Monday, May 26, 2008
High house prices are just redistributing wealth, not creating it
Telegraph: Lower house prices can make you happy
A great deal of sense as usual from Roger Bootle
Posted by monty032 @ 09:23 AM (460 views) Add Comment
5 Comments
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1. Rm96696 said...
Lets imagine the following scenario: you and your neighbor live in almost identical houses. You decide to buy your neighbor's house for a billion pounds and he buys yours for the same amount. What is to stop you? The gain on your house covers the purchase of his house and vice versa. Now you're both billionaires! Next step: take out a home equity loan for, say, 100 million pounds. Since this is only 10 percent of the value of your house the banks should offer very favourable conditions since it is almost without risk. Trouble repaying the interest on the loan? No problem. "Withdraw" another 10 percent to repay the first home equity loan. What happens when you run out of equity to borrow? No problem, swap back into your original house at 2 billion pounds and keep going!
Sounds absurd? Isn't this how the u.k. economy was been running for the last 10 years?
2. confused76 said...
Roger Bootle is having the best time of his life after eating humble pie for many years. What he did not mention is that "this time is different", i.e. there are a million ma and pa buy to lets who are going to bite the dust
So lower house prices are not economically neutral but are economically positive since will destroy this insane get rich quick busines that has done so much damage to the rest of the country.
BTL will go down the drain! Yesss!
3. i remember the 90`s said...
That was Janet and John standard ,although it was probably true anyone could have wrote that and to think he gets paid for it .
4. str 2007 said...
Down sizers won't loose by falling prices, they simply won't gain as much as they thought. They're sure to gain about the amount they originally anticipated.
Currently their house is 'worth' far more then they could ever have imagined only a few years ago.
So they miss out on a few cruises - big deal.
5. letthemfall said...
Roger Bootle has received a lot of scorn from the VIs for predicting what he saw as inevitable - as did we. He puts the house price fiasco in a nutshell. The volatility of house prices since the 70s is really a scandal, and perhaps one of the biggest economic failings of all British govts.