House price inflation - is this good? I thought inflation was bad!!

TinTentTourist

Why does the media (and the financial sector) always report positively on house price rises and negatively on falls. It does not help us to buy or sell, it usually means we just have to get bigger and bigger loans.
When the Government bangs on about keeping inflation (in general) under control, why are they always so happy to report growth in house prices (yes I know it is an indicator, but at whose expense?)
Basic economics dictate that if there is a shortage, prices rise. I believe it's time we as the public should make our voices heard, instead of accepting price rises as a good thing, let the Government and the financial sector know that we do not agree, we want price stability or at the most, 1-2% per year.
I believe our obsession (as a county) should be brought in line with reality. The only people who gain from house price inflation are the ones with money to lend or speculate with, and all at our expense.
Martin F

CloudCuckooLand

You cannot go using logic and common sense so brazenly on this forum.

ILW

House price inflation is good if you have a spare house or two. Think you will find that many of the people in power do.

shortchanged_2

HPI is generally good for people who have money and we all know that money wields influence. Money makes money.

Personally I think HPI is in general destructive in that it squeezes many people out of the housing market whilst lining the pockets of some.

It just highlights the greedy nature of this country with the 'I'm alright Jack' mentality.

Housing should be what it is, a place for people to live. Basically a fundamental human right.

It's a shame in this country that we always have such a boom and bust housing market. If only house prices would rise in general with the rate of inflation then it would be better for all, apart from those who look to make money out of property that is.

Graham_Devon

It's realtively simple.

When you have a house, in general, many want it to keep increasing in value, even though in many cases you know that it means nothing to you, it feels better than it losing value.

However, the above is intensified on forums etc, as inevitably you get those who have chosen toi invest in houses, who, in nearly all cases, want it to rise and rise, though want to buy at the cheapest possible price.

When you haven't got it, you don't want to be priced out.

High house prices do nothing for the country as a whole, or the economy. They only do lots of good, financially, for those invested. Unfortunately, politicians have been making a fortune from it too, and many are highly invested, so don't want it to crumble. Therefore, home owners are seen as far more important than those priced out.

Lance

HPI played a major part in the collapse of economies in the West as owners mewed. They kept increasing their mortgage to spend the equity. They loved the fact the house earned more than them and the banks loved the extra lending and the government loved all the extra spending to boost the economy which caused HPI to increase. Then prices dropped and the system collapsed. Those who bought second houses and sold at the right time made good money, mostly MP's 'second homes'.

Generali

A couple of points directed at the OP:

- Economics teaches us that everything that people want is scarce. That is the single premise upon which the whole of economics is based.
- 70% of Britons (roughly) own the house they live in. House prices have clearly been reasonable at some point.
- House prices are stable in nominal terms and so falling in real terms. Presumably your policy goal has been met. Another 'win' for the Tories right?

FWIW, I think house prices will be considerably lower in the UK in 20 years time than today in real terms. That's my theory and I'm sticking to it.

DervProf

TinTentTourist wrote: »

Why does the media (and the financial sector) always report positively on house price rises and negatively on falls.

Ah, but it isn't just inflation, it`s house price inflation.

House prices need to be at the limit of what people can afford, if they are too cheap, it`s bad news for the economy. There's a shortage of property, don't you know, so prices must keep rising. It's the right thing for hard working families.

I read today that energy companies are predicting a 20-25% rise in energy prices by the end of this decade. That's bad inflation. Still, house prices might rise by 50%, that's good inflation, and any homeowner will not be bothered by their gas/electricity bills going up in price, because it'll be insignificant compared to the increase in value of their home. They'll be much better off, so the higher energy bills won't be a problem.

Happy days.

StevieJ

In answer to your thread title Inflation is good what is bad is high inflation (unless you are a govt with large debts:)) and deflation.

FTBFun

DervProf wrote: »

House prices need to be at the limit of what people can afford, if they are too cheap, it`s bad news for the economy. There's a shortage of property, don't you know, so prices must keep rising. It's the right thing for hard working families.

Yes, that's supply and demand for you. Have you not worked this one out?

DervProf

FTBFun wrote: »

Yes, that's supply and demand for you. Have you not worked this one out?

I typed "There's a shortage of property, don't you know, so prices must keep rising."

Therefore, it is clear that I have worked it out. Oh yes, there is an element of sarcasm in my post. If anything, you might come to the conclusion that I might not believe that there's a shortage of property. A shortage of property will lead to price increases (so long as people are able to pay the price). A shortage of any item will often lead to price rises, but not always.