Property price crash if Tories win

carolt

http://www.guardian.co.uk/business/2010/apr/19/conservative-victory-property-price-crash

And of course, big crash if they lose, as interest rates would go up under Labour.

Kohoutek

I wonder if this person posts on MSE too:

"Whether you like it or not, the UK is moving towards a small property owning elite with most mugs (people) working to pay rent and tax. I have managed to get into the position of owning many properties, and will be in that elite, thanks mainly to labours benefits system and the bank bailouts.

There is no reason for everyone to be bogged down with home ownership - it was a stupid tory aspiration - and one that is fast disappearing, thankfully. Germany has the right housing model, with 40% renting. Labour can see what the future is and wisely encourage it."

drc

The comments to the article are quite balanced considering it is the Guardian.

Kohoutek wrote: »

I wonder if this person posts on MSE too:

"Whether you like it or not, the UK is moving towards a small property owning elite with most mugs (people) working to pay rent and tax. I have managed to get into the position of owning many properties, and will be in that elite, thanks mainly to labours benefits system and the bank bailouts.

There is no reason for everyone to be bogged down with home ownership - it was a stupid tory aspiration - and one that is fast disappearing, thankfully. Germany has the right housing model, with 40% renting. Labour can see what the future is and wisely encourage it."

Sounds like nuLabour's ethos in general "We know what is best for all you plebs"..."Do as we say not as we do" etc.

phil_b_2

You'll have to forgive me if I only beleive it when I see it. I think we must have hit double figures for 'house prices will crash when X happens' theories.. they just keep getting knocked out of the park.

Cleaver

Economist Dhaval Joshi said the aggressive cost-cutting, designed by shadow chancellor George Osborne to fund a cut in national insurance contributions next year, would lift unemployment by almost 250,000 people and knock out a significant market prop. "Prices remain around seven times average income, which is higher than the long-run average of 5.5. It is unsustainable without continued low interest rates and government support, especially public sector jobs," he said.
.
Joshi said that without sustained government support, residential property would follow the path of commercial property, where values have fallen 22% since 2006. "Recent support to house prices will disappear if base rate or unemployment heads higher. Both risks are real, but higher unemployment is the more likely," he said. "On our calculations, Labour's 1.5% spending cut for 2010-11 equates to 120,000 jobs, while the Conservatives' 2.8% cut would shed about 230,000."

Interesting article.

I'm not going to pretend to know the answer to this, but would shedding 230,000 public sector jobs really have so much of inpact on house prices as to make them fall 20%?

A quick, Cleaver-stylee back of a fag packet calculation: 37 million people of working age in the UK, and 72.2% of them work. So that's 26.7 million people working in the UK. If the Tories cut 230,000 public sector jobs it would represent a cut of 0.9% of people working. Our population is around 61 million, so 230,000 represents 0.3% of the population as a whole.

Obviously a lot of these people would get jobs, but let's say for sake of argument that they don't. Would 0.3% of the population losing their jobs cause a 20% decrease in house prices? If so, how?

Graham_Devon

Cleaver wrote: »

Interesting article.

I'm not going to pretend to know the answer to this, but would shedding 230,000 public sector jobs really have so much of inpact on house prices as to make them fall 20%?

Nope.

But couple that with inevitable interest rate rises. Tighther mortgage lending criteria (I believe this will come, maybe not for a year). Inevitable tax rises.

That might make things harder. People seem to have forgotten interest rates are at an all time low. They are now simply normal. As the recession becomes old news, people forget that a massive tax take is around the corner.

Cleaver

Graham_Devon wrote: »

Nope.

But couple that with inevitable interest rate rises. Tighther mortgage lending criteria (I believe this will come, maybe not for a year). Inevitable tax rises.

That might make things harder. People seem to have forgotten interest rates are at an all time low. They are now simply normal. As the recession becomes old news, people forget that a massive tax take is around the corner.

Yeah, maybe you're right.

However, I think we'll see prices stagnate for a year or three. Up a bit, down a bit. Interest rates start to rise gradually over the next few years and I think people will just get used to it. I don't reckon we'll see property crash 20% whatever government is elected.

The interest rate thing is interesting. My mortgage rate has never really changed since 2004. Was on a fixed at just over 4% and are now just under 4%. When rates start to rise we may fix for five years or so at around 5%. Fully appreciate that others may be in a different boat.

But who knows hey? Time will tell. Could easily take another route.

Really2

But are they not going to make cuts by not re-recruiting after retirement or people leaving?

How is that increasing the jobless?

Thrugelmir

Cleaver wrote: »

Interesting article.

I'm not going to pretend to know the answer to this, but would shedding 230,000 public sector jobs really have so much of inpact on house prices as to make them fall 20%?

A quick, Cleaver-stylee back of a fag packet calculation: 37 million people of working age in the UK, and 72.2% of them work. So that's 26.7 million people working in the UK. If the Tories cut 230,000 public sector jobs it would represent a cut of 0.9% of people working. Our population is around 61 million, so 230,000 represents 0.3% of the population as a whole.

Obviously a lot of these people would get jobs, but let's say for sake of argument that they don't. Would 0.3% of the population losing their jobs cause a 20% decrease in house prices? If so, how?

There would a knock on effect. From the direct loss of jobs would eminate an indirect loss. The whole economy interlinks.

Cash will also be saved by cutting back on capital expenditure. This will impact more on the private sector than public.

sjaypink

Graham_Devon wrote: »

Nope.

But couple that with inevitable interest rate rises. Tighther mortgage lending criteria (I believe this will come, maybe not for a year). Inevitable tax rises.

That might make things harder. People seem to have forgotten interest rates are at an all time low. They are now simply normal. As the recession becomes old news, people forget that a massive tax take is around the corner.

I suppose what I've been wondering about recently though, is whether housing will take priority?

We will (a decent % of people, certainly not 0.3%) be poorer in the next year or two, I don't think though that the income cuts for most will mean -presuming no further tightening of mortgage lending- they cannot afford to buy...

...what I'm trying to say is, in times of less money, will people continue to take out loans for new cars, pay out for sky subscriptions, expensive holidays- or will that all be cut back on as house buying takes priority?

...I think the money (for many) is around somewhere, just wondering if a change in spending habits will come about from tax rises, IR rises etc

...but then you need to think what further domino effect does even 1% of working people losing their jobs have on their spending back into the economy? What effect will maybe 20-30% (very conservative estimate, if you think to Cameron ) of people cutting their spending due to tax & IR rises have on the rest of the economy?

I'm waffling . Just not convinced it is all going to go smoothly, but not really sure why :cool:

Thrugelmir

Really2 wrote: »

But are they not going to make cuts by not re-recruiting after retirement or people leaving?

How is that increasing the jobless?

Natural wastage saves paying redundancy claims.

Net reduction in public sector employment. Cuts by stealth.