Polonius

To thine own self be true

Buy, buy!

Posted by Polonius on 8 June, 2007

I’m no economist, but the following argument just came to me one day, and it seems fairly convincing.

Residential property prices in the UK have climbed ridiculously over recent years, and we keep hearing that there’s going to be a crash. But is that likely? Sure, a significant rise in inflation could trigger a collapse, but there’s a more predictable event that will apply an upward pressure on prices.

The proportion of the UK population who own their own homes increased dramatically through the 1970s and ’80s. Many of the people who bought then are now in their seventies. It won’t be long before they start dying in significant numbers. Their children will inherit their homes, mortgage-free. Suddenly, people who have been struggling to pay their own mortgages will find themselves with six-figure sums to spend.

Yes, a slump in property prices is possible, but it will be against a rising trend.

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One Response to “Buy, buy!”

  1. Slinky Malinky said

    There’s some merit in your argument but it’s not entirely straightforward – people are living longer nowadays and may have to re-mortgage or sell the family home to finance nursing care. There has also been media coverage of the “kipper” syndrome, where children are potentially cashing in their inheritance early and, of course, everyone has a higher expectation of life these days and more and more elderly people are selling up and moving abroad or taking out equity release schemes on their homes so they can travel. If they have more than one child, the remaining money would usually be split between them, meaning that it’s less likely (although not impossible) for many people to be confident of the six figure sums you talk about.

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