Sunday, August 2, 2009

An argument against house price bubbles

New homes matter more than rising house prices

"If one person's asset rises in value, he or she is, on paper, richer. But if the price of every asset rises simultaneously it is not mass enrichment, it is inflation." Closing paragraph: "It will be a sign of Britain's healthy emergence from recession when, instead of celebrating price rises, we measure success by how many new homes are built and how affordable they have become."

Posted by quiet guy @ 10:06 PM (841 views)
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5 thoughts on “An argument against house price bubbles

  • mark wadsworth says:

    Cool. Despite I am small government free market liberal, I have to day that the Guardian appears to talk the most sense about housing.

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  • mark wadsworth says:

    “say” not “day”, obviously.

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  • A heartfelt hear hear. Good post quiet guy. I’ve always thought the Guardian is the most consistently sensible newspaper.

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  • stillthinking says:

    The reason why the oldies don’t downsize instead of rattling around in their family houses is because for many there is no reason to do so. Benefits in the UK are means tested, releasing capital by downsizing means you don’t qualify for dramatically reduced council tax and also you immediately lose completely income support. Perhaps it is true that the full state pension is not affected, but I think there are a lot of elderly women now who only qualify for income support, and out of a pension age couple they are most likely to last the longest.
    Encouraging downsizing is an excellent idea, and also taxation neutral. If you allowed state benefits to continue while letting downsizers also keep their capital gains effectively free because otherwise they won’t do it. Also this frees up money for a bit of spending, also good. But no chance of this ever happening because of the can of worms of means tested pensions, and the need to change pension rules for those with cash savings to prevent encouragement of using housing as a tax free bank.

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  • Imminent_plunge says:

    My favourite ever quote re house prices in the comments:
    “Any country that screws younger generations by denying them affordable housing is sick and twisted and deserves to go down the toilet.”

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