House Prices and the economy - according to the boe

Slam62 · 4 Dec 2017 at 17:29

From
http://edu.bankofengland.co.uk/knowledgebank/how-does-the-housing-market-affect-the-economy/

The housing market is closely linked to consumer spending. When house prices go up, homeowners become better off and feel more confident. Some people will borrow more against the value of their home, either to spend on goods and services, renovate their house, supplement their pension, or pay off other debt.

When house prices go down, homeowners risk that their house will be worth less than their outstanding mortgage. People are therefore more likely to cut down on spending and hold off from making personal investments.

fails to consider those who have had low pay rises and can't afford current prices. Imo it is generally wrong in a number of ways.

I'm interested to hear people's thoughts I suspect there will be two distinct sides.

Click to expand...

aardvark · 4 Dec 2017 at 19:01

building an economy on ever increasing house prices is unsustainable and pretty moronic - history shows it generally doesn't end well.

Mason- · 4 Dec 2017 at 19:05

Doesn’t make you better off, unless you own more than one property. For most people there only property is their home. House prices going up, generally uniformly, doesn’t make them any better off. Houses should be homes first, investments second.

Glaucus · 4 Dec 2017 at 19:06

All I can say over the last few months house prices have stabalised and the last two weeks I've seen a lot more being reduced. Especially newer builds.
And I think this is just the start of it. Unless we do a u turn on brexit or at least sign upto single market.
People think house price rises make them better of, but it's only true for a fairy small proportion. Those that downsize or those that sell up and move abroad.

Randomface74 · 4 Dec 2017 at 19:09

The problem is the gap between house prices and wages.

Fusion · 4 Dec 2017 at 19:11

The interests and desires of the middle classes and wealthy are possibly reflected too much in economic thinking. It's all part of the neoliberal/anglo-saxon capitalist model, where assets and asset prices are protected, in one way by strongly controlling inflation.

The housing market is definitely broken, as it is neither a free market or a strongly controlled one. Social mobility and social well being is pretty far down the current government's agenda, and is shown by the recent departure of several members of the "task force" set up not too long ago to look at how best to achieve the aforementioned.

High prices must also have a negative effect on the economy. I'd love to live in London or perhaps some of the better environs, but just can't afford it, probably even if I got a better paid job than I have currently. There will be jobs I could do, where I'd earn more and pay more tax (which would benefit the coffers), but I can't take due to prohibitively expensive housing. That can't be ideal.

Hades · 4 Dec 2017 at 19:21

My house is 'worth' much more than I bought it for so I can afford to see it drop a bit. If they remain as they are now then my kids can't afford to ever buy. But if they drop then my kids (and others of course) will be better off. So I don't see a house price fall as necessarily a bad thing long term. But obviously that's looking at it from my own circumstances. I do appreciate that it will hurt some people in a different situation.

antijoke · 4 Dec 2017 at 19:46

House prices will never fall to affordable levels for the vast majority of the country now.

It’s too big to collapse and the government will not allow it. The hilarious part is all this help to buy is similar to benefit payments for rental properties. It’s just giving out money to boost the market for those that wouldn’t be able to afford it to keep the wheels turning.

Those of us who can’t afford to get a deposit are eternally ******.

wesimmo · 4 Dec 2017 at 19:49

billysielu said:
The problem is the gap between house prices and wages.

And people's ability to get a mortgage.

I've just bought the house we already live in, as part of the process I pretended we were looking to sell and got 3 estate agents to value it.

I'm still getting phone calls to see if I want to let it out at a price that would bring in double what I'm paying for the mortgage.

Ok I put down about 20% deposit, but that tends to be the issue, getting the lump sum and not the monthly payments, if my experience is anything to go by.

I've inadvertently ended up with 2 properties and both I could double the mortgage in rent if I chose to.

Caged · 4 Dec 2017 at 20:18

Maybe 30 years of growing the economy by selling houses to each other rather than making anything was a bad idea

Tom_ed1987 · 4 Dec 2017 at 20:20

I think that overall prices will remain steady for the foreseeable, and thus gradually become more affordable as time passes. Stamp duty has killed off mobility for those living in the average large family home in the SE, so there might be some actual (further) reductions there.

Delvis · 4 Dec 2017 at 20:41

Give up on a house, unless I come into some money I'll never own a house, or even get enough for a deposit at this rate.

Hades · 4 Dec 2017 at 20:42

Tom_ed1987 said:
Stamp duty has killed off mobility for those living in the average large family home in the SE, so there might be some actual (further) reductions there.

This is very true. We have a five bedroom house in a fairly nice part of Surrey. My wife and I have considered downsizing to a three bedroom house to free up some money for our children's education. But we can't afford to downsize. By the time we have paid the estate agent fees, legal fees, stamp duty on the new property and other sundry moving expenses it's just not worth downsizing. t would just be an exercise in giving other people money for little net benefit. So we have to stay where we are. Unless something dramatic happens in our lives I can't see us moving anywhere soon.

Fusion · 4 Dec 2017 at 20:48

Hades said:
This is very true. We have a five bedroom house in a fairly nice part of Surrey. My wife and I have considered downsizing to a three bedroom house to free up some money for our children's education. But we can't afford to downsize.

Really? How much is your current property worth (if you don't mind)? Would have thought the differential would easily outweigh moving costs.

K.C. Leblanc · 4 Dec 2017 at 21:04

antijoke said:
House prices will never fall to affordable levels for the vast majority of the country now.

It’s too big to collapse and the government will not allow it. The hilarious part is all this help to buy is similar to benefit payments for rental properties. It’s just giving out money to boost the market for those that wouldn’t be able to afford it to keep the wheels turning.

Those of us who can’t afford to get a deposit are eternally ******.

This is very much the case, after when millions of people end up in negative equity you don't get reelected.

Any proper house building scheme also needs radical economical policy to ease home owners morgages, we also need a change to planning law so homes for home for owner occupation, homes for rental vita short fold tenancy and holiday homes are fundamentally different.

K.C. Leblanc · 4 Dec 2017 at 21:05

Oops double post

Hades · 4 Dec 2017 at 21:10

Fusion said:
Really? How much is your current property worth (if you don't mind)? Would have thought the differential would easily outweigh moving costs.

I think rather not say on a forum. I'd never be able to afford it nowadays and even ten years later we still have to make a lot of sacrifices to afford it (no new cars, haven't been on holiday for five years, still can't afford to do much work on the house, etc). Yes there would be some margin after downsizing but the amount I'd be giving away to solicitors and in stamp duty would hurt. A lot. It would be like tipping a years salary down the drain.

Delvis · 4 Dec 2017 at 21:19

Hades said:
I think rather not say on a forum. I'd never be able to afford it nowadays and even ten years later we still have to make a lot of sacrifices to afford it (no new cars, haven't been on holiday for five years, still can't afford to do much work on the house, etc). Yes there would be some margin after downsizing but the amount I'd be giving away to solicitors and in stamp duty would hurt. A lot. It would be like tipping a years salary down the drain.

But if that means a cheaper mortgage and. Ore time/money in the long haul to do other things?

Caged · 4 Dec 2017 at 21:21

Pretty sure the guy with the house and the income has done the sums on whether it's worth downsizing

Randomface74 · 4 Dec 2017 at 21:21

Hades said:
This is very true. We have a five bedroom house in a fairly nice part of Surrey. My wife and I have considered downsizing to a three bedroom house to free up some money for our children's education. But we can't afford to downsize. By the time we have paid the estate agent fees, legal fees, stamp duty on the new property and other sundry moving expenses it's just not worth downsizing. t would just be an exercise in giving other people money for little net benefit. So we have to stay where we are. Unless something dramatic happens in our lives I can't see us moving anywhere soon.

This is being investigated atm - in the context of one of the reasons why elderly people don't downsize - so expect the situation to change somehow in the foreseeable future.