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Rising house prices are good as they suck all the liquidity up and keep people from enjoying the surplus increased living standards whoud have given them.

Rising house prices are also good as a lovely big house is a nice easy tax target compared to cash stored under the bed. Stamp duty is lovely when a 150,000 house is 350,000 same house same people movre tax lovely.

Rising hosue prices are great as they prevent people from saving, and having kids generating tax efficiently whilst the working population can be augmented via immigration.

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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,

and for this reason, care homes charge sky high prices....knowing full well £200K gives about 200 weeks of care...another distorted market.

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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

They were the only reasons I could think of ...

anyone stepping off the "property ladder" wants the highest price possible.

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Actually Hamish your post made a lot of good points.

We are looking to buy at some point hopefully soon, and so have been saving and not buying too many luxury items and its sometimes hard, I think if a lot of people had to live within their means they would find it a very scary prospect.

They can see a world of lovely rewards for working hard, holidays and experiences and if simply taking out a mortgage makes all that possible then fair play, you have for the first time made me see things from their point of view, I could never understand it before, why someone would want to live in mountains of debt but I guess if it gives you a key to paradise then I can see how many would be tempted.

I guess if the worse came to the worse and you lost your job say, you could always declare yourself bankrupt and walk away.

Maybe the sheeple aint so daft after all...

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If salaries stayed at the same levels but house prices were 50% lower and therefore mortgage repayments were correspondingly lower, there would be substantially more disposable income in the economy.

There are issues re growing negative equity as the crash continues. The government would be advised to provide fairly priced mortgages (1.5% over base) for those needing to remortgage who are in negative equity in the coming years. I would also suggest looking at a way of providing a scheme to allow people to move (if they need to for work or other reasons) when in NE via a government backed scheme. THe govt has 2 fully nationalised banks and several part nationalised banks through which they could operate such a scheme to offset the problems associated with negative equity.

Hamish does put together some apparantly well reasoned arguments, but he still has not come up with a good reason for rising prices apart from sparing the blushes of the unfortunate and the stupid.

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

...................

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

...dead on ...in fact this is another example of FSA failure ...it is their duty to control irresponsible financial advertising...........such advertising is aimed at the simple people, possibly academically educated.....but with no common sense....the FSA feeds them to the wolves.....another reason the FSA should be closed down and their regulatory resonsibilities returned to the BofE.................. <_<

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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.

Hamish, you're not thinking about it deeply enough and are only considering the interests of the people currently in the market rather than the long-term interests of the British people and future generations. I know that as a self-confessed child-hater you don't care two hoots for the next generation but that's another matter.

Imagine that, using Hillary Clinton's metaphor, we could press a reset button and reduce house prices by 50% - imagine if the price they had paid for their houses in the first place was 50% less. Surely it's obvious that they would now be much better off now as they would be living in and owning the same properties, but less of their lifetime income will have gone on buying their house.

In fact the only people who you could possibly say would be worse off are those whose wealth is obtained purely from lucky timing in the property market leaving them in a strong financial position out of proportion to their lifetime earnings.

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Imagine that, using Hillary Clinton's metaphor, we could press a reset button and reduce house prices by 50% - imagine if the price they had paid for their houses in the first place was 50% less. Surely it's obvious that they would now be much better off now as they would be living in and owning the same properties, but less of their lifetime income will have gone on buying their house.

But you can't. Therefore the rest of your point is meaningless.

You may as well say what if we could invent food replicators from star trek to solve world hunger. Nice idea, aint gonna happen though.....

If "the sheeple" have the choice of bankrupting themselves, or leaving the problem for future generations to solve, they will ALWAYS choose door number two. As we live in a democracy, thats what will happen.

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Any loan is better than a secured loan...

Look houses and land should not make non-productive, lazy and greedy people rich...land is free and there is enough to go around for all of us.....profit and growth should come from hard work, productivity innovation and forward thinking.

A home is to live in not to make FREE money out of. ;)

Edit: Sit back and relax, your property will work for you, you need not do nothing..... :lol:

Edited by winkie
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But you can't. Therefore the rest of your point is meaningless.

You can't for the people currently in the market, but you can in the long-term. House prices are well on their way to 50% down already. You just have to prevent another bubble from happening and eventually the people who paid too much for their houses will pay off their debts or die. But from that moment forwards my 'fantasy' scenario would be reality.

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You can't for the people currently in the market, but you can in the long-term. House prices are well on their way to 50% down already. You just have to prevent another bubble from happening and eventually the people who paid too much for their houses will pay off their debts or die. But from that moment forwards my 'fantasy' scenario would be reality.

Again, not going to happen.

If "the sheeple" have the choice of bankrupting themselves, or leaving the problem for future generations to solve, they will ALWAYS choose door number two. As we live in a democracy, thats what will happen.

A government that presides over a prolonged period with no HPI..... is a one term government.

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If "the sheeple" have the choice of bankrupting themselves, or leaving the problem for future generations to solve, they will ALWAYS choose door number two. As we live in a democracy, thats what will happen.

A government that presides over a prolonged period with no HPI..... is a one term government.

"The sheeple" do not have this choice.

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"The sheeple" do not have this choice.

In a democracy, the sheeple always have the choice.

No HPI = No re-election.

How on earth do you think those incompetent socialist [email protected] of Labour managed to stay in power for so long? And the crash is the only reason they'll be booted out this time.

The tories know full well they'll be a single term government if they don't get the housing market recovering in short order.

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Again, not going to happen.

If "the sheeple" have the choice of bankrupting themselves, or leaving the problem for future generations to solve, they will ALWAYS choose door number two. As we live in a democracy, thats what will happen.

A government that presides over a prolonged period with no HPI..... is a one term government.

McSheeple, where's your sig gone?

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In a democracy, the sheeple always have the choice.

No HPI = No re-election.

How on earth do you think those incompetent socialist [email protected] of Labour managed to stay in power for so long? And the crash is the only reason they'll be booted out this time.

The tories know full well they'll be a single term government if they don't get the housing market recovering in short order.

Single term governments were quite normal before Thatcher and unless the Labour party goes the way of the Liberals it's not improbable that we'll have another era of one term governments.

Besides, it's logically impossible for the majority to consistently rig the economy in their favour because it's inherently unstable. Only a minority can hope to consistently receive a larger share of resources than they deserve.

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Again, not going to happen.

If "the sheeple" have the choice of bankrupting themselves, or leaving the problem for future generations to solve, they will ALWAYS choose door number two. As we live in a democracy, thats what will happen.

A government that presides over a prolonged period with no HPI..... is a one term government.

Hamish,

I'm quite happy to concede that is what governments may want to do. It may be what people want governments to do.

However at what point does HPI become unsustainable?

House prices cannot be udecoupled from the wider economy. If 100% of buyers incomes are taken up servicing housing costs then... er ... no other economic activity can take place.

The increase in how you say "unconventional lending" signalled the point at which a crash was inevitable. I include interest only mortgages in that bracket. HPI had already reached the extent that normal people had to take irrational risks to benefit from HPI. All those left behind would have been left behind forever.

You cannot create wealth out of housing. It is non productive. The banks know it. Which is why they won't continue this fiasco until the younger ones have forgotten why.

Edited by GrillsBears
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Hamish,

I'm quite happy to concede that is what governments may want to do. It may be what people want governments to do.

However at what point does HPI become unsustainable?

I agree at some point it becomes unsustainable. However that point has clearly not been reached. Australia has managed to stay at an average price/salary ratio of between 5 times and 9 times for 25 years straight now, including it's crashes. And thats with a higher tax burden and lower income than the UK.

House prices cannot be udecoupled from the wider economy.

Completely agree. Price crash = economic collapse. Prices crashed first, then spending slowed, then unemplyment rose, then the recession started. It is estimated that 8% of consumer spending is down to equity withdrawal of one form or another, the wider economy cannot survive without it.

If 100% of buyers incomes are taken up servicing housing costs then... er ... no other economic activity can take place.

Which of course cannot happen. But don't forget that prices did not crash because they had become unnafordable to those who had bought them, they crashed because the credit markets siezed up and people could not get mortgages. This also caused the recession and unemployment and all the other [email protected] we are dealing with today. Restore credit, free up mortgage lending, let prices recover, economic activity will increase, recession will end, employment will rise, and eventually, when people can truly no longer afford to pay more, prices will stop rising until incomes catch up. But we're not there yet.

The increase in how you say "unconventional lending" signalled the point at which a crash was inevitable.

In the USA, where supply is potentially far greater than demand, and where a much, much higher percentage of loans were indeed non-conventional and sub prime, then perhaps. However we had not reached that point here, and indeed perhaps never would have. We crashed because they did and lending froze. Perhaps we would have crashed eventually anyway, perhaps not.

You cannot create wealth out of housing. It is non productive. The banks know it. Which is why they won't continue this fiasco until the younger ones have forgotten why.

Housing is an asset class, pure and simple. Housing can be productive, it serves a utility purpose and can generate revenue. Shelter must be paid for, whether renting or buying. A paid for house prevents people from having to spend money on rent, and therefore allows them to spend money on other things. Even at peak prices, a 25 year mortgage is far cheaper than a lifetime of renting.

You certainly can create wealth from housing, which is far more productive an asset than something like Gold.......

Ultimately, housing is a neccessity, and will increase in value as long as global population increases, and increase of supply lags increase of population.

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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.

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.

I think you are unfairly commenting on bear opinion, we do not think 'a crash is good for everyone', we simply state that a crash is likely when house prices get too high, and that high house prices are bad for everyone including the VI's when a long term view is taken. Those that do come out a recession on top by selling at the right time are simply devaluing the economy.

To paraphrase your comments on who it is bad for : 'The crash is bad for anyone who wants/needs free money for not doing anything'.

I do feel sorry for those who got sucked into this banking scam, but I avoided the 'good life' because I did my own assessment on affordability. Its a free country those who make bad decisions need to suffer consequences.

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Completely agree. Price crash = economic collapse. Prices crashed first, then spending slowed, then unemplyment rose, then the recession started. It is estimated that 8% of consumer spending is down to equity withdrawal of one form or another, the wider economy cannot survive without it.

Are you sure about that? Has every economic advance been dependent on a house price boom? Isn't the boom a symptom of confidence? In the early 2000s there wasn't a house price boom but the economy was growing. No one was saying then that there was a dependence on house prices. The dependency is invented by people who've done well recently and don't want it to stop. They just need to adapt - learn different skills, do something more profitable.

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Are you sure about that? Has every economic advance been dependent on a house price boom? Isn't the boom a symptom of confidence? In the early 2000s there wasn't a house price boom but the economy was growing. No one was saying then that there was a dependence on house prices. The dependency is invented by people who've done well recently and don't want it to stop. They just need to adapt - learn different skills, do something more profitable.

oh the HPI started before 2000....it had got to 2003 when the press started noticing that no-one could afford a starter home on a normal salary.. Eric has links to the program where 9/10 of EAs had a in house "advisor" where Lying was the best advice.

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Are you sure about that?

Yes

Has every economic advance been dependent on a house price boom? Isn't the boom a symptom of confidence?

The two are irrevocably linked.

In the early 2000s there wasn't a house price boom but the economy was growing. No one was saying then that there was a dependence on house prices. The dependency is invented by people who've done well recently and don't want it to stop. They just need to adapt - learn different skills, do something more profitable.

The last boom started around 1996. 100% of Labours economic success was predicated on house prices rises.

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oh the HPI started before 2000....it had got to 2003 when the press started noticing that no-one could afford a starter home on a normal salary.. Eric has links to the program where 9/10 of EAs had a in house "advisor" where Lying was the best advice.

Prices rose in the early 2000s but they didn't get silly until the system went into overdrive. 2000 - 2003, prices weren't too bad, reach 2005 and they were silly. 2007 the last spurt. During this time, some people started to put out the idea that our economy depends on house prices and it became a self fulfilling prophecy.

The German economy doesn't depend on house prices. They had modest growth for many years, after the difficulties absorbing East Germany, yet their economy carried on. Our economy is clearly defective if it relies on house prices. And people who believe we can carry on like that are clearly living in a fantasy world, [email protected] over Kirstie and Phill.

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The German economy doesn't depend on house prices. They had modest growth for many years, after the difficulties absorbing East Germany, yet their economy carried on. Our economy is clearly defective if it relies on house prices. And people who believe we can carry on like that are clearly living in a fantasy world, [email protected] over Kirstie and Phill.

Germany still saw massive house price growth, although not as big as ours.

But primarily the German economy consists of making and exporting things that people in consumer economies such as ours want to buy. Which is why they are deeply screwed right now, with an economy that is tanking far further and faster than our own. Ironic, isn't it.......

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