UK "one of the wealthiest countries on the planet & getting wealthier by the day"

HAMISH_MCTAVISH

the_flying_pig wrote: »

but what am i missing? i refer you to my post 17 - given that we know the GDP per capita [income] figures already, what, in very simple terms, is the story as to why higher house prices in the UK tell you something meaningful about UK living standards vis-a-vis [say] French living standards?

OK, in very simple terms, but only because you asked nicely.;)

Your question is a strawman.

House prices don't, in isolation, tell us anything about living standards.

They only tell us something (and an incomplete thing, at that) about wealth.

However in general terms, countries with higher wealth tend to have higher living standards than countries with lower wealth. And countries with higher wealth tend to have higher house prices than countries with lower wealth.

Living standards in the UK, for example, are vastly higher on average than those in Bangladesh. As are house prices, on average.

Indeed, house prices even tell us a lot about distribution of wealth within a country.

The average resident in Laughton is vastly more affluent than the average resident in Loughborough.

Rising house prices tend to be both cause and effect of rising wealth.

A virtuous circle.

what's the equivalent story for housing wealth?

e.g. might it be that we have higher quality housing stock than the French, giving us higher living standards? a plausible story perhaps, but obviously changes in the market value of that same stock wouldn't change our living standards... or would it?

You're thinking about input changes.

What you need to be thinking about is output changes.

ALL wealth stored within housing will eventually be released and either recycled to future, younger, generations or spent in the economy. Via taxation, inheritance, downsizing, etc.

The housing market is many things....

It's a wealth creator, it's a wealth multiplier, but above all else it is a wealth accumulator.

And that wealth is always, ultimately, released.

Graham_Devon

wotsthat wrote: »

Depends on age etc. but say they felt a bit flush because of their HPI gains why couldn't they spend 75%? A 25% saving ratio doesn't sound outrageously extravagant.

This isn't something that has been made up tonight. When people become more wealthy they spend more. I really can't see the point of increasing my net worth if I still spend the same as when I was p**s poor.

OK, so what you are really saying is people become more careless with the spending.

It's not really that they can spend more because they have more. They can spend more than they did before because they feel better because the value of their house has gone up.

If anyone else did that, you'd be deriding them for wasting money. Plenty of your posts talk about spending less. Yet now you say people can spend more and thats acceptable because the value of their house has gone up.

What happens if it goes down? Would you then suggest they are being a little too extravagent and have to spend less of their income again?

It's all a little baffling really. On the one hand you are saying people make their choices if they spend more and have to live with it, but on the other hand are suggesting people can spend more of the very same income at will just because the value of their house has increased.

HAMISH_MCTAVISH

Graham_Devon wrote: »

OK, so what you are really saying is people become more careless with the spending.

Which I wouldn't disagree with.

Another way of putting that is that people are more confident to spend in the economy and take risks when they have assets behind them if it goes wrong.

Risks like starting a new business, conducting home improvements, etc.

And when enough people take those risks, and spend that money, employment and the economy tend to rise, creating a virtuous cycle of growth and benefitting not just the risk-takers/borrowers, but also everyone else..

Graham_Devon

HAMISH_MCTAVISH wrote: »

Another way of putting that is that people are more confident to spend in the economy and take risks when they have assets behind them if it goes wrong.

Risks like starting a new business, conducting home improvements, etc.

And when enough people take those risks, and spend that money, employment and the economy tend to rise, creating a virtuous cycle of growth and benefitting not just the risk-takers/borrowers, but also everyone else..

I'd agree Hamish. As I stated, people are more carefree and take more risks.

That's what this is about in essence. It's not spending more because it's sensible. Not spending more because it's warranted. It's just taking more risks in a more careless manner.

HAMISH_MCTAVISH

Graham_Devon wrote: »

I'd agree Hamish. As I stated, people are more carefree and take more risks.

That's what this is about in essence. It's not spending more because it's sensible. Not spending more because it's warranted. It's just taking more risks in a more careless manner.

I don't agree it's careless.

But rather that it's a calculated, sensible and acceptable level of risk, which is required for economic growth and societal advancement.

Graham_Devon

HAMISH_MCTAVISH wrote: »

I don't agree it's careless.

But rather that it's a calculated, sensible and acceptable level of risk, which is required for economic growth and societal advancement.

Right, so just to get this straight.

Say a househld has an income of £1,500 a month. They spend £1,200 of that on bills, living, mortgage etc.

Their house value goes up 5% and increases by 10k.

Is it now ok to "risk" more spending? How much is OK?

Only it's been said that spending too much is your own life choice and you have to live with the consequences.

Yet now we seem to be at parrallels with all the other wordly advice given on here to save more and spend less on rubbish. As now, you are stating they can spend more, presumably on stuff they don't actually need as they didn't have them before.

So what's acceptable? Taking out a sky package at £50 a month? Or is that waste? Only it is in every other scenario on here. Now, it appears, so long as house prices increase, it's no longer wasteful spending on something you didn't actually need?

Would they be allowed the dreaded iphone if their house value increases?

HAMISH_MCTAVISH

Graham_Devon wrote: »

Right, so just to get this straight.?

Don't be daft.

Lets say I want to start a business and need to remortgage to raise £50K.

Am I more likely to want to, or indeed be able to, do this when house prices are crashing or when they're rising?

Graham_Devon

HAMISH_MCTAVISH wrote: »

Don't be daft.

Lets say I want to start a business and need to remortgage to raise £50K.

Am I more likely to want to, or indeed be able to, do this when house prices are crashing or when they're rising?

That's lovely, but we were talking about increasing how much income we spend and how people can spend more of their income if their house goes up in value.

You gonna stick on the same track or choose a completely different destination now?

wotsthat

Graham_Devon wrote: »

OK, so what you are really saying is people become more careless with the spending.

Careless is your choice of word. It doesn't have to be like that

Graham_Devon wrote: »

It's not really that they can spend more because they have more. They can spend more than they did before because they feel better because the value of their house has gone up.

Yes when people feel richer they spend more. However they can only spend what they've got.

Graham_Devon wrote: »

If anyone else did that, you'd be deriding them for wasting money. Plenty of your posts talk about spending less. Yet now you say people can spend more and thats acceptable because the value of their house has gone up.

What happens if it goes down? Would you then suggest they are being a little too extravagent and have to spend less of their income again?

If you want to take the argument to the extreme fair enough. You make out I'm advocating that if a house goes up by £10k then £10k has to be spent. It doesn't.

If net worth falls I'd expect spending to fall too. It really isn't rocket science.

the_flying_pig

HAMISH_MCTAVISH wrote: »

Don't be daft.

Lets say I want to start a business and need to remortgage to raise £50K.

Am I more likely to want to, or indeed be able to, do this when house prices are crashing or when they're rising?

that's such a micro, micro [nano? pico?] level example. what does it tell us economy wide? as i've said on here a zillion times before, businesses are disproportionately started by the young, all the evidence shows this. how does a young UK person having more mortgage debt than a young french person make it easier for him to start a business?

why do higher house prices mean that, in aggregate, UK living standards are higher than french ones, despite our GDP per capita [i.e. consumption, investment, government spending, exports minus imports, etc] being near enough exactly the same?