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whitemice

New Infographic: 7 Ways You’Re Paying For High House Prices

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It may be worth doing...but can i be frank? My opinion is they have been thus far utterly ineffectual in altering public opinion in any meaningful way, and seem to skirt around the core issues of price/loose lending/government intervention. Campaigns generally tend to be based on 'What can we get the government to do to help?' Rather than 'Get rid of these props and open your eyes'. The 'crisis' is entering the mainstream not because of their work, but because it's beginning to seriously affect everyone.

That's not to say they aren't trying, or good people....but I think they are afraid of saying the things we do on here because they think it won't get air time.

This, 100%

I'm sure their hearts are in the right place, but IMO they've achieved little to date.

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It literally ties you to a place.

Even small pay differences between areas get leveraged up so for example you cannot move from Norwich to Cambridge and forget about London.

I have come to the conclusion prices either have to go up so people cash out and the market moves, or prices fall so people cash out to avoid loosing money.

The government have chosen the former to try and keep the market moving. However each cut in irs, each scheme just puts the prices higher and higher and the fall to reality even more dramatic.

This market may remain irrational longer than i can remain alive.

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7 Ways You’re Paying For High House Prices:

I don't see an infographic there. I do see several things some of us have been saying for a very long time: for example, here (fairly recent but clearly stated in the footnote). Or for comment in the mainstream press, see here (and perhaps also follow some links).

A post like that can preach to the choir, and the idea that high house prices are a problem is now fully mainstream. But as soon as you go beyond that, you need to consider how people who are unsympathetic to your viewpoint will react. If you print ten good and irrefutable claims alongside one dodgy claim, they'll focus on the dodgy one and the entire article is then discredited in their eyes (just look at how climate change deniers behave here on HPC for an example).

There are two possible issues with your points. One: do they hold in an absolute sense? Two: how do figures compare with historic norms? To pick on one of your points, the real brain drain was a phenomenon of an earlier age. It may be hard to support in an absolute sense in a time when our universities and companies seem to be attracting serious levels of foreign talent, and it can certainly be dismissed as trivial compared to the post-war era of punitive taxes.

So having criticised you, what do you think about my words, linked from one of the URLs I posted above, wrapping the idea of a trend towards a brain drain in an "if"?

If chickens can’t come home to roost now for property millionaires and bankers, we’re transferring yet more burden onto the productive economy. And that’s tilted towards the young (because fewer of them own property) and high-earners (who pay more tax). That’s precisely the people who will be most welcome in other countries, when the burden of subsidising our fat-cats gets too much for them. If we drive too many of them out, the economy is basically gone!

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Is (2) accurate?

To what extent do high house prices create higher rents? For a given housing stock, if an owner (or putative owner) rents then that frees up a house to either be sold to an OO (lowering house prices) or to be rented (balancing the supply v demand for rentals).

Rents, surely, are set by the wages/benefits of renters v the supply of rental properties. Costs on the supply side (house prices, interest rates, etc) shouldn't change the rental market. In fact, it's more likely to be the other way round - high rents create high prices; just like other assets.

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Rents, surely, are set by the wages/benefits of renters v the supply of rental properties. Costs on the supply side (house prices, interest rates, etc) shouldn't change the rental market. In fact, it's more likely to be the other way round - high rents create high prices; just like other assets.

If rents become unafforabable it is possible that renters share and live in othercrowded accomodation as opposed to rents dropping.

If all renters in town x had a £5K pay rise and the number of rental properties doubled, I doubt rents would increase at all.

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Rents, surely, are set by the wages/benefits of renters v the supply of rental properties. Costs on the supply side (house prices, interest rates, etc) shouldn't change the rental market. In fact, it's more likely to be the other way round - high rents create high prices; just like other assets.

It's more complicated than that, you have to bear in mind the supply of sale properties. If a renter can't afford what's on sale they're milk cows.

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It may be worth doing...but can i be frank? My opinion is they have been thus far utterly ineffectual in altering public opinion in any meaningful way, and seem to skirt around the core issues of price/loose lending/government intervention. Campaigns generally tend to be based on 'What can we get the government to do to help?' Rather than 'Get rid of these props and open your eyes'. The 'crisis' is entering the mainstream not because of their work, but because it's beginning to seriously affect everyone.

Frank is good. But I think you're being unfair on them. Mainstream public opinion is a really, really difficult thing to shift.

You're right that the crisis is entering the mainstream, but that doesn't mean everyone cares about it. There is much more work to be done to get a critical mass of people to demand change, which only government has the power to enact.

Credit to the pressure groups for putting in the media appearances and doing the research to highlight the misery of the minority to the majority who still largely believe house price inflation is a great thing.

I'm with Whitemice on the idea that the mission is to highlight the problem. Once we start trying to go beyond that into causes and solutions, consensus starts to break down as different people and groups have different ideas.

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Is (2) accurate?

To what extent do high house prices create higher rents? For a given housing stock, if an owner (or putative owner) rents then that frees up a house to either be sold to an OO (lowering house prices) or to be rented (balancing the supply v demand for rentals).

Rents, surely, are set by the wages/benefits of renters v the supply of rental properties. Costs on the supply side (house prices, interest rates, etc) shouldn't change the rental market. In fact, it's more likely to be the other way round - high rents create high prices; just like other assets.

Let me have a go at that.

Firstly I think that the statement "high house prices cause high rents" doesn't hold up. However some of the root causes of high prices also cause high rents, for example tight supply of housing in some parts of the country where employment prospects are good. Under this line of argument high house prices and high rents may have some common causes. If you addressed those problems (in order to lower house prices) rents would also fall.

I think you have a point. Maybe "Forcing up rents which draws money out of the productive economy" should be "High rents draw money out of the productive economy".

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I see high house prices as a result of (1) constrained supply combined with the larger impact of (2) easy lending and low interest rates.

Addressing (1) would act to reduce both rents and prices. But (2) is, IMO, the real driver behind high house prices.

And it's (2) which causes the wider economic damage. Lending is only easy and cheap if it's for houses (unproductive economically) rather than for businesses (productive economically).

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Rents need to service a mortgage generally and profit for the landlord. High house prices = big mortgage and therefore higher rents.

That's certainly the Mark Alexander / 118 line. Costs drive prices. I'm not so sure. It's not the case in other markets and I don't see why the housing market is any different. There's certainly a substitution effect between renting and buying but I'm not convinced prices drive rents.

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Preaching to the choir is all very well but for any significant change you need to convert current homeowners / boomers

I am of the firm belief that mental house prices have a knock on effect on almost every aspect of what makes life good or bad ... so you need to ask yourself what boomers care about most.

Living here in central boomerland, streetlife is all about::

Traffic

Local doctors / NHS

Crime

Housing development (in the main new horrible estates)

Cost of gardeners / handymen etc

Antisocial teenagers (though to a boomer all teenagers are antisocial)

You also have the kids question. I.e. why haven't yours left home yet / why don't you have grandkids / you do have grandkids and are knackered looking after them.

Isolate the problems these people have and explain, in very simple terms, why HPI has caused those problems.

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I think there needs to be a "What you can do" section.

As an example. I once commented on facebook that putting limits on how much banks could lend would be a good solution to the problem. To which someone replied with something like "don't be ridiculous, how can I afford to buy if banks won't lend?". Building more is the unanimously excepted solution, apparently. Supply and demand, innit!

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Preaching to the choir is all very well but for any significant change you need to convert current homeowners / boomers

I think there's more mileage in highlighting the problem to the vast majority of the middle ground who have never stopped to properly think about it or join the dots. I doubt we'd ever change the mind of a BTL or "pension's my property, innit" type. But what about all the younger generation who simply dismiss the idea of ever owning a house because all they've ever known is ludicrously high prices, and have that view reinforced by parents convinced that prices can never fall because, well they don't, do they?

I'd prefer to reach out to people who aren't currently thinking than try to change opinions of the raving converts.

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The draft above is absolutely spot on IMO. Great stuff.

It's good, but if the audience is the layman I think it could be simplified, for example I think 1 is a bit long and point 2 could be split.

  1. Your next home costs more. House prices have raced ahead of salaries, so you will need to borrow more and work for longer to pay your mortgage. It will take you much longer to own your home.

  2. You pay more in rent. High house prices force up rents.

  3. You need to earn more. Whether you own or rent, high house prices mean you need to earn more, which makes it more expensive to employ people, raising the price of everything you buy.

Just an idea..and it could be tighter still

Edited by LiveinHope

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Rents need to service a mortgage generally and profit for the landlord. High house prices = big mortgage and therefore higher rents.

Fallacy.

I recollect noting this in Germany in the 1980s. House prices were higher than Blighty, but rents were much lower. That worked because interest rates were also much lower - though still of course higher than today in either country.

Edited by porca misèria

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Rents need to service a mortgage generally and profit for the landlord. High house prices = big mortgage and therefore higher rents.

Well for the last five or more years interest rates have been falling not rising.....but rents have been rising.

Yields have been falling only because capital growth has been rising.....and when capital growth stalls or falls......when costs and taxes rise...BTL will not be profitable for all.

All BTL will do then is force subletting, create overcrowding and slum areas and streets....people with no stake in the area where they live....so bringing down values further.

The rents people will pay has and always has done coincide with the wages they earn or the benefits they receive.... ;)

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Well for the last five or more years interest rates have been falling not rising.....but rents have been rising.

Yields have been falling only because capital growth has been rising.....and when capital growth stalls or falls......when costs and taxes rise...BTL will not be profitable for all.

All BTL will do then is force subletting, create overcrowding and slum areas and streets....people with no stake in the area where they live....so bringing down values further.

The rents people will pay has and always has done coincide with the wages they earn or the benefits they receive.... ;)

Is that entirely true? If every council in London could double its council stock tomorrow and/or move all pro single parents to empty houses in Glasgow etc. Would it not affect rents in London at all?

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Is that entirely true? If every council in London could double its council stock tomorrow and/or move all pro single parents to empty houses in Glasgow etc. Would it not affect rents in London at all?

No.

edit to say....people are moving away from London every day, both owners, renters and families who can no longer afford to buy or rent.....London's loss, another place's gain.... ;)

Edited by winkie

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It's good, but if the audience is the layman I think it could be simplified, for example I think 1 is a bit long and point 2 could be split.

  1. Your next home costs more. House prices have raced ahead of salaries, so you will need to borrow more and work for longer to pay your mortgage. It will take you much longer to own your home.

  2. You pay more in rent. High house prices force up rents.

  3. You need to earn more. Whether you own or rent, high house prices mean you need to earn more, which makes it more expensive to employ people, raising the price of everything you buy.

Just an idea..and it could be tighter still

100% agree.. it's got to be REALLY tight. every word must be important. Every point as concise and accurate as possible.

e.g. ( but could be better still )

3. Less money in your pocket. High rent or mortgage payments means less money for you and your family.

Edited by ManVsRecession

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https://en.wikipedia.org/wiki/Law_of_rent

The Law of rent was formulated by David Ricardo around 1809, and presented in its most developed form in his magnum opus, On the Principles of Political Economy and Taxation. This is the origin of the term Ricardian rent. Ricardo's formulation of the law was the first clear exposition of the source and magnitude of rent, and is among the most important and firmly established principles of economics.

John Stuart Mill called it the "pons asinorum" of economics.[1]

Ricardo noticed that the bargaining power of laborers can never dip below the produce obtainable on the best available rent-free land, because whenever rent leaves them with less than they could get on that free land, they can simply move to the new location. The produce obtainable on the best available rent-free land is known as the margin of production. Since landlords have a monopoly over a given location, the only limiting factor for rent is the margin of production. Thus, rent is a differential between the productive capacity of the land and the margin of production.

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100% agree.. it's got to be REALLY tight. every word must be important. Every point as concise and accurate as possible.

e.g. ( but could be better still )

3. Less money in your pocket. High rent or mortgage payments means less money for you and your family.

Completely agree. We are competing for people's attention and the less effort you demand from them the easier it is.

I wear two hats at work and when wearing one of them I craft things that go out to all of our 10K or so employees. Getting them even to read it is a victory, and if they understand it as well then halleluja. Less is definitely more - once their eyes glaze over you can forget it.

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  • 399 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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