Friday Debate: Will House Prices ever be allowed to fall?

RenovationMan

Given that so much of the UK's economy is rooted in property, probably more than at any other time in history and given that so many voters are now home owners, will any government ever allow prices to fall in a significant way?

If market forces prevents us from having ever increasing house prices and the government put measures in place to support existing prices, will we ever see anything other than stagnation?

If we have stagnation over the next 5 to 10 years while wages catch up with house prices, is there any value in waiting to buy once a reasonable deposit has been saved up?

Graham_Devon

Honest answer....I really don't know.

All I would say is that I think it will take a LOT longer than 5-10 years for ages to catch up with house prices, if prices stayed "stagnant" and the starting point is todays wage economy.

chucky

RenovationMan wrote: »

Friday Debate: Will House Prices ever be allowed to fall?

fall to what levels.

they were allowed to fall in 2008, 1991, 1989, 1982

Exocet

Will they be allowed to fall? I think you have a lot of faith in the government.

RenovationMan

chucky wrote: »

fall to what levels.

they were allowed to fall in 2008, 1991, 1989, 1982

They were allowed to fall in 2008, mainly because the government was taken by surprise by the 'firestorm' that hit the economy. As soon as they could they put measures in place that helped the housing market to recover 10% or more in just under a year.

I've not such faith in any government being able to prevent boom and bust or pre-empting a financial disaster, but I do believe they will eventually put things in place to sort the situation out.

As far as 91, 89 and 82 are concerned, my point is that property is now more connected to the success of the economy (and success of a political party) than ever before and so will receive far more support that it did back then.

Generali

How could a Government prevent house prices falling? After all something is only worth what a buyer will pay and it can only sell for what a seller wants to sell it for.


If the Government sets a price for houses rather than allowing the market to find a price then there will be a lot of disappointed buyers and sellers. That doesn't sound like a good idea if you want to be voted in again.

CLAPTON

RenovationMan wrote: »

They were allowed to fall in 2008, mainly because the government was taken by surprise by the 'firestorm' that hit the economy. As soon as they could they put measures in place that helped the housing market to recover 10% or more in just under a year.

I've not such faith in any government being able to prevent boom and bust or pre-empting a financial disaster, but I do believe they will eventually put things in place to sort the situation out.

As far as 91, 89 and 82 are concerned, my point is that property is now more connected to the success of the economy (and success of a political party) than ever before and so will receive far more support that it did back then.

why do you say that house prices are more connected to the success of the economy (and of a political party) that ever before?

chucky

RenovationMan wrote: »

They were allowed to fall in 2008, mainly because the government was taken by surprise by the 'firestorm' that hit the economy. As soon as they could they put measures in place that helped the housing market to recover 10% or more in just under a year.

I've not such faith in any government being able to prevent boom and bust or pre-empting a financial disaster, but I do believe they will eventually put things in place to sort the situation out.

As far as 91, 89 and 82 are concerned, my point is that property is now more connected to the success of the economy (and success of a political party) than ever before and so will receive far more support that it did back then.

not sure that's correct.

they are/were probably more connected to the success of the finance/banking sector than ever before. bank balance sheets are very dependent on house prices.

link to that to the success of the economy if you like.

Blacklight

What are the consequences of property prices falling?

First of all everyone who took on a new mortgage since 2006/7 will have an asset worth less than the amount they owe. That's every first time buyer without a 40% deposit and every landlord who bought an investment property with less than a 40% deposit and anyone that upsized using their equity to take on smaller LTV mortgate. A lot of people.

In addition there has to be a trigger. Last time it was reduction in the amount of credit. What else could make prices fall? Rising interest rates? High unemployment and lack of demand? Perhaps a combination.

Whatever the trigger it will have an impact on more than the housing market.

Imagine the state of the country where there is no credit available, what little there is demands such a high amount to service the debt every month that no-one wants it or simply can't afford to borrow it, unemployment is out of control and people either can't move because they have to sell at a loss or are getting repossessed and left homeless. Nothing is for sale and if it was no-one would buy it.

Do you think the government will sit back and let the UK turn into Greece?

Generali

Blacklight wrote: »

Do you think the government will sit back and let the UK turn into Greece?

FWIW, Greek property prices are down only about 1.9% over the past year despite their economy being in a right pickle (sorry to use economic jargon - a right pickle falls between recession and depression).

ruggedtoast

RenovationMan wrote: »

Given that so much of the UK's economy is rooted in property, probably more than at any other time in history and given that so many voters are now home owners, will any government ever allow prices to fall in a significant way?

If market forces prevents us from having ever increasing house prices and the government put measures in place to support existing prices, will we ever see anything other than stagnation?

If we have stagnation over the next 5 to 10 years while wages catch up with house prices, is there any value in waiting to buy once a reasonable deposit has been saved up?

Its more about what they wont do. I honestly dont think the government will instigate any policy that will intentionally lower house prices, or look like lower house prices may result.

Social housing, more rights for tenants, affordable housing, managed schemes for new housing, realistically enforceable caps on immigration, forget it.

What they may find is that the recession, the lack of money to pay high housing benefit, and the declining standard of living in the UK do it for them.

The last government put through enough schemes to prop the housing market up with public money, whether the new crew are able to add to that I'm not sure.

The sad fact is that the people with the most wealth have the loudest voices, and there is a lot of wealth and vested interest concentrated in high house prices.

I freely admit I was wrong about how far New Labour would go to keep the bubble going. I never thought that Brown would underwrite a bubble market in 2007 to the extent that in 2010 the next government was having to lay off frontline policemen and slash double digit percentages off education and health.

But he did, and here we are. I think if you have a deposit you're better off putting it into property than losing 3% a year on it in the bank due to inflation while paying rent.

Then if you lose your job you'll get no benefits at all until those savings are all gone.