Tuesday, Oct 21, 2008
Concentrated bear food (makes you feel sick)
Telegraph: Financial crisis: House-price slump to cost economy £50 billion
House prices are set to fall 35 per cent from last year's peak, as the property slump costs the wider economy almost £50bn as people stop buying homes, economists warned. With house prices predicted to make their biggest fall in British history by dropping 35 per cent by autumn next year, the associated consumer spending is expected to plunge, they said ... This is expected to have a huge impact on the wider economy as each house sale triggers around £4,000 in new spending on household goods, on items such as washing machines and other white goods.
Posted by quiet guy @ 11:34 PM (516 views) Add Comment
8 Comments
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1. Maihem said...
That's okay, we can buy other stuff. Or, even better, work less and have more... but that would be a horrifying prospect for families right? If they could play with the kids all the time and still provide everything their children needed - I'm sure Gordon will put a stop to that sort of nonsense.
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3. beartil2010 said...
Doesn't make me feel sick - we had the same article from the daily mail yesterday.
The papers have finally gotten round to reading the consultancy Capital Economics' reports and reporting on it, having neither the guts nor the understanding to do it before.
What makes me sick is watching my savings dwindle!!!
4. rm96696 said...
Isn't it a bit absurd that in a country with a totally irrelevant construction sector the "housing market" is so important to the economy. Considering that the houses in the uk today are exactly the same as the houses that existed 30 years ago it is obviously absurd to think that the country could have become wealthy as a result of the "housing market".
The "housing market" has nothing whatsoever to do with the construction or refurbishment of houses, but is simply a game in which millions of people swap houses among themselves (hopefully at ever higher prices). Since the houses are always the same there can't possibly be any real wealth creation in this. In fact ironically the only people to take more out than they put in are the estate agents (who receive a fee for facilitating the swapping) and other intermediaries (lawyers etc.) or people who cash in and leave the game. I admit that the game, like gambling, may provide some entertainment value (some people like to pass their weekends seeing houses and looking in estate agent windows), but the real importance of the "housing market" is that it can create the illusion of wealth and give people something to borrow against.
Why go through the roundabout route of trying to recapitalise the banks and reflate the housing market? Why not simply pass a law that everyone is wealth and can borrow up to a million quid a year guaranteed by the treasury? Sounds absurd? Why is it more absurd than believing that the country has become wealth from housing when the houses are the same houses that existed 30 years ago. It is all a question of faith...
5. inbreda said...
rm96696 - I totally agree. Your point nicely illustrates the absurdity of the bail-out and the attempts by the government to keep house prices artificially high. Their meddling will only make things worse and I now think it is entirely inevitable that the uk is going to see its worst ever depression.
6. shipbuilder said...
Excellent stuff, Maihem, rm96696. Mass delusion all round, our fantasy economy and fantasy wealth going up in smoke - we should be glad to see it go.
It's time to kick the corporate, dumbed down, non-value added, overworking, money chasing slave-drone economy into touch and get back to inventiveness, creativity, enjoyment, working less but creating more and for development, not growth.
7. stillthinking said...
Move your bloody savings man. Get them out. You know what is going to happen to interest rates. You know what is going to happen to the pound.
I already spent mine.
8. mark wadsworth said...
RM96696, spot on.
It's not just the great British public who are enthralled by the Fool's Gold that is ever rising property prices, the way the tax system works, the gummint collects a disproportionate amount from this, e.g. extra IHT and Stamp Duty Land Tax when house prices go over the IHT or various SDLT threshhold, extra profits/interest income earned by banks and depositors in bank, extra Stamp Duty Land Tax, all the VAT and tax from estate agents, solicitors, white goods retailers etc, extra CGT from BTLers who cashed out in time.
So in a recession, all these lovely tax revenues dwindle away again.
So why not wait til the bottom of the house price cycle and replace the whole lot (list above, plus Council Tax, Business Rates) with Land
Value Tax? Initially there'd be few winners or losers in cash terms, but this would keep prices low and stable. To the extent prices do rise slightly, LVT receipts are more like rent, so like rents, they would be fairly immune from fluctuations in land prices.
Just sayin', is all.
Finally: ... dropping 35 per cent by autumn next year I like the way that this has now entered the popular consciousness.