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LuckyOne

Time To Own Up .....

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http://noir.bloomberg.com/apps/news?pid=20601039&sid=ayOOXulI0zf0

Financial analysts who have been making a living predicting the direction of the U.K. property market haven’t been short of data in recent days.

House prices are in freefall, so hop on a train to Heathrow Airport and catch the last plane to Shanghai before the whole country collapses. No, wait a moment, they are rising again. Pile into the FTSE-100 index while you still can.

These soothsayers should all retrain to do something more useful -- like melting ice cubes and then refreezing them. It is time for the British to give up their long, passionate affair with rampant property inflation.

U.K. house prices are still overvalued, and are a threat to the nation’s future. The property market is a distraction from the work of rebuilding an economy toward one based on manufacturing and exports. And the vast wealth created by the real-estate boom has created social divisions between the young and old, and the middle and working classes.

Prime Minister David Cameron’s government and the Bank of England should do what they can to influence the cost of homes by targeting a decade of stable or slightly falling prices.

Halifax, the mortgage-lending unit of Lloyds Banking Group Plc, last week said the price of the average home fell 3.6 percent in September compared with August. That was the steepest monthly fall since it started tracking prices in 1983.

State of Flux

That was contradicted by research company Acadametrics Ltd. and LSL Property Services Plc. They reported last week that house prices in England and Wales had risen to a two-year high in September. Led by London, prices gained 0.2 percent on the month and 7 percent compared with a year earlier.

Clearly, the market is in a state of flux. With an economy that is barely growing, and with big government-spending cuts scheduled, it is hard to find much confidence in real estate.

And yet, the point is that it isn’t needed. Another property boom is the last thing Britain should want right now.

Admittedly, for most of the past two decades, housing was a pretty good indicator of the overall health of the economy. It was about as simple as reading a children’s book: If house prices were up, and mortgage lending was buoyant, the economy would soon follow. All the buyers would soon be rushing down to the shops to fill their new homes with televisions and furniture. Everyone else would feel wealthier because their houses were worth much more and would promptly buy a new car or book a winter holiday to celebrate. House prices told you everything you needed to know.

But the U.K. needs to move on from its addiction to rising house prices. Here’s why.

Old Yardsticks

First, house prices are still too high. The International Monetary Fund made that point last week. “What remains worrisome, however, is that house prices are still high based on traditional valuation yardsticks,” it said in its World Economic Outlook. Spot on. Even after a deep recession, and the collapse of several mortgage lenders, the British property market has hardly corrected at all.

From 1999 to 2009, the total value of privately owned housing in the U.K. rose from 1.719 trillion pounds to 3.755 trillion pounds, according to Halifax. It has declined 8 percent since 2007, hardly a scratch in the gains of the past decade.

Second, the U.K. needs to rebalance its economy away from property development, borrowing and consumption toward manufacturing and exports. There are some hopeful signs that it is happening. Manufacturing is reviving. The latest data from the U.K.’s Office for National Statistics showed factory output up 0.3 percent in August, more than most economists forecast.

Right Direction

It’s not great, but for a country where manufacturing had virtually been forgotten it is an encouraging early sign. Exports rose to a two year-high in June, then slipped back a bit the following month. Again, it is a fragile, mixed picture. But the U.K. is taking a few small steps in the right direction. It needs to continue on that path. It doesn’t need another house price boom to knock it from that course.

Three, the crazy price of housing has become hugely divisive. The middle-aged and elderly have vast amounts of housing wealth built up in the long boom, while the young find it very hard to get a first step on the property ladder. Worse, it is getting even harder for them, as mortgage lending has become much tighter. Likewise, middle-class families can use their housing wealth to help their children buy properties and get through university. Working-class families can’t. The U.K. needs a sensibly priced property market to make society more socially mobile, and fairer as well.

In reality, Britain needs to turn all its attitudes toward property upside down. Each month, as the data gets published, any rise in house prices should be met with disappointment. And a drop should be welcomed.

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In reality, Britain needs to turn all its attitudes toward property upside down. Each month, as the data gets published, any rise in house prices should be met with disappointment. And a drop should be welcomed.

Too true.

Good article, with a fine ending. :)

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It was all of us. Matt was the collective consciousness of of us all.

It is actually a bit eerie. It is almost like this article is a synthesis of about 10,000 posts on this site.

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Yet another example of the msm lurking then plagiarising HPC. Nothing we haven't said for years. Not that I'm complaining as it's always good to get this message to a wider audience than those at HPC. I'll ask again: would the reporters lurking on HPC please own up. Especially those who copy and paste from here.

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Yet another example of the msm lurking then plagiarising HPC. Nothing we haven't said for years. Not that I'm complaining as it's always good to get this message to a wider audience than those at HPC. I'll ask again: would the reporters lurking on HPC please own up. Especially those who copy and paste from here.

And some politicians too.

The phrase "No-one on benefits should be better off than someone in work" has quite a familiar ring to it ......

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the U.K. needs to rebalance its economy away from property development, borrowing and consumption toward manufacturing and exports.

Yes. Yes! Yes!!!!

And it will.

It's going to be a rough old ride, but we will get there.

I have no time for these "Britain is finished" types, so it is nice to read an article where someone just calmly says "Here's the problem, here's the solution, and we've already started down the right road."

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  • 153 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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