Housing market

[mandryka]

We’re not living in a time of falling house prices. Anyone who can’t keep up with their mortgage payments will possibly make a profit on sale of the house, even after costs - remember that mortgages aren’t 100% of the purchase price. Whether they can find something to rent in the private sector depends mainly on their income and whether they have CCJs. But there’s no reason why having a problem paying your mortgage should lead to CCJs - it’ll only do that if the mortgager takes you to court.

 

[Sue Pertwee-Tyr]

We’re not living in a time of falling house prices. Anyone who can’t keep up with their mortgage payments will possibly make a profit on sale of the house, even after costs - remember that mortgages aren’t 100% of the purchase price. Whether they can find something to rent in the private sector depends mainly on their income and whether they have CCJs.

We’re talking about the currently hypothetical, but not unlikely, scenario of a housing market crash, like the one that happened in relatively recent memory, and the near miss just over a decade ago.

And yes, the intersection between people who can’t meet the mortgage and the people who have CCJs is quite a large one, so what’s your point? That people can always sell up in the hope that they can rent, before they get evicted and find out for sure they can’t?

Oh, and the monthly rental for property is often greater than the mortgage payment would be, so if they can’t meet the mortgage…

 

[mandryka]

We’re talking about the currently hypothetical, but not unlikely, scenario of a housing market crash, like the ones that have happened twice in relatively recent memory.

OK, in fact that crossed my mind after posting, if house prices fall and/or interests rates rise, then yes, there will be negative equity and there will be defaulting repayments.

 

[Arkless Electronics]

A total bursting of the housing bubble and market crash making all property worth only say 25% of its present value is what is needed.
I want to see all the people making loadsa money from property bankrupted and most BTL rental places back on the market dirt cheap!

Homes for people are what is needed... not more feckin capitalism and the wealthy getting wealthier.

 

[Tony L]

What is bizarre is that this mindset (and I'm the same) has been extremely unsuccessful for the past 20 years. My net worth would be MUCH higher now if I'd mortgaged myself to the eyeballs instead of buying only as much house as I needed at the time.

Likewise. My current house has been a pretty poor investment*. House prices are very low here and whilst a pretty nice terrace in a decent area with nice neighbours etc it was a bit of a basket case as a structure. The interesting thing is the Liverpool city centre flat I sold hasn’t shifted that much in the 18 odd years since either. Each has put on about 20-25% in that timeframe, whereas the Liverpool place more than doubled in the three years I was there, hence my accruing equity.

*Viewed from a purely speculative perspective. From every other perspective it has been the best move I’ve ever made as it was my ticket right off the mind-numbingly tedious corporate rat-race and provided the freedom to do my own thing in a fully financially viable way (this place).

 

[Darth Vader]

A house should be your home and not seen as an investment. Whilst the price of some properties in places like London have gone crazy many others haven't. I have just sold my holiday apartment for £60K more than I paid and people think I've made a killing. However if inflation is taken into account I've actually made a loss. My wife and I did rent it out as a holiday let and made quite a bit over the years. However we bought it for the fun of owning and using a nice place by the sea in Carbis Bay Cornwall (where Bojo held the G7) and over the years our family has had some very enjoyable holidays there.

As an investment it was a waste of time as we could have made a lot more putting the dosh into the stock market whereby that £60K 'profit' would have become more like £600K over the time of ownership.

You pays yer money and takes yer choice.

DV

 

[Bob McC]

Is that really the case? There aren't any 5-bedrooms in Uphall at the moment - the nearest is new-builds in East Calder and they're £435K.

BTW not all 5-beds in Balerno are £1.3M - there is a decent one on the market at offers over £430K at the moment although I expect that'll make a good bit more than the list price.

My aunts Uphall house is valued at under £300K. 5 bed detached, double garage.
When she goes into care we will have to sell.

 

[Bob McC]

A total bursting of the housing bubble and market crash making all property worth only say 25% of its present value is what is needed.
I want to see all the people making loadsa money from property bankrupted and most BTL rental places back on the market dirt cheap!

Homes for people are what is needed... not more feckin capitalism and the wealthy getting wealthier.

And I want world peace and to teach the world to sing.

 

[Aethelist]

A house should be your home and not seen as an investment. Whilst the price of some properties in places like London have gone crazy many others haven't. I have just sold my holiday apartment for £60K more than I paid and people think I've made a killing.

Erm. Is that not a contradiction?

 

[Sue Pertwee-Tyr]

If I were king, I’d let all councils work out how much providing accommodation for the homeless cost in their area, and fund that amount by dividing it equally and charging all the second homes in their area.

 

[ks.234]

Where would these ‘buffer stocks’ be held and who decides how and when they are used? Any notion of reserves is just funny money. Like saying I have £10K in a bank savings account when I owe the bank £10M.

I have to start by saying that my starting point in all of this was that economic recessions are not “natural” in the same sense that shortages of natural resources cause economic turbulence in the form of starvation.

We have mitigated against shortages of natural resources for thousands of years. Storing grain in times of plenty to release grain in times of dearth goes back at least to the Bible and is rightly seen as a moral imperative to mitigate starvation. The US does something similar today with their Strategic Petroleum Reserve, the US buys petroleum while cheap and sells into the US market when it’s expensive.

A loose buffer stock strategy would be to buy your grain when cheap and sell when expensive and leave the how much, why and when up to the individual buffer stocks. Another strategy is tight price control whereby the government controls the buffer stock and sets a ‘buy price’ and a ‘sell price’ for the stock of the e.g. grain. This strategy effectively stabilises the price of the e.g. grain within the boundaries of the buy price and the sell price.

The buffer stock that it currently used to control inflation in our monetary policy is unemployment. Current monetary policy sees inflation as the result of demand and therefore seeks to suppress demand by suppressing wage demands. When inflation still happens regardless, then our government tinkers with interest rates which is itself inflationary and regressive.

An alternative to a buffer stock of unemployed people is to have a buffer stock of employed people. With a Job Guarantee whereby the government becomes the employer of last resort offering everyone who works the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.

Such a strategy would put a floor under the condition people experience in the economy and maximises the public good and stabilises prices.

There are strategies available to stabilise the economic turbulence of the sort we are currently experiencing. The current economic turbulence isn’t natural, it’s a political choice determined by a particular monetary policy.

 

[Sue Pertwee-Tyr]

An alternative to a buffer stock of unemployed people is to have a buffer stock of employed people. With a Job Guarantee whereby the government becomes the employer of last resort offering everyone who works the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.

Such a strategy would put a floor under the condition people experience in the economy and maximises the public good and stabilises prices.

There are strategies available to stabilise the economic turbulence of the sort we are currently experiencing. The current economic turbulence isn’t natural, it’s a political choice determined by a particular monetary policy.

In practical terms this isn't far removed from the old Tory concept of 'workfare' is it? The main difference being the 'just and favourable remuneration' element. The successive government policies have been to 'motivate' the unemployed into work by making social security measures minimal, punitive and unpleasant. It needs a change of mindset, and I don't think we'll see it unless and until the ruling classes see unemployment as a realistic prospect for them and their kind.

 

[Heckyman]

Economic recessions absolutely are natural, they occur because of human psychology. When people feel confident about the future, they borrow from future earnings and spend them today. Inevitably they end up borrowing too much and then have to reduce expenditure, hence recession.

If recessions aren't allowed to happen, you tend to get inflation and price controls. Which is what we're starting to see now. Tends not to turn out well, historically. What's really needed is a reset of the global economic system, but this won't happen until it becomes the only remaining option. Could be years from now.

 

[Ponty]

I have just sold my holiday apartment for £60K more than I paid and people think I've made a killing. However if inflation is taken into account I've actually made a loss. My wife and I did rent it out as a holiday let and made quite a bit over the years. However we bought it for the fun of owning and using a nice place by the sea in Carbis Bay Cornwall (where Bojo held the G7) and over the years our family has had some very enjoyable holidays there.

DV

You’ve obviously enjoyed using it and offloaded at a good time IMHO. At least it wiped its face. Cornwall gets hammered in downturns because it’s so reliant on money from outside the county. One of my best school mates lived in a beautiful house on Hain Walk at the time. His father lost it in the early 90’s recession (as did my father with our house), that’s life. You simply wouldn’t believe me if I told you what it sold for at the time. Of course, we’re not likely to see 15% IR’s and we currently have full employment but there are an awful lot of highly leveraged people sailing very close to the wind with no resilience.

 

[ks.234]

In practical terms this isn't far removed from the old Tory concept of 'workfare' is it? The main difference being the 'just and favourable remuneration' element. The successive government policies have been to 'motivate' the unemployed into work by making social security measures minimal, punitive and unpleasant. It needs a change of mindset, and I don't think we'll see it unless and until the ruling classes see unemployment as a realistic prospect for them and their kind.

Yes, it could be sold as a kind of workfare, but the main difference is that a Job Guarantee would be to set a floor level for a living wage in line with Article 23 of the Universal Declaration of Human Rights, rather the Tory Workfare that was punitive and designed to make the unemployment figures look a bit better while still forcing wages well below the standards of the UDoHR.

Yes it does need a change of mindset, but personally, I feel it will have to come from the electorate because it won’t come from our ruling classes.

Better Health, Education, Standard of Living and measures to tackle Climate change are all possible. We have to start demanding those basic means of a proper and sustainable existence from our ruling classes as a pre-condition of lending them our vote.

 

[stevec67]

Erm. Is that not a contradiction?

No, because he goes on to say that it didn't keep up with inflation so effectively it's a loss. If he'd put it in stocks and shares the gains would have been better than inflation.
If I need £12000 for a new car and plan to raise this by saving £1k a month at the bank, the end of the year might show me £12,500 with interest. Great, I've made £500. But if the same car is now £13k, I'm worse off and I've actually gone backwards.

 

[ks.234]

Economic recessions absolutely are natural, they occur because of human psychology. When people feel confident about the future, they borrow from future earnings and spend them today. Inevitably they end up borrowing too much and then have to reduce expenditure, hence recession.

If recessions aren't allowed to happen, you tend to get inflation and price controls. Which is what we're starting to see now. Tends not to turn out well, historically. What's really needed is a reset of the global economic system, but this won't happen until it becomes the only remaining option. Could be years from now.

Not sure that the vagaries of human demand consumption are natural and even less that borrowing is the driver of problematic inflation. Likewise to say that absence of recessions are the driver of inflation seems to be putting the cart before the horse somewhat. Recessions are the product of inflation, not the other way around.

Besides, we happily live with inflation based on borrowing when it suits us, notably when it comes to housing. House price inflation causes periodic economic turbulence for those unable to service their borrowing, but the easy remedies to resolve that turbulence by stabilising house prices are unacceptable to the self interest of those who profit from ever increasing house prices and betting on periodic turbulence

While self interest is a part of the human condition, it isn’t a necessary part, self interest is not what defines the human condition, other things like altruism to name but one play their part too. So I would argue that self interest and greed are not the necessary defining condition of being human, and are not therefore natural in the proper sense of the word.

 

[Sue Pertwee-Tyr]

No, because he goes on to say that it didn't keep up with inflation so effectively it's a loss. If he'd put it in stocks and shares the gains would have been better than inflation.
If I need £12000 for a new car and plan to raise this by saving £1k a month at the bank, the end of the year might show me £12,500 with interest. Great, I've made £500. But if the same car is now £13k, I'm worse off and I've actually gone backwards.

I think this is to miss the point that on the one hand the post was saying that a house should be your home, while on the other was discussing a second property which clearly isn't. Let's keep in mind that, in a lot of rural and 'touristy' locations, locals are priced out of the market by owners of holiday properties. This tendency to own second homes in the moneyed classes is contributing to the housing issues those same classes purport to be concerned about.

 

[ks.234]

we currently have full employment

No

 

[Darren L]

we currently have full employment .

What? Nonsense, there's currently about 1.38 million claiming Jobseekers/Universal Credit but that's a totally false indication of how many people are unemployed, the real no is about 3.5 million.