Jump to content
House Price Crash Forum
Biriani

Nickell On How To Reduce House Prices

Recommended Posts

Just been to a meeting where Stephen Nickell from the BoE was speaking, and in the questions afterwards, someone asked why monetary policy had been unable to control asset prices.

His response was, and I paraphrase:

"Just put me in charge of the planning system, and I'll bring everyone's house price down"

"including your own?" someone asked.

"Yes, even my own."

All very amusing, but it's actually quite revealing about some opinions on the MPC. They're doing their bit with monetary policy to keep inflation on target, and if the inadequacies of our planning system contribute to a speculative housing boom, they're not going to try to fight it with the second-best policy of interest rates that would have all kinds of undesirable side-effects.

I must admit, having read some of the stuff from the policy institute about the impact of planning regimes on house prices in different countries, I'm coming to the view (echoed in the earlier thread about the CPRE) that this is one of the major contributing factors to the boom.

Share this post


Link to post
Share on other sites

Just been to a meeting where Stephen Nickell from the BoE was speaking, and in the questions afterwards, someone asked why monetary policy had been unable to control asset prices.

His response was, and I paraphrase:

"Just put me in charge of the planning system, and I'll bring everyone's house price down"

"including your own?" someone asked.

"Yes, even my own."

All very amusing, but it's actually quite revealing about some opinions on the MPC. They're doing their bit with monetary policy to keep inflation on target, and if the inadequacies of our planning system contribute to a speculative housing boom, they're not going to try to fight it with the second-best policy of interest rates that would have all kinds of undesirable side-effects.

I must admit, having read some of the stuff from the policy institute about the impact of planning regimes on house prices in different countries, I'm coming to the view (echoed in the earlier thread about the CPRE) that this is one of the major contributing factors to the boom.

You can't move round my way for new flats and houses being built. I'm serious. You can't travel 1 mile in the locale without coming across a building development.

Share this post


Link to post
Share on other sites

Since this chap always votes for rate cuts I had him down as a individual who wanted high house prices.

:blink:

By the way does Brown own property?

Edited by delite1

Share this post


Link to post
Share on other sites

I must admit, having read some of the stuff from the policy institute about the impact of planning regimes on house prices in different countries, I'm coming to the view (echoed in the earlier thread about the CPRE) that this is one of the major contributing factors to the boom. [biriani]

Ireland demonstrates that even a dramatic expansion in new house builds does not constrain a housing bubble caused by cheap money...

'Ireland has highest European per capita house building rate':

http://www.finfacts.com/irelandbusinessnew...e_1000716.shtml

The strength and extent of the property boom can be seen in the fact that over a third of the current housing stock has been built in the past decade. Annual completions are 3.5 times what they were a decade ago, and the country has the highest per capita building rate in Europe.

Share this post


Link to post
Share on other sites

I think that cheap money and a bubble mentality have been the main things driving the property boom. But clearly building a skip load of houses wouldn't help drive prices higher.

Share this post


Link to post
Share on other sites

How to reduce house prices.

1. Chose the area you wish to move to.

2. Setup a limited company with a title like International Energy LTD

3. Put in a planning application for a Nuclear Reactor on the Village Green.

Wait a couple of weeks, then send out a mailshot to the residents, you would be amazed how cheap those houses would be.

Share this post


Link to post
Share on other sites

Ireland demonstrates that even a dramatic expansion in new house builds does not constrain a housing bubble caused by cheap money...

'Ireland has highest European per capita house building rate':

http://www.finfacts.com/irelandbusinessnew...e_1000716.shtml

I'm not sure it is directly comparable. For one thing, the IR is far lower in Ireland. For another, the demographics are completely different - they have a young population who have been coming of age over the boom period. There has been a lot more genuine demand there.

Share this post


Link to post
Share on other sites

His response was, and I paraphrase:

"Just put me in charge of the planning system, and I'll bring everyone's house price down"

"including your own?" someone asked.

"Yes, even my own."

All

Why the surprise? For most owner occupiers the 'price' of ones home is only relevant if one has a mortgage close to it's supposed value and that is not the case for the vast majority of home owners ! Wasn't the average mortgage around £38K last year? Though it may have increased since I last looked. Whatever, if prices halved most of us wouldn't give a toss because the next house we buy will also have halved! However it would be bloody good news for our kids (unless they were mortgaged to the hilt of course).

Share this post


Link to post
Share on other sites
Whatever, if prices halved most of us wouldn't give a toss because the next house we buy will also have halved! However it would be bloody good news for our kids (unless they were mortgaged to the hilt of course).

Spot on.

Perfect illustration of the pointlessness of high property prices; there are few gainers. Just imagine if house prices had stayed sane. Low IRs would have made the cost of ownership less expensive and the benefit to society would be greater disposable income, some of which might have found its way into investment in sensible things like industries which employ people, export goods and services, make profits and pay taxes.

That money instead has been soaked up, like blotting paper, by unproductive bricks and mortar.

Share this post


Link to post
Share on other sites

Why the surprise? For most owner occupiers the 'price' of ones home is only relevant if one has a mortgage close to it's supposed value and that is not the case for the vast majority of home owners ! Wasn't the average mortgage around £38K last year? Though it may have increased since I last looked. Whatever, if prices halved most of us wouldn't give a toss because the next house we buy will also have halved! However it would be bloody good news for our kids (unless they were mortgaged to the hilt of course).

The logic is impeccable, but the fact is most people would be outraged at the thought of the value of their home dropping.

Hopefully www.pricedout.org.uk can start to address the fallacy of high house prices being a good thing. The public need the facts!

Share this post


Link to post
Share on other sites

Why the surprise? For most owner occupiers the 'price' of ones home is only relevant if one has a mortgage close to it's supposed value and that is not the case for the vast majority of home owners ! Wasn't the average mortgage around £38K last year? Though it may have increased since I last looked. Whatever, if prices halved most of us wouldn't give a toss because the next house we buy will also have halved! However it would be bloody good news for our kids (unless they were mortgaged to the hilt of course).

This is the 'double whammy' faced by many people who have MEW'd or taken out loans to help get their children or other family members (i.e. divorced spouse) onto the property ladder.

Both of them are suddenly vulnerable to interest rates changes and both of them will be owing more as compared to the house value. This means both are more affected to a slide or crash.

According to statitistics (ahem) nearly 4j0% of all FTB's have required financial assistance to get onto the ladder... i.e. they are needing money that might otherwise have gone to their family members mortgage/pension/savings etc. because prices are so high they can't realistically get a deposit together themselves...

Not sustainable... it exposes more people to the market...

I think the figure you quote is primarily made up of those of pensionable age who own their homes outright displacing the average. I'd like to see the figures banded by age i.e. 21-30, 31-40, 41-50, 51-60, 61+ etc. - does anyone have this available or know a URL?

- Pye

Share this post


Link to post
Share on other sites

I think the figure you quote is primarily made up of those of pensionable age who own their homes outright displacing the average. I'd like to see the figures banded by age i.e. 21-30, 31-40, 41-50, 51-60, 61+ etc. - does anyone have this available or know a URL?

- Pye

Yes, I think around half the homes in the UK are mortgage free? Anyway, there are 11.5 Million mortgages outstanding and probably, What? About 23 million homes? Seems about right!

As for breakdown by age I'd imagine that somewhere on the CML site there will be something http://www.cml.org.uk/cml/home

Share this post


Link to post
Share on other sites

That money instead has been soaked up, like blotting paper, by unproductive bricks and mortar.

The longer this goes on, the more of a long-term drag this is going to be on the whole economy.

Every silly bugger who takes out a silly mortgage now at silly prices is going to be a slave to that mortgage and cut back on other household and luxury spending that keeps other people in jobs.

Assuming that these people even finish these mortgages and don't get repoed first, that's 25 years of these people spending less on other things than they would have done otherwise, just for the sake of "getting on the ladder".

This is a price that is too damned high for the whole economy, and we need to sort this out for the long-term. But with muppets like Gordon Brown, in charge, we're only ever geared to politicians' short-medium term aspirations.

Share this post


Link to post
Share on other sites

The logic is impeccable, but the fact is most people would be outraged at the thought of the value of their home dropping.

Hopefully www.pricedout.org.uk can start to address the fallacy of high house prices being a good thing. The public need the facts!

The logic isn't impeccable at all.

I imagine a *lot* of people intend to do a major downsize or rent to supplement their pension.

Falling nominal price of their chief asset is then not very welcome,

understandably, and however much fairer it then is for everyone

else.

Pent

Share this post


Link to post
Share on other sites

How to reduce house prices.

1. Chose the area you wish to move to.

2. Setup a limited company with a title like International Energy LTD

3. Put in a planning application for a Nuclear Reactor on the Village Green.

Wait a couple of weeks, then send out a mailshot to the residents, you would be amazed how cheap those houses would be.

:lol::lol::lol::lol:

Share this post


Link to post
Share on other sites

3. Put in a planning application for a Nuclear Reactor on the Village Green.

:lol: Another good one is to pretend you're opening a prison or a loony bin. People hate those in their backyards.

Maybe the threat of a large quarry would also help !

Share this post


Link to post
Share on other sites

You can't move round my way for new flats and houses being built. I'm serious. You can't travel 1 mile in the locale without coming across a building development.

Indeed, they're over 50% of new building starts, the fact that practically nobody wants to live in such properties, in such locations, at such prices is lost on the builders, planners and nimbies alike. Very few want to spend £200k to live in their socially engineered rabbit hutches, they are the slums of tomorrow, no amount of supply-side Keynesianism will change that.

Basically groups like the CPRE have gone too far for their own good and have dictated the agenda for too long, people are only now starting to wake up to the consequence of this.

Why a Labour government allows its planning policies to be dictated by Sir Max Hastings is beyond me.

Share this post


Link to post
Share on other sites

The logic isn't impeccable at all.

I imagine a *lot* of people intend to do a major downsize or rent to supplement their pension.

Falling nominal price of their chief asset is then not very welcome,

understandably, and however much fairer it then is for everyone

else.

Pent

My point is that the people you describe are a minority of homeowners. For most it makes sense for houses to be cheaper.

Share this post


Link to post
Share on other sites
I imagine a *lot* of people intend to do a major downsize or rent to supplement their pension.

And if 'a *lot*' of people try to do that, guess what happens? A crash in the price of the houses they're selling, and a boom in the price of the retirement flats they're buying.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.