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Agreed - I can understand why there would be concern over lower equities or bond prices - but how are lower real estate prices really a bad thing? Young familie

Agreed - I can understand why there would be concern over lower equities or bond prices - but how are lower real estate prices really a bad thing? Young families are killing themselves trying to earn enough to subsidize the retirement of older homeowners through high real estate prices, mostly because our cites are so badly managed and zoned. Or well managed and cunningly zoned, if you're a Hollywood villain and what you're interested in is destroying a whole generation with debt.

vidarh 10y ago
It's bad for investors, which can affect the speed of new builds. Otherwise it's only bad for home ownes if they drop too fast, or if you want to treat your home as an investment and plan on trading down in the future, which is incredibly risky to depend on.
simonh 10y ago
> but how are lower real estate prices really a bad thing? It depends why they are lower. If they are lower because more houses are being built that could be a good thing because relieving the chronic shortage in affordable housing will help more people get on the property ladder, increase the available labour pool for businesses, if they live closer to work it will ease transport congestion, etc, etc. Good all round. However if house prices are falling because wages are getting depressed so people can't afford higher prices, the jobs market is slowing, inward investment is petering out, etc then it's not so much that lower house prices themselves are bad, but it's a really bad sign for the economy. Apart from anything else, falling house prices due to economic factors is going to reduce investment in new housing, which we really do need in the medium to long term.
- dx034 10y ago
  It seems that the recent price development is due to higher taxes on second homes (and expensive purchases) which deter capital investors. This could be a good thing as it means that a higher share of houses will be owned by people living only in London, instead of second homes. And even though it only directly effects the most expensive property, it ultimately lowers prices for a lot of houses due to the inelastic nature of housing demand.
rwmj 10y ago
High house prices are mainly good when you die. You no longer need a house and your descendents get to convert the house equity into cash (paid for by the younger generation). The rest of the time high house prices just mean larger debt, more risk if prices fall and higher transaction costs.
- mathgeek 10y ago
  This assumes that you never sell your house to fund your retirement. High house prices also imply higher real estate taxes, which pressures the older generation to sell.
  - rwmj 10y ago
    The UK real estate tax ("council tax") is ridiculously small even at the highest levels. Even if I was in a multi-million pound property, the maximum I'd ever pay would be £3.5K annually, and for most houses it's less than half that.
    - mathgeek 10y ago
      Things are different depending on locale. Here in the US, retirees living on a fixed income where their house is most of their net worth have it very different from the wealthy in the UK.
notahacker 10y ago
London is something of a special case, where (i) property is so expensive it simply isn't accessible to people on average salaries to buy and (ii) property investors are interested in the market for the capital gains rather than the rental income, and so owners aren't necessarily as aggressive at pushing for market rents as they could be. A poor outlook for property prices could potentially result in quite a few tenants finding their landlords squeezing them much harder in future. More generally, whilst lower property prices are generally a good thing for the economy, a property price crash and the resulting economic instability is unequivocally a bad thing.
deleted 10y ago
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vidarh 10y ago

It's bad for investors, which can affect the speed of new builds. Otherwise it's only bad for home ownes if they drop too fast, or if you want to treat your home as an investment and plan on trading down in the future, which is incredibly risky to depend on.

simonh 10y ago

> but how are lower real estate prices really a bad thing? It depends why they are lower. If they are lower because more houses are being built that could be a good thing because relieving the chronic shortage in affordable housing will help more people get on the property ladder, increase the available labour pool for businesses, if they live closer to work it will ease transport congestion, etc, etc. Good all round. However if house prices are falling because wages are getting depressed so people can't afford higher prices, the jobs market is slowing, inward investment is petering out, etc then it's not so much that lower house prices themselves are bad, but it's a really bad sign for the economy. Apart from anything else, falling house prices due to economic factors is going to reduce investment in new housing, which we really do need in the medium to long term.

dx034 10y ago
It seems that the recent price development is due to higher taxes on second homes (and expensive purchases) which deter capital investors. This could be a good thing as it means that a higher share of houses will be owned by people living only in London, instead of second homes. And even though it only directly effects the most expensive property, it ultimately lowers prices for a lot of houses due to the inelastic nature of housing demand.

rwmj 10y ago

High house prices are mainly good when you die. You no longer need a house and your descendents get to convert the house equity into cash (paid for by the younger generation). The rest of the time high house prices just mean larger debt, more risk if prices fall and higher transaction costs.

mathgeek 10y ago
This assumes that you never sell your house to fund your retirement. High house prices also imply higher real estate taxes, which pressures the older generation to sell.
- rwmj 10y ago
  The UK real estate tax ("council tax") is ridiculously small even at the highest levels. Even if I was in a multi-million pound property, the maximum I'd ever pay would be £3.5K annually, and for most houses it's less than half that.
  - mathgeek 10y ago
    Things are different depending on locale. Here in the US, retirees living on a fixed income where their house is most of their net worth have it very different from the wealthy in the UK.

notahacker 10y ago

London is something of a special case, where (i) property is so expensive it simply isn't accessible to people on average salaries to buy and (ii) property investors are interested in the market for the capital gains rather than the rental income, and so owners aren't necessarily as aggressive at pushing for market rents as they could be. A poor outlook for property prices could potentially result in quite a few tenants finding their landlords squeezing them much harder in future. More generally, whilst lower property prices are generally a good thing for the economy, a property price crash and the resulting economic instability is unequivocally a bad thing.

deleted 10y ago

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