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I've been racking my brain for ages now trying to genuinely look for reasons why housing prices shouldn't fall or even that they should continue to go up as the bulls among you think they should.

The only reason I can think of is that those who bought their homes during the last few years will end up in negative equity. I agree, that is an awful financial situation if you need to sell, but I can't help but think that the the numbersa that would benefit a massive drop, would out-weigh massively those who bought at peak and now 'need' to sell.

What actual economic benefits are there for housing to remain astronomically high? I can only see negatives to high housing costs. But am I missing something? Bullish news articles talk of 'recovery', but prices going back up to 07 levels? I just can't see any benefit to anyone other than those who bought around that time.

I'm just trying to get a rounded viewpoint here, not trying to be a self-righteous smug so-and-so.

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I've been racking my brain for ages now trying to genuinely look for reasons why housing prices shouldn't fall or even that they should continue to go up as the bulls among you think they should.

The only reason I can think of is that those who bought their homes during the last few years will end up in negative equity. I agree, that is an awful financial situation if you need to sell, but I can't help but think that the the numbersa that would benefit a massive drop, would out-weigh massively those who bought at peak and now 'need' to sell.

What actual economic benefits are there for housing to remain astronomically high? I can only see negatives to high housing costs. But am I missing something? Bullish news articles talk of 'recovery', but prices going back up to 07 levels? I just can't see any benefit to anyone other than those who bought around that time.

I'm just trying to get a rounded viewpoint here, not trying to be a self-righteous smug so-and-so.

People like high house prices if they own a house - generally - as it makes them feel richer. Recent times have allowed many to feel very clever indeed because they did nothing while increasing their paper wealth. When things changed, they felt a sense of injustice that their paper wealth, that they mostly had not earned, disappeared.

When someone is "earning" loads of paper wealth they forget about the consequences and start to look for reasons to justify the gains and find more gains. They try to justify things like uncontrolled immigration or low house building. Gordon Brown is on record as saying our housing market is different because we have a shortage of houses. It's as if he wants a shortage of houses so that people can preserve their wealth and vote for him.

As for negative equity, I don't think that's a terrible situation at all. If people buy something that has been widely recognised as overvalued (by newspapers, serious economists, etc.) then it's their fault and they should just live with it. During the 90s I was in negative equity myself. It was annoying and upsetting but I didn't think that I deserved government assistance at the time. Instead, I felt that the government should try to prevent property bubbles. That would stop most negative equity from happening to innocents. The main point is that the needs of those in negative equity don't outweigh the needs of the general population for an affordable, decent place to live.

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Don't expect many replies to this thread! Beyond boosting the paper wealth of a select few, there are no benefits to having high house prices. You know it, and more importantly, they know it.

not for politicians....rising prices makes the voters feel rich and they can borrow more and have that extra car and holiday....and a happy voter is a voter for the incumbent.

and when you question the debt levels, the politician can say...and they were all doing it recently...course theres a lot of debt, its an indication of our wealth!.

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Don't expect many replies to this thread! Beyond boosting the paper wealth of a select few, there are no benefits to having high house prices. You know it, and more importantly, they know it.

The only benifit i can see now for prices not to go any lower is that if they do collapse furthur the entire economy and economics of the country will go with them.

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I have an increasing annoyance that is the phrase equity release, or equity withdrawal.

I have stopped saying anything as it is losing me friends, but an example.

I had a baby 3 years ago and being new to the area joined lots of clubs, I made a great group of friends and one has a lovely big house and also a flat 'as an investment' thats rented out.

A few weeks back she said 'I hope prices dont drop any more or the flat will be in neg eq'.

I kepy my gob shut but someone said, but you've had it years, it shouldnt be.

She replied yeah but we've taken equity out of it.

In short, she's a teacher and on maternity leave since having her second, but when she returns it'll be part time, Hubby is self employed.

They have a house and flat, when times are tough they 'take equity' out of one or the other properties.

I couldnt keep my mouth shut and said but surely you knew if you borrowed money at some point you'll have to pay it back?

She looked at me as if I had 2 heads and almost spat NO, we took equity out of them.

You mean you took out a secured loan on the flat?

NO, its called E Q U I T Y release you take it out.

someone else piped in yeah we withdrew equity a while back, we got a cheaper rate at the time so it was free money. :blink:

Bearing in mind I'm the only one of the group who doesnt own a house so of course I dont have a clue about such things, but she - a teacher - genuinely thought her house was generating cash somehow, the conversation moved on and I do think the penny dropped ( :lol: ) but seriously up till that point she really didnt realise she was simply borrowing money, everytine they wanted a big purchase or was short of cash they went and got free money from the bank.

It's astonishing but there is a huge amount of people that really do not realise they are simply borrowing money and if you borrow money you will need to pay it back, it shouldnt matter at all what happens to house prices, the amount you have borrowed stays the same.

My house for instance, I rent from someone who has several properties, this was his family home he bought at peak, he cant afford to live here, he has an IO mortgage that our rent just covers now the IR's are low, he is renting it for a year 'till the market picks up'.

He cant afford to live in it, cant afford to sell it for what its worth now so unless the market does pick up he's snookered.

From a FTB point of view, if they were to buy now and prices go down they are paying more than they would had they waited, if they go up they have the security of being able to sell if things get tough, so I would guess they would rather scrimp a bit and have prices rise than have them fall.

I am seeing more and more though that sentiment is changing, even 6 months ago people were congratulated for buying, now someone mentions buying and its a different story, we are coming out of the denial stage and it wont be long now before buying is no longer celebrated.

If I had a say I'd abolish that phrase tomorrow, ensure it was called something like taking-out-a-loan-against-your-property.

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Is there is an economic benefit of house prices going up or down - or is it just a zero sum game that just benefits either homeowners or non-homeowners??

In the long term, shouldn't house prices follow population growth because land is limited? If the population is growing, prices could be expected to rise (although there's loads of spare land in the UK overall, there is high demand for particular useful bits of it like town centres). If the population fell, we'd end up with loads of spare houses and prices would fall very dramatically (imagine what it would do to house prices if half of the population suddenly emigrated).

And whilst negative equity causes problems if you want to move or lose your job, the bottom line is that the mortgage can be slowly paid off and you will still end up with the house at the end, even if you end up paying more for it than had you bought it a bit later. The biggest problem with widespread negative equity is that it limits job mobility. Though we may see a lot of people renting out their houses that are in negative equity and renting a house in another town that someone else can't sell because it is in negative equity.

The problems of the last few years have been caused by too much debt (or lending, i guess, strictly) - I see house price rises as a symptom of the problem rather than the root cause. Only paying off debt or defaulting will get us out of the mess - not house price rises or falls per se.

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snip

I couldnt keep my mouth shut and said but surely you knew if you borrowed money at some point you'll have to pay it back?

She looked at me as if I had 2 heads and almost spat NO, we took equity out of them.

You mean you took out a secured loan on the flat?

NO, its called E Q U I T Y release you take it out.

someone else piped in yeah we withdrew equity a while back, we got a cheaper rate at the time so it was free money. :blink:

snip

the credit industry goes to enormous lengths to make you feel that you are using YOUR money.

get a credit card (debt) and they say YOU are worth the credit limit....implies that it is an asset.

equity release....cash tied up in your house....well, you cant release it without either selling it or borrowing against it.

homeowner loan and consolidation same things...debt.

Equity: the difference between what someone else can borrow to buy your house and what you owe on the mortgage on sale....only the debt is real.

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Is there is an economic benefit of house prices going up or down - or is it just a zero sum game that just benefits either homeowners or non-homeowners??

In the long term, shouldn't house prices follow population growth because land is limited? If the population is growing, prices could be expected to rise (although there's loads of spare land in the UK overall, there is high demand for particular useful bits of it like town centres). If the population fell, we'd end up with loads of spare houses and prices would fall very dramatically (imagine what it would do to house prices if half of the population suddenly emigrated).

And whilst negative equity causes problems if you want to move or lose your job, the bottom line is that the mortgage can be slowly paid off and you will still end up with the house at the end, even if you end up paying more for it than had you bought it a bit later. The biggest problem with widespread negative equity is that it limits job mobility. Though we may see a lot of people renting out their houses that are in negative equity and renting a house in another town that someone else can't sell because it is in negative equity.

The problems of the last few years have been caused by too much debt (or lending, i guess, strictly) - I see house price rises as a symptom of the problem rather than the root cause. Only paying off debt or defaulting will get us out of the mess - not house price rises or falls per se.

The trouble is land isn't limited planning permission is only 9% of the country urbanised

Edited by Greg Bowman
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I have an increasing annoyance that is the phrase equity release, or equity withdrawal...........

.........It's astonishing but there is a huge amount of people that really do not realise they are simply borrowing money and if you borrow money you will need to pay it back, it shouldnt matter at all what happens to house prices, the amount you have borrowed stays the same.

During the boom years when there were headlines like

"house prices rising by £100 a day"

A sizeable number of people actually pictured their bank manager putting £100 cash into their "jar" in the bank vault.

Equity release is just going along and asking for some of the contents of your jar.

Nice, simple free money.

Isn't it?

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I've been racking my brain for ages now trying to genuinely look for reasons why housing prices shouldn't fall or even that they should continue to go up as the bulls among you think they should.

The only reason I can think of is that those who bought their homes during the last few years will end up in negative equity. I agree, that is an awful financial situation if you need to sell, but I can't help but think that the the numbersa that would benefit a massive drop, would out-weigh massively those who bought at peak and now 'need' to sell.

What actual economic benefits are there for housing to remain astronomically high? I can only see negatives to high housing costs. But am I missing something? Bullish news articles talk of 'recovery', but prices going back up to 07 levels? I just can't see any benefit to anyone other than those who bought around that time.

I'm just trying to get a rounded viewpoint here, not trying to be a self-righteous smug so-and-so.

The answer is easy to deduce from the character profile of your average bull.

Crowd follower.

Status obsessed

Shallow enough to paddle in.

Selfish.

Zero sense of social/economic responsibility.

I reckon 70% of people fit this profile. These people are very easy to enslave within the monetary system. They don't realise what is being done to them or what they are doing to others. The reality they believe in is reinforced by the authorities and the mainstream media. These people have their lifestyle and attitude validated. They perform a secondary role as social police, enforcing unwritten laws and superimposing forms of arbitrary segregation on the rest of us, like class, wealth and social status. They love to feel superior. They have no intellect.

If you hold shares in a arms manufacturer you will benefit from bloodshed.

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I've been racking my brain for ages now trying to genuinely look for reasons why housing prices shouldn't fall or even that they should continue to go up as the bulls among you think they should.

The only reason I can think of is that those who bought their homes during the last few years will end up in negative equity. I agree, that is an awful financial situation if you need to sell, but I can't help but think that the the numbersa that would benefit a massive drop, would out-weigh massively those who bought at peak and now 'need' to sell.

What actual economic benefits are there for housing to remain astronomically high? I can only see negatives to high housing costs. But am I missing something? Bullish news articles talk of 'recovery', but prices going back up to 07 levels? I just can't see any benefit to anyone other than those who bought around that time.

I'm just trying to get a rounded viewpoint here, not trying to be a self-righteous smug so-and-so.

Interesting post, and a reasonable question.

I can completely understand many of the points the HPC bears make, particularly around affordability for FTB's, but what I don't understand is how they fail to realise just how much of a fringe minority they are in the real world. HPC only has around 20K members since it's inception, of which some are bulls and most are inactive. I'd go so far as to say the number of active bears on here is only a few thousand.

Because although the popular perception on HPC is that a crash is good for most people, it clearly is bad, or at best irrelevant, for the majority.

To put this in perspective, there are very roughly around 25 million households in the UK. Around 20% to 25% of these are in council, social or subsidised rented housing, and for most of these people the housing market is irrelevant, as they have cheap, free or subsidised housing for life.

The balance are privately owned, and the vast majority of them are owner occupiers.

So, the breakdown is now as follows. (Again very rough, but close enough to illustrate the point).

17.5 million or so privately owned, owner occupied houses, and around 2.5 million private rentals.

Now, of the 20 million properties in private hands, around 12 million have mortgages, and according to all the posts around here, at least 5 million of these are in Negative equity, or in severe danger of being in negative equity. For these people a price crash is absolutely terrible.

Another 8 million are mortgage free and so will be owned by people approaching retirement, for whom downsizing, equity release or wanting to leave money to the children is the most likely scenario. For these people also, a price crash is terrible.

The balance, around 7 million, is less clear. Some of them will be owned by people who may need to upsize, in which case a price crash may work out for them, IF the person they are buying from also drops their price. However, some of them will be owned by people who have perhaps come on hard times, and may need to downsize and release equity in the process, and for them, a price crash is terrible. And some of them will be owned by people who neither need to move or sell, in which case a price crash is irrelevant to them.

So, to recap..... A price crash is absolutely terrible for the 5 million in NE, and the 8 million who may need to downsize as they approach retirement.

It's also bad news for another few million who may need to downsize or MEW because of the recession.

It's completely irrelevant for another few million who don't need to move or change size, and for another 5 million in subsidised housing, council, rented, social and for those private renters with no interest in buying.

It might be good for perhaps a couple of million who may want to upsize, but only IF they can find a seller who wants to also reduce the price, and IF the crash has not wiped out so much equity they cant get a good rate. But in reality, few of them will actually end up taking advantage of the opportunity.

And it's clearly good news for perhaps a million or so potential FTB's who were lucky enough to be born at a time which meant they will be at the age to buy during or right after the crash stage of a housing market cycle.

But for the vast majority, a crash is bad news, and a recovery is to be hoped for as soon as possible. The media know this, which is why they keep playing to it.

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It would be better if house prices were lower because then we could afford to buy cars, have more holidays, clothes etc all debt free ! .....and if we did lose our jobs at least we would have the security of knowing that we can forfeit a few months or perhaps even a year without being in serious trouble. This would have kept the economy in a healthier state because even those without jobs on small mortgages would not be reticent to spend. High house prices have simply screwed the economy.

Of course the sheeplike, greedy, thick as pig s**t apes don't want that and want to mess their lives up with a big mortgage that crucifies their lifestyle because everyone elso does and its the thing to do. Then they bore everyone to tears with crap inane like "Wish I could afford a holiday this year but got the mortgage to pay see". YAAAAWN.

These prats can fall on their own sword and many have and many will. A sharp lesson is what was needed and they got it.

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Interesting post, and a reasonable question.

Another 8 million are mortgage free and so will be owned by people approaching retirement, for whom downsizing, equity release or wanting to leave money to the children is the most likely scenario. For these people also, a price crash is terrible.

Hamish, I would put myself into that category a small mortgage outstanding and at quite a few years to go before retirement. A price crash would be good for me and my children, they could then afford to buy a property and I have no intention to equity release, why should a parent leave money to their children..they should work to look after themselves like I did and my parents did.

Money does not grow on trees or houses. ;)

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Hamish - I think you have a bit of a blinkered view on reality. Even the BBC did a survey last year asking what people wanted to happen to house prices. More wanted them to fall than to rise. I will try and find it if I can.

At a very high level:

People between 30-50 who own a place want them to rise

Everyone else would be happy for them to fall.

*Obvious exceptions

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Population Stats

2 in 5 in the UK are either under 16 or over 67. I can confidently say 99% of them would, if they were asked, be happy for prices to fall.

So that is 12 million people already, off the top of my head, that disagree with you Hamish. :P

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Population Stats

2 in 5 in the UK are either under 16 or over 67. I can confidently say 99% of them would, if they were asked, be happy for prices to fall.

So that is 12 million people already, off the top of my head, that disagree with you Hamish. :P

I can confidently say the under 16's are more worried about pocket money and pimples, and the over 67's are more worried about peeping through the white veil curtains and complaining about the under 16's.... :P

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High house prices equals money for nothing, and people like nothing better. Of course, since it is your classic pyramid scheme you need more suckers entering at the bottom to keep the scam going. Why, good old fashioned greed I'm afraid combined with a dose of fear. A heady combination.

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Because although the popular perception on HPC is that a crash is good for most people, it clearly is bad, or at best irrelevant, for the majority.

Errrrr, no. It is bad for anyone who ever intends to buy a house or trade up. The higher they are, the more you pay from what you earn, in the same way as food etc.

Tight old people shouldn't expect their inability to save for retirement to be resolved by younger people taking on more debt.

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Interesting post, and a reasonable question.

I can completely understand many of the points the HPC bears make, particularly around affordability for FTB's, but what I don't understand is how they fail to realise just how much of a fringe minority they are in the real world. HPC only has around 20K members since it's inception, of which some are bulls and most are inactive. I'd go so far as to say the number of active bears on here is only a few thousand.

Because although the popular perception on HPC is that a crash is good for most people, it clearly is bad, or at best irrelevant, for the majority.

To put this in perspective, there are very roughly around 25 million households in the UK. Around 20% to 25% of these are in council, social or subsidised rented housing, and for most of these people the housing market is irrelevant, as they have cheap, free or subsidised housing for life.

The balance are privately owned, and the vast majority of them are owner occupiers.

So, the breakdown is now as follows. (Again very rough, but close enough to illustrate the point).

17.5 million or so privately owned, owner occupied houses, and around 2.5 million private rentals.

Now, of the 20 million properties in private hands, around 12 million have mortgages, and according to all the posts around here, at least 5 million of these are in Negative equity, or in severe danger of being in negative equity. For these people a price crash is absolutely terrible.

Another 8 million are mortgage free and so will be owned by people approaching retirement, for whom downsizing, equity release or wanting to leave money to the children is the most likely scenario. For these people also, a price crash is terrible.

The balance, around 7 million, is less clear. Some of them will be owned by people who may need to upsize, in which case a price crash may work out for them, IF the person they are buying from also drops their price. However, some of them will be owned by people who have perhaps come on hard times, and may need to downsize and release equity in the process, and for them, a price crash is terrible. And some of them will be owned by people who neither need to move or sell, in which case a price crash is irrelevant to them.

So, to recap..... A price crash is absolutely terrible for the 5 million in NE, and the 8 million who may need to downsize as they approach retirement.

It's also bad news for another few million who may need to downsize or MEW because of the recession.

It's completely irrelevant for another few million who don't need to move or change size, and for another 5 million in subsidised housing, council, rented, social and for those private renters with no interest in buying.

It might be good for perhaps a couple of million who may want to upsize, but only IF they can find a seller who wants to also reduce the price, and IF the crash has not wiped out so much equity they cant get a good rate. But in reality, few of them will actually end up taking advantage of the opportunity.

And it's clearly good news for perhaps a million or so potential FTB's who were lucky enough to be born at a time which meant they will be at the age to buy during or right after the crash stage of a housing market cycle.

But for the vast majority, a crash is bad news, and a recovery is to be hoped for as soon as possible. The media know this, which is why they keep playing to it.

Try answering the question.....it was why are high house prices good.? not why a crash is bad? nice try :lol:

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Rising house prices provide the ideal vehicle for sucking value out of the community by selling its constituents something that would be free if the vendor wasn't there in the first place- land. If you want to live the easy life rent extraction is a great way to get others to work for you whilst sitting back and reaping the benefits.

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Higher house prices means more stamp duty paid, more money for old people to spend on their care homes ... more money to emigrate with,

so more tax, more money to be borrowed to subsidise people who haven't saved, and people who want their new life paying for...

i'm not convinced they are good reasons

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