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Telegraph: Why I Would Be Celebrating If Brexit Led To Lower House Prices

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Shame comments aren't allowed anymore.

Fitch, the credit rating agency, today warns that Brexit might lead to a 25pc correction in house prices. This would result in them falling to what Fitch believes is their long term "sustainable" level. I don't mean to be irresponsible, but good; this would be very welcome.

There are few things likely to turn me into a Brexiteer, but the prospect of falling house prices might just do it, and I speak here as someone with some degree of housing wealth. A Treasury assessment of the short term consequences of Brexit, due to be published in the next week or so, is expected to focus heavily on this supposed bogey. But I wonder whether a sharp correction in the housing market is in fact the unarguable harm presumed, or even if it is true that Brexit would lead to such an outcome.

Unless you are a buy-to-let landlord - a tiny minority of the population - or about to sell up and leave the country, the price of houses doesnt matter. Indeed, if prices were a bit cheaper, and therefore more affordable, I would wager that most people would be a good deal happier.

This is obviously the case for first time buyers trying to climb onto the housing ladder, but it is also true for those already on it, since all house prices move together, and the next step up would therefore become relatively cheaper. Lower house prices would also make the market very much more active; many households cannot afford to move even if they would like to, and therefore become stuck in their present abodes - though ridiculous levels of stamp duty are also a large part of the problem here.

Housing is not an investment, or rather shouldn't be; it is a utility, and therefore in some measure should be something which is affordable to all. Unfortunately, it has become as much a perceived store of wealth as a place to live, no more so than in Britain, where a dysfunctional housing market is a major cause of the imbalances at the heart of the economy.

Both the International Monetary Fund and the Bank of England last week highlighted the risk of Brexit to house prices as if this were a cause for extreme alarm. They cannot have it both ways. In the past, both institutions have cited fast rising house prices as a key concern for the UK economy, yet now here they are warning of catastrophe if they fall.

If one digs down into what might be the underlying causes of a Brexit inspired correction higher inflation, higher interest rates, depressed real incomes and so on - then such a scenario would indeed by most unwelcome. But these effects are by no means certain, and as for Brexit acting as a deterrent to foreign buyers, thats a complete red herring, and in any case might in any case be regarded as a positive boon.

The truth is that eventually, the pound would fall to a level that would once more make UK property attractive to foreign buyers, whose chief reason for investing in London and elsewhere in the country has little to do with membership of the EU. Rather it is about robust rule of law, reliable property rights, social stability, a relatively liquid market, and the ability to get your money in and out of the country easily.

All that said, there is plenty of evidence to suggest that house prices heavily influence peoples propensity to spend. Its called the wealth effect; if households feel richer because their properties keep rising in value, they also tend to spend more. Yet the UK cannot forever live on the spoils of rising house prices. The longer this debt fueled fantasy persists, the more certain financial and economic crisis becomes.

Britains housing market has long been a cause of national shame, with one of the lowest rates of construction of new housing anywhere in the developed world. There are simply not enough houses to go around in areas where people want to live and work. This in turn is caused by some of the most restrictive planning laws in Europe. These regulations have nothing to do with the EU, but are almost entirely a British design. Dismantle the damaging EU regulations by all means, but we perhaps need to start closer to home.

http://www.telegraph.co.uk/business/2016/05/16/why-i-would-be-celebrating-if-brexit-led-to-lower-house-prices/

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It'd be interesting to conduct a poll to see how many people actually believe forever HPI is bad. Not just FTBers struggling to get onto the market but homeowners like myself. I'm sure it's higher than people imagine - which runs the risk of this backfiring: "25% reductions you say? Leave it is" etc

Edited by spunko2010

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Massive change in mainstream message lately.

Warner is a prominent journalist, and he's listing out all the key reasons why HPC = good for the greater good.

Important article actually, worth sharing.

Can you imagine the BTL lot reading the Telegraph today?

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I can see no other way this side of the decade for significantly reducing house prices unless we leave the EU and I'm not sure they will come down significantly thereafter under the current regime. I'm surprised that the younger population are the ones more likely to vote to remain. Surely their parent have tried talking some sense into them and must want to kick them out of the family home at some point or can see how much a ripoff private rents are? Then again I don't understand the mentality of at least half the population, they seem to live in a completely different dimension to me including the government.

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All going well there until the last paragraph.

My feelings too. It could have been written by an HPCer up until that point and I was thinking "amazing, the message is finally getting through".

And it is I think, but the author unfortunately didn't follow the logic all the way through. He managed to get that high prices benefit few, he managed to get that lower prices benefit more, he managed to get that the financialisation of houses is a problem, and he managed to get the diametrically opposed messages from a government who say they want houses to be more affordable on the one hand and that cheaper houses are bad on the other.

He broadly failed to identify that the wealth effect is illusory and therefore the increased spending from it can only be temporary and ultimately creates an economic drag (although his use of the word "fantasy" suggests that he didn't fail to get it, but rather just failed to get it across).

But he totally failed to make the connection that leaving the EU would not impact either our planning laws or our rates of housebuilding and so if an exit were to cause a correction it would prove that neither of these factors can explain why prices are not already correct.

It was a good effort though and a huge step forward. Commendation!

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I can see no other way this side of the decade for significantly reducing house prices unless we leave the EU and I'm not sure they will come down significantly thereafter under the current regime. I'm surprised that the younger population are the ones more likely to vote to remain. Surely their parent have tried talking some sense into them and must want to kick them out of the family home at some point or can see how much a ripoff private rents are? Then again I don't understand the mentality of at least half the population, they seem to live in a completely different dimension to me including the government.

They've been brainwashed into being Owen Jones clones. Brexit = racist swivel-eyedness which just doesn't go down well with the peer group. Never mind they're getting royally shafted by the government and older generations, so long as their views are "right on".

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They've been brainwashed into being Owen Jones clones. Brexit = racist swivel-eyedness which just doesn't go down well with the peer group. Never mind they're getting royally shafted by the government and older generations, so long as their views are "right on".

Those brainwashed idiots probably dont feel confident about BREXIT in a country that spends its taxes fighting the EU to allow our thieving bankers to be rewarded with bigger bonuses.

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...BREXIT is about democracy ...not speculation on House Prices....if you wish to live outside democracy ...in other words no democracy and laws are forced on you without representation.. ...vote to remain ...if you are for democracy.. VOTE BREXIT....to leave Euro Land..... :rolleyes:

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Those brainwashed idiots probably dont feel confident about BREXIT in a country that spends its taxes fighting the EU to allow our thieving bankers to be rewarded with bigger bonuses.

Quite. The UK political establishment have proven that they are supremely uninterested in the fate of people who don't already own houses. Why would I want to send more power their way?

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25% not nearly enough in many places though. What are the chances of Brexit according to any reliable polls?

However if there is a mechanism that pushes prices down 25% then what would the banks do?. Firstly they would lend very little and in fact may well demand minimum 25%+++ deposits which would even at reduced prices still exclude the majority of buyers. Investors would not buy in a falling market and once again the banks would lend less to them.. I would see a spiral down which could not stop till house prices met wages, ie real wages not just magic money from money laundering and easy peasy over lending as happens now (again after the 2007/8 thingy).

Panic would not stop until the real bottom and the government is hardly in a position to drop the interest rates another 5% or so. (they will try though until the GDP drops to US 20c or so)

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They've been brainwashed into being Owen Jones clones. Brexit = racist swivel-eyedness which just doesn't go down well with the peer group. Never mind they're getting royally shafted by the government and older generations, so long as their views are "right on".

+1

Although supporting the EU means supporting bull fighting which is hardly politically correct

http://www.peta.org.uk/blog/european-council-fails-to-end-bullfighting-subsidies-but-this-is-not-the-end/

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Good old Faisal Islam is on Sky News right now with David Cameron. Waiting for him to get the housing question in...

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Hello.... Most of you wont know me... some of you might remember me. I dont know if my post count/hpc stats still show or not. I used to be very active here. But eventually circumstances caught up with my principles and I bought.

So I stopped posting in the main forum, although I occasionally lurk in OT.

But my heart never changed through buying. Deep down. when you scratch beneath the surface. I am still HPC to the core. I have children. This place taught me so much. I was lurking here during the worst times (early naughties) and during the times of hope (late naughties)... only to watch the hope evaporate. I watched the HPs and the entire world economy pushed further into the madness. Why am I writing this post? Are you curious as to why? read on.....

Of everything that I learned during my time here (and beleive me its like a phD in economics if you ever have the time), there was one thing that I always held on to as a certainty.

The fact that one day, the priced out would outnumber the HPI blessed. I always knew that when this happenned.... things would change. In fact, I came to realise that ONLY when this happenned would things change. When the people who cant afford homes can outvote those who own, the price would fall. Like I say.... I have been getting on with my life away from here..... but today..... when I saw that the brexit camp were using hpc to bolster their argument....... my mi d was blown..... It has happenned. I am calling the top of the market.... Right here.... right now.... I am not starting a thread .... or for that matter rejoining the HPC ranks..... but mark my words..... when I saw the bremain camp threaten that brexit could cause HPC and the comments and feedback had as many "GOOD" remarks as "OH NOs".... and I then saw the brexit using HPC as a reason for Brexit......

Believe me.

Our day has come.

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some of you might remember me.

Welcome back sbn! Your 'fishing for lurkers' thread was great.

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They've been brainwashed into being Owen Jones clones. Brexit = racist swivel-eyedness which just doesn't go down well with the peer group. Never mind they're getting royally shafted by the government and older generations, so long as their views are "right on".

The young people I've seen interviewed who wish to remain in the EU seem to have two principal reasons. Firstly they believe in some generalised way that anything that slightly impedes them 'travelling anywhere' is bad. Secondly that they want the ability to 'work anywhere in Europe'.

With European unemployment figures at around 10% (double ours and more) why they think they might (as graduates) be employable in the likes of Greece, Italy, Romania, Bulgaria, France, Spain etc baffles me. The majority of them I would imagine also speak only English.

Anyone seen German firms bemoaning their lack of English workers?

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On the train last week, 2 late 20s early 30s women in the seats opposite were discussing Brexit. One said, "for selfish reasons I am going to vote leave because I want house prices to come down". Oh how I smiled.

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The young people I've seen interviewed who wish to remain in the EU seem to have two principal reasons. Firstly they believe in some generalised way that anything that slightly impedes them 'travelling anywhere' is bad. Secondly that they want the ability to 'work anywhere in Europe'.

With European unemployment figures at around 10% (double ours and more) why they think they might (as graduates) be employable in the likes of Greece, Italy, Romania, Bulgaria, France, Spain etc baffles me. The majority of them I would imagine also speak only English.

Anyone seen German firms bemoaning their lack of English workers?

And this is the major point that the remain camp is brainwashing the youth with for their vote.

It's part of the idealism of being a youth. The world is your oyster, where will your career take you? Helicopter pilot? Marine biologist? Or... just end up in admin in an office in Slough.

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The young people I've seen interviewed who wish to remain in the EU seem to have two principal reasons. Firstly they believe in some generalised way that anything that slightly impedes them 'travelling anywhere' is bad. Secondly that they want the ability to 'work anywhere in Europe'.

The EU must explain why I was sharing an office with an Australian for some of the 15 months I was working in France. Erm.

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