High house prices are a risk to the economy, UK warned

brit1234

HAMISH_MCTAVISH wrote: »

Most misleading 'Daily Fail' title ever?

The entire article is about this....

House prices only get a mention in a bullet point of "other issues".

Not in the original article, they have changed it. If you actually read the web link you gave it still contains the original tittle.

/UK-economy-destabilised-high-house-prices-mortgage-debt-EC-issues-warning-annual-report.html

Come on Hamish tell us if Sibley has hacked the article in the vain attempt to keep average prices above £160k. Remember to tell him next time to change the URL.



As you can see the original article is all about UK house prices being too high.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Ah, yes.

Here.

http://www.dailymail.co.uk/news/article-2152209/UK-economy-destabilised-high-house-prices-mortgage-debt-EC-issues-warning-annual-report.html?

Right, so that's NOT my article then.

Is that the best you can do?! Say the article is misleading because another article on the subject on another media website includes other bits and pieces!?

Not really surprising that a finance website focuses on the finance part, is it Hamish?

Conrad

Graham_Devon wrote: »

First real warning about how high house prices are detrimental to the UK economy from those with a bit of power.

As ever the 'experts' have not allowed for the fact us Brits have tended to use property as an alternative to Teutonic style cash savings.

In other words the debt is higher but they forget this is largely backed by real assets, so it isn't simply consumption debt.

So a client of mine with £1m in mortgage debt would look like a high risk on an economists spreadsheet, but what isn't factored in is that this debt captures a high rental income relative to debt payments.

drc

Can you imagine. At this rate young people will need to take out a mortgage just to pay rent.

MacMickster

Conrad wrote: »

As ever the 'experts' have not allowed for the fact us Brits have tended to use property as an alternative to Teutonic style cash savings.

In other words the debt is higher but they forget this is largely backed by real assets, so it isn't simply consumption debt.

So a client of mine with £1m in mortgage debt would look like a high risk on an economists spreadsheet, but what isn't factored in is that this debt captures a high rental income relative to debt payments.

This debt may CURRENTLY provide a high rental yield relative to debt payments, but the risk arise from the fact that the value of the asset may fall significantly at a time when the debt payments also rise.

One of the problems with the current inflation targets (plural as there are both the stated 2% target and implied target to help to inflate away government debt) is that they take no account of asset price inflation.

When asset prices increase rapidly their acquisition takes money from the circulating capital of the country, tying it up in fixed assets. Rapid asset deflation, however, helps to cause the kind of problems seen in Spain and Ireland.