Z
I'm trying to make sense of your logic, but I can't.Refer to my posts above. I address this fallacy in full.
If you sell the petrol, of course you'll lose money... or am I losing my mind?Now, you find the price of petrol falls to 50cents. What do you do? If you sell, will you really "lose" money? OF course not, because you still need 10,000 litres of petrol, but will buy it will cost you less, which at market prices perfectly offset the drop in your asset value.
The big downside is that you'd have to fork out transaction costs and possibly stamp duty in order to move. For that reason alone (especially if you get hit for stamp duty) I'd be inclined to tough it out where you are for the time being.
I would suggest it is a bit more complicated than that. And to be clear I am talking about your PPR. A house, as an asset, is a stream of future rental payments. If the market writes down the price of this asset you have to ask why? There is really only two things that detemrine the price:If the price has fallen because future real rents are going (expected) to be lower, you lose on the sale, but you are going to gain on the reduced rental payments in the future.
- The expected real rents it will attract
- The discount rate applied to these rentals.
If the price has fallen because real interest rates are expected to be higher over the future then you lose on the sale, but you gain because you will earn an increased return on you capital from the now higher interest rates (or pay less in interest if you have a mortgage).
For extra credits, you can use the same logic to explain why an increase in house prices doesn't make you "wealthy" via your PPR.
You can't really attempt to apply logic to bubble market pricing.
That doesn't mean that the logic is flawed however
We are not going to rush into this, we like where we live it's just family stuff has changed dramatically in the last 3 months and we could do with a 4th bedroom & bigger kitchen!.
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