Road to recovery starts with rising house prices

homelessskilledworker

CLAPTON wrote: »

I would suggest that for a young lady who has a property in negative equity and wants to move house, the size of her **** is probably not her major concern.

Ok, thats a fair point. But I would then argue we have to stop huge spikes in the property market, something I even thought myself when I owned.
If property was to rise roughly slighly better than flat or at inflation levels or lot less people would be burnt.

Gordon Brown and Tony Blair are the real villians here, they allowed a debt induced bubble to inflate in the noughties. Prices may or may fall, but what we need now whatever we get is a stable property market.

CLAPTON

homelessskilledworker wrote: »

Ok, thats a fair point. But I would then argue we have to stop huge spikes in the property market, something I even thought myself when I owned.
If property was to rise roughly slighly better than flat or at inflation levels or lot less people would be burnt.

Gordon Brown and Tony Blair are the real villians here, they allowed a debt induced bubble to inflate in the noughties. Prices may or may fall, but what we need now whatever we get is a stable property market.

what we need now is more and better houses being built in areas with a shortgage

we need to protect people from themselves by making a minimim deposit so that negative equity is unlikely (probably around 15%)

whether we have stable prices is probably outside the ability of the state to manage and anyway it's undesireable that they try.


whether the prices are 'stable ' or not is of much lower importance

wotsthat

Emy1501 wrote: »

Apart from maybe a slightly cheaper rate I cant really see the benefit of my house rising by 50k. Like most people I don't own more than one home and will always need somewhere to live.

Reality is most people will never have any real access to their HPI

I can see the benefits to you, as an individual, of something you own increasing in value by £50k. Yes it's less liquid than £50k cash but there are still benefits other than having a better LTV.

Emy1501 wrote: »

Outside of Central London I suspect that for prices to rise you need people at the bottom to take on extra debt which means they have less money to spend in the economy.

I thought the housing market was part of the economy.

Emy1501 wrote: »

The housing minister has previously suggested that high HPI is not good for the economy and in an ideal world HPI would run at half of wage inflation. Wage inflation is about 2% and prices are falling at the moment so no real need at the moment.

A politician suggesting something is evidence of nothing.

Emy1501

wotsthat wrote: »

I can see the benefits to you, as an individual, of something you own increasing in value by £50k. Yes it's less liquid than £50k cash but there are still benefits other than having a better LTV.



.

What exactly are those benefits?

As for Housing yes its part of the economy but for me high housing costs especially for those at the bottom is partly what is holding back the ecomony and I can't see how HPI above wage inflation will help the country in the long run.

wotsthat

Emy1501 wrote: »

What exactly are those benefits?

As for Housing yes its part of the economy but for me high housing costs especially for those at the bottom is partly what is holding back the ecomony and I can't see how HPI above wage inflation will help the country in the long run.

For me as an individual....

Better access to mortgage products (I pay a lower rate on my mortgage than I receive in savings).

Opportunities to downsize and release some 'free' money.

If I need long term care I'll have an asset to sell that's worth more than it otherwise will be.

Children will be delighted with inheritance (subject to above)

A higher valued asset to borrow against (I could have bought a holiday place with the equity in my main residence most of which came from HPI).

I feel more secure financially (rationally or not) and more likely to spend into the economy.

Clearly, as an individual, I need to offset the fact that my mortgage is bigger than it would be without HPI, I might need to help my children with deposits, etc. etc.

Whether any of this is beneficial to the economy as a whole is clearly much less clear. HPI above wage inflation might be an issue - however recent data seems to show (albeit MoM) negative HPI and positive wage growth.

Loughton_Monkey

wotsthat wrote: »

If my house goes up in value by £50k then my net worth goes up by the same amount. As an individual it's easy to see and understand that benefit.

Does every homeowner seeing their net worth increase by £50k benefit the whole economy? Who knows?

If there's real evidence that rising house prices are detrimental to the economy then the government should try and align the incentives of individuals with that of the whole economy. The economy is driven by individuals trying to improve their own circumstances.

There are as many answers to this as there are economists!

One problem is that individuals tend to look at their own 'economy' largely in terms of wealth. Sadly, Governments and economists tend to look mainly at things like GDP which are not really 'wealth', but 'turnover'. I'm sure this is not unconnected with the fact that most tax revenue comes from [what I would term] 'money movement' as opposed to 'wealth'.

This is one reason, in my view, why we are not recovering quickly. Our beloved government is 'in a hole' financially. A very deep hole. Spending less helps but only a little. What they need is for more money to swirl around in the form of wages or spending - because only these bring serious tax revenue to them. The public, on the other hand, rich or poor, are beginning to 'ringfence' their wealth. We all want to feel wealthier than we were last year.

So we have a bit of an impasse between requirements of the government, and the economic behaviour of individuals.

The more this goes on, stand by for more attention to wealth taxation. Cleggie's Mansion Tax is a small example, but I wouldn't be surprised to see U-turns on Inheritance tax at the next budget.

Emy1501

wotsthat wrote: »

For me as an individual....

Better access to mortgage products (I pay a lower rate on my mortgage than I receive in savings).

Opportunities to downsize and release some 'free' money.

If I need long term care I'll have an asset to sell that's worth more than it otherwise will be.

Children will be delighted with inheritance (subject to above)

A higher valued asset to borrow against (I could have bought a holiday place with the equity in my main residence most of which came from HPI).

I feel more secure financially (rationally or not) and more likely to spend into the economy.

Clearly, as an individual, I need to offset the fact that my mortgage is bigger than it would be without HPI, I might need to help my children with deposits, etc. etc.

Whether any of this is beneficial to the economy as a whole is clearly much less clear. HPI above wage inflation might be an issue - however recent data seems to show (albeit MoM) negative HPI and positive wage growth.

Little chance of me considering downsizing for sometime and when I look at the generation above few have done this. This seems to be a dream for most more than reality.

As for long term care I would probably be entitled to that whether I have equity in my house or not. Ok maybe slightly better care who knows but not really relevant to me at present not likely to be relevant for a good few years yet.

Regarding the kids again not really relevant at present of course in due course they will have to pay the extra IR on the extra debt for for me to enjoy my wealth tied up in my house. The reality as I have previously stated is they will pay more in interest payments on the extra debt they have to take to buy a house than the inheritance they may receive.

As for feeling wealthy well I know I can't sell up and live in a box but I can see why a fair few fall for the illusion that they are wealthy and spend beyond their means or borrow against the property without really understanding that they can;t get to their wealth until they sell.

wotsthat

Emy1501 wrote: »

Little chance of me considering downsizing for sometime and when I look at the generation above few have done this. This seems to be a dream for most more than reality.

As for long term care I would probably be entitled to that whether I have equity in my house or not. Ok maybe slightly better care who knows but not really relevant to me at present not likely to be relevant for a good few years yet.

Regarding the kids again not really relevant at present of course in due course they will have to pay the extra IR on the extra debt for for me to enjoy my wealth tied up in my house. The reality as I have previously stated is they will pay more in interest payments on the extra debt they have to take to buy a house than the inheritance they may receive.

As for feeling wealthy well I know I can't sell up and live in a box but I can see why a fair few fall for the illusion that they are wealthy and spend beyond their means or borrow against the property without really understanding that they can;t get to their wealth until they sell.

If my house goes up in value by £50k I've explained the real benefits that this has (and might have) to me in the future. I wasn't aware of your circumstances so assumed that you might benefit too. I was clearly very wrong.

It's a conundrum though - I bought in the late nineties rather than rent - is it an illusion that HPI has made me wealthier as a result?

Emy1501

wotsthat wrote: »

If my house goes up in value by £50k I've explained the real benefits that this has (and might have) to me in the future. I wasn't aware of your circumstances so assumed that you might benefit too. I was clearly very wrong.

It's a conundrum though - I bought in the late nineties rather than rent - is it an illusion that HPI has made me wealthier as a result?

I would assume I am pretty average. I'm not sure what % of people either downsize or require care when they are older but I doubt its that high and benefits you have suggested are easily outweighed by the fact I have kids like most people.

I also first bought in the 90's. yes I'm in a better position than renters but in a worse position than if house prices hadn't risen when you consider trading up or the extra cost to my children of any house they may buy.