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Why High House Prices Are A Bad Thing

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Why High House Prices are a bad thing.

Unless you’ve been living in a cave in Afghanistan for the last ten years, you probably subscribe to the belief that high house prices are a good thing. Even Firt Time Buyers could be persuaded of this idea, if they’d acted earlier. How has this belief become so entrenched in UK mindset that now virtually everyone believes that an inflated housing market is a good thing, and who is really benefiting from the situation?

There are two main reasons behind the current state of affairs, the first is greed, that widespread human trait, the second is the media. The latter galvanises the populace so that the former takes on a life of its own, leading to a loss of focus and increasingly disconnected society, focussing on greed above all else.

As people have been told through the media that housing is a sure fire way of making millions of pounds (with real life examples to back this up), everyone has piled on the speculative bandwagon to make their million in property. This enormous pyramid scheme has been duly encouraged by all who stand to gain by its continuation; Estate Agents who are paid in commission of the value of your property; mortgage advisors who are paid a fee on taking out a mortgage; banks and building societies, who are relying on the large sums of money they lend you for their income. All of these players have a vested interest in the rising of house prices, and continued activity in the housing market, because it directly affects their income. Why would any of these people talk down, or undervalue property, or advise a customer against taking out a mortgage? They would literally be talking themselves out of a job.

So who can you listen to? Who can you trust? Well, it seems no-one in a position of power is likely to tell the truth. After Jim Cramers hilarious but quite disturbing outburst on CNBC’s mad money show, following the collapse of the Bear Stearns hedge fund, it seems that for a brief moment the truth slipped out. This doesn’t happen very often. He effectively said that the guys in positions of power shouldn’t say how bad things are as this causes panic, and that they should continue regardless pretentding everything is fine. Northern Rock customers may relate to this type of behaviour, when they had to be bailed out by the Bank of England. The premise being, if we pretend everything is OK, then everything will be OK. Mmmmmm.

Anyway I digress. Back to the point. Why are rising house prices a good thing? Well, because they make paper millionaires out of many people. As people gradually see and hear stories about house price rises making millionaires out of people who are doing nothing more than owning a house, they all pile into the market to get some of the good stuff for themselves. This is pure greed, and the reasons behind speculative bubbles. As people believe that someone else will pay more for their house than they did when they sell their house, they will pay well over the odds, thereby inflating the market. It’s all well and good sitting in a £3m house in Notting Hill, but what happens when no-one want to pay £3m for your house, or even £2.0m? What’s it worth, then? Well, the same as it was always worth; what someone is prepared to pay for it. When greed is taken out of the equation, reality bites. We must always ask the question, is it worth it? Most of the time the answer is NO.

The second point which has allowed this boom has been the borrowers’ irresponsible practice. Rather than stick to strict guidelines about lending practices, they have lent money to any and everybody who wants it. We hear time and again that supply and demand are the chief reasons behind the price growth. This is nonsense. This only has a minor effect where we see ‘gazumping’ happening. The reason is actually the ‘affordability’, or the buyers’ access to cheap money to fund the purchase in the first place. If you can only borrow £50k, you will buy a £50k house. If you have access to £500k, you will buy a £500k house. The VI, and the person who’s house you’re buying would all prefer it if you paid £500k, rather than £50k. If the banks, building societies, mortgage advisors, and estate agents (all vested interests) behaved responsibly rather than jacking up prices and lending ever increasing amounts of money, we would not where we are today.

Why would I want to spend such a large portion of my income on the roof over my head? And who is benefiting? Lower house prices would benefit everyone in the long run, apart from perhaps the landowners who will stand to gain from speculation in their most valuable asset, and the rents that they can extract from it will be significantly increased. So this benefits those who have property and land (those who are already rich grow richer).

I would like to pay less money for rent or towards mortgage repayments; this allows me a larger portion of disposable income to enjoy my life. Although I suspect that I am in a minority. People seem to be keen on paying more and more to have a roof over their head. If we all decided to pay less for our houses (as we will soon start to do, when people realise the bottom has fallen out of the market), then prices go down. Greed and fear are what motivate the herd mentality.

It has been stated in the past that very few types of people benefit from house prices being high:

1. People who are downsizing to a smaller house

2. People who are selling to rent

3. People who are investing in property (BTL)

4. Landowners who extract rent from tenants

Everybody else who buys property is getting involved in the massive pyramid scheme called the ‘UK housing market’, which relies on the bigger fool to keep the momentum going. When new people stop joining the scheme (either due to affordability, or when they realise that it is actually a giant scam, and they won’t get their money back) the whole thing collapses like the house of cards that it is.

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Why High House Prices are a bad thing.

Unless you’ve been living in a cave in Afghanistan for the last ten years,

Have you seen how high HPI is in Afghanistan?

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Why High House Prices are a bad thing.

Unless you’ve been living in a cave in Afghanistan for the last ten years, you probably subscribe to the belief that high house prices are a good thing. Even Firt Time Buyers could be persuaded of this idea, if they’d acted earlier. How has this belief become so entrenched in UK mindset that now virtually everyone believes that an inflated housing market is a good thing, and who is really benefiting from the situation?

There are two main reasons behind the current state of affairs, the first is greed, that widespread human trait, the second is the media. The latter galvanises the populace so that the former takes on a life of its own, leading to a loss of focus and increasingly disconnected soci etc..........................

Thanks for revealing the mysteries of the universe for us on your 4th post.

It's a good job you came, because in all the years of this forum nobody has ever expressed such revolutionary opinions.

:rolleyes:

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Guest DissipatedYouthIsValuable

Top marks to the original poster.

Bah humbug to the overleveraged party poopers above. I need a cleaner if you're a bit short of cash, but you'll have to undercut the rates of the Polish.

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Thanks for revealing the mysteries of the universe for us on your 4th post.

It's a good job you came, because in all the years of this forum nobody has ever expressed such revolutionary opinions.

:rolleyes:

Now you are starting to be a pain. What has upset you the last couple of days?

The post is excellent and I think you get your kicks from just having goes at people :angry:

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Now you are starting to be a pain. What has upset you the last couple of days?

The post is excellent and I think you get your kicks from just having goes at people :angry:

Awww, tiggle-wiggle! I thought we were going to have a special relationship and now you're turning all nasty on me? What a shame...... :(

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Thanks for revealing the mysteries of the universe for us on your 4th post.

It's a good job you came, because in all the years of this forum nobody has ever expressed such revolutionary opinions.

:rolleyes:

I've been around this forum for a while thanks, though I reserve the right to stay out of pointless banter. I make my point and I leave. Thanks for your constructive criticism. I notice that in the press today, the chancellor of the exchequor shares my views.......

Regards

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I've been around this forum for a while thanks, though I reserve the right to stay out of pointless banter. I make my point and I leave. Thanks for your constructive criticism. I notice that in the press today, the chancellor of the exchequor shares my views.......

Regards

Goodo -- you are right in what you say - don't worry about the attacks.

You may know my opinions too - I have been on this site for several years.

I have been banging out the same message for years now: It is this one: The Moneylenders are most responsible for the massive & unprecedented rise in house "prices" over the last decade. By arrogantly [and I think deliberately] allowing lending multiples to go over the traditional 3.5 x salary [max] - they have simply hyped/inflated the "price" of property ad nausea -- and this started the World's Greatest Ever Pyramid Selling Scam - which we have had to watch unfurl over the last decade - particularly the last 7 years.

See all my posts here - http://www.housepricecrash.co.uk/forum/ind...sult_type=posts

and you will see my main theme, particularly over the last 2 years. THIS WHOLE SCAM WAS ORCHESTRATED BY THE MONEYLENDERS and their friends - the VI's - the Property "Developers", Speculators, "investors" and also all those associated with Meedja outfits which pumped out the propaganda to the "masses" to "Buy, Buy, Buy... [etc.]" - thus to keep the whole scam going on and on and on --- using the BBC - [sCANDAL] - and all channels available to pump out the sickening & repulsive property "programmes" [actually ADVERTS] - like "Location, Location, Location" -- mindless ADVERSTISING fronting as a "programme".....

The really interesting question, to me, is this: Was it all deliberate? Did the Moneylenders KNOW that they were doing this? That will be the great story for any budding journalist out there - to go over the traces - i.e. to follow the trail all the way back to the start - and to ask lots of questions - starting with: "Why, when it must have become obvious that lending more and more, without ANY checks, - cf. "Self-Cert" and Sub-Prime etc., - did the Authorities [FSA, BoE etc.] NOT STOP IT? Was it because many people INCLUDING those in high positions, i.e. Regulatory Officials, Bank Directors, MP's [NOTE THESE - How many DON'T have BTL Portfolios?] were making money hand over fist as THEY 'played the market' and made millions/billions?

So -- WHY was all this allowed to run for so long? Why is only now that the likes of Darling and many others, after SO long, wake up and smell the coffee and realise that lax lending - and indeed FRAUDULENT lending - cf Sub-Prime & Credit Crunch - is the key to HPI -- and this HPI is BAD for us all? Why are they only saying this now? - http://www.dailymail.co.uk/pages/live/arti...d=1770&ct=5

Is the answer something like - Many, many parties, including the VIs, used the HPI whilst the going was good to line their pockets, EVEN THOUGH they KNEW it was going to lead to terrible problems?

Edited by eric pebble

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Now you are starting to be a pain. What has upset you the last couple of days?

The post is excellent and I think you get your kicks from just having goes at people :angry:

its quite common on forums, ive noticed the longer and more thought out the post the more likely some unfortunate will come along and post a short dismissal. I guess the motivation is that they like making somone else feel worthless, make them feel they wasted their time - god knows why anyone would want to do that I dont know. Hopefully its just "banter" - if not then we should be worried that such people exist :(.

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its quite common on forums, ive noticed the longer and more thought out the post the more likely some unfortunate will come along and post a short dismissal. I guess the motivation is that they like making somone else feel worthless, make them feel they wasted their time - god knows why anyone would want to do that I dont know. Hopefully its just "banter" - if not then we should be worried that such people exist :(.

In my case it was just banter - I have a warped sense of humour, which sometimes misfires. Sorry.

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