Would a Collapse in House Prices Be a Good Thing
Would it be for the greater good if house prices fell dramatically ?
With massive economic problems facing both the UK and the US is it now time to consider taking steps to greatly reduce to cost of buying a home ?
Whilst I understand there are those who would be affected by this, would more benefit ?
I offer the discussion as a theoretical one rather than concentrating on what would happen to individuals.
News that one of Britain’s biggest building societies is raising rates to such a level they are deliberately trying to avoid new business in the mortgage sector brought all this to my mind.
Others are beginning to insist on no more than 3 times annual salary and up to a 25% deposit.
Whilst property has always risen in value over the long-term and buying a first house has never been easy it was always a manageable situation.
Now houses have gone beyond being expensive and are now out-of-reach to large numbers of hardworking people with decent jobs.
I don’t believe a house should be a luxury, anybody working full-time should be able to buy one.
Naturally, the better off you are the better the house you can buy but there is no reason why, when we have tons of land doing nothing, average property prices should be as they are.
One idea could be to allow the sale of unused farmland etc to be used for ‘affordable housing’
The effect of a large number of new houses would bring the market back down in general.
Whilst I understand the negative equity issue, it would only affect relatively few as to most the value of your home is purely theoretical.
The vast majority will still be paying their mortgage and whilst they continue to do so would remain unaffected by the theoretical value of their property.
As things stand today I see no hope for so many people looking to get started, shelter is a basic essential and not a luxury. The number of people now renting is a ticking time-bomb.
people may be able to pay £500 a month whilst you’re working but what happens when you retire and get £100 a week pension ?
I’ve never understood the obsession with the value of your house, rarely can it be cashed in and if you want to move you lose more than you’ve gained on percentage increases.
There is a very real danger that those people, myself included, who are comfortably on the ladder simply forget about those who are not and those to come !
I’m alright Jack !
Well, you might not be these absurd house prices are ultimately undermining the whole economy and that is beginning to affect us all.
Would you like to see prices slashed ?
Am I making any sense ?
Jordan said,
March 28, 2008 @ 12:17 pm
Always
No
:B
Jordan
Rod said,
March 28, 2008 @ 12:44 pm
Jordan
straight to the point as always
Enjoy the weekend
RC
Witches of Eastwick said,
March 28, 2008 @ 6:34 pm
Rod,
Now sit down…. we agree with you! The Witches like to think they recognize the problems here, having acquaintances in all kinds of financial situations. For instance someone we know is paying £800 in rent because they can’t get a mortgage and may we add that the person in question is well past 40. At this rate what hope have they got of paying one off before they hit 120 if in fact they ever manage to buy?
As a matter of interest we overheard a conversation at a recent gathering… one woman said that her daughter wanted to work as a beautician when she leaves school…. great we said, what a nice career but will she be able to support herself on this type of wage? A general discussion followed with everyone chipping in their opinion but we were surprised at how many people were not considering the fact that low paid jobs are unlikely to meet the bills these days for essentials let alone extras. Admin work in general 20 years ago was not paid well but then the houses were cheap and many a worker bought a little terrace house in Lincoln… wages have gone up a bit but house prices have soared, in some cases to more than 20 times their original price…. what chance do all these people stand in the future?
What percentage of the population are earning less than £20,000? The majority we suspect and even if two people get together, in some counties it’s still not enough. If things don’t change everyone will be moving to Latvia to take up plumbing or building etc., or living with their parents forever.
WoE
Rod said,
March 28, 2008 @ 6:51 pm
WoE
it’s a very real problem and one that has yet to fully show itself.
As you mention, £20k is a good wage in Lincolnshire, but with responsible lending rates that equates to a mortage of £70k … Useless round here never mind elsewhere.
You also make a very good point about the beautician. I am sick of hearing people citing teachers and nurses etc and the problems they face with their pay … what about people working in shops etc - all on minimum wage we never hear about them on the news.
There are a lot of people currently managing thanks to the help they receive from the government because they have children - what happens when the children come of age and those benefits stop ?
I wouldn’t want to be 20 again !
Regards
Rod
the dinosaur said,
March 28, 2008 @ 8:18 pm
Rod, I’ve never studied economics, the stock market or international finance so I can only comment from a simple and common sense point of view. Whether it’s advantageous for property prices to fall or not really depends on which side of the fence you are, existing home owner or would be home owner! I could get very political and ramble on about the growing social divide, inequality of investment in different parts of Britain etc. etc. but to keep to the subject of how to make houses affordable for everyone who works for a living and deserves a home of their own, it makes sense to discourage the buying of so called second homes as pure investments which has been booming. Why when everything else is being taxed so enthusiastically, can’t multiple property owners be kept in check by making them pay much higher council tax, I suspect the answer is something to do with politicians being the worst culprits at buying up housing for their personal profit.
Little Brother said,
March 28, 2008 @ 10:29 pm
Rod,
This reverts back to your earlier posts on relationships and the fact that many couples stay together purely for economic reasons. A member of my staff is currently facing the exact same dilema, I shall spare the details but if you knew them and the wage earnt coupled with the taxes paid for many years to be unable to afford the rent on a terrace council house in a less than attractive part of Lincoln is simply not acceptable in this country. It’s about time the government ‘wised up’ to the problem, we are too busy helping everyone else when we can’t look after our own. The minimum wage goes up periodically but what about those just above it? What chance has anyone got of saving for a deposit let alone meeting the mortgage payments. The whole thing stinks.
LB
Rod said,
March 29, 2008 @ 8:17 am
Dino
that’s a good point and something which also puts pressure on the market, second house, add to that the number of people living on their homes.
The record number of separated families who now occupy 2 houses instead of one …
Best
Rod
Rod said,
March 29, 2008 @ 8:21 am
LB
Spot On !
Your example shows exactly what I’m talking about.
The governments answer at the moment sems to be to help those with children, ignore everybody else and most importantly ignore the real issue.
Their assistance for some in the form of benefits is nothing more than a sticking plaster with the real problem left untreated.
Regards
Rod
Kitana said,
March 30, 2008 @ 10:46 am
I feel the prices have to change eventually…..what i have noticed in the UK, is how the younger generation (i.e. under 21) are a little naive, thinking if they dont get a mortgage now, they will never afford property because the rates and prices are as they are…….i saw a documentary which showed to 19 years old girls buying a £250,000 flat in London…..if their circumstances alter in the wrong way even slightly, they are going to be in real trouble! the fact is, its lack of education, i believe, what goes up must come down, house prices always change, its goes from sellers to buyers market and back again…..right now people are so desperate for ‘the perfect home’ that they are buying well over asking price, which in turn puts the base prices up across the board……i think patience is the key……they will fall again, and i think it will be drastic, putting a lot of people who are already stretched, into difficulty…….that £250,000 flat may be worth a lot less soon, but once you’ve bought it, price decreases dont help you!!! I feel lenders and giving far too much in the first place, i remember when they advised a ,ortgage of 2-3 times your annual income, that is now 5 times!! I wouldnt buy right now, i would rather wait for a repossession, because sadly, i think thats where we are headed!! I am glad to be paying a lowly rent……i am very lucky, in scotland, i am paying just over £100 a fortnight for my 3 bedroom flat……i am happy, and have no financial strain due to that!! I hope my prediction doesnt happen though, i would hate to see a lot of people homeless once more, after apparently landing their dream home!!
Rod said,
March 30, 2008 @ 5:41 pm
Hi Kitana
you make some great points, I especially agree with lender responsibility.
Had people not been sop keen to lend too much money then prices could never have risen the way they did.
I remember having a mortgage interest rate of about 14% - what would happen to those on 5x annual if that situation arose again ?
Scotland certainly sounds the place to be
Regards
Rod