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House Price Inflation... Your Thought's On Why It's "bad Thing"

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Researching another article, this time it's on the myths of house price inflation.

I'm interested in hearing everyones views on why HPI (unsustainable or not) is a bad thing (or a good thing if you think that way). All views welcome... if you don't want to express them publically please PM me!

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This sums it up nicely for me

The value of property is one of the first commodities to rise in value when the supply of money increases rapidly. In the short-term this makes property owners believe they have suddenly struck it rich, but in reality it is the decline in the value of their money. It also places an increased financial burden upon the population, who end up paying an increased percentage of their income on housing, unless their incomes also rise.

http://www.rense.com/general69/econm.htm

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Why is it bad? Cos people have to borrow more money to buy houses. This eventually leads to this money being taken out of the economy when people have to tighten their purses/wallets.

Therefore, the highstreet suffer, and if the consumer 'mew' then they will eventually suffer via repossesion if they can't keep up repayments.

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The notion that high property prices are 'a good thing' is risible.

If the price of motor cars, home goods, or the weekly food shopping had doubled in the last 5 years there would have been a Revolution. So why is it OK for houses to be beyond the reach of a whole raft of society?

High prices simply make the cost of living more expensive for most. Unproductive bricks and mortar, like blotting paper, are sucking the country dry of money that could so much better be used for investment in productive enterprises. It is all so futile.

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Because it makes us believe there is a supply problem. <_<

Wood laminate floor anyone? <_<

£30,000 for a soulless house makeover? Anyone? <_<

Edited by megaflop

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One more thing to throw in the the mix;

Obviously for speculator's it is a very good thing (they can sell up whenever and don't have to replace it)

For FTB's and those on the way up the ladder it's a bad thing (despite what most of them think).

However are there any economic arguments why HPI isn't a good thing for those on their way down the ladder or hopping off it completely? Also is the balance of gain for these guys in equilibrium with the losses of those on the way up it?

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However are there any economic arguments why HPI isn't a good thing for those on their way down the ladder or hopping off it completely? Also is the balance of gain for these guys in equilibrium with the losses of those on the way up it?

Because HPI is inextricably linked with the ' boom and bust' economic cycle GB swore blind he would stop. And the trillions sucked into housing chasing these false profits could have been used in business investment rather than the illusory and transient profits housing offers.

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I don't think HPI is a bad thing.

But I think that's because I'm very patient.

HPI is a syptom of society, if you are aware of it then it is powerless to hurt you.

If you are oblivious to HPI and it's effects then it can be bad for you, but that is down to your own ignorance.

There are two main types of HPCer's on this site, there are those who are frustrated at their inability to buy and direct that frustration at varies groups such as EA's and various BBC shows, and the second type who usually seem to be a little older (IMO) can recognise that a downturn is inevitable and all the moaning and shouting can only bring the event forward by a day or two.

The downturn does not really need a trigger as one is inevitable, it's the self regulation of the system, the free market, the decentralised emergency of asset integrity and affordability. There is no greater power at play here, this boom is a sympton of human nature and group reasoning. That same human nature includes fear and paranoia the two tools that will be fundamental to the downturn.

The market sways to and fro, up and down on one basis, that basis is sentiment. If you can understand mass public sentiment then yours is the world, and things like HPI are powerless against you because you do not need to participate in group reasoning to make decisions.

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Guest pioneer31

The notion that high property prices are 'a good thing' is risible.

If the price of motor cars, home goods, or the weekly food shopping had doubled in the last 5 years there would have been a Revolution. So why is it OK for houses to be beyond the reach of a whole raft of society?

High prices simply make the cost of living more expensive for most. Unproductive bricks and mortar, like blotting paper, are sucking the country dry of money that could so much better be used for investment in productive enterprises. It is all so futile.

When motor cars, home goods, weekly shop rise, it is SOMEBODY ELSE making the profit.

Homeowners rejoice when property rises because THEY are the ones feeling rich.

It's ok to for blaant profiteering as long as it's you making it.

Its pure and simple greed. In this day and age more and more people EXPECT to sit on their **** and make money for nothing.

Edited by pioneer31

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Simple.

High house price inflation is a bad thing because accomodation is a *necessity*

When prices of things we cannot choose whether to buy or not increase faster than wage inflation, we get poorer.

(of cause you can argue that we can choose to rent, that's okay, but I'd argue that without tenancy refom renting is undesirable in the long term).

Even the VIs should be able to acknowledge this. I bought some oil shares a while ago and my profit on those has far outweighed the increase in my yearly petrol bill, however I wouldn't argue that high petrol prices are a good thing for this country.

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HPI is a good thing when it rises roughly in line with inflation - thus the investment in your property should rise in line with the value of wages and other costs in society. Hence there wouldn't be any need for a HPC if prices had matched earnings rises for the last 10 years.

HPI is a bad thing when it is significantly in excess of inflation for a sustained period - when this occurs the value links between earnings and House Prices get blown out of all proportion and crease to make economic sense. Similarly the higher valuation of the asset allows for further unsecured borrowing to occur.

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Because it's a massive disincentive for those who don't own - the next generation. Price a whole generation out of the market and they will be less economically active, because there is less incentive.

I'd bet there's a direct link between our low productivity levels as a country and HPI. It is simply demoralising; why get off your a**e when all you can do is rent a slightly bigger/better hovel from some condescending f*ckwit jumped up slumlord?

I don't disagree with ?...! in general terms but the damage this is doing to the long-term health of our society and our economy is desperately worrying. Years ago I worked for an organisation that had suffered badly from government policy - part of BAe, where there had literally been no work for 2-3 years while they waited around for govt decisions (back in the 70s). Result was that all the people with get up and go had left, and although the organisation was still there with all the facilities etc it's heart and soul had been ripped out. The contract came through, it staggered on through the 80s and 90s, then BAe shut the site down completely. Where there used to be 7000 skilled manufaturing employees there's a huge warehousing facility for Chinese-made goods, a housing estate and part of the local university.

What worries me is that HPI will, over time, turn out to have done the same thing to the whole of the UK.

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Houses are actually quite simple things in the main.

Simpler than motor cars.

Motor cars have got cheaper in spite of the more complex systems in them.

So houses get more expensive?

People are fools and are not seeing the root of the problem.

Nonsensical planning regulations and some quaint belief that high density housing will save the Planet.

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Researching another article, this time it's on the myths of house price inflation.

I'm interested in hearing everyones views on why HPI (unsustainable or not) is a bad thing (or a good thing if you think that way). All views welcome... if you don't want to express them publically please PM me!

HPI is a bad thing unless it mirrors general inflation.

The steady market of 1994-1999 was IMO a good thing. Money could still be made by renovation modernisation and repair and realistic pricing.

I was able to FTB, upsize and downsize and payoff mortgage in 6 years. No crazy price inflation just a steady market and fair pricing. All we need now is a general 50% reduction on every property and we would be at the correct level.

I would be more than happy with that.

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If HPI could be infinite would it be a bad thing?

If coupled with infinite loosening of credit then it could continue forever and ever.

Then it wouldn't matter that you paid £5million for a 2 bed terrace, as it would be worth £10million later on.

You always get your money back!

But as there is a limit to credit liquidity (inflation adds liquidity but cannot be infinite otherwise people lose trust in the monetary system) this cannot continue infinitely.

So ultimately HPI will dissapear up its own **** to become HPD.

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Because it's a massive disincentive for those who don't own - the next generation. Price a whole generation out of the market and they will be less economically active, because there is less incentive.

I'd bet there's a direct link between our low productivity levels as a country and HPI. It is simply demoralising; why get off your a**e when all you can do is rent a slightly bigger/better hovel from some condescending f*ckwit jumped up slumlord?

I don't disagree with ?...! in general terms but the damage this is doing to the long-term health of our society and our economy is desperately worrying. Years ago I worked for an organisation that had suffered badly from government policy - part of BAe, where there had literally been no work for 2-3 years while they waited around for govt decisions (back in the 70s). Result was that all the people with get up and go had left, and although the organisation was still there with all the facilities etc it's heart and soul had been ripped out. The contract came through, it staggered on through the 80s and 90s, then BAe shut the site down completely. Where there used to be 7000 skilled manufaturing employees there's a huge warehousing facility for Chinese-made goods, a housing estate and part of the local university.

What worries me is that HPI will, over time, turn out to have done the same thing to the whole of the UK.

I agree absolutely - it decreases economic, social and birth rate productivity in exactly those demographic sections of society that we need to be most economically and socially productive. Decreases labour market flexibility for those tied to jobs that they can't move from because they have to service high mortages. Decreases the birthrate, as women can't afford to give up work to have or to look after children. Locks out people from housebuying at a crucial demographic moment when we need more, not fewer, young adults to form households and start families. It's incredibly demoralising for those under 35 (I speak with experience) to realise that whatever they do, however hard they work, however good their job, they don't have a snowflake's chance in hell of buying their own house. This decreases community spirit and even increases crime - not only because young people are demoralised, but because it reduces the number of young people settling down and "buying in" to their local communities; so you end up with areas that have transient tenant populations, who have no investment in their area, their schools, their councils or local government, or their neighbours (for example, why are local govt people getting increasingly older and older? Because young people don't become active in local government if they aren't owner-occupiers. Same goes for school PTAs, neighbourhood watch schemes, etc.). It decreases social cohesion, because fewer young people have the same level of investment in their local community as the older members.

It also stores up a heap of economic and social problems for later. What happens after a HPC to all those people, many nearing retirement, who decided that their house/BTL would be their pension? They could end up far worse off than if they'd left their money in a pension scheme. Plus, as the number of young people goes down, and the number of landlord boomers reach retirement age, there will inevitably come a HPC as boomers are forced to sell properties to fund their retirement care. The greater HPI now, and even if a crash doesn't happen in the next few years, the greater the crash in 15, 20 years' time when boomers realise they are *all* selling their assets at the same time to pay for spiralling health and care costs....HPI will end up biting in the ass the very people who it's great for now. And we'll end up with enormous social and health-care problems for the retired/retiring generation. Only the other day I saw an ad for a TV programme on how the NHS is forcing pensioners to sell their homes to pay for healthcare, as if this was a shocking, dreadful and unforeseen thing. Well, in 20 years' time there won't be any option, and it will be HPI that brought it about....

Will today's young person, unable to buy a house because they're priced out of the market by speculators and older investors, be sympathetic in 15 years' time when those people have to sell their properties to pay for their care....? I wonder.... What I mean is: the welfare state and all of our society works on the principle that some sections of society recognise that they are responsible for other sections - ie. the workers subsidise the pensioners, the richer subsidise the poorer, and as a society we're collectively responsible for maintaining ourselves *as* as society. But if you allow social cohesion to decrease - for example by stopping young people economically and psychologically "buying in" to the social system, then you might find, unfortunately, that those same young people in twenty years' time don't feel they are responsible, or indeed give a damn, if you're forced to sell your home to pay for the rocketing costs of your healthcare - because they have never felt invested in that system to start with.

You can already see this working in politics - voter apathy amongst younger demographics. If you don't make it an incentive for people to psychologically buy in to a particular system, you haven't got much chance of convincing them to support it at a much later date.

Edited by Zaranna

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I agree absolutely - it decreases economic, social and birth rate productivity in exactly those demographic sections of society that we need to be most economically and socially productive. Decreases labour market flexibility for those tied to jobs that they can't move from because they have to service high mortages. Decreases the birthrate, as women can't afford to give up work to have or to look after children. Locks out people from housebuying at a crucial demographic moment when we need more, not fewer, young adults to form households and start families. It's incredibly demoralising for those under 35 (I speak with experience) to realise that whatever they do, however hard they work, however good their job, they don't have a snowflake's chance in hell of buying their own house. This decreases community spirit and even increases crime - not only because young people are demoralised, but because it reduces the number of young people settling down and "buying in" to their local communities; so you end up with areas that have transient tenant populations, who have no investment in their area, their schools, their councils or local government, or their neighbours (for example, why are local govt people getting increasingly older and older? Because young people don't become active in local government if they aren't owner-occupiers. Same goes for school PTAs, neighbourhood watch schemes, etc.). It decreases social cohesion, because fewer young people have the same level of investment in their local community as the older members.

It also stores up a heap of economic and social problems for later. What happens after a HPC to all those people, many nearing retirement, who decided that their house/BTL would be their pension? They could end up far worse off than if they'd left their money in a pension scheme. Plus, as the number of young people goes down, and the number of landlord boomers reach retirement age, there will inevitably come a HPC as boomers are forced to sell properties to fund their retirement care. The greater HPI now, and even if a crash doesn't happen in the next few years, the greater the crash in 15, 20 years' time when boomers realise they are *all* selling their assets at the same time to pay for spiralling health and care costs....HPI will end up biting in the ass the very people who it's great for now. And we'll end up with enormous social and health-care problems for the retired/retiring generation. Only the other day I saw an ad for a TV programme on how the NHS is forcing pensioners to sell their homes to pay for healthcare, as if this was a shocking, dreadful and unforeseen thing. Well, in 20 years' time there won't be any option, and it will be HPI that brought it about....

Will today's young person, unable to buy a house because they're priced out of the market by speculators and older investors, be sympathetic in 15 years' time when those people have to sell their properties to pay for their care....? I wonder.... What I mean is: the welfare state and all of our society works on the principle that some sections of society recognise that they are responsible for other sections - ie. the workers subsidise the pensioners, the richer subsidise the poorer, and as a society we're collectively responsible for maintaining ourselves *as* as society. But if you allow social cohesion to decrease - for example by stopping young people economically and psychologically "buying in" to the social system, then you might find, unfortunately, that those same young people in twenty years' time don't feel they are responsible, or indeed give a damn, if you're forced to sell your home to pay for the rocketing costs of your healthcare - because they have never felt invested in that system to start with.

You can already see this working in politics - voter apathy amongst younger demographics. If you don't make it an incentive for people to psychologically buy in to a particular system, you haven't got much chance of convincing them to support it at a much later date.

Agreed.

When this game of musical chairs is over, the UK will not be a better place than it was before.

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my reasons:

a) the economy is now FUBAR, I mean really we are so screwed economically its not even funny.

b ) hundreds of thousands will go bankrupt.

c) people have commited suicide already through overstreatching themselves

d) it was so unnessecary and is totaly a product of the CPI targeting regime NuLabor bought in.

e) there is no such thing as good inflation prices are prices. you can only hope they are fair.

f) if we had just gone through the 2000 recesion with out the merry dance of reflation we would be over this crap by now. we could have got over it and start rebuilding.

g) speculative bubbles are inherently bad they prey on the week and the stupid. the number of numbnuts I speak to who lost thousands and thousands on the Dot.Bomb bubble is ridiculous.

h) it has resulted in a serious malinvestment in nearly all anglophone economies. capital that could have been spent on production has instead been used for investment in consumption.

I) my personal relationship with my family has suffered as they have encouraged me to buy a house and I won't, and have joined the BTL bandwagon despite my well intentioned protests.

J)this boom has led to the lining of the pockets of vast numbers of estate agents and bank shareholders. and generally companies which are not owned by the UK public.

K) this boom has led me to the conclusion that vast swathes of the public are but sheep to the manipulations and propaganda machine of the VI's

L) I don't even want a house. I just want to have a chance to buy one at a fair price.

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i think it's bad in the current state. few weeks ago on bbc was an interview with new "graduate" teacher. it was presented as a good thing that she "graduated" at her place of work without leaving the job of a class assistant. she couldn't stop working because – in her own words - she needs to pay a mortgage :o . but i would prefer that someone with the former education would teach my children. :angry:

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This sums it up nicely for me

The value of property is one of the first commodities to rise in value when the supply of money increases rapidly. In the short-term this makes property owners believe they have suddenly struck it rich, but in reality it is the decline in the value of their money. It also places an increased financial burden upon the population, who end up paying an increased percentage of their income on housing, unless their incomes also rise.

http://www.rense.com/general69/econm.htm

Yet all this could be avoided if they had not rejected the Law of God. It is only by returning to following God's Law and the teachings of Jesus Christ that this looming disaster can be avoided.

Good neutral article :blink::blink::blink:

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Thanks everyone who replied to this post so far. Some great stuff there.

Anyone got any other good reasons on why HP boom's aren't a good thing that haven't been brought up so far?

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Thanks everyone who replied to this post so far. Some great stuff there.

Anyone got any other good reasons on why HP boom's aren't a good thing that haven't been brought up so far?

HPI is only a bad thing if you buy a house you can't afford. There are certain positive aspects of house price inflation, particularly if it is driven by a BTL frenzy.

a. It will encourage new building.

b. There will be pressure for new purchasers to monetise their assets, by renting them out.

c. Given points a. and b. there will be increased supply of rented accomodation.

d. Given point c. rents will go up very slowly, and they might even stagnate or fall.

So anyone who doesn't want to play the 'buying property' game, and is happy to rent, should actually be able to benefit from HPI.

If house prices keep on rising, and the BTLers keep marching, then the situation is even better. As more and more property gets owned by fewer and fewer people, we'll become more like countries on the continent, where renting is the norm. The BTLers will make their money (the yield will be small) and those who don't own property will have somewhere to rent. And because they're renters they'll have greater flexibility - they can pack up and leave if they need to pursue an employment opportunity elsewhere. Meanwhile, as prices increase, more and more new developments will go up. Cheap rental accomodation! Of course this is why high house prices are, in my opinion, unsustainable.

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Yeah to be fair I should have entitled this thread why house price _booms_ (i.e. sudden surges inflation unrelated to the underlying market mechanics) are a bad thing.

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  • 302 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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