- house in 2021: 500k €, monthly mortgage 1500€
- same house in 2022: 450k €, monthly mortgage 2000€
It’s not seeing the forest for the trees.
Inflation is high. That €2000 payment will only be equivalent to €1900 next year. And long term, house prices grow at least with inflation so if you can afford it, now is a better time.
So I'm playing my Uno reverse card and proposing that you aren't seeing the forest for the trees.
And the majority of workers in the world don't get even inflation-adjusted raises every single year.
We saw this in the 70s. Where inflation eroded the costs of buying a house quickly, even though the interest rates were also high.
I meant the people licking their lips because the prices may drop now, or who specifically waited to buy because the prices will drop
I for example wouldn't be jumping in just yet into the UK housing market. Plus renting can be cheaper than buying, in that case it isn't worth jumping into the market either.
If so your asset is going down and your mortgage payments are going up.
Equity is an asset with debt attached so if the debt is getting more expensive while the asset is declining in value, that isn't good.
This is good for people with lots of cash, as they don't need to borrow to buy, and they can now buy at a lower price. I would also say it's possibly good for people that can afford to take on the debt in the short term, as prices would be expected to rise, and interest rates fall in the long term.
I have a fixed rate mortgage so my asset is going down in value. But it depends whether o am going to be a net buyer or seller in the short term, whether this is good or bad. If I move up to a more expensive property then lower prices are good because that would tend to compress price differentials, but that would also work against me if I wanted to down size. So more generally we could say this is good for younger people who are generally net buyers of houses, and bad for older people who are generally net sellers.