Tuesday, Feb 24, 2009
Why is the Government using our money to bribe a bank to puff up a new house price bubble?
Daily Mail: Why is the Government using our money to bribe a bank to puff up a new house price bubble?
"This Government’s economic policy has proved a one-trick pony - the only ‘success’ Ministers understand is a debt-fuelled consumer and housing boom, and to return to that land of lost content they will throw around any amount of our money."
Posted by becky @ 09:36 PM (655 views) Add Comment
12 Comments
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1. alan said...
Is the government trying " to puff up a new house price bubble" or maybe halt the rapid downward trend? The article makes an assumption, then tries to argue against the assumption.
Turning the housing bubble from a sudden bust into a gentle deflation may not be such a bad idea. Rapid price drops/rises tend to catch out a lot of people. In this case, forcing recent (bona fide) borrowers into immediate negative equity.
Maybe a slower deflation of the bubble would be less painful?
2. inbreda said...
Hardly alan - any recent bona fide buyer would be expecting to stay in the house for a good few years - an average of 7 I beleive. If it deflates slowly the house would be worth its lowest value at the point they come to sell it. If it is a rapid deflation, got out the way sooner rather than later, the recovery might just kick in before they try and sell.
Any time inbetween matters not to them, cos they bought the place to live in, not to make money from it, right?
3. inbreda said...
...and in terms of boosting the economy by encouraging borrowing and spending, how is anyone going to release equity on a property that is falling in value - irrelevant of whether it is falling fast or slow? Recent buyers - tough luck - such is life my friends. Get the crash out the way quickly and the new buyers who buy at the bottom can appreciate the feel good factor of rising prices again, and borrow and spend and boost the economy. If that is REALLY what you want.
4. Quiet Guy said...
Alan,
Surely the idea that "a slower deflation of the bubble would be less painful" is a political concern. If I buy a property and it loses value then I have a choice - stay put and wait or sell and take the loss now. Why should I expect anybody to artificially boost my property value to make things less painful for me? The free market answer is obvious. The government is wasting public money in an attempt to save itself at the next election which is a crazy way to use our taxes. The more money we misallocate to over-priced (and non-productive) houses the poorer we will all be in the end.
If my gold loses value, can we start using tax money to push up the price again? You see I don't want to experience anything painful because I might not like it. OK?
5. shipbuilder said...
Pity all these newly wise journos weren't asking this question 5 years ago.
6. debtfree said...
What a mess.
The only way that GB and his cronies can make money and boost the economy is via one of the necessities in life.... shelter for the family.
'Home Sweet Home', makes you feel sick just thinking about it.
7. gone-to-colombia said...
The only use I ever had for the Mail was to light my fire.
I never heard that rag complaining about the rise in house prices?
Straw journalism.
8. Jayk said...
Sorry, I cannot take anything seriously which appears in the Daily Mail.
And by association I cannot take anyone seriously who reads or quotes it.
9. Lucas said...
Isn't the answer obvious. I bet 99% of the of the government, Labour MPs and all the influential people ministers want to keep sweet are property owners who probably brought a property during the bubble (which became evident around 2001 even to the casual observer). Hence the desperation the govt is going to do anything and whatever it takes to stop the decline in prices and get them up again so they can sleep at night.
Well some of us had sense not to buy a property when it was clearly overpriced, they've only got themselves to blame, but it looks like the government prefers to reward stupid and reckless people. I'm not at all happy that my taxes are going to subside these dimwits, I feel like rioting probably like the thousands of other smart people out there.....
10. Glass Half Full said...
The house/ home tends to be biggest asset purchase of most people's lives. It is suddenly worth much less than someone paid for it and they are in negative equity, this removes several financial options to that person should other things go wrong, like losing a job, job relocation, serious illness or a death in the family. They are perhaps unable to move if they can't clear the mortgage and or can't raise a deposit on another property. This restricts the workforce, it adds stress and tension to UK citizens and these people stop acting normally in other everyday behaviours. I.e. they spend less money on other things. This has the knock on effect of putting other jobs at risk as other businesses fail and the spiral down continues.
By slowing down a deflating housing bubble, the workforce is more transient, less individual stress & tension exists, less behavioural changes, less businesses fail and a shorter/ shallower recession results.
Post 2. inbreda said... You seem to think that house prices will fall to a certain point and the sooner we get there, the sooner things will bounce back again! This is complete rubbish. No one knows where the bottom is. Some believe we have long since overshot what they thought house prices will fall to and others think we are only just half way there. In fact everyone could be wrong and this could result in the complete collapse of our economy and every other economy making any property completely worthless! You do not know the outcome of this and to suggest that any recent bona fide homeowner just chills out and let things crash quickly is irresponsible and very short sighted.
11. mark wadsworth said...
The Daily Mail is the ugly mirror image of the equally ugly Guardian.
They whine about savers being robbed to subsidise borrowers, but complain if the government doesn't "help" (i.e. subsidise) "hard pressed home-owners" (in order to keep house prices as high as possible).
Life is so simple when you only see one half of the picture.
12. gardeniadotnet said...
@7. Life is so simple when you only see one half of the picture.
How true.