Politics Of House Prices

[Smurf1976]

Where I am (Tasmania, Australia) we're having an election this Saturday.

Labor is presently in government with the Liberal party being the traditional opposition although the Greens are also a very major force in politics here.

Unlike what I understand is the situation in the UK, Labor in Tasmania has been pushing productive industry, repaying debt and so on. In contrast the Liberals are openly proposing (hate to think what the real plan is - they sold off vital hospital equipment last time) creative accounting with the debts (they sent us virtually broke twice in the past 20 years), cutting investment in public assets etc. The Greens are against basically everything except tourism. No surprise then that I'm voting Labor this time. The other two are basically about the bubble economy rather than anything productive. And Labor's actually done pretty well paying down debt over the past few years.

But one thing has me a bit worried. In significant danger of losing (in which case a minority government would be the likely outcome since neither of the others seem likely to gain an outright majority), Labor has resorted to warning that if the Greens get elected then house prices would fall due to the decline in the economy. I don't doubt the validitiy of the statement since the Greens (the only realistic partner in a minority government) absolutely oppose anything which creates wealth (preferring only service industries such as retail and tourism, even then with some restrictions, but they've promised heaps of new public spending...). But I think it says a lot about where the votes are. They're clearly with keeping house prices high rather than allowing a fall. The local Labor party can't be the only ones to have thought of this (indeed the Greens promptly responded with a promise to keep house prices rising).

Since interest rates etc are outside the control of an Australian state government, the ability to influence house prices basically relates to the overall state of the economy (Labor's point given the track record of rising debts and falling population with the others) whilst the Greens are presumably planning on land use restrictions etc. or just making empty promises given their position on productive industry.

I think this could be a warning sign about what politicians the world over are thinking. There's more votes in house prices rising than falling. No doubt they've all known it for years but this is the first time I've seen it used so blatantly. I think we'll see more of this elsewhere. Whether or not it has any effect is another matter. If anything, the threat that prices might fall may in hindsight be significant no matter who is elected (trigger?).

Needless to say the real estate industry is claiming that the market wouldn't fall under the Greens as much as Labor claims though they do strongly hint that it would fall "but not as much as last time". That's a pretty bold admission from the industry, that prices could fall. Hmm...

[mustrum_ridcully]

In the UK neither the NuLab or the Tories will be willing to allow house prices to crash - in fact I believe they will actively promote HPI.

NuLab needs no explanation, but the Tories (who IMHO helped cause the problems in first place through right to buy in the 80's) have not only teamed up with Krusty but also plan to have more goverment appointed "independent" advisors on the BoE MPC.

The LibDems, they might do something as they at least seem to acknowledge the problem of 1.5million people without homes and there being 700,000 empty houses in the UK.

In the end 70% of the adult population apparently own their own homes - a large proportion of whom would be very upset to hear that their £250k home is now worth £125k.

Edited March 16, 2006 by mustrum_ridcully

[no accountant]

Yep, I think we're screwed ('we' being non-land owners). The majority will naturally protect their interests and there's nothing we can do about it since we live in a democracy.

Gradually our ranks will swell, but it will take another 50 years or so for us to become a majority and change the planning and tax laws in our favour. "Return the land to the people!" - will be the cry. (this has happened many times in history)

[Smell the Fear]

In the end 70% of the adult population apparently own their own homes - a large proportion of whom would be very upset to hear that their £250k home is now worth £125k.

The belief that high house prices are good for them is a fallacy of which they need to be made aware. The fact is that high prices are BAD for the majority of this 70%.

If they knew the facts and heard the argument against high prices, surely they would change their mind?

[mustrum_ridcully]

The belief that high house prices are good for them is a fallacy of which they need to be made aware. The fact is that high prices are BAD for the majority of this 70%.

If they knew the facts and heard the argument against high prices, surely they would change their mind?

Agree totally, but I just can't see any politicians being brave enough to tell them that - most politicians are too concerned about being populist rather that doing the right thing.

[john_d_uk]

Agree totally, but I just can't see any politicians being brave enough to tell them that - most politicians are too concerned about being populist rather that doing the right thing.

As has been said on here many times, the high house price only benefits those who sell and do not buy another property in the UK at the moment.

But who else does high house prices benefit?

1. The government through Stamp duty paid by more properties in high stamp duty bands.

2. The government through high levels of inheritance tax (more personal estates fall under the criteria)

3. The government through reduced subsidy for care home / nursing home places - paid for by the old people's property values, whilst those with nothing have their places paid for.

4. The government through council tax band increases.

5. The government through insurance premium tax - pay more on higher value properties.

6. The government through VAT of EA fees (more on expensive houses)

I am sure I have missed some, but when you see this list, no wonder the government wants high house prices!

JD

Edited March 16, 2006 by john_d_uk

[john_d_uk]

As has been said on here many times, the high house price only benefits those who sell and do not buy another property in the UK at the moment.

But who else does high house prices benefit?

1. The government through Stamp duty paid by more properties in high stamp duty bands.

2. The government through high levels of inheritance tax (more personal estates fall under the criteria)

3. The government through reduced subsidy for care home / nursing home places - paid for by the old people's property values, whilst those with nothing have their places paid for.

4. The government through council tax band increases.

5. The government through insurance premium tax - pay more on higher value properties.

6. The government through VAT of EA fees (more on expensive houses)

I am sure I have missed some, but when you see this list, no wonder the government wants high house prices!

JD

The government through people remortgaging, MEWing and spending the money in retail - extra tax receipts, extra income tax from employees etc.

The problem is that this has created a completely false economy, based on accumulating debt, both governmental and personal.

This will end in tears, and is not as far away as some think. The clown's bottom lip is quivering; it won't be long until he cries.

JD