Friday, May 25, 2007

Newsnight discuss houseprices

Newsnight Homepage

Interesting report and debate on the problems and causes of high houseprices in the UK. You can watch it on this link by clicking on "latest programme" though you have to sit through the Tony Blair interview first! The comments on the discussion board a worth a read too.

Posted by becky @ 08:28 AM (569 views)
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2 thoughts on “Newsnight discuss houseprices

  • The best comment Becky, is that by Dr. Ian Spooner:

    Yes, we do need a substantial crash in house prices – the euphemistic “correction” – to rectify this boom having run 3-4 years longer that it should have.

    Most real estate professional, commentators and economists knew the “corection” should have taken place several yaers ago, when prices had already escalated unhealthily but within the pattern of all boom-bust cycles.

    This extended and socially divisive boom occured because of artificially low interest rates and “cheap money” emanating from the USA despite the USA beaing terminally broke and living off the rest of the world to the tune of drawing in $3 billion foreign capital per day.

    Low interet and business hungry banks, in the majority of countries, created a plethora of virtually negative interest loans, mortages and re-finance your house deals that fuelled this boom, put borrowed money in peoples’ pockets, fed the “feel good factor” and kept the populace happy.

    As house price rose above all previous ratios and country after country vied for “the most expensive house price: income level in the world” many professionals and commentators tentatively suggested this was not a good thing and was leading to possibly the biggest bust ever.

    Conspiracy minded theorists argue that governments create debt burden deliberately to keep the population timid, malleable, content with consumer rubbish and fearful of losing their mortages and credit ratings. May be something in that but most recognise the looming dangers of social unrest and economic hardship. Everyone over 35 remembers negative equity, previous crashes. Trouble is those younger than that think the fairies will always give them money at almost nil interest, that the paper gain of $1000 a day on their house is a natural right, that it’ll go on forever.

    What did governments do when they should have been getting out of the negative real interest trap? Nothing. They had “painted themleves into a corner” with electorates gorged on “free money” and feared the outcome; the ever higher mountain of debt, the repossessions and the social unrest created both by the high prices and inevitable when rates eventually rise and prices crash.

    It is now happening in the USA, they have “Bitten the bullet” in very small bites; quarter point rises almost monthly, gently-gently but prices are already tumbling.

    It is time the banks, mortgage companies, credit unions, shonky no doc, low security and refi-mortgage sharks were stopped from making fortunes from innocent borrowers. Time for sensible rates of interest (which would reduce the lenders need to lend to so many at low rates) affordable houses across the spectrum
    and the re-adjustment that might still restore equity to society.

    Take the heat off housing and once the dust subsides people MIGHT find they can actually converse about something else, live for something else, learn they are a great deal richer than the small minded- property obsessed sub-human they have been for so long.

    And governments, always ready to claim praise for the effect in their own countries of what are often worlwide trends might actually educate their peoples this time, point out in unison that this WAS a global madness and share the blame for letting it happen. That’s a way of getting “un-painted from the corner” without all the blame.


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  • Was quite disappointed with the debate to be honest. All they talked about was the shortage of properties. If really that was the main reason why then rental yields keep decreasing…

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