According to information from the Department for Communities and Local Government website

The average house price in the 1950s was around £2000.

In the 1960s, prices crept up to £4000.

In the 1970s the average price went up to £20,000.

In the 1980s, the prices went up to Ò£55,000.

By the end of the 90s, the average price was £92,000.

In the period 2000 to 2005. The price had doubled again with the average price around £190,000

So where has all this money come from? Is the same house really worth double what it was six years before. Many people have chosen to take some of this value out of their houses by taking out secured loan against the property but are they richer or do they just feel more wealthy?

It is all very well enjoying the benefits of this additional money now, but ultimately, it does have to be paid back. So by taking out the money today, we are living on money that we won’t have in the future. You may feel more wealthy because you have borrowed money against your house and have more money to spend but you have also increased your debts. You owe more money than you did before.

The only way to actually realise that increase in the value of property is to sell the property. But since it’s our home, we need to buy another one to live in. So unless we downsize. There is no real gain.

The biggest difference between now and the 1970s, is the ease of obtaining credit. In the 1970s it was difficult to get a mortgage. You had to apply and then keep your fingers crossed hoping that it would be approved. That was a limit to how much money, the building societies and banks had available for mortgages. Many people were turned down, even though they had good credit ratings, simply because the building society had used up its allocation of money for the month.

It’s all so different now. Money is readily available to anyone that can afford to pay and little regard is taken of how things might change in the future. So are we any better off, or is it just that we have a far larger debts.

It is hard to understand that the average house in 2005 can be worth double what it was worth in 1999. It is significant that for this period, interest rates have been at an historically low level. It is unlikely that they will remain so in the longer term. If rates start to rise then there will be a squeeze on people who have over borrowed and many will find they are unable to comfortably deal will with their debt payments.

Another significant change in recent years in the housing market has been a number of people investing in property to let. Many of the properties that have been purchased as investments have been purchased with borrowed money on an interest only type mortgages. These have proved to be good investments over recent years as house prices have soared.

Things do change though. If the interest on these loans becomes greater than the income from the rent then they only make sense as an investment if house prices continue to rise. However, if interest rates do rise it is likely that house prices will at best stagnate and they may even drop back to some degree.

If this were to happen then there would be a surge in investment properties being put on the market, which would lead to a glut of the sort of properties that are typically rented. These are usually small flats and houses at the lower end of the market. These sellers would be looking to dispose of their properties, fairly quickly, so the properties would be priced to sell and they would be prepared to drop the price to make a sale. This would destabilise the lower end of the market, which would have a knock-on effect in reducing house prices, generally.

So it would seem that house prices are decided more by the interest rate and ease of obtaining credit rather than any other factor. There is no question that there is a limited supply of housing and a significant demand for it but the value of property is still restricted by what people can afford to pay. While interest rates remain low house prices will probably continue to slowly increase as people are able to borrow more and more money. If and when interest rates start to rise significantly that may change.

The fairly recent surge in the price of fuel is bound to have a long-term effect on people’s finances and the amount of available money they have to spend. The long-term view seems to be that fuel prices will remain at current high levels and that interest rates are likely to rise.

So now would be a good time to take control of your debt so that if rates do rise you will be able to afford the repayments on any remaining loans. Far better to be prepared than to struggle, if and when your circumstances change.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

I’ve been reading the report of the APIG (All Party Parliamentary Internet Group) inquiry into Digital Rights Management and I must say I was pleasantly surprised. Read the report here..>
To be honest I expected it to condone current business practices and support moves to strengthen them but it doesn’t say that at all. Their recommendations include Proper Labeling of Digital Products so you know what you can and can’t do but they didn’t just say the label should exist. Oh no. This is what they said….

“100. Because, as we have observed, consumers expect to copy CDs, we believe that all CDs should in future come with a prominent label saying, ‘you are not permitted to make any copies of this CD for any reason’ the current rubric (usually in a small font) that says ‘Unauthorised copying [..] prohibited’ is quite clearly overlooked or not understood. The prominent label should add, when appropriate, ‘and if you try to make a copy, you should note that we have tried very hard to ensure that you will fail’. Doubtless, even clearer and more accurate wording is possible.
101. Furthermore, from the evidence we received, it is likely that a full-disclosure label will also need to say ‘this CD may not play in all devices’. It will often have to go on to say, ‘if your current player device breaks or is stolen this content may become inaccessible’ and ‘moving this content to a new device will not be possible if we cease supporting this platform or go out of business’.
102. For some types of content the labelling will need to warn the user, ‘you cannot access some parts of this DVD without a working Internet connection to enable us to record your identity’, or ‘your playing of this song may be recorded in marketing databases in foreign countries’. We note that these data protection issues are a matter of concern to the ‘Article 29 Working Group’ of European Data Protection officials, who consider this data transfer to be excessive when there is no evidence of any likely wrongdoing.”

They don’t seem to be beating around the bush there. You can read that as acceptance of the current situation but my reading is that it is making a point of emphasising just how restrictive these protection systems are. I think that the record companies would not be too keen on having to put that sort of labeling on their products which shows how they are restricting peoples rights and I think it will help to push them towards a more reasonable system of protection. I am sure there will be a lot of unhappy people who discover that having paid for their music they won’t be able to transfer it to a new device. The record companies need to compromise on this to keep any public goodwill..

I would prefer it if there was no protection at all. I gave up buying CDs a while back after I found I was unable to copy all of the tracks of one of Dido’s cd’s to my computer. I have bought several hundred CDs over the years and I choose to play them on my computer as MP3s. It’s like having your own Jukebox and it’s great but if they don’t want me to copy MY CD’s when I’ve paid for them then I just won’t buy them, I don’t pirate them either, I have just weaned myself off buying music when I hear it and like it.

Another point raised was the disparity in price across borders. Apparently an Itunes download costs approximately 55p in the USA, 68p in Europe and 79p in the UK. Why? I suppose there may be VAT included in that price but so there would be in Europe but it’s the same product probably from the very same computer host so why should there be any differences? The report recommended that the Department of Trade And Industry look into this in the European area as we are supposed to be in a single market.

They also commented on, ” a significant mismatch between what consumers believe they ought to be permitted to do with copyrighted material and what the law allows.” This is about the fact that unlike in the USA we Brits are not allowed to make copies of music or film for any purpose at all. Not for “backup” nor to play your own compilation in the car.

Now pardon me if I’m wrong here but I thought we lived in a democracy. A democracy is where the will of the people is upheld, isn’t it? If that is what people believe should be the case then the law should match the “view of the people”. Maybe Saddam Hussein was supported by the record companies for enforcing laws against the will of the people but I don’t think that should happen in a democracy.
Of course we don’t live in a democracy, I was forgetting myself for a moment there.

One very encouraging thing they say is that, “we recommend that OFCOM publish guidance to make it clear that companies distributing TPM systems in the UK would, if they have features such as those in Sony-BMG, MediaMax and XCP systems, run a significant risk of being prosecuted for criminal actions.”

Right on, it’s good to see we apparently have something right. I was surprised that a company with as many lawyers as Sony must have considered that it would be ok to infect customers machines with their anti-copying virus. Did any Sony executives go to jail for this? No. Would you or I go to jail if we spread a virus around? Yes.

So we are not all equal in the eyes of the law then…. how reassuring.
I went off Sony a few years ago. I used to think their equipment was the one to have but since they bought Film Studios and Music Companies and went all digital rights management mad, I won’t buy anything with a Sony label on it now on principle. If they don’t want my business then that’s fine with me.
I believe in justice and fair play. I don’t pirate music, yet I would be considered in the same breath because I have copied all my own music from CD onto my computer. Am I thus a criminal because I want to play music as I sit at my computer? I don’t think so. If the record companies think so then they can refund me for all the CDs I’ve bought and I’ll just buy the tracks I want on-line.

Talking of which. Can anyone explain why it costs the same to buy music on-line as it does to buy a CD? Silly question really. Of course they can’t. Very much like the telephone system there’s virtually zero distribution cost once you have covered the system set-up costs with the first couple of hundred sales. So where does the money go? It’s not to the record shops, nor on heating and lighting that shop. It isn’t paying that cute salesgirl (or boy) who is either an expert on music or knows nothing at all, any wages.

When I looked it up a couple of years back it cost, typically, about 15p to licence a track if you wanted to make your own compilation CD to sell so there is little reason for a digital track download to cost much more than that. If that was what downloads did cost then I believe they would sell a lot more copies and make a lot more money overall. It might be the death of Ye Olde Record Shopee but I think that is only a matter of time before it happens anyway.

The Music Industry still hasn’t grasped it have they. They resisted the idea of music downloads for years, just as the movie industry resisted the idea of putting films on video. There is more music around now than ever before. More money is made in the music industry than ever before. Music is part of our lives in a way it has never been before. Sooner or later they will recognise that it should be cheap, readily available and free of restrictions. They will make even more money that way.

Overall I thought the report a fair and balanced view of the current situation with a few little digs at the music industry and generally giving support for the consumer. Have a read at the link above. It’s an interesting read of about 30 pages or there is a summary available at the site.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Following on from yesterdays article about credit card charges I discovered another excellent site being run by a Law Student Stephen Hone & Mike Sowden formerly within the merchant banking sector. www.penaltycharges.co.uk They have set this site up to fight the the excessive and illegal bank charges imposed by UK banks. Example letters and information on how to apply for refunds of these charges is on the main website and they have a terrific forum where you can read of lots of example cases where people have reclaimed hundreds and even thousands of pounds. They give support throughout the process which is so important when people are dealing with big companies and feeling a little unsure of themselves. It is educating and eye-opening to read some of the stories on there. It is remarkable how badly and uncaringly these customers have been treated by the banks. We all know Banks are profit motivated but some of these excesses are shocking. I’m delighted that people are now fighting back. A new era? I’d like to think so. Once people realise that they really can fight back then maybe it will develop into other areas. I thoroughly recomend a visit to the site and why not examine your own bank charges history and see if you have a claim to make. You can claim for the last six years. Well done to the team at www.penaltycharges.co.uk you are doing a great service for lots of people who deserved to be treated better by the banks.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)