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High Prices - Are There Any Advantages?

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Hi there all. This is my first post although I've been viewing the site for a while. This post is directed to all but I'm particularly interested in what the bulls on the site think the advantages of high prices are? We hear lot's of talk about the good times but do you think UK plc seriously benefitted from the boom? Here is my take on it.

Economic effects

There are two sides to this

- People thought they were rich. The rising prices created the credit boom and they spent money in the shops.

- The retail industry flourished.

- Obviously true that the banks, estate agents and builders profited directly.

- Many of us enjoyed steady employment and higher wages which at least to some extent was an indirect result of high prices.

However :-

- It was impossible for this situation to continue and when things turned sour we have all seen the results for jobs/pensions/govt debt etc.

- Much of what was bought in the shops was manufactered abroad so the benefit was limited.

- Many companies got to rely too heavily on debt and didn't build up enough cash reserves for the bad times.

- Only a very few home owners really benefitted - those who owned lots of high value property.

- Even for those who earned better high housing costs often far outstripped wage rises (unless you had already bought early at a low price).

- How many really clever business people were lost where they were really needed during the boom? While in many countries they were the 'captains of industry' many of ours were buying houses and becoming landlords or developers (or working for a bank). Who can blame them? - it was easy money, but its pretty unproductive.

Social effects

I don't think anyone can argue that these are generally negative.

- High prices create huge divisions in society between those with property and those without. The haves get rich on the rental income from the have-nots.

- Many of the have-nots are young people who then feel let down/frozen out.

- Many turn to radical politics in their frustration at feeling frozen out of society.

- Houses spring up everwhere because there's big profit involved but nobody is bothered about the infrastructure needed.

- Essential workers can't afford to live where they work.

- Those who do get on the housing ladder have to work so hard that they sacrifice everything else to own property. They may well put off having children as they can't afford it, when they do have kids both parents have to work etc.

Frankly I can't see how it can be so good for everyone but please correct me if I'm wrong!

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I agree with your assessment except for one chicken-and-egg issue:

You think that high house prices caused a credit boom

That doesn't sound logical to me: You cannot have high house prices without a credit boom, so the boom is a precondition.

IE the credit boom allowed high house prices, not vice versa

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I agree with your assessment except for one chicken-and-egg issue:

You think that high house prices caused a credit boom

That doesn't sound logical to me: You cannot have high house prices without a credit boom, so the boom is a precondition.

IE the credit boom allowed high house prices, not vice versa

I would qualify that with insanely high house prices. I thought they were pretty high in 2000 and we didn't really have a credit boom at that stage.

From the OP (welcome by the way)

Many of us enjoyed steady employment and higher wages which at least to some extent was an indirect result of high prices.

I am not sure that many of us did enjoy higher wages.

I am not anti-immigration, but it was used mercilessly to hold down wages in IT, and in the retail and hotel sector to name a few.

Some of the increase in GDP would have come from the unfettered immigration, I don't know if it was a massive +ve effect, but I bet the govt thought it was. :)

As you intimated, a property bubble creates malinvestment and money is taken away from genuinely orthwhile efforts into a huge Ponzi scheme.

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There are no advantages at all as far as I can tell.

The worst three side-effects for me are:

1) It increases debt. And when has debt ever been good?

2) It encourages speculation in the hope that prices will rise even further, e.g BTL, which destroys communities and ads

nothing worthwhile to anything, and

3) As a result of both of the above, it brings out the worst in people behaviourally - someone who might have been

reasonable before becomes a smug, braying tw@t in designer clothes that do not suit the cut of his / her jib overnight...

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Additional downside of HPI:

Huge numbers of home owners quit saving and got into the MEW/'My house is my pension' mindset.

Result? Redundancy can be fatal without savings, and old age is now a fearful prospect.

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Additional downside of HPI:

Huge numbers of home owners quit saving and got into the MEW/'My house is my pension' mindset.

Result? Redundancy can be fatal without savings, and old age is now a fearful prospect.

Possibly not, with JSA and HB / Mortgage Interest Payment schme - unless you have high unsecured debt?

Fair enough, you will have to go back to the breadline existence, but that is surely not the end of the world?

People need to swallow their pride and take whatever is going.

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There is only one tiny possible advantage in that a lot of eyesores, that would otherwise remain abandoned, get done up as the owners try to cash in.

Everything else is a disadvantage (as with all pyramid schemes :rolleyes: )

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Guest BAREBEAR_soon to be ALIVA
Of course there are advantages. If you already own, you are rich for doing sod all. You just have to remember to cash in at some point.

If you can get your mortgage paid by your employers, you are doubly rich.

But your only rich if you MEW and only until that runs out then you have more debt. If you MEW'd to buy cars holidays etc you have a short term benefit but long term debt. You've effectively bought a car over 25years.

Its a dubious benefit.

The only benefit I can see of high house prices is if you sold up and didnt have to buy another place or rent. For example if you inherited a house.

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EVERY single problem that the UK has today, is directly down to, or can easily be traced back to, high house prices and rental costs.

(drops red rag, and legs it towards the gate)

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...

At the same time this new service is being introduced RoS will begin broadcasting the highlights from the figures, on commercial radio stations, across Scotland each Thursday. Listen out for the latest changes in the property market each Thursday or find the complete set on this site on the following Monday.

....

Recent research indicated that the general public are extremely interested in house price information.

http://www.ros.gov.uk/public/news/latest_house_prices.html

We're all rich

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Of course there are advantages. If you already own, you are rich for doing sod all. You just have to remember to cash in at some point.

If you can get your mortgage paid by your employers, you are doubly rich.

That's a benefit to certain select individuals.

I think the OP was looking for benefits to the country/society as a whole.

I'm sure we can think of individuals or groups of individuals who benefit from almost anything that is simultaneously undesirable/damaging to society at large.

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But your only rich if you MEW and only until that runs out then you have more debt. If you MEW'd to buy cars holidays etc you have a short term benefit but long term debt. You've effectively bought a car over 25years.

Its a dubious benefit.

The only benefit I can see of high house prices is if you sold up and didnt have to buy another place or rent. For example if you inherited a house.

Who says? If you havent MEWed a penny and bought your house in 2000 you are creaming it.

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EVERY single problem that the UK has today, is directly down to, or can easily be traced back to, high house prices and rental costs.

(drops red rag, and legs it towards the gate)

Now that is where you are wrong, wrong, wrong, you see. Your just thinking middle to long term, not short term. Where would we be if people could not buy a new 50k Chelsea tractor by mewing! Exactly..............you see..............my point!

Right then, I must be off. Just glad I cleared that up then, I knew there was a benefit with high prices. Wibble, wibble, my old man's a trouser press.........etc

Edited by Tim Miller

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That's a benefit to certain select individuals.

I think the OP was looking for benefits to the country/society as a whole.

I'm sure we can think of individuals or groups of individuals who benefit from almost anything that is simultaneously undesirable/damaging to society at large.

Oh don't be silly. Idiot bulls can't see the big picture. Short term gain at somebody else's expense is all they care about - just like politicians.

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Oh don't be silly. Idiot bulls can't see the big picture. Short term gain at somebody else's expense is all they care about - just like politicians.

I think you have hit the nail on the head. Notice that there are a distinct lack of bulls making any comments on this thread - could it be that they know there's no real advantage to society? (only to their pocket and s*d everyone else!!)

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I think you have hit the nail on the head. Notice that there are a distinct lack of bulls making any comments on this thread - could it be that they know there's no real advantage to society? (only to their pocket and s*d everyone else!!)

When I buy gold, I want the price to go up. I don't care if that makes someone elses jewelry more expensive to buy.

When I buy a classic car, I want the price to go up, I don't care if it makes someone else unable to afford it.

When I buy shares in a company, I want the price to go up, I don't care if that means your pension fund gets a smaller return (dividend) on it's future purchases of them.

Houses are like any other asset class, yes they have utility value, but they are still just an asset.

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I agree with your assessment except for one chicken-and-egg issue:

You think that high house prices caused a credit boom

That doesn't sound logical to me: You cannot have high house prices without a credit boom, so the boom is a precondition.

IE the credit boom allowed high house prices, not vice versa

See exactly where you are coming from. Only thing I would say is that they both feed off each other. A credit boom causes the high prices agreed, then the increased equity encourages even more borrowing to spend, spend, spend (the higher the equity, the more the bank feels safe to lend).

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The government (both national and local) benefits from higher house prices. Increased revenue from stamp duty, council tax and inheritance tax. Vested Interest, anyone?

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When I buy gold, I want the price to go up. I don't care if that makes someone elses jewelry more expensive to buy.

When I buy a classic car, I want the price to go up, I don't care if it makes someone else unable to afford it.

When I buy shares in a company, I want the price to go up, I don't care if that means your pension fund gets a smaller return (dividend) on it's future purchases of them.

Houses are like any other asset class, yes they have utility value, but they are still just an asset.

Strange, there was me thinking they were somewhere to live? I ake it you own more than one? To be honest I think you've just proved my point - the only benefit is to speculators like you right? (and b***locks to anyone else).

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The government (both national and local) benefits from higher house prices. Increased revenue from stamp duty, council tax and inheritance tax. Vested Interest, anyone?

So when the government has to pay housing benefit to millions of unemployed, no doubt the high house prices and following on from that, higher rents will also cost the taxpayer more. There's no net gain in wealth from houses going up in price and if everybody decided to sell tomorrow, where would the money come from to realise all this "wealth" and more to the point, where would everybody live? The only people who benefit from high house prices are money lenders and speculators.

Edited by Von Moses

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When I buy gold, I want the price to go up. I don't care if that makes someone elses jewelry more expensive to buy.

When I buy a classic car, I want the price to go up, I don't care if it makes someone else unable to afford it.

When I buy shares in a company, I want the price to go up, I don't care if that means your pension fund gets a smaller return (dividend) on it's future purchases of them.

Houses are like any other asset class, yes they have utility value, but they are still just an asset.

Sure, but people don't need to be involve themselves in classic cars, gold ("bullion, bullion, bullion, bullion!"), dot.com shares or tulip bulbs, so they needn't be that affected when most bubbles pop.

Everybody HAS to involve themselves in housing however, so even sane people who don't believe in limitless boom without bust, an end to history or youcantgowrongwithpropertyinnit, have to buy into it in some form or another. Even those scumbag renters that we're supposed to look down upon. That's the problem. Benefit or suffer, you cannot escape it.

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So when the government has to pay housing benefit to millions of unemployed, no doubt the high house prices and following on from that, higher rents will also cost the taxpayer more. There's no net gain in wealth from houses going up in price and if everybody decided to sell tomorrow, where would the money come from to realise all this "wealth" and more to the point, where would everybody live? The only people who benefit from high house prices are money lenders and speculators.

Steady on. I wasn't saying that the advantages outweigh the disadvantages. Far from it. It's just that when you're in power in a boom you're quite happy to accept the increased revenues from stamp duty, inheritance tax etc. I'd be quite happy to see them all shot (the Tories would have done the same) for destroying this country's economy. Too many people I know have had their life's work wiped out through no fault of their own.

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