Some Christmas cheer from the Guardian

Jason74

HAMISH_MCTAVISH wrote: »

First class muddling there Graham, but here's the formal definition of an asset.

An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

A house absolutely fits the criteria of asset.

It is vastly more cost effective to own than to rent over a lifetime, so economic benefits are realised by the owners of houses whether they live in them or not.

Even if HPI was zero, it would still be significantly cheaper to own than to rent over the long term, and those savings are an economic benefit.

A house or land is an asset, not a consumable good.

All of the above is in itself true.However , the business dictionary describes "goods" as follows.

"A commodity, or a physical, tangible item that satisfies some human want or need, or something that people find useful or desirable and make an effort to acquire it"

That is also a pretty good description of a house. I think there's also an important issue here in respect of what economic benefits people are expecting from the "asset" side of home ownership.Many people (myself included) own a home on the basis that it enables the need for shelter and living space to be provided cheaper than renting it in the long term. That is one thing. The house is an "asset" only in so much as it reduces the cost of essential "goods" (the "physical item" of somewhere to live) over a lifetime. As you say, this would be true even without HPI.

When however people are owning properties primarily as an asset (ie, the main purpose of ownership is to make money), that is a very different thing. Not least, when a property is owned for anything other than owner occupation, that by definition means that there is one property less available for owner occupation (something you and I agree is a good thing).

You often mention the issue of a housing shortage. When other essential goods have been in short supply in the past, the government has taken measures to stop people holding on to those goods for the purposes of profit. I believe that it would be beneficial if something similar were to happen now in respect of houses. Of course, because in the UK we see houses primarilly through their value as an asset, rather than as a good (and we have demonstrated that they are in fact both), that is unlikely to happen. I believe that this is a shame.

Graham_Devon

wotsthat wrote: »

Just because 'most' people think something doesn't make it so. I think most people would be offended at the rather simplistic outlook you credit them with.

Buying a house, and living in it, is absolutely one of the best investments that can be made towards future financial benefit.

What is the primary reason for buying a house for the majority of people in the country?

Simple question gives you a simple answer.

It's because they need somewhere to live. The asset worth comes further down the line. Once they have the house, they then may be concerned about it's worth, as that has knock on effects further down the line (such as moving to another home). But the primary reason for buying a house, for most people, regardless of how you attempt to suggest I'm insulting people, is they need a place to live.

(I can't quite believe you are trying to argue differently or make an argument out of this basic, basic premise in all honesty).

wotsthat

Graham_Devon wrote: »

What is the primary reason for buying a house for the majority of people in the country?

Simple question gives you a simple answer.

It's because they need somewhere to live. The asset worth comes further down the line. Once they have the house, they then may be concerned about it's worth, as that has knock on effects further down the line (such as moving to another home). But the primary reason for buying a house, for most people, regardless of how you attempt to suggest I'm insulting people, is they need a place to live.

(I can't quite believe you are trying to argue differently or make an argument out of this basic, basic premise in all honesty).

The simple answer as to why the majority buy houses is to live in. I didn't realise you thought this was being disputed.

However, the question was whether houses are assets or not and the answer to that question isn't affected by whether people live in them or not.

I really think most people manage to understand that a house doesn't suddenly become an asset 'further down the line'. My house was an asset when I bought it and remains so today - whether I live in it, use it as a pigeon coop or desire to make money from it doesn't make a jot of difference to its status as an asset.

HAMISH_MCTAVISH

Jason74 wrote: »

All of the above is in itself true.However , the business dictionary describes "goods" as follows.

"A commodity, or a physical, tangible item that satisfies some human want or need, or something that people find useful or desirable and make an effort to acquire it"

That is also a pretty good description of a house. I think there's also an important issue here in respect of what economic benefits people are expecting from the "asset" side of home ownership.Many people (myself included) own a home on the basis that it enables the need for shelter and living space to be provided cheaper than renting it in the long term. That is one thing. The house is an "asset" only in so much as it reduces the cost of essential "goods" (the "physical item" of somewhere to live) over a lifetime. As you say, this would be true even without HPI.

Again, you seem to be conflating the motivation for people owning an asset (and this will be different for everybody) with whether or not something is an asset.

Houses are assets. Under any reasonable definition, with or without HPI, they provide economic benefits to owning them. Which makes them an asset.

A loaf of bread is a consumable good. If you don't eat it it will go stale and perish. It's not an asset.

Now in general terms, asset price inflation is a good thing, and consumable goods inflation is a bad thing. This is a well established economic theory. You don't buy shares and celebrate if they fall in price. You do snap up a bargain if your favourite cheese is on sale in Tesco.

You seem to be saying that asset price inflation is bad for those that don't (yet) own the assets. At face value that makes some level of sense.

If I want to buy a house, or a share in Apple, or a piece of fine art, then surely I want to buy it more cheaply if I can.

However if I want to sell a house, or a share in Apple, or a piece of fine art, then surely I want to get the best price I can for it in the market.

That's just basic common sense.

But of course, it's slightly more complicated than that in the real world, as we'll come onto next....

When however people are owning properties primarily as an asset (ie, the main purpose of ownership is to make money), that is a very different thing. Not least, when a property is owned for anything other than owner occupation, that by definition means that there is one property less available for owner occupation (something you and I agree is a good thing).

Most people in the UK own houses to live in. They also get an economic benefit through ownership. There's nothing wrong with that.

A small minority of people in the UK own houses as an investment, and/or rent them out. They too get an economic benefit through ownership, and also provide a service of renting houses to those who cannot or just don't want to own. There's nothing wrong with that either.

The UK housing market needs owner occupation, it also needs social housing, and private renting.

You often mention the issue of a housing shortage. When other essential goods have been in short supply in the past, the government has taken measures to stop people holding on to those goods for the purposes of profit. I believe that it would be beneficial if something similar were to happen now in respect of houses.

There is a massive shortage of housing.

We need to build millions more houses.

This is the elephant in the room, and anything other than this is tinkering around the edges.

Shuffling the ownership structure around by penalising a few owners to make them sell doesn't create any more housing and doesn't alleviate the shortage in any way.

So it won't fix the problem.

the_flying_pig

HAMISH_MCTAVISH wrote: »

... in general terms, asset price inflation is a good thing, and consumable goods inflation is a bad thing. This is a well established economic theory...

100% stuff & nonsense. and that was probably the best bit of your post.

nickj_2

Graham_Devon wrote: »

What is the primary reason for buying a house for the majority of people in the country?

Simple question gives you a simple answer.

It's because they need somewhere to live. The asset worth comes further down the line. Once they have the house, they then may be concerned about it's worth, as that has knock on effects further down the line (such as moving to another home). But the primary reason for buying a house, for most people, regardless of how you attempt to suggest I'm insulting people, is they need a place to live.

(I can't quite believe you are trying to argue differently or make an argument out of this basic, basic premise in all honesty).

and whilst you are living in said house it doesn't really make any difference as to what happens to the price , we moved in to our house in 1993 , paid £57k for it , if i wanted the same house today i wouldn't get much change from £250k , however it is a roof over my head , unless i downsize or when i snuff it then the money will be worth something to someone , if i want to move , then unless i go to somewhere dirt cheap the money won't make any difference as all other houses have risen at the same rate
at the end of the day if people are paying more and more for housing , it can only mean that they will have less and less to spend on keeping the economy going , which seems to be going in the right direction , however we know that people haven't had pay rises and the cost of living is rising so the "boom" yet again is probably being paid for on the never never .
i expect there are several people here who probably get a "semi" on every time the halifax house price index is announced and they see their house has gone up £2k in the last week , but can it really ever be good news for the average man on the street

Jason74

HAMISH_MCTAVISH wrote: »

Again, you seem to be conflating the motivation for people owning an asset (and this will be different for everybody) with whether or not something is an asset.

Houses are assets. Under any reasonable definition, with or without HPI, they provide economic benefits to owning them. Which makes them an asset.

A loaf of bread is a consumable good. If you don't eat it it will go stale and perish. It's not an asset.

Now in general terms, asset price inflation is a good thing, and consumable goods inflation is a bad thing. This is a well established economic theory. You don't buy shares and celebrate if they fall in price. You do snap up a bargain if your favourite cheese is on sale in Tesco.

You seem to be saying that asset price inflation is bad for those that don't (yet) own the assets. At face value that makes some level of sense.

If I want to buy a house, or a share in Apple, or a piece of fine art, then surely I want to buy it more cheaply if I can.

However if I want to sell a house, or a share in Apple, or a piece of fine art, then surely I want to get the best price I can for it in the market.

That's just basic common sense.

But of course, it's slightly more complicated than that in the real world, as we'll come onto next....



Most people in the UK own houses to live in. They also get an economic benefit through ownership. There's nothing wrong with that.

A small minority of people in the UK own houses as an investment, and/or rent them out. They too get an economic benefit through ownership, and also provide a service of renting houses to those who cannot or just don't want to own. There's nothing wrong with that either.

The UK housing market needs owner occupation, it also needs social housing, and private renting.



There is a massive shortage of housing.

We need to build millions more houses.

This is the elephant in the room, and anything other than this is tinkering around the edges.

Shuffling the ownership structure around by penalising a few owners to make them sell doesn't create any more housing and doesn't alleviate the shortage in any way.

So it won't fix the problem.

Thank you for the well thought through reply, and there is much in this post that I would agree with. However, there are a few points here that would argue with.

1) I am not disputing that a house is an asset. I have acknowledged this in my posts on several occasions. However, being an "asset", and being a "good" are not mutually exclusive. A house is not a consumable good I grant you (although that is of little relevance in this instance), but by the business dictionary definition (which is as good as any), it is a "good" nonetheless. This is a matter of fact, rather than one of opinion. I believe that as a society we would be much better off if the principle value of a house was seen though its use as a "good", rather than its value as an asset. This is of course a matter of opinion, and one that in turn explains the other areas I disagree with you on.

2) Ultimately I do see a problem with people owning houses as an investment. If home ownership is a good thing, then the more people who own homes the better. By definition, if there is a shortage of homes, people owning multiple properties reduces the number of people who can own homes. Given we agree that there is a shortage (at least in some parts of the country), owning property for investment purposes ought to be strongly discouraged. You are right that only large scale building will ultimately solve the problem in full, but reducing investment ownership will by definition free up some properties for owner occupation (as evidenced by the fact that as BTL has risen, home ownership has fallen), and as you brought up Tesco, "every little helps".

3) We see that inherent tension between the value of housing as an asset, and it's use as a good fundamentally differently. You take the view that because it is an asset, a rise in value should be celebrated. I take the view that because it is (also) a good, a rise in it's price is essentially a bad thing. Essentially, you view it like shares or fine art, while I view it more like energy or food. We'll never agree of course, as there is an element of truth in both approaches. Your view is certainly the prevailing one in the UK I would acknowledge. It's just that personally I think we're poorer as a society for that.

CLAPTON

Jason74 wrote: »

Thank you for the well thought through reply, and there is much in this post that I would agree with. However, there are a few points here that would argue with.

1) I am not disputing that a house is an asset. I have acknowledged this in my posts on several occasions. However, being an "asset", and being a "good" are not mutually exclusive. A house is not a consumable good I grant you (although that is of little relevance in this instance), but by the business dictionary definition (which is as good as any), it is a "good" nonetheless. This is a matter of fact, rather than one of opinion. I believe that as a society we would be much better off if the principle value of a house was seen though its use as a "good", rather than its value as an asset. This is of course a matter of opinion, and one that in turn explains the other areas I disagree with you on.

2) Ultimately I do see a problem with people owning houses as an investment. If home ownership is a good thing, then the more people who own homes the better. By definition, if there is a shortage of homes, people owning multiple properties reduces the number of people who can own homes. Given we agree that there is a shortage (at least in some parts of the country), owning property for investment purposes ought to be strongly discouraged. You are right that only large scale building will ultimately solve the problem in full, but reducing investment ownership will by definition free up some properties for owner occupation (as evidenced by the fact that as BTL has risen, home ownership has fallen), and as you brought up Tesco, "every little helps".

3) We see that inherent tension between the value of housing as an asset, and it's use as a good fundamentally differently. You take the view that because it is an asset, a rise in value should be celebrated. I take the view that because it is (also) a good, a rise in it's price is essentially a bad thing. Essentially, you view it like shares or fine art, while I view it more like energy or food. We'll never agree of course, as there is an element of truth in both approaches. Your view is certainly the prevailing one in the UK I would acknowledge. It's just that personally I think we're poorer as a society for that.

housing is largely a matter of want and not need.

e.g. does each child in a family NEED their own room or is it just a want?

do dad/mum actually need an office/hobby room or is that an want?

is a garage an need or a want?

is a large garden a need or want?

is the fashion to go away to Uni (and so require additional accommodation) a need or a want?

Should we discourage students going away to Uni to free up that accommodation for owner occupiers?

In what way do you think 'homes' are like 'food or energy'?
most food is entirely a want and not a need;
does anyone need off season food all the year round?
does anyone need foreign food at all?

aubergines, avocado, bananas, white bread, hamburgers, frozen chips etc etc aren't needs but simply wants



Are we poorer as a society because of all these 'wants' ?

The relative fall in the number of owner occupiers is largely because of the government restricting the supply of land and control over lending.

HAMISH_MCTAVISH

Jason74 wrote: »

I believe that as a society we would be much better off if the principle value of a house was seen though its use as a "good", rather than its value as an asset.

I think most people do principally think of their houses in terms of it's use as a "good" (in other words, the utility value it provides), but this doesn't make it any less true that it provides significant financial benefits to it's owner. Whether they think about it or not.

2) Ultimately I do see a problem with people owning houses as an investment. If home ownership is a good thing, then the more people who own homes the better. By definition, if there is a shortage of homes, people owning multiple properties reduces the number of people who can own homes. Given we agree that there is a shortage (at least in some parts of the country), owning property for investment purposes ought to be strongly discouraged. You are right that only large scale building will ultimately solve the problem in full, but reducing investment ownership will by definition free up some properties for owner occupation (as evidenced by the fact that as BTL has risen, home ownership has fallen), and as you brought up Tesco, "every little helps".

I see your logic.

But I don't agree with it.

Lets say you penalise 100 investors and they then transfer 100 houses to owner occupied.

You have decreased the stock of rented houses by 100, and increased the stock of owner occupied houses by 100.

And you've decreased the pool of renters by 100, and increased the pool of buyers by 100.

So far so good..... There is no change to the balance of supply and demand in either the rental pool or the O/O pool. Prices and rents haven't changed. And we still have a stonking great shortage of housing.

What you have done however is increase the operating costs for the remaining private landlords, and you've decreased the number of them.

Now as we presumably agree that there has never been a time where 100% of the population can own their homes, and never will be, so the private rented sector is required to exist in some form or another, then effectively you're creating conditions ripe for exploitation.

That hasn't ended well anywhere it's been tried....

As population will continue to increase, and we're not building enough homes, but you're further condensing ownership of an ever shrinking pool of rental houses and lumbering their landlords with increased costs and onerous regulations.

Not to mention discouraging them from building new housing to let out, or bringing back into use derelict properties to let out.

Look at the onerous regulations that led to Rachmanism in the UK, or the rent controls that caused such havoc with the market in parts of the USA.

It's a really bad idea.

Especially when there are much simpler and less market-distorting solutions.

Like building more houses....

There are really only two constraints to building more in the UK.

-Prior to 2007 it was primarily planning restrictions.

-Post 2008 it's been primarily a lack of available mortgage and development finance.

Cure those two problems and there is no reason we can't build more than enough houses for the needs of FTB-s, whilst keeping a dynamic and responsive private rental sector in place for those who simply don't want to buy.

I'd be happy to see more social housing built as well. The more the merrier really.

We need 3 million new houses in the next 10 years.

It'll take the combined efforts of owner occupiers, landlords, social housing providers, and government, if we're to stand any chance of delivering them.

Essentially, you view it like shares or fine art, while I view it more like energy or food. We'll never agree of course, as there is an element of truth in both approaches. Your view is certainly the prevailing one in the UK I would acknowledge.

Quite.

We'll agree to disagree there.

Jason74

CLAPTON wrote: »

housing is largely a matter of want and not need.

e.g. does each child in a family NEED their own room or is it just a want?

do dad/mum actually need an office/hobby room or is that an want?

is a garage an need or a want?

is a large garden a need or want?

is the fashion to go away to Uni (and so require additional accommodation) a need or a want?

Should we discourage students going away to Uni to free up that accommodation for owner occupiers?

In what way do you think 'homes' are like 'food or energy'?
most food is entirely a want and not a need;
does anyone need off season food all the year round?
does anyone need foreign food at all?

aubergines, avocado, bananas, white bread, hamburgers, frozen chips etc etc aren't needs but simply wants



Are we poorer as a society because of all these 'wants' ?

The relative fall in the number of owner occupiers is largely because of the government restricting the supply of land and control over lending.

Much of this is true up to a point, although actually what you've done is summed up exactly why housing is just like food and energy in many respects. Housing meets the basic human need for shelter, food meets the obvious need not to starve, and energy meets the need for people to have access to heat, light etc. In all three cases, many people in practice consume in a way that satisfies a "want", rather than just a "need" (while some others do not have enough to meet basic requirements). You provided good examples for this both with food and housing, and the same is also true of energy.

The fact remains however that all of those three things ultimately satisfy basic human needs in the way that most other "assets" do not. My point is essentially that we would as a society be better off if people saw housing primarily as a way of meeting that need (or if you prefer, for the utility value of the "want" element), rather than as a means of accumulating financial wealth.