A warning to first time buyers

Graham_Devon

More national press articles stating house prices are too high and warning of the governments meddling attempts.

The policy, it seems, is to force up house prices by hook or crook because it makes Britons feel wealthier and encourages spending. And sharp falls in property prices would be disastrous for Britain’s still-fragile banking sector.

Of course higher prices simply make it harder for first-time buyers.

Also among Halifax’s data was the latest price-to-wages ratio for UK property, now at a heady 4.51. That ratio went as low as 3.07 in the worst phase of the 1990s property crash.

Would-be buyers should be warned that house prices are vastly overpriced - and the Government is determined to push them further.

All good stuff. We need more of this in the national press. The BBC have cottoned on.

http://www.telegraph.co.uk/finance/personalfinance/comment/9974836/A-house-price-warning-for-first-time-buyers.html

Carl31

Why is the assumption that high prices = more spending? Surely its the opposite?

shortchanged_2

Carl31 wrote: »

Why is the assumption that high prices = more spending? Surely its the opposite?

It's the common misconception, basically the cause of the current crisis.

Higher house prices = more perceived wealth = whack more stuff on credit = live beyond your means.

grizzly1911

Helps the banks balance sheets too if there assets are improving.

wymondham

Looks like the Government are still managing to keep all their cards in the air and keep prices up whatever!

somethingcorporate

shortchanged wrote: »

It's the common misconception, basically the cause of the current crisis.

Higher house prices = more perceived wealth = whack more stuff on credit = live beyond your means.

You missed a bit that involves treating the equity in the higher valued houses as a cash machine.

So consolidate credit cards by MEWing and then starting all over again.

olly300

somethingcorporate wrote: »

You missed a bit that involves treating the equity in the higher valued houses as a cash machine.

So consolidate credit cards by MEWing and then starting all over again.

Unfortunately it's too soon for this to work again.

Wait 10-15 years and people would have forgotten........

shortchanged_2

somethingcorporate wrote: »

You missed a bit that involves treating the equity in the higher valued houses as a cash machine.

So consolidate credit cards by MEWing and then starting all over again.

And then all of a sudden no house price rises and........oops.

The Bank of Mewing has gone bankrupt.

Generali

Carl31 wrote: »

Why is the assumption that high prices = more spending? Surely its the opposite?

It's known as the wealth effect: if the value of people's assets rises then they feel more secure in going out and spending.

Graham_Devon

Generali wrote: »

It's known as the wealth effect: if the value of people's assets rises then they feel more secure in going out and spending.

Important to note, however, that this doesn't necessarily involve spending money you have spare.

It often involves spending on credit and increasing debts. That was part of the problem we've just been through and are still suffering from 5 years later.

Dreadzone

Graham_Devon wrote: »

All good stuff. We need more of this in the national press. The BBC have cottoned on.

The BBC have only cottoned on because a Conservative government is doing this. It was all wealth creating when Labour did it, but now it seems we may have a bubble.