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shedfish

House Prices - The Good, The Bad, The Ugly

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some positives about lower house prices

mobility and convenience

redistribution of wealth in favour of the young

easier to raise children

traffic reduction

more disposable income to boost the economy

some positives about high house prices

(over to the bulls)

Edited by ɥsıɟpǝɥs

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Another positive:

Lower house prices = lower mortage payments = massively more cash to be spent in the economy = more employment = less on benefits = more tax revenues = an eventual rebalancing of this country's finances.

Simple, isn't it?

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Another positive:

Lower house prices = lower mortage payments = massively more cash to be spent in the economy = more employment = less on benefits = more tax revenues = an eventual rebalancing of this country's finances.

Simple, isn't it?

Nope. More money elsewhere --> inflation.

High house prices per se could be just fine if they were stable. The problem is volatility, and the tax regime which rewards speculation while penalising hard work.

The first step in fixing the problem is to fix the tax situation so that hard-earned income is taxed much less than capital gains on property. So if earned income is (as now) taxed at up to 74%, then property gains should be taxed at 90%, not zero or (at most) 18%. Conversely if property speculation is taxed at 0-18% then earned income should never be taxed at more than 10%.

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Nope. More money elsewhere --> inflation.

High house prices per se could be just fine if they were stable. The problem is volatility, and the tax regime which rewards speculation while penalising hard work.

The first step in fixing the problem is to fix the tax situation so that hard-earned income is taxed much less than capital gains on property. So if earned income is (as now) taxed at up to 74%, then property gains should be taxed at 90%, not zero or (at most) 18%. Conversely if property speculation is taxed at 0-18% then earned income should never be taxed at more than 10%.

a little money velocity might be helpful, without the preposterous inflation engine function hitherto fulfilled by property

like your tax thoughts though...

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Nope. More money elsewhere --> inflation.High house prices per se could be just fine if they were stable.

What are the consequences if 'more money elsewhere' is saved/invested, rather than spent on High Street? More jobs?

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The person who said that the money would be spent elsewhere leading to inflation misses the point. Inflation would only come if the quantity of goods available stays the same. The mortgage payments are leading to people being unable to live without access to the credit card etc.... Now if the mortgage comes down then the person can either

a) save the spare cash. --> no inflation

B) spend the "bonus" instead of using the credit card. --> no inflation

c) spend the bonus and still splurge on the card. --> possible inflation.

Now to return to the topic. House price rises above inflation are bad High real house prices are virtually NEVER a good thing.

They destroy community spirit as the young cannot afford to live near their family.

They destroy your quality of life as you have to pay astronomical sums each month for your little space. Life becomes a matter of work & sleep.

The low-paid and non-elite find that there is less and less chance of getting a property and security. That in itself is not disastrous but High House prices mean that the elite shrinks and shrinks. Gradually the incentive to work becomes less and idleness rises with the attendant social problems. Why work to pay rent when you can get housing benefit and dole?

Rising house prices allow people spend to beyond their means causing price competition for the honest saver. Iknow of one person who self cert for 60k despite only making 20k. result he gets mortgage for 210k when he should only get 60k. He can now push prices up further moving property away from the honest person.

Now some might say that it makes the house owner richer but surely this can be seen as illusory as well. You have only got that money if you choose to downsize in price. If you sell the house and buy something similar you have not got richer at all.

So remind me. What are the advantages of HPI?

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Nope. More money elsewhere --> inflation.

Lower house prices without higher other prices = deflation.

Over the longer term, lower property prices would enable lower prices throughout the economy (including labour) = better able to compete.

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High property prices leads to increased property speculation. This ties up productive capital in non-productive assests.

Low property prices decrease the amount of speculation and drive productive capital in productive assets.

High property prices = fuedalism

Low property prices = capitalism

For me, it's a no brainer.

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Agree with the fact that lower house prices are socially desirable.

However the thread subtitle says "why do you want what you want?"

I think it's only fair to add that my strongest motivation now is self-interest. Feeling sure that I have social justice on my side is nice, but it would be hypocrisy to say that I only want house prices to drop for the benefit to society.

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Lower house prices without higher other prices = deflation.

Over the longer term, lower property prices would enable lower prices throughout the economy (including labour) = better able to compete.

Yes, about 60% of the present sterling money supply was borrowed into existence to buy domestic property.

Money supply inflation and HPI are two aspects of the same process.

A lot of money is now out there somewhere and it doesn't dissappear with HPC.

If or when money velocity picks up we will see more general price inflation, probably including further speculative bubbles.

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