Britain Can't Afford Falling House Prices

HAMISH_MCTAVISH

Housing minister Grant Shapps has declared that he finds it “horrendous” that young home-buyers are priced out of the market. His answer is “house-price stability”, with a small real-terms drop in prices.

It's a sentiment that most twentysomethings I know would endorse. I sympathise. But his comments suggest to me a worrying naivety about the housing market, especially the capital's.

Of course London house prices are bonkers. They have been for years. We've all got stories of crazy valuations or how if we had to buy today we'd be settling for a lock-up in Romford. Indeed a survey last month found that since the peak of the boom in November 2007, prices have risen in many parts of London, not just in swanky Westminster (up seven per cent) but even in my own Southwark (up 1.7 per cent).

There are two problems here. First, Shapps is at best opaque about what he plans to do about it. This is because he knows there's nothing he can do.

The Government could depress house prices with taxes — say, a big hike in council tax and stamp duty, or Capital Gains Tax on sales of first homes. There'd be some justice in that. But it's as likely as Shapps parading down Oxford Street in a ra-ra skirt while singing The Red Flag.

It could stabilise prices with a massive housebuilding programme to increase the supply of homes. I'd support that. But it doesn't want to spend that kind of money. Anyway, such a splurge is impossible these days because of the green belt. Indeed, the Government's new Localism Bill is supposed to give local communities more power to stop developments. Shire Nimbys will see off Shapps faster than he can say “communities with the vision and drive to build more homes”.

We could try to make borrowing easier. But interest rates are already at record lows. Maybe bully the banks into lending more? That's partly what got us into this mess — and ministers also want banks to build up reserves (ie the opposite).

The bigger problem is that, for good or ill, our economy now depends in significant part on the property market. Like our over-dependence on the financial sector, it's easy to see why this is a bad thing. Changing it is another matter.

To make homes really affordable would take such a price crash that, were it to happen, it would cripple the recovery and probably drive banks under. Nor are housebuilders going to build to increase supply while prices are static.

Meanwhile ordinary people have quite logically decided to invest in property — something Shapps tuts at —because of employers gutting their pension schemes.

It might mean the end of Thatcher's “property-owning democracy” as we know it. But whether we like it or not, we need rising property prices. And Shapps's wishful thinking will not alter the raw dynamics of this huge slice of urban real estate one jot

http://www.thisislondon.co.uk/standard/article-23911059-london-cant-afford-falling-house-prices.do

Excellent article.

Absolutely spot on.

purch

Britain Can't Afford Falling House Prices

Add that to the list of all the other things we can't afford but are going to have to stomach.

DervProf

"Britain can't afford falling house prices"

I can, but Hamish can't, or doesn't want to.

Graham_Devon

It's actually London, Hamish.

In any case, I find it bizzare you'd give the thumbs up to the fact were so screwed and so over levereged we "cant afford" any correction in prices without all of the cards falling down.

DervProf

Graham_Devon wrote: »

It's actually London, Hamish.

In any case, I find it bizzare you'd give the thumbs up to the fact were so screwed and so over levereged we "cant afford" any correction in prices without all of the cards falling down.

Hamish gives it the thumbs up, or the clinking beer glasses to anything that lines his own pocket, so it seems. He's so short sighted, that he can't look beyond the end of his own bank balance.

HAMISH_MCTAVISH

DervProf wrote: »

Hamish gives it the thumbs up, or the clinking beer glasses to anything that lines his own pocket, so it seems. He's so short sighted, that he can't look beyond the end of his own bank balance.

Absolutely.

What's that, house prices increasing?

Trebles all around!!!

Now where's my monacle.....

diable

I can't afford an Aston Martin either give it a year or so and I won't even be able to afford a full tank of petrol in one go............

Cleaver

Interesting picture to accompany the article:


"Heavyweight: a 26lb fox shot in Maidstone towers over Archie Wright, seven"

diable

Cleaver wrote: »

Interesting picture to accompany the article:


"Heavyweight: a 26lb fox shot in Maidstone towers over Archie Wright, seven"

I think the fox is better looking....................

Sibley

As long as house prices don't drop everyone will be happy.

Percy1983

Sibley wrote: »

As long as house prices don't drop everyone will be happy.

Yep the priced out generations will be so happy its untrue...