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The Dangers Of Home Ownership

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Nothing really new but good to see the a bearish article on this blog

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The dangers of home ownership

Fraser Nelson 11:58am

The slump in home ownership is reported today as a bad thing. Many Conservatives, who believe that home ownership releases what the late Shirley Letwin called "vigorous virtues", may agree. So might Labour, which came to regret its opposition to the Thatcher policy of allowing council tenants to buy their home.

Like inflation targeting, home ownership was a solution that worked so well in the 1990s that it was vigorously pursued in the next decade. But here's the rub: it had disastrous effects. In this case, the disaster was governments pursuing greater home ownership as a policy goal. This meant cheap loans, which meant subprime mortgages, which meant a credit bubble.

Our contributing editor Dennis Sewell wrote a definitive piece about how the American obsession with home ownership blew the US bubble. In Britain, too, politicians — such as George Osborne — talk about helping young couples on to the "housing ladder," as if it were a Jacob's ladder leading towards asset bubble heaven. They believed this in Japan as well — until its real estate market collapsed, opening a fiscal trapdoor through which many young couples fell.

I'm struck by how many financiers I meet now who have sold up and are now renting, in anticipation of a second crash in Britain that would send property prices crashing. An unreliable indicator, certainly, but only an ideologue would say that buying a house is a one-way bet. If people can't afford houses, it's a sign of an overvalued market. House prices in Britain are already falling. They're down 2.1 per cent over the past year, against 5 per cent RPI inflation — a 6.8 per cent real terms fall. If British buyers would rather rent and wait, then I don't think it can be seen unequivocally as a problem.

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  • 336 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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