Ken's Blue Blog
Musings on "the bleedin' obvious"; views on the meaning of life, or anything else that takes my fancy.

Thursday, April 22, 2004

Using Your Home as an Investment

The UK has, for the last few years, been experiencing a boom in house prices. Double-digit annual growth has become the norm.

The result has been a feel good factor, among the home owning classes; as they perceive their personal wealth to be increasing exponentially.

Pepped up by their new wealth, they have indulged in an orgy of consumerism; financed by credit secured against their homes.

I warn you of two problems with this:

  • Bull cycles (upward price appreciation) do not last forever, there will be a downturn.

  • Borrowing long to invest short is foolhardy in the extreme.

My advice to these foolhardy people is as follows; don’t treat your home as an investment, you have to live somewhere.

Carry on like this and you will be swamped by debt, which you can’t service; which will result in you having nowhere to live.

No comments:

Post a Comment