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DEMO

House Price Increase

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A few purely theoretical questions for you, don't concern yourself with practicalities just yet.....

Is there anything inherently wrong with house prices increasing at a rate above the rate of wage inflations?

If so should there be a mechanism to correct this 'failure' either via a voluntary donation system or through taxation?

Contra to that should there be a system for preventing house prices increasing at a rate below the rate of wage rate inflation?

Would any potential first time buyers on this forum currently struggling with house price affordability be prepared to make a voluntary donation from house price gains in the event of this cycle repeating itself in the future?

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Is there anything inherently wrong with house prices increasing at a rate above the rate of wage inflations?

Yes. It means that people who don't own property find it harder and harder over the years to buy any, until it is absolutely impossible.

It also means that the price of houses becomes more and more detached from what people are able to actually pay for that commodity before they actually own any (i.e. people who aren't just swapping houses using the fairy tale "equity" in them).

It is absolutely unsustainable, and the fact that people base their personal economics on such a notion is preposterous.

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Is there anything inherently wrong with house prices increasing at a rate above the rate of wage inflations?

Yes because for house prices to go up above wage inflation, people need to have more and more money. If there not getting this from wage increases, they are working longer, spending less etc etc, there are limits and as such thats why house prices go up in line with wages..

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DEMO,

It is not the cost of houses that is going up (other than by build and material costs) it is the price of land.

Taken to the extreme for analysis if you make land expensive enough there is hardly a single productive/economic activity that is worthile or indeed competitive or money making. This is the road to economic stagnation and the destruction of remaining industies that are foreign income earning it will also beging to eat away at service industries too. Moreover with such high land costs any infrastructure projects either become uneconomic or prove to be very bad value for money.

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Guest prudence
DEMO,

It is not the cost of houses that is going up (other than by build and material costs) it is the price of land.

Taken to the extreme for analysis if you make land expensive enough there is hardly a single productive/economic activity that is worthile or indeed competitive or money making. This is the road to economic stagnation and the destruction of remaining industies that are foreign income earning it will also beging to eat away at service industries too. Moreover with such high land costs any infrastructure projects either become uneconomic or prove to be very bad value for money.

Of course the cost of land is a factor in house prices and of course builders want maximum profit but in the past few years prices have been driven upwards by a speculative mentality and\or people not being worried about taking on a massive financial commitment based on their belief that circumstances (such as rising IRs and unemployment levels) would not change so they could continue to meet their current debt repayments.

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<i>Of course the cost of land is a factor in house prices and of course builders want maximum profit but in the past few years prices have been driven upwards by a speculative mentality and\or people not being worried about taking on a massive financial commitment based on their belief that circumstances (such as rising IRs and unemployment levels) would not change so they could continue to meet their current debt repayments. </i>

Yes, but the point is the net result of the lending profligacy does not raise the value of the bricks as such it is the value/cost of the land that the bricks are sitting on that is raised. This has a huge effect on company expansion and new company formation as companies are competing for land to grow and expand their businesses or they require office space, the cost of which reflects the cost of land on which it is built. Even if land is designated residential/commercial it makes little odds, both go up, as there is always a way in which some of it can switch use.

Japan had a land price bubble, it has been recognised as such and very nearly destroyed their economy for good - luckily they still had some top class major employers that pulled them through - mind you they had the backdrop of unprecedented global growth as a backdrop without which they may have failed. They are still not out of the woods yet.

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A few purely theoretical questions for you, don't concern yourself with practicalities just yet.....

Is there anything inherently wrong with house prices increasing at a rate above the rate of wage inflations?

If so should there be a mechanism to correct this 'failure' either via a voluntary donation system or through taxation?

Contra to that should there be a system for preventing house prices increasing at a rate below the rate of wage rate inflation?

Would any potential first time buyers on this forum currently struggling with house price affordability be prepared to make a voluntary donation from house price gains in the event of this cycle repeating itself in the future?

When house prices are considered at a "Macro" economic level then the price increase might be sustained.

But it is not a macro economic environment.

Houses are one of the biggest single expenditures that we have.

When this Expenditure increases as prices rise outside of other factors then the proportion of expendible money becomes swayed.. What increased houseprices take impacts the rest of the economy.

durring house price inflation people also go into a debt frenzy.

Bigger debts in housing, bigger debts spent into the high street..

Then house prices falter.. People stop taking on more and more debt..

The big economic sway hits the high street like a sledge hammer..

High Street has an embolisim..

(see todays papers..)

a recession begins..

house prices drop..

People weep about negative equity..

Blah..

Essentially you may be able to afford £200- £300 more to run your mortage then you would have needed 8 years ago.. The Economy can't.. The high street is 2/3rds of the economy and is reporting being 20% down

That is recession..

Edited by apom

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  • 335 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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