michael Maloney’s “Guide to Investing in Gold and Silver”. There are fundamental reasons why paper based currencies are bad news for ordinary citizens, chiefly because politicians cannot resist printing more and more of it (and for thousands of years have never been able to).

    While I don’t believe the Euro, Dollar or Pound will go to zero anytime soon, I do believe I’ll see all of them fail in my lifetime.

  110. 02/06/2010, Andy Craig wrote

    Wow. It is astonishing how people can read this article, totally miss it’s point and then rail against it with such fervour and anger. Moneyweek’s job (which they do extremely well) is to inform you so you have the best long run chance of preserving and even growing your REAL wealth (that you can buy REAL things with – like Mars Bars, yes – but energy, shelter, food etc…). Mr Frisby’s article is doing precisely that. If you want to carry on thinking “in sterling” for whatever strange dogmatic reason you have for blindly doing so you can look forward to a thoroughly impoverished future. If you make more of an effort to understand what Mr Frisby and Moneyweek are saying – you might be in with a chance of having a pot to p*ss in for the thirty plus years you hope to be in retirement.

  111. 02/06/2010, Toby wrote

    I have written exactly the same on a forum several years ago…years before the crises but nobody believed it.

    You get the best picture about house prices if you travel around the world and compare what you get for you money in other countries….(Germany, Austria, Italy, France/Spain, Sweden, Canada, Denmark, Belgium, …….)

    The most disappointing thing is, although house prices went down a lot, you still get no value for money in the UK – tiny, purpose-built houses and not very pretty, stable or energy efficient. hardly anyone owns a passive house in the UK…they don’t even exist there. Houses are built the same way as 50 years ago.

  112. 04/06/2010, Alex wrote

    Can I just say as the originator of the ‘mars bar’ method of house price measurement. That the whole point is that mars bars, gold, shares, wages and houses etc have all inflated together.

    If everything including wages has/have gone up then there is in effect no bubble because relatively mars bars, gold and houses still in effect cost the same as they always have done ( in the case of houses factoring in that women now work ).

    Furthermore gold has no special place, apart from perhaps that it pays no income/dividend and infact costs you money to store, compared to stocks gold has to rise by 10% a year just to stand still.

  113. 04/06/2010, Mark wrote

    As a Zimbabwean business owner I consider myself well schooled in the capacity of governments to abuse fiat currencies. I know many pensioners here who had an innate faith in the value of govt. issued money. In the last 10 yrs they lost everything. full stop.
    Fact is that all of UK stats are measured in a rapidly weakening currency .
    If you want a real fright chart your GDP against gold – then tell me the recession is over.
    inflation = muppet tax.

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  115. 09/06/2010, Capitalist Pig wrote

    What a load of old tosh.

    You cannot live in a gold bar and surprise surprise youcan only buy houses with Sterling.

    Irrelevance at its best, good for a chuckle though.

  116. 03/08/2012, Toby wrote

    The point is, the whole system is corrupt.

    Young people like myself are twice as better off renting, it is costing me 40% less than if I owned and payed a mortgage, I have no assets, but Im also debt free.

    The whole system is peaking, it cant continue in the red for much longer, the problem is the only people to lose are the ones with all the money, and we all know money = power, and thats a lot of power doing everything it can to hold on to this capitalist imperial slavery system.

    The old folks with the cash are in denial because of their own selfish needs, if we are really lucky, the shift will come soon, and one day people wont be starving to death, let alone whining about how much their property is worth compared to a piece of metal.

    This thread is proof to how sad humanity has become over imperial slavery for a few thousand years.

  117. 08/02/2013, rob wrote

    You really need to get out more.

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