Why we only *seem* financially better off than in the 1970s

[Sankari]

One thing that bugs me, why should houses be any different from anything else we buy? Really they shouldn't cost anything more than materials, labour and a acceptable profit, paying for it over many years should be done mainly direct to the builder with no interest on top as they're making a profit already and should just have to accept getting profits back slower.

The builder needs cashflow to maintain his business. He cannot afford to take payments over such a long period of time; the cost of building a house is enormous, so he requires large sums of money as soon as possible.

Most houses these days are built in stages, with the payment being released by the bank to the builder over a period of time, subject to the buyer's approval of the work.

Having been built, houses increase in value as a result of supply and demand. They are affected by population trends, migration and immigration trends, land use trends, land availability trends, and changes to the surrounding area.

When the population rises, housing becomes a valuable commodity and prices rise to match the rising demand.

If a suburb offers excellent amenities and a premier location, it will be valued more highly than a poorly serviced suburb 30km from the CBD.

If a suburb experiences significant development (eg. a sudden rise in high-density housing; a new set of council flats; the creation of an industrial estate; the construction of a heavily polluting factory) it will become less attractive to buyers, and its value will decrease correspondingly.

Etc. etc.

 

[scorza]

One thing that bugs me, why should houses be any different from anything else we buy? Really they shouldn't cost anything more than materials, labour and a acceptable profit, paying for it over many years should be done mainly direct to the builder with no interest on top as they're making a profit already and should just have to accept getting profits back slower.

No other products are bought that way either. The price of practically every item on the market is determined by a combination of supply and demand, and a "mug factor" that depends on how prepared consumers are prepared to pay over the odds for something. This is how big multinational companies are able to collude with one another and make sure consumers in "Treasure Island" Britain pay more for say, consumer electronics, than anywhere else in the world.

 

[Surfer]

recent example of such collusion..(apparently)

http://www.independent.co.uk/news/b...ion-firms-accused-of-price-fixing-810522.html

 

[Scottly]

Another thing I find questionable are shares, making money off money by using companies isn't that great really because instead companies could pass the savings onto the products and services and even increase the workers pay, this should benefit everyone instead of the far smaller group doing shares.

You really don't understand what shares are. By owning a share you actually own part of a company, and are therefore entitled to a share of the profits. The process of buying or selling shares doesn't affect a company's bottom line, which is what needs to be altered to decrease the price of a company's goods and 'benefit everyone'.

Unless you think no company should ever be allowed to make a profit, which is just plain retarded.

 

[Sankari]

This is how big multinational companies are able to collude with one another and make sure consumers in "Treasure Island" Britain pay more for say, consumer electronics, than anywhere else in the world.

I'd be fascinated to see you prove that consumers in Britain pay more for consumer electronics than anywhere else in the world. Got source?

Speaking as an Aussie, I can confirm that we pay more for electronics Down Under. I was delighted when I came to the UK and found that they were so cheap.

 

[scorza]

I'd be fascinated to see you prove that consumers in Britain pay more for consumer electronics than anywhere else in the world. Got source?

Speaking as an Aussie, I can confirm that we pay more for electronics Down Under. I was delighted when I came to the UK and found that they were so cheap.

Well alright, perhaps I should have said pay more than USA and the Far East. Source: Quentin Wilson on Tonight with Trevor MacDonald some day last week

 

[Radiation]

The builder needs cashflow to maintain his business... Etc. etc.

supply and demand...

Yes I see the poor state of how things are and run now but regardless my point still stands and there are better ways, i know people like to play devils advocate but I was talking pretty generally there as how things could be without going into unnecessary detail and of course there's allsorts of areas and issues that would need looking at before everything could work well enough, at the end of the day don't people want to live in a better and more fair world?

You really don't understand what shares are. By owning a share you actually own part of a company, and are therefore entitled to a share of the profits. The process of buying or selling shares doesn't affect a company's bottom line, which is what needs to be altered to decrease the price of a company's goods and 'benefit everyone'.

Unless you think no company should ever be allowed to make a profit, which is just plain retarded.

Who are you to presume what I do and don't understand? You've only made what shares are a bit clearer which i knew already and my point is unchanged that shares are mainly about profits and are motivation for said companies to make profits as they have to deal with shareholders, where as if companies were motivated on the idea of sustainability and the greater good the world would be a much better place.

I don't have a problem with profits up to a point but being the sole motivator is a real issue that needs to be dealt with, think about it, when a company gets to a certain size taking in such large profits seems pointless except that in the current system its mostly for the shareholders, instead a lot of that money could be kept in our wallets instead of paying excessive amounts for mainly just those shareholders, this way both the companies and everyone else wins as the cost of living goes down and quality of life goes up.

 

[Sankari]

Well alright, perhaps I should have said pay more than USA and the Far East. Source: Quentin Wilson on Tonight with Trevor MacDonald some day last week

LOL, good old Quentin Wilson, eh? International expert on electronics prices.

 

[Sankari]

Yes I see the poor state of how things are and run now but regardless my point still stands and there are better ways, i know people like to play devils advocate but I was talking pretty generally there as how things could be without going into unnecessary detail and of course there's allsorts of areas and issues that would need looking at before everything could work well enough, at the end of the day don't people want to live in a better and more fair world?

Yes, we all want to live in a better and fairer world. The question is: how do we achieve it?

What would you suggest as an alternative to the current arrangement?

 

[scorza]

LOL, good old Quentin Wilson, eh? International expert on electronics prices.

I know it's not exactly Financial Times stuff, but QW does imo, take a lot of credit for making cars cheaper in the UK. He spent a lot of effort pointing out the difference in car prices we paid compared to other European consumers.

 

[The Mad Rapper]

Iwhile the price of a property is set by the vendor (influenced to some extent by market forces).

This is where you, and many others, are wrong. The price of a property is set by the buyer at the moment of sale.

Property prices in the UK have risen because of the availability of cheap credit. This has caused a bubble in so much as that prices would never have risen so high had that cheap credit not been available.

 

[MTA99]

Who are you to presume what I do and don't understand? You've only made what shares are a bit clearer which i knew already and my point is unchanged that shares are mainly about profits and are motivation for said companies to make profits as they have to deal with shareholders, where as if companies were motivated on the idea of sustainability and the greater good the world would be a much better place.

I don't have a problem with profits up to a point but being the sole motivator is a real issue that needs to be dealt with, think about it, when a company gets to a certain size taking in such large profits seems pointless except that in the current system its mostly for the shareholders, instead a lot of that money could be kept in our wallets instead of paying excessive amounts for mainly just those shareholders, this way both the companies and everyone else wins as the cost of living goes down and quality of life goes up.

I've highlighted "shareholder" and "greater good" because they two are one and the same. There is nothing (other than your current financial position) stopping you benefiting from the success of any company that has issued shares. I'll concede that there are a number of large companies that are "owned" by a relatively few shareholders but the whole share market works because anyone can buy or sell.

If you make the focus of the business "sustainability" how do you measure it? Profits are quite a good indicator

 

[Sankari]

This is where you, and many others, are wrong. The price of a property is set by the buyer at the moment of sale.

No, the price is set by the vendor and subsequently negotiated by the buyer. It is finally agreed between the vendor and buyer.

I can't just walk up to a house and say "I'll buy that house for 5p" regardless of what they're asking. And even if I offer an attractive proposition, I can still be turned down by a vendor.

The price at point of sale represents a mutual agreement by vendor and buyer.

Property prices in the UK have risen because of the availability of cheap credit. This has caused a bubble in so much as that prices would never have risen so high had that cheap credit not been available.

It's about supply and demand. How does cheap credit drive up house prices?

 

[Scottly]

Who are you to presume what I do and don't understand? You've only made what shares are a bit clearer which i knew already and my point is unchanged that shares are mainly about profits and are motivation for said companies to make profits as they have to deal with shareholders, where as if companies were motivated on the idea of sustainability and the greater good the world would be a much better place.

I don't have a problem with profits up to a point but being the sole motivator is a real issue that needs to be dealt with, think about it, when a company gets to a certain size taking in such large profits seems pointless except that in the current system its mostly for the shareholders, instead a lot of that money could be kept in our wallets instead of paying excessive amounts for mainly just those shareholders, this way both the companies and everyone else wins as the cost of living goes down and quality of life goes up.

Well duh. Business is about making profit, and beyond that it's about maximising profits. Who the hell are you or anyone else to decide that a company is making 'too much' money? And you seem to have a poor idea of who shareholders usually are, they're not always super-rich businessmen - large multinational companies often give shares to employees as a bonus, and funds can be bought intop by just about anyone.

If you have a problem with shareholders earning too much, here's a tip: buy shares and get in on the action!

 

[Bear]

It's about supply and demand. How does cheap credit drive up house prices?

Im guessing that cheap credit means more people on lower incomes have access to the housing market which creates more demand therefore causing house prices to rise. As you say supply and demand.

 

[MTA99]

It's about supply and demand. How does cheap credit drive up house prices?

If a buyer is able to pay more a vendor will ask for more.

 

[Tefal]

Quick Ot question for Evangelion, are most houses in auz, wooden like in the states or brick like uk?

 

[Sankari]

Im guessing that cheap credit means more people on lower incomes have access to the housing market which creates more demand therefore causing house prices to rise. As you say supply and demand.

Well, it may have some influence, but it's hardly the driving force. After all, houses are more expensive than they've ever been. You can't get a house on a credit card; mortgages aren't the same as the "cheap credit" you can pick up at a high street shop.

If a buyer is able to pay more a vendor will ask for more.

In which case he needs to know how much a buyer is able to pay - and the only time he gets a hint about the buyer's ability to pay, is when the buyer makes an offer.

But even then, this only allows him to bargain for his asking price; it doesn't give him the ability to increase the price during negotiations. At the end of the day, he has no guaranteed knowledge of the buyer's ability to pay; he only has the offer on the table. He has no way of knowing if this reflects a genuine ability to pay (unless the buyer is hopelessly indiscreet).

Asking prices increase under competition; eg. multiple buyers seeking the same property. They don't rise spontaneously during a 1:1 negotiation.

People don't say "Well if you're prepared to pay the asking price, surely you can afford to pay another £5,000 on top of that", or "I know you said you could afford £350,000 but I have full details of your personal financial position, and I am aware that you can go as high as £550,000 - so how about we make this the new price and sign the contract now?"

The vendor has no way of obtaining intimate knowledge of the buyer's financial situation unless confidence is breached - whether knowingly or otherwise.

 

[Sankari]

Quick Ot question for Evangelion, are most houses in auz, wooden like in the states or brick like uk?

Brick.

Tasmania has a slightly higher proportion of wooden houses because during the early years of urban expansion (I'm talking about the Federation period here) it was expensive to ship bricks across Bass Straight from the mainland, and local manufacture was limited. Wood was plentiful and cheap, so it made sense to build timber homes.

My house in Adelaide is double brick; you can see some photos here. I don't have any photos of my other property.

 

[Tefal]

Brick.

Tasmania has a slightly higher proportion of wooden houses because during the early years of urban expansion (I'm talking about the Federation period here) it was expensive to ship bricks across Bass Straight from the mainland, and local manufacture was limited. Wood was plentiful and cheap, so it made sense to build timber homes.

My house in Adelaide is double brick; you can see some photos here. I don't have any photos of my other property.

oo very nice

I'm assuming this means that house prices down there are more inline with British ones, and not the very cheap sounding ones you get in America where you get a very large house, which seams to be made solely of partition walls?
Although all I ever see on tv of Australian houses is bungalows