To think house prices are too high but the economy is based on them so they will be kept high at all costs(52 Posts)
I thought for years that they were about to crash as too high and unsustainable. Then scheme after scheme came out to rig the market and keep them high. Its shown that they will do anything to keep them high.
I guess its because the economy is very reliant on them, so if they fell it would bring the country down with them. The pound has already been devalued massively.
They are starting gradually to tax btl more, but seems like they are slowly doing it to not crash the market, but just to get them to exit the market gradually. Then as demand outstrips supply buyers will replace the over leveraged btl people.
Therefore I conclude that a whole generation will just be funked over in order to keep them high?
Am I pessimistic or realistic? I'm seriously looking at leaving my home country.
Its got nothing to do with keeping them high. There is a shortage of housing and a rising population it is simple demand and supply. The help to buy etc is just desperation and arguably makes it even worse.
I don't think there will be a housing correction (prices falling) any time soon.
Bit confused by your post. Of course the government would want to sustain house prices as a significant drop (as happened in 2008) spells disaster for the economy and contributed to the collapse of several high street banks, as I'm sure everyone remembers.
It's not a conspiracy against people who don't yet own their own house, or who wish to move somewhere bigger.
And based on supply, demand, the fact that it's only recently happened and prices have now recovered very well, implies that this is very unlikely to happen again any time soon.
There are plenty of areas with affordable housing, perhaps move elsewhere if you are priced out of your local market?
What do you mean by 'the pound has been devalued'?
The pound is performing pretty steadily, especially when you look at what has happened with the Euro/gold prices/oil prices
Other than that, tfoot is right - this is basic supply and demand economics. No one is rigging anything...
Supply and demand in popular areas makes housing expensive
In areas that are not desirable house is a lot less expensive.
Try looking at the north west house prices
The Guardian: Newham, east London, sees UK's biggest house price rise. google.com/newsstand/s/CBIw5oP27ic
Price falls of 3%+ in Wales
You are right. Rising house prices make people who own their homes feel wealthy and so spend and borrow more. If you felt that the value of your house was going down you would be less likely to buy a new car. And that's the case even if you have no intention of moving until you die. It's not a case of the affordability of your monthly mortgage repayments, it's about whether we think we will have jam tomorrow which determines our spending behaviour today. The government is artificially propping up prices by creating schemes which enable first time buyers to borrow obscene amounts of money to buy little boxy houses which cost no more than £40k to build. If, instead, they left the market to run itself, the lack of first time buyers would, over time force prices down. The government can't afford to do that because the only thing that props up our economy is solidly rising house prices.
It is the world's largest Ponzi Scheme. It will not end well.
They're very obviously too high as the average age of first time buyer has been creeping up and up. In fact it's about my age. My generation has been watching them go up and up, thinking they have to stop some time, all our working lives. Members of my generation had to be extremely lucky to be able to buy, having nothing ever going seriously wrong for them or help from the previous generation. Later generations are completely screwed, its help from previous generation or nothing.
Lol at 'it's not being rigged'. Everything the neoliberalists have done - both new labour and tories, they are much the same - has had the effect of preserving privilege and helping wealth to accumulate in fewer and fewer hands. Very obviously so too. We have a choice - we can either believe it's a deliberate conspiracy against the poor and lower middle classes, or just that it's total incompetence on the half of a political class that is totally insulated from the realities of life. I have in the past been generous and assumed total incompetence, helped by such examples as Cameron's laughable letter to Oxford Council and his apparent wish to stay in the EU after playing the immigrant hate card for all he's worth, but the absolute refusal to listen to the increasing body of evidence proving that neoliberalism directly leads to sociological and economic shit makes me think conspiracy. It's probably a bit of both, they reinforce their own divided mentalities daily.
Either way we so badly needly change, this path leads directly to socioeconomic crash.
YABU. We have a free market driven by supply and demand. Schemes have not been introduced to keep prices artificially high, they have been introduced to try to curb house price inflation in the face of unsustainable disparity between the two forces.
The disparity has been increasing for 25+ years, not just the period of the last government.
By pushing prices down you would be forcing a large proportion of the population into negative equity and bank loans into default.
The best approach is to try to stem the rate at which prices are rising so that in the long term they become more affordable, which I think is roughly what will be achieved by:
- Increasing house building
- facilitating more FTB (who will all benefit from future growth)
- managing the economy to control interest rates
- curbing the growth of BTL and eliminating tax loopholes that unfairly make it a more profitable business interest than other investments
- regenerating industry in areas of the country to dilute highly concentrated areas of demand in certain parts of the country
These are all policies which have been introduced and I can't see how any of them will result in rigging prices higher, other than by helping to increase demand by making the UK a pretty desirable place to live. Which in the long term has to be good news for all of us.
What would you do differently?
What exactly has ever been done to curb house price inflation? I'm genuinely curious, what do you think has been done that could possibly be interpreted as leading to that aim?
I'm seeing social housing sell off into private hands, the encouragement of buy-to-let - you'll notice they're only curbing it now because of fiscal measures, not out of any concern for the lower classes, and what they are doing will only affect the smaller landlords not the larger (I can't find much sympathy for any landlord but that is a fact) - and multiple home ownership generally, how tha could never be expected to cause problems on a small island with a large population is beyond me, and an occasional 'help-to-buy' sop which keeps them high.
House building has famously not kept pace with increasing population. How are they facilitating more first time buyers realistically? The help-to buy isa is a joke, an extra £3k after 5 years or so when prices are 150k. Allowing smaller deposits doesn't protect us from future rate rises which as you say would directly lead to negative equity. Part ownership doesn't help for the same reason, just raises the prospect of future insecurity. We will not all benefit from future house price growth unless we have the capability to sell one and move into a cheaper place, how much help is that exactly?
And regenerating industry? Don't make me laugh.
Totally agree Houseofmirth66.
I'm not saying is a conspiracy (although there are sites out there that do and I've come to the conclusion they are full of very paranoid and dilusional people). Its more just a case of unindented consequences. The vast majority are in so much debt that theuere is no way to let them fail without brining yjr country down. So even though people have taken on too much debt. They will be saved with near zero interestrl rates and other interference as they are the majority.
Lol at free market supply and demand. Its anything but, its a very rigged market and many MPs own btl so there are many vested interests to keep them high. These schemes like help to buy have just pushed up prices where I live. Also the stamp duty changes have pushed up prices a lot for the sub 250. Places that were 150-180 a few years ago are now over 250.
It mayebr a ponzi scheme. But does that mean it will collapse?
Final sallery pensions are the same. But they are unlikely to collapse, they will carry on to this detriment of those at the bottom. I think the same is happening with houses.
What a lot of typos. Even for me . I'm busy and on my phone in my defence. Wish there was an edit!
Years of record low interest rates have enabled house prices to rise far beyond any sensible valuation.
However - a sudden crash would cause massive economic problems and misery for millions of people. Stability and a gradual decline would be best - which could potentially be achieved by gradually rising interest rates, restrictions on buy to let (will be interested to see if this will work; I reckon they should restrict non-EU buyers who aren't resident in the UK too) and a sensible house building programme.
For over 20 years and longer before any of these policies were introduced, nothing was done to curb house price inflation or dilute demand in popular areas, that's why we are in the dire situation we are today.
None of them are going to work overnight but surely they're better than doing nothing? The key thing in my mind is that changes are now afoot, it's introducing them that is the biggest step, now they have the chance to be used as levers to stop inflation increasing at the pace it has been. How effective that is depends on numerous factors, but I've no doubt results will not be immediate. Any home owner will benefit from price growth as long as it's outstripping regular inflation, you may just not realise those gains until you come to buy a cheaper house by downsizing.
Again, what should be done differently?
It's true nothing has been done and any curbing of buy-to-let is a good start. But it is obviously going to hit small landlords like I said. What is going to stop the extremely rich continuing to buy properties in their entirety in cash upfront?
The neoliberalists have never 'managed the economy'. Their whole ideological point is that they think the free market will rule itself, they want less regulation, less management. Which is provably bonkers. Real management would have said, ten years ago, ok this is well out of hand (bearing in mind they've been increasing for 20), lets legislate that any two-bedroom property has to be sold at no more than, say 5x minimum wage while simultaneously banning multiple property ownership. That is management. All they know how to do is manage figures and statistics.
The realising of gains is still rubbish. What if you never sell and downsize because you are buying a home to live in, not an investment to sell? Or you have to sell up for care home fees?
House building in the UK is notoriously inelastic. Governments never seem to get a handle on this and I'm at the point where I agree you. It feels like they are eyeing expensive house sales as a way of covering elderly social care while the indebted younger generation suck up what jobs they can to meet their mortgage payments (if they can get to that point) - plus student loan plus pension. If mum and dad have a house to inherit, then people might complain less - until it goes on the care home fees.
I'm just assuming if the DCs want a house the eventual sale of their grandparents houses one day will have to pay for it otherwise forget it.
You have a point. We've not got a free market, there's constant interference with it, and there's pretty much nowhere in the country where housing isn't expensive relative to both local incomes and prices a couple of decades ago. I don't agree with all you say, but you're right that we've seen lots of government intervention to avoid a crash. A huge number of people don't want to hear it though, as you're about to find out.
I think we are agreeing on impact of neoliberalism on the economy and house prices, more should have been done earlier.
Realising of gains is not rubbish though. In your example, if house price inflation has increased faster than care fee inflation (which it has) then you've benefitted from owning a house. Further, for those who choose not to downsize but to stay in a property, there are numerous ways of releasing equity either through a private scheme or against state provided services which again allow you to realise the gains that you would otherwise not have had. Realising gains does not simply mean cashing in a lump sum and travelling around the world or handing it out to DC.
Social care is a very important point though. It is a ticking time bomb for the country, current regulation requires an individual to pay their full cost of care until their assets are under £23,000 at which point the state pays. Many elderly are asset rich and cash poor (assets primarily being property), so the equity built up in house price growth may ultimately be benefitting the wider economy by reducing the contributions that the welfare state has to make to social care in the future.
In the past, life expectancy was shorter and family support networks were typically more localised, factors which have changed to dramatically increase social care needs today.
I realise this seems very unfair, my parents both need full time care so I'm highly familiar with how the system and choices work regards costs, houses and family in later life.
I think we are probably getting a bit off topic around this point but it is important to consider how LT house price growth can support those in retirement no longer earning an income yet facing high care costs. It goes no way to justifying inflation to date, all I know is I would hate to be a politician!!
The problem with the houses for care home funding is it stops when no one owns housing - except those who were lucky enough to buy housing before prices rise steeply and have been able to repeatedly equity release to buy BTL since.
Any debate on this is always going to be skewed by location as I can tell that most of the above posts are referring to the south east or other select areas. Can only have a reasoned debate if people realise that house buying is not out of reach to those on average incomes in the majority of the UK, and rich foreigners are not buying all the properties with cash!! That's only a tiny postcode area surely... Most of the country's residential housing is simple supply and demand and mostly owned by ordinary working people.
Off topic, but not... it's one socioeconomic system, so it's all related. I'm not in the se by the way. For a variety of reasons I won't bore you with but related to both my and my dhs poor starts in life we only stopped living hand-to-mouth 8 years ago or so, so 'even' northern house prices are way out of our sight. Many people are living hand-to-mouth their entire lives now. Working people are turning to foodbanks to survive. Even median income doesn't give you much more than that these days. So house buying is indeed out of most people's reach, especially if the major expense, housing, has always been going into someone else's hands as rent rather than into (partly) your own hands as mortgage. You need money to make money, something people who've always had it have never understood.
Who said anything about rich foreigners buying with cash. It's locals too, the kind of multiple-property-owning landlords who can afford to give houses as presents to their children.
Something else that needs to be banned is the growing practice of estate agents guaranteeing rent payments to landlords even when they don't have tenants. Funny our society as a whole can afford that but not guaranteed rent payment for tenants. A clear example of how the 'free market' defeats itself, they don't even need to compete for tenants any more.
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