Disaster for Britain as housing becomes more affordable

Generali

StevieJ wrote: »

I wasn't referring to you Gen (although it may a have seemed so), I was merely pointing out that falling house prices are not good for everyone and can in fact have certain dark consequences.

Sorry for the misunderstanding StevieJ.

Falling house prices are likely to end up messing up the lives of a lot of my mates, sadly. Perhaps my sister too. She has a young child and an aged MIL to look after.

I don't wish bad things on people. When I post predictions I merely look at what could happen not what I would like to happen.

beingjdc

stephen163 wrote: »

Housing is the biggest form of wealth in the UK. I am a prospective FTB so obviously want house prices to fall but I can also appreciate how increases in house prices will tend to benefit the economy as a whole. People feel wealthier and this wealth is even crystallised through remortgaging

You haven't crystallised your wealth when you do that. You've taken on a larger debt, secured on an asset whose value has risen as long as all the other people who are doing the same thing don't want to sell theirs.

That's the problem, when people say "oh mortgage debt in the UK is £1 trillion but the value of houses is £3 trillion". Really. So if we all needed to sell up, we'd get £3 trillion would we. Who from, Chinese people buying holiday homes?

harrup

stephen163 wrote: »

I am a prospective FTB so obviously want house prices to fall but I can also appreciate how increases in house prices will tend to benefit the economy as a whole. People feel wealthier and this wealth is even crystallised through remortgaging, so aggregate demand increases and the economy grows faster than it would have done. In theory, everyone benefits (thought the benefit is disproportionately weighted to the homeowner!) and things look rosy for the government of the time.

Thanks for an interesting, intelligent post.

Regrettably, my intelligence/intellect seems to have gone AWOL. Could someone please explain Stephen's statement - preferably in one syllable words since my brain is evidently moribund:

"...but I can also appreciate how increases in how prices will benefit the economy as a whole. People feel wealthier, etc, etc...."

I simply cannot get my head round it. HOW, specifically, do high houses accomplish this? I mean ....how do they sensibly & long-term accomplish this? If this perceived wealth is based primarily, if not solely, on an illusion, and stops when the banks and/or credit card companies recall their loans - HOW does it benefit the economy? Isn't it rather an accident waiting to happen and one which was almost guaranteed to happen?

Genuine questions, BTW, not some covert criticism on Stephen's post. But statements like these seem so....I don't know.... counter intuitive. My un-ecomomist brain can even partially understand Brown's encouragment to spend our way out of the recession. People SHOULD spend with gay abandon- at least....those WITH money. Those without crurrent debts.

But how would already debt ridden people benefit from going even deeper into debt? I sure ain't bailing them out if the sh*t hits the fan even deeper - I'll say "cheerio" and move to New Zealand or something. Debt free and with my money.

I MUST be missing something crucial here. Anyone with an explanation?

ruggedtoast

A lot of people are relying on property for their pension. I do think as well, that culturally, British people are rather in love with the idea of the big break; whereas other nationalities are a bit more realistic about what they can get out of the system.

Wookster

harrup wrote: »

I simply cannot get my head round it. HOW, specifically, do high houses accomplish this? I mean ....how do they sensibly & long-term accomplish this? If this perceived wealth is based primarily, if not solely, on an illusion, and stops when the banks and/or credit card companies recall their loans - HOW does it benefit the economy? Isn't it rather an accident waiting to happen and one which was almost guaranteed to happen?

The point is it doesn't. That's why we are in the current mess. Its got to a stage where the source of the money that's been feeding the ability to buy more and more expensive houses has simply dried up and because new buyers (read: mugs) have stopped coming into the property market, the bubble bursts.

It really is a textbook example of a ponzi scheme.

What's very damaging about the current mess is that the level of debt taken on by people (which must be paid back) is simply mind boggling.

Even more damaging is that bubbles like this tend to mask other inefficiencies and problems (such as the global car over capacity) in the economy and the market doesn't operate as it should and cull the poor players, and so to emerge from this mess, the economy will have to fundamentally restructure (or find another bubble, oops I mean ponzi scheme).

This is why I prefer the term "economic crisis" to "financial crisis" as all the warts of our (and the global economy) will now errupt and will need to be lanced.

geoffky

harrup wrote: »

Thanks for an interesting, intelligent post.

Regrettably, my intelligence/intellect seems to have gone AWOL. Could someone please explain Stephen's statement - preferably in one syllable words since my brain is evidently moribund:

"...but I can also appreciate how increases in how prices will benefit the economy as a whole. People feel wealthier, etc, etc...."

I simply cannot get my head round it. HOW, specifically, do high houses accomplish this? I mean ....how do they sensibly & long-term accomplish this? If this perceived wealth is based primarily, if not solely, on an illusion, and stops when the banks and/or credit card companies recall their loans - HOW does it benefit the economy? Isn't it rather an accident waiting to happen and one which was almost guaranteed to happen?

Genuine questions, BTW, not some covert criticism on Stephen's post. But statements like these seem so....I don't know.... counter intuitive. My un-ecomomist brain can even partially understand Brown's encouragment to spend our way out of the recession. People SHOULD spend with gay abandon- at least....those WITH money. Those without crurrent debts.

But how would already debt ridden people benefit from going even deeper into debt? I sure ain't bailing them out if the sh*t hits the fan even deeper - I'll say "cheerio" and move to New Zealand or something. Debt free and with my money.

I MUST be missing something crucial here. Anyone with an explanation?

stephan has been brainwashed by the system and fell for it...prices up good--prices down bad...

Really2

StevieJ wrote: »

I thought you had me on ignore

He reads all mine too. I think there is a thing built in to MSE which forces him not to ignore all posts that are true but differ from his opinion.
Either that or he loves us really.:D

stephen163

Increasing house prices make people feel secure and more ready to splash their cash. This is surely a good thing for economic growth, and the economy as a whole. What good is wealth to an economy if it is tied up in a theoretical house price valuation? At the very least, people who MEWed and spent were doing a service for the economy. Everyone benefits from consumer spending.

I might be naive in believing this, but increasing house prices resulting in increased consumer confidence and therefore spending is overall a good thing for an economy? The vast majority of people who do this do it in a controlled manner and do not overstretch and it is ultimately up to the individual to regulate their own spending but I do believe that the benefits of increased spending outweigh the negative aspects resulting from overstretching.

harrup

geoffky wrote: »

stephan has been brainwashed by the system and fell for it...prices up good--prices down bad...

LOL - well, he seemed a rather savvy poster rather than a brainwashed zombie.

Either way, Brown's "Tax & spend" is continuing and now he is even upping his ante. Most people ARE still spending lustily. Presumably, for some this is due to a fatalistic outlook ala " I'm already broke....so what's the difference if I go even MORE broke...after all, the government actively encourages me to do so".

Bizarre.

mr.broderick

Graham_Devon wrote: »

Quite an inquisutive little one aintcha!

Tell you what. You tell me how it makes an iota of difference what I do or don't to do to this thread, and then I'll let you know.

I sell cars graham, what do you do?