plonkee money an english-er's thoughts on personal finance

March 5, 2007

housing market crash?

Filed under: house — plonkee @ 1:12 pm

Again last week I watched an episode of Tonight which had a monetary slant. In this case it was about whether the housing market would crash or not. The gist of the programme was that there was a panel of three people, property search agent Phil Spencer, journalist Jonathan Maitland and columnist and landlord Rosie Millard. Then some experts presented a segment on whether they thought the housing market was on the brink of crashing or not. The conclusion was that Millard and Spencer (who both have something to lose if there is a crash) thought that there wouldn’t be a crash and Maitland thought that there would. Spencer was more confident that Millard.

It wasn’t the greatest show ever, but it wasn’t too bad. I cooked and ate my dinner whilst watching it so I didn’t exactly give it my full attention. It got me thinking though about the main factor that I thought they didn’t mention. General inflation.

You see when you’re borrowing a fixed amount of money, inflation is your friend. Every year that goes sees the relative cost of a mortgage payment dropping with the miracle of compound interest.

If I don’t move house and wait long enough, my house will be a rent-free place to live. What more could anyone want. In any case, eventually any house is likely to be worth more than it is today. That’s inflation for you.

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