No going back

moneyinmypocket

Is a house not an assets as well though?

paulmapp8306

neilem wrote: »

This. Not sure how anyone can argue against that... unless they have a vested interest in property staying high.

Well, you cant argue from a "best for the country" POV, however everyone has to live somewhere, sooo while the availability of houses only gets worse (as population is going up far quicker than housing is being built) housing prices will still be propped up bu buyers who are either investing (and providing rental prioperties) of owner/occupiers who can afford to get on the ladder.

Despite the relative difficulties of 1st time buying - there are still enough (or nearly enough) people who CAN get a mortgage and afford it. Prices are generally stagnant or slightly falling (so going down in real terms either way) which helps BUT as inflation goes up, the affordability is actually about the same, or possible getting worse as the cost of food/clothes/utilities (and petrol TBH) goes up leaving less money for accommodation.

Personally, I think restricting the price of utilities would go far further to restoring the economy than big house price falls. That would free up far more money to be spent on other goods that house prices falling - as availability of credit would still limit who could buy.

ukcarper

neilem wrote: »

So your alternative is to keep going as is? People unable to purchase a home with prices being out of reach for many, and when attempting to obtain a mortgage the banks say no because they've finally caught on that they need to actually assess lending risk - thus pushing the demand for rent, in turn sees an increase in cost in that market.

When people do have the means to get a mortgage, then they are usually pushing close to their limit, so not much free income to splash the cash into other areas of the ecomony (as PasturesNew has already described).

House price crash is just a scary phrase, I prefer the phrase of house prices getting back to normal.

House prices are just above long term average and this is probably the best solution i.e house prices falling slowly in real terms.

You look at things simplistically if you want but that doesn’t make it correct, as things are never simple.

Where do you think all the houses would come from if they the price suddenly fell by 50%? The builders would not build and sell at a loss, the majority of people who already own would not be able to sell as they would be in negative equity and it wouldn’t be worth downsizing as the cost involved would take up most of any spare capital. On top of that the banks balance sheet would be devastated.

ruggedtoast

Mr._Pricklepants wrote: »

Can someone explain this notion that every pound spent on housing is a pound lost to the economy? It's just a pound in different hands.

As wealth, and specifically housing wealth becomes increasingly heavily concentrated in a small strata of super-privileged people, the pound is probably going to be untaxed and offshored.

Rich people are very good at not paying tax.

I can see a direct benefit to our actual economy in someone taking out a £70k loan to buy a house from someone who takes out a £140k loan to buy another house, and also a £70k loan to spend in B&Q (to use a crude example).

I can see far less benefit in someone taking out a £140k loan to buy a house from someone who needs to take out a £280k loan, and both of them spending the rest of their lives paying them back to the bank, where they get to enjoy 3 years being mortgage free before they have to sell up to fund their nursing care.

It seems like the banker and nursing homes win in this scenario, I'm not sure how everyone else does.

moneyinmypocket

These folks have summed it up perfectly there is no going back house prices are here to stay

neilem

Mr._Pricklepants wrote: »

Can someone explain this notion that every pound spent on housing is a pound lost to the economy? It's just a pound in different hands.

Every pound spent on housing is not a pound lost, however, if that is every pound you can muster up, then it is. Think if everyone did this (which has been the way for the past few years), then there wouldn't be any room to spend outside from this one-to-one transaction. No spare money to do up your garden, renovate some rooms, or whatever else... so instead of passing your entire limited funds to the seller, why not pass a portion of it then you and spend on other things, so other industries are getting a piece of your pie which comes with a new home.

Mr._Pricklepants

neilem wrote: »

Every pound spent on housing is not a pound lost, however, if that is every pound you can muster up, then it is.

No, it's not lost
The pound is still in the system, maybe not where you like it to be, but that's another issue. And if it's every pound you can muster up, then you've overstreched.

ruggedtoast wrote: »

As wealth, and specifically housing wealth becomes increasingly heavily concentrated in a small strata of super-privileged people, the pound is probably going to be untaxed and offshored.

Could be. But at the same time we could say that if there was more money left in pockets to spend on chinese tat, that pound would eventually go offshore anyway.

MacMickster

PasturesNew wrote: »

If house prices were miraculously half price overnight.... people would immediately be able to borrow/buy one - and then buy furniture, knick knacks, do DIY, order minor and major works, buy building materials, carpets, soft furnishings, garden furniture.... and once settled in the repayments would be low enough for them to afford to go out for meals, holidays, join activities .... thus stimulating the WHOLE economy.

Pretty much what I meant in my earlier post, but much more clearly expressed.

MacMickster

Mr._Pricklepants wrote: »

No, it's not lost
The pound is still in the system, maybe not where you like it to be, but that's another issue. And if it's every pound you can muster up, then you've overstreched.

If the money to buy the property came from a mortgage then with FRB that is newly created money, which ceases to exist as it is repaid.

Consequently, more and more of the money in existence is tied up in capital assets and hence unavailable to circulate throughout the wider economy.

ukcarper

Originally Posted by PasturesNew
If house prices were miraculously half price overnight.... people would immediately be able to borrow/buy one - and then buy furniture, knick knacks, do DIY, order minor and major works, buy building materials, carpets, soft furnishings, garden furniture.... and once settled in the repayments would be low enough for them to afford to go out for meals, holidays, join activities .... thus stimulating the WHOLE economy.

MacMickster wrote: »

Pretty much what I meant in my earlier post, but much more clearly expressed.

Do you really believe that would happen if house prices suddenly halved?