Controlling House Prices

[undeservingrich]

The sort of punitive regulation and taxation of the rented sector is exactly what we had up to January 1989.

I was a tenant from 1968 though to 1987 when I bought my first flat. Anybody who wasn’t a tenant during that period has no idea of the shitty condition of the nations housing stock at that time. Regulated tenants were paying rents which didn’t even cover the maintenance on the properties and this meant that little or no maintenance was done. When tenants died or moved out properties were boarded up or turned into “bed and breakfast” which was one way of getting round the regulations. I occupied the top floor of a Victorian Terrace for 18 months. The flat was entirely self contained but my landlord would collect the rent and give me a receipt for 7 days bed and breakfast. I kept a torch in the hall because the hall lights according to one of the other tenants hadn’t worked since the war.

Nobody ever complained because there was such a shortage of property that when you moved on you could obtain the equivalent of 6 months wages as “key money” from the incoming tenant.

Today’s tenants by and large have safe well decorated and modern homes this purely as a result of market forces and supply and demand. The private rental sector is too small to have any effect on house price inflation. You must look elsewhere for the cause.

[laurejon]

I too lived in rented housing during my early years, in fact my Landlord was both a Magistrate and the Local Fair Rents officer.

The standard was dire, as you quite rightly point out under those dark years housing was just awfull and the tenant had very little say in things.

However that said, I was not working and the Dole office kindly paid for my lazy existance plus a good supply of beer money for over two years. Great days never to be repeated.

The standard today is far far better, people vote with their feet nobody forces them to take second best. In this world you get what you pay for, the days of cheap rents and squalid Fagan type housing has long gone, its just a shame we still have a Labour Government.

[Sledgehead]

Asset prices rise and fall. At the extremes, these movements are illogical and are fuelled only by sentiment excess. If you want to stop th eworst economic disasters therefore, the answer is education. If a wider proportion understood market mechanisms and valuations, markets around the world would be less prone to excess, both to the up and downside.

...I look back at the ftse between 25th July and 8th August this year and see one thing: ignorance. How else can one explain the low dealing sizes coupled with day upon day of rises? Today half the people that joined in that period would have found themselves either in loss or at breakeven, and so we get panic selling on the 6th day of a fall, yet how many 7 day falls has the stockmarket thrown up in its history? Magnify this situation over months/years and you have a sadly typical boom-bust cycle.

<{POST_SNAPBACK}>

This debate over whether a house is an asset or somewhere to live is irrelevant. If people figure the finances stack up they will buy something to sell it on. If you don't believe it look at ebay. A statistic out a couple of day sago showed that households were £3000 more wealthy as the contents of their homes had been raised in value by the inflation in the price of second hand goods made possible by matching willing buyers with ebay traders. These ebay traders aren't trading BP shares or golf futures or ftse options. They are trading ordinary possessions. So if you class a house as a possession, you hav eto accept it will be traded for profit.

The important aspect here as that consumers act responsibly by awarding goods/possessions/assets etc values commensurate with their worth. When housing becomes too expensive that is the time to stop buying instead of saying "houses only go up in value."

Indeed it is not the treatment of housing as investments that has caused this, but the forgetting that a house should be a GOOD investment, by which I mean the figures should stack up wrt renting.

To say "it was thinking of housing in these investment term sthat led us here in the first place" is to ignore what proper investors are saying: prices need to make sense on an investment basis. When they no longer add up, people should realise the end is nigh.

If you deride STRs and other investment minded sorts for taking this approach, how are you to define "too expensive"? Is it merely that you are unable to buy? Maybe you can't buy a ferrari either. In fact, looking at property as an investment producing a return is THE way of determining whether excessive inflation has occured in house prices.

Like I say, people need educating, both in terms of the fundamentals and the dynamics one can expect in markets.

All the idiots who sold the ftse yday ignored the underlying nature of markets. Today they could sell for 40 points better.

[laurejon]

There is another way to stop House Price Inflation.

Make it much more difficult of FTB'ers to get onto the ladder. It is the young ones who lack experience and have been offered endless loans that have pushed up the prices by offering over and above the asking prices. They then think a gallon of Magnolia and a sanding stick is what constitutes a refurbishment project and another mug comes along and buys it.

Put Stamp Duty up to 10% for FTB'ers and those that have been out of the market for three years that will ensure only those who can really afford it could buy into it and the element of speculation jumping in and out is removed.

It would help to get many more people into rented housing where their work efforts to society would be far more highly regarded than wasting economic effort in persuing HPI just to line their own pockets without a sound business plan.

[homedaq]

Put Stamp Duty up to 10% for FTB'ers and those that have been out of the market for three years that will ensure only those who can really afford it could buy into it and the element of speculation jumping in and out is removed.

But wouldn't that just lead to the banks offering new cashback/125% etc type of scheme to cover the higher up front costs, and therefore just result in the buyer ending up deeper in debt?

Edit: This is pretty much what happens in Holland with its much higher (about 10% of loan) up front fees. They just slap in on the mortgage making FTB's even more a risk to equity falls as they start off in neg eq.

If the banks can land a customer with a lifelong debt, they will, particularly as a borrower with security is infinitely preferred to a tenant in their eyes.

Surely the rise in BTL is more directly to blame for the frothy increases than the poor FTB's?

I agree with your last point though if not the method, with the aim to cultivate renting.

With retirement ages likely to increase, perhaps people will just rent for a lot longer, buy in their late 30's or early forties with a whacking deposit and therefore no need to take on too much debt. The banks wouldn't like it though!

Edited August 19, 2005 by homedaq

[cprulesok]

[yeah too right - its great watching politicians crap their underwear, especially when old fat Ar*e Brown said

"were sick of the Tory booms and busts"

doesnt that W****R know thats what free market economies do.

basically socialists cannot run a free market economy and the tories arn't much better either