MSE News: Homeowners 'to profit from property'

Former_MSE_Guy

"House price growth is projected to average 2% a year in real terms between 2012 and 2025, says a study ..."

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Homeowners 'to profit from property'

sinbad182

Brit1234 in 5.......4......3........2..............

3400581

Lenders are not tightening their criteria, just applying some. We are mainly in the situation we are in now because lenders handed out mortgages and loans to people with no prospect of repayment in the hope that rising house prices and wages would cover their @rses. It didn't and their greed forced thousands into unneccessary hardship. Unfortunately the borrowers are not blame free as their desire to have things they wanted but couldn't afford led them to put on rose tinted spectacles also. The real answer to this issue is to get the price of housing stock down to a level where it represent a more reasonable proportion of the average income so that families can take out mortgages they can afford and for those families to stop wailing they can't afford to feed and clothe the kids when they have 2 cars, 3 TV's, Expensive Holidays etc instead of concentrating on paying for the essentials. Regettably this will probably never happen because of Human Greed and the need for Government Intervention to force housing prices down by at least 30% and force Lenders to underwrite Negative Equity losses. Political suicide but for the good of the people.

jimpix12

Surely this is very bad news to all those who are banking on their house price increases paying for their lifestyle...? 2% a year as an estimate is very conservative and hardly optimistic. Let's just say if I put all my money into a house with intentions to flip it I'd be concerned right now... in fact I'd probably spend most of the working day on a Forum telling anonymous users who'll listen about how wrong this is...

The_Earl_of_Streatham

PWC keep referring to this as a study; you can't study the future, really you can't. It's speculation at best.

A 2% return with no guarantees, very high entry and exit costs and fees for maintenance doesn't exactly scream 'fill yer boots'. In a healthy economy with growth, inflation runs at about 2% and is considered a good thing at that level. When you take into account that you'll probably be be borrowing money at more than 2% to make the initial purchase it's a non-starter as an investment.

The best way to extract value from a house is to live in it.

jimpix12

A serious question then: What benefit does it have to PWC to cite such 'depressing' statistics? You're right that if using this as the basis of your investment then it's a bad idea.

Turnbull2000

Like it or not, stronger house price growth is imperative to consumer confidence and economic recovery.

The_Earl_of_Streatham

Turnbull2000 wrote: »

Like it or not, stronger house price growth is imperative to consumer confidence and economic recovery.

Why would increasing the price of a necessity be imperative for consumer confidence? Increases in the cost of fuel and food have no such effect.

What would increase consumer confidence would be a move back to making goods and services that people want to buy, thereby creating secure jobs. To do that wages will have to come down so we can compete with all those countries that now do the stuff we don't anymore.

Wages, however can't come down because of the outrageous cost of finding somewhere to live.

High and rising house prices have poisoned nearly every aspect of the real economy that most of us have to live in.

Consumer confidence is only helped by house prices in an economy where wealth is not actually created by real value-adding activities but by borrowing from the future by creating credit "secured" on an asset price bubble.

HAMISH_MCTAVISH

House price growth is projected to average 2% a year in real terms between 2012 and 2025, says a study ..."

In real terms.... So 2% a year above inflation, or 4% to 5% a year in nominal terms.

A very, very conservative estimate, given we're about to have the largest generation of FTB age people in history (bigger even than the boomer generation) meet the biggest housing shortage in over 100 years.

I would think it's far more likely house prices will rise by at least 50% in real terms, and more than double in nominal terms, between now and the peak of the next cycle some time around 2030.

HAMISH_MCTAVISH

The_Earl_of_Streatham wrote: »

High and rising house prices have poisoned nearly every aspect of the real economy that most of us have to live in.

Nonsense.

Consumer confidence is only helped by house prices in an economy where wealth is not actually created by real value-adding activities but by borrowing from the future by creating credit "secured" on an asset price bubble.

More nonsense.

Falling house prices are terrible for the economy and consumer confidence.

And the UK of course never had a credit driven asset price bubble. We removed 65% of credit, yet prices remain just 10% below peak. All we had was a good old fashioned supply shortage.

brit1234

HAMISH_MCTAVISH wrote: »

Nonsense.



More nonsense.

Falling house prices are terrible for the economy and consumer confidence.

And the UK of course never had a credit driven asset price bubble. We removed 65% of credit, yet prices remain just 10% below peak. All we had was a good old fashioned supply shortage.

Hamish you are the one speaking nonsense as usual.

Falling house prices are not terrible for the economy if they are over valued. As it allows people to get on the ladder and start chains.

What we need most for a healthy economy is a free market. Our housing market is being propped up by extra low interest rates, forbearance by banks on defaulting mortgages, SMI (tax payers paying mortgages for people who can't afford them), Newbuy/shared equity schemes to prop up prices.

We should remove the props and let house prices find their natural level, if its higher then fair enough, if its lower again fair enough but true economic growth comes out of the free market not interferance.

PS growth in prices of 2% is equal to BOE inflation targets so is not good for investors looking for capital appreciation as there is none.