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Dicky

Some Graphs To Show How Well The Economy Is Doing

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_41380395_bankruptcy_0805_gra203.gif

_41276317_house_070705_gra203.gif

GDP Growth

192.gif

Interesting, just look at the GDP graph at the point IR starting ramping up from 3.5% to 4.75% and the lag between that and the housing market. I'd say we haven't even seen the worst of it yet.

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_41380395_bankruptcy_0805_gra203.gif

_41276317_house_070705_gra203.gif

GDP Growth

192.gif

Interesting, just look at the GDP graph at the point IR starting ramping up from 3.5% to 4.75% and the lag between that and the housing market. I'd say we haven't even seen the worst of it yet.

Ok, Can anyone see where i was going with my rants these past few months? Speaking as a business owner? House prices are killing our business'. I cannot retain staff, they are leaving the capital in droves. We develop world class software and technology but the housing and buildings issue adds (I would estimate) 30% to my cost line compared to Canada, Australia, France, Belgium. Don't even begin to mention India, China, Brazil.

Maybe a cold, sharp shock may be needed to make people realise how tough it getting for people who want to get up in the morning and achieve something with each day. Maybe irstie and Beenie might start to realise that if someone esle isn't paying the bills, they have nothing left to flog off!

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Ok, Can anyone see where i was going with my rants these past few months? Speaking as a business owner? House prices are killing our business'. I cannot retain staff, they are leaving the capital in droves. We develop world class software and technology but the housing and buildings issue adds (I would estimate) 30% to my cost line compared to Canada, Australia, France, Belgium. Don't even begin to mention India, China, Brazil.

Maybe a cold, sharp shock may be needed to make people realise how tough it getting for people who want to get up in the morning and achieve something with each day. Maybe irstie and Beenie might start to realise that if someone esle isn't paying the bills, they have nothing left to flog off!

Makes you think doesn't it. And here's some further food for thought. What would happen to the UK economy of legislation was passed to cap house prices at 80-90% below current levels? Think about it. Most of the housing stock was built over 40 years ago, and has been paid for several times over, as has the building/land costs. There's no ecomic reason why people should continue to pay them over and over again. With housing being most peoples biggest item of expenditure it would have these benefits:

- People could afford to be paid much lower wages, and still be better off. This would reduce the costs to most business massively and inflate profits.

- Reduced labour costs would make Britain genuinely competitive against china and other developing nations. Other countries would outsource jobs back into Britain.

- With higher disposable incomes, people would have more for consumer spending on products and services, improving their quality of life, and increasing the volume of transactions to most of the UKs businesses. This in turn would also create greater employment, and combined with increased international competitiveness could achieve 100% employment levels.

- GDP would be permantely up.

- Tax revenues would be up, both from higher voulmes of business transactions, and from possible icapacity to increase taxation levels due to higher disposable incomes.

- Higher tax revenues and lower employment costs would revive failing public sector institutions (e.g. NHS) and also allow sustainable public ownership of things like the railway network.

So what's the downside? Can anyone give a genuine reason why legislating a capping of all UK property prices would not solve so many of the UK's problems and make it a sustainable country.

Only downside would be much lower profits for banks. However, in a true democracy how long can we really go on allowing a few bankers to call all the shots?

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Makes you think doesn't it.  And here's some further food for thought.  What would happen to the UK economy of legislation was passed to cap house prices at 80-90% below current levels?  Think about it.  Most of the housing stock was built over 40 years ago, and has been paid for several times over, as has the building/land costs.  There's no ecomic reason why people should continue to pay them over and over again.  With housing being most peoples biggest item of expenditure it would have these benefits:

- People could afford to be paid much lower wages, and still be better off.  This would reduce the costs to most business massively and inflate profits.

- Reduced labour costs would make Britain genuinely competitive against china and other developing nations.  Other countries would outsource jobs back into Britain.

- With higher disposable incomes, people would have more for consumer spending on products and services, improving their quality of life, and increasing the volume of transactions to most of the UKs businesses.  This in turn would also create greater employment, and combined with increased international competitiveness could achieve 100% employment levels.

- GDP would be permantely up.

- Tax revenues would be up, both from higher voulmes of business transactions, and from possible icapacity to increase taxation levels due to higher disposable incomes. 

- Higher tax revenues and lower employment costs would revive failing public sector institutions (e.g. NHS) and also allow sustainable public ownership of things like the railway network.

So what's the downside?  Can anyone give a genuine reason why legislating a capping of all UK property prices would not solve so many of the UK's problems and make it a sustainable country.

Only downside would be much lower profits for banks.  However, in a true democracy how long can we really go on allowing a few bankers to call all the shots?

Very interesting. But it's only a thought in hind-sight! So, forgetting the problems it would cause by implying a cap today (as 100s of millions of people would be in massive debt less asset value - i.e. negative equity) it wouldn't solve much:

-If house prices were capped would rents fall too? If house prices were 1/10th of what they are now I would go on a BTL buying spree as the yields would be massive.

-Wages would also fall (as you mentioned) but they would probably fall in line with houses prices, i.e. 80-90%. Making houses no cheaper.

-ok, we would be more competitive to the world (i.e. exports), but imports would be very expensive, with leads to massive inflation (and we import more than export). And the inflation would continue to be in double figures until it reaches an equilibrium with the rest of the world (i.e. what it is today).

In fact it wouldn't help at all, it would be like the currency Liera, were they are soon to knock off the 6 zeros - but the value stays the same!

Edited by Jason

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Very interesting.  But it's only a thought in hind-sight! So, forgetting the problems it would cause by implying a cap today (as 100s of millions of people would be in massive debt less asset value - i.e. negative equity) it wouldn't solve much:

But that wouldn't be a problem for most people. Negative equity is actually the banks problem, not the owners, as it is for the banks own security that the loan is secured on the house. True, it becomes your problem when the bank takes measures against you to protect itself from the negative equity, but this is fairly secondary. The actual negative equity would do you no harm in this scenario. Even if prices weren't capped you'd still have to repay the loan either way, so it wouldn't actually cost home owners more. And moving house / moving up would not cost so much, so you wouldn't actually be trapped in negative equity anyway.

-If house prices were capped would rents fall too?  If house prices were 1/10th of what they are now I would go on a BTL buying spree as the yields would be massive. 

Logically it would obviously be sensible to legislatively cap rents at the same time as house prices, but in practicality it would hardly be necessary. You couldn't go on a BTL buying spree and charge huge rents, as who would pay them? If people could buy a house for £100 a month, they would always do that rather than pay you £800 a month in rent. Of course, because this idea would be an artificially controlled market, and not subject to market forces, then there would be the risk that with prices so cheap a few people would just buy thousands of houses, have a monopoly, then charge huge rents based on this. But that could also be solved in the legislation... simply charge 5000% tax on second home purcahses (including BTL). I.e. buying just one house (to live in) costs you £20,000, but buy a second one and you pay £20,000 plus £1,000,000 tax. That would make BTL and speculation completely unviable without actually banning it.

-Wages would also fall (as you mentioned) but they would probably fall in line with houses prices, i.e. 80-90%.  Making houses no cheaper.

I agree they would fall massively, but not by the same proportion. Since FTBs cannot afford to buy properties now, wages would need to fall to a level where people could afford to buy houses. After all, based on my taxation idea above there would be no speculative or BTL purchaes to keep the market afloat. Also, don't forget, only house prices would be capped, food, energy and everything else would remain unchanged.

-ok, we would be more competitive to the world (i.e. exports), but imports would be very expensive, with leads to massive inflation (and we import more than export).  And the inflation would continue to be in double figures until it reaches an equilibrium with the rest of the world (i.e. what it is today).

Not convinced. Wages didn't rise in propertion to rising house prices (thanks to external competitive labour supply), so would probably not be likely to fall in line with them either. Although I conceed there would be the risk that this idea would lead to potentially more expensive imports. But isn't that part of the basis of the some the benefits of the scheme? I.e. if we could now build DVDs players (etc) more cheaply than the Chinese then we would buy them off ourselves rather than buying the now more expensive chinese ones, and not only that by would export them and sell them to the chinese. Dont forget, increase you production, your exports and your efficiency is the only real way to add value, wealth and prosperity to a nation, anything else (i.e. tinkering with interest rates) is simply just cooking the books while pulling the wool over your own eyes.

In fact it wouldn't help at all, it would be like the currency Liera, were they are soon to knock off the 6 zeros - but the value stays the same!

No, only if the inflationary affect effects everything. If you artificially control the price of a single asset it is not the same have suffering general inflation. And, remember it is only the external factors that would see relative price inflation (oil, imports, etc - which admitedly would not be too good), but internal factors (UK goods and produce, and wages) would actually undergo some degree of price and wage DEFLATION.

So, can I be Chancellor yet?

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So, can I be Chancellor yet?

All this is interesting... But I think you totally under estimate what we import. You say DVD players would be cheaper if we made them. Where would we get the materials from? The materials we would use would be imported. What about other imports like oil, gas & food?

However... aren't you describing a Communist system? Where the government controls everything? Which history shows us doesn't work.

Don't we live in a capitalist world, with a 'you want something you work for it' attitude? By definition capitalism leads to boom & bust, and were in that very strong cycle now.

What does everyone else think???

P.s. You can be chancellor, no problem!!!

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However... aren't you describing a Communist system? Where the government controls everything? Which history shows us doesn't work.

Which is precisely where I think Clown and Blah are trying to take us !

D :blink:

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However... aren't you describing a Communist system? Where the government controls everything?  Which history shows us doesn't work.

I don't think it's akin to a communist system, as "Everything" would not be controlled by the state, there would just be capping of the prices of one asset class. The rest of the economy and industry would be a free market. And would wouldn't need to enforce this through legislation. It could be done through a tax mechanism. All sorts of policies are controlled through simple taxation levels at the moment, and this would be no different. For example, it could be achieved by simply setting tax at:

Property upto £20,000 = 0%

Property over £20,000 = 2000%

Effectivly creating a cap through taxation.

However, you are right about the oil issue, which an an comparatively expensive import would effectivly act like a tax on everything. However, on the plus side it would act as a very good counter-weight to wage-deflation, which would be required in order to keep real wages relatively high in order to reap the benefits of my idea.

Now all I need to do it get ellected.... I'll start making some rossettes...

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Ok, Can anyone see where i was going with my rants these past few months? Speaking as a business owner? House prices are killing our business'. I cannot retain staff, they are leaving the capital in droves. We develop world class software and technology but the housing and buildings issue adds (I would estimate) 30% to my cost line compared to Canada, Australia, France, Belgium. Don't even begin to mention India, China, Brazil.

Do I assume correctly that your business is in London. Because if it is then it is not just the houseprices. Last year I drove down to London (I live on the Hampshire/Wiltshire border) just to go on a web development course. It cost me £75 for the week in petrol. God knows what it would cost me now. Taking the train is out of the question for lots of reasons, and the commute takes between 2 and 4 hours a day depending on traffic. By wednesday I was that tired that I could not concentrate enough to work out basic stuff.

I get calls from people asking me if I want to relocate to Bath(the other direction) or London. Bath property prices the last time I looked are ridiculous.

So I work for myself. I may not earn as much. But do I want to pay those ridiculous prices in London or Bath. No. I don't want to commute those distances either.

The only choice is to do what your staff are doing and move somewhere where they are. Or let them work from home all or part of the week. We have the technology. Do the research. Which I'm sure you have (don't mean to patronise).

As a development company, why do you need to be in an expensive area.

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Guest growl
Which is precisely where I think Clown and Blah are trying to take us !

:blink:

You are so right. Communisn is exactly where thay are taking us. Except that the population are being led by the carrot of debt, instead of the stick of poverty.

This government doesn't care about whether we can afford to run our business's or own our property.They want us to find it hard in the long run so that we depend on them more for their credits(benifits..handouts..control).

Sorry nearly went into a rant then............ :) Mention the communism and I'm off on one.

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Guest Bart of Darkness
Don't we live in a capitalist world, with a 'you want something you work for it' attitude?

[old git mode]Maybe the rest of the world, but modern Britain?

It seems to be riddled with BTL's who live off unearned income and Chavs who live off benefits and thieving.

If most other people want something they MEW for it.[/old git mode]

Sorry, had to get that off my chest. :)

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Makes you think doesn't it.  And here's some further food for thought.  What would happen to the UK economy of legislation was passed to cap house prices at 80-90% below current levels?  Think about it.  Most of the housing stock was built over 40 years ago, and has been paid for several times over, as has the building/land costs.  There's no ecomic reason why people should continue to pay them over and over again.  With housing being most peoples biggest item of expenditure it would have these benefits:

- People could afford to be paid much lower wages, and still be better off.  This would reduce the costs to most business massively and inflate profits.

- Reduced labour costs would make Britain genuinely competitive against china and other developing nations.  Other countries would outsource jobs back into Britain.

- With higher disposable incomes, people would have more for consumer spending on products and services, improving their quality of life, and increasing the volume of transactions to most of the UKs businesses.  This in turn would also create greater employment, and combined with increased international competitiveness could achieve 100% employment levels.

- GDP would be permantely up.

- Tax revenues would be up, both from higher voulmes of business transactions, and from possible icapacity to increase taxation levels due to higher disposable incomes. 

- Higher tax revenues and lower employment costs would revive failing public sector institutions (e.g. NHS) and also allow sustainable public ownership of things like the railway network.

So what's the downside?  Can anyone give a genuine reason why legislating a capping of all UK property prices would not solve so many of the UK's problems and make it a sustainable country.

Only downside would be much lower profits for banks.  However, in a true democracy how long can we really go on allowing a few bankers to call all the shots?

Nice theory. Thing is the way we live today... we'll go looking for the next speculative market in which to satiate our greed. I'd give it 6 months before Kirsty & Co would be back with "Tulips, tulips, tulips"....

"People thought it was dead... but we're here to tell you that after over 100 years demand for tulip bulbs is set to rocket... we're going to show you how through a few simple measures you can make profits that will turn property developers green with envy..."

Alan.

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[old git mode]Maybe the rest of the world, but modern Britain?

It seems to be riddled with BTL's who live off unearned income and Chavs who live off benefits and thieving.

Many a true word....

A very valid point, here.

The UK is neither a Monarchy, nor a democracy, nor a state, nor a

free economy.

It combines elements of all of them.

And therein lies the difficulty of anticipation.

House prices in a Communist State would be static.

In a free economy they would be sky-high, presumably, and

we would be a nation of renters.

The compromise we "enjoy" makes the market such fun B)

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Ok, Can anyone see where i was going with my rants these past few months? Speaking as a business owner? House prices are killing our business'. I cannot retain staff, they are leaving the capital in droves. We develop world class software and technology but the housing and buildings issue adds (I would estimate) 30% to my cost line compared to Canada, Australia, France, Belgium. Don't even begin to mention India, China, Brazil.

Maybe a cold, sharp shock may be needed to make people realise how tough it getting for people who want to get up in the morning and achieve something with each day. Maybe irstie and Beenie might start to realise that if someone esle isn't paying the bills, they have nothing left to flog off!

BOOM n Bust: I sympathise with you TOTALLY: I had a small business + rented premises in London 2 years ago - and my rent was put up by 3x - so I just had to get out! And the same with nearly ALL the business's around me (in business park)!! MANY of them just upped and sent away!! And - for months and months - offices left empty!! That was what the landlords brought on themselves!! Ha Ha!!

History will record that - the rise in property prices and rents has brought misery and ruin to COUNTLESS thousands - BUT ALSO - it will have played the KEY ROLE in bringing the UK toi its knees........ I REALLY BELIEVE THIS.

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BOOM n Bust:  I sympathise with you TOTALLY: I had a small business + rented  premises in London 2 years ago - and my rent was put up by 3x - so I just had to get out!  And the same with nearly ALL the business's around me (in business park)!! MANY of them just upped and sent away!!  And - for months and months - offices left empty!! That was what the landlords brought on themselves!! Ha Ha!!

History will record that - the rise in property prices and rents has brought misery and ruin to COUNTLESS thousands - BUT ALSO - it will have played the KEY ROLE in bringing the UK toi its knees........ I REALLY BELIEVE THIS.

What we now have in Britian is a modern day Irish potato faminie whereby the lions share of ones income goes to pay Landlords and we all know what happen there don't we.

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Makes you think doesn't it.  And here's some further food for thought.  What would happen to the UK economy of legislation was passed to cap house prices at 80-90% below current levels?

Beautifully argued Sir, you truly are a great thinker.

There might be a slight problem in that no-one would build or sell houses but I am sure that can be rectified using just a little more legislation ....

MofD

PS: I wonder if you would care to publish details of an account that could be used to receive donations, and promise to emigrate to North Korea on receiving sufficient funds to purchase a one-way air ticket. I would be certain to contribute so that you may experience the effects of policies not unlike what you propose. Obviously, your North Korean comrades have been at it for some decades now and are close to perfecting every little detail, whereas your suggestion would merely get things going. Still, I am sure you deserve the pleasure of living there. Just think that apart from all the other advantages, they have no banks that make "excessive" profits.

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There might be a slight problem in that no-one would build or sell houses

And that would be different from the current situation in the housing market how exactly? :lol:

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The only choice is to do what your staff are doing and move somewhere where they are. Or let them work from home all or part of the week. We have the technology. Do the research. Which I'm sure you have (don't mean to patronise).

As a development company, why do you need to be in an expensive area.

Yes, I agree with you. We do operate as much as we can on the outskirts of Bristol. Problems are that it is a unique nature business. International clients will not go to Swindon or Birmingham in this field. They will go to Toronto, Brussels, Paris, Madrid, Luxembourg, Brussels, Montreal. Partly due to infrastructure. At this moment, the communications technology partly used in the services is only available in very limited amounts in very large cities. In the Uk, London is the only place the communications provider has made available the infrastructure, probably because it is only economical to provide at this stage of technology development in the largets cities with an existing and mature communications backbone. This will change in the future, maybe 10 years down the line. Meanwhile, Shangai and Mumbai are coming online this year. Also because of associated ancillary services that are also difficult to find outside of London (Bristol and Middlesborough to a lesser extent can provide) and that the final target market will likely be based in a large city, it is close to the destination market.

Also, as a lesser point, they will not come down to the Bristol office because when client pitching and entertaining needs to go on, they want to be in London. And they will pay the hotel rates etc., so not for me to argue if that is their choice. But it could easily be Paris, Brussels, Madrid, Luxembourg, Montreal, Chicago.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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