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> The government must act now to support the housing market and prevent a potential crisis. When house prices were going up in the past decade, property owners

by jstx1 4y ago

> The government must act now to support the housing market and prevent a potential crisis. When house prices were going up in the past decade, property owners were getting richer while doing nothing, landlords were collecting higher and higher rent and regular people were priced out of owning a home, the government did nothing. But now all of a sudden it should intervene because prices might go down?

ftyhbhyjnjk 4y ago
Exactly what I was thinking. When prices were soaring, so many middle-class people were forced out of the market. No one cared about "economy" then. But now that the prices are going down and actually become affordable to many, some are worried they might lose out on their "investment". Thus the uproar.
LatteLazy 4y ago
I don't disagree, and I also don't think the report is true but I think your comment might miss some hidden dimensions to this. First, if you go up by 60%, then down by 60% overall you have gone DOWN by 36%. That's quite a bit (1 * [1+0.6] * [1-0.6] = 0.64). Percentage change cannot just be netted off on a +/- basis even if it seems that way for small changes... Second, I agree owners have enjoyed a decade of unearned rises. But only people who have owned for that long. I bought 7 years ago, it's gone up 60ish % in that time. If it goes down 60% now, that's my luck and I will eat it. But what about someone who bought yesterday? Should the market suffer a big drop, I don't think it would be unfair for the government to assist recent (last 5 years?) buyers. Third, high house prices lead to building. We then step on the hose by refusing to build infrastructure and restricting planning permission and subsidising people to stay in homes that are too big for them and they cannot afford. But we won't stop doing those latter things. So if prices drop a lot, building will stop and the shortage of available housing will get worse not better. Similarly anyone in negative equity will likely have no option BUT to sit there and hope it gets better, further reducing supply. Also falling prices means lenders will charge much higher rates and demand bigger deposits. This will further reduce the effective supply. Could you buy a mansion for 100k? Not unless you have it in cash if no one will lend to you... The same point applies to rent: if your landlord's mortgage goes up, so does your rent. And you don't even own it. Forth is the political dimension. No one cares about 5%. But I don't think the UK political or economic system could tolerate a 20% (let alone 60%) drop. There is a scene in (I think) Yes Minister where the PM says a minister has his full support and everyone knows they will be gone by the end of the day as a result. "We believe that the private mortgage market should be allowed to operate freely and without interference" will mean nothing the moment 51% of people want a cheaper mortgage. Of course that's just my cynical opinion.

by jstx1 4y ago

ftyhbhyjnjk 4y ago

Exactly what I was thinking. When prices were soaring, so many middle-class people were forced out of the market. No one cared about "economy" then. But now that the prices are going down and actually become affordable to many, some are worried they might lose out on their "investment". Thus the uproar.

LatteLazy 4y ago

I don't disagree, and I also don't think the report is true but I think your comment might miss some hidden dimensions to this. First, if you go up by 60%, then down by 60% overall you have gone DOWN by 36%. That's quite a bit (1 * [1+0.6] * [1-0.6] = 0.64). Percentage change cannot just be netted off on a +/- basis even if it seems that way for small changes... Second, I agree owners have enjoyed a decade of unearned rises. But only people who have owned for that long. I bought 7 years ago, it's gone up 60ish % in that time. If it goes down 60% now, that's my luck and I will eat it. But what about someone who bought yesterday? Should the market suffer a big drop, I don't think it would be unfair for the government to assist recent (last 5 years?) buyers. Third, high house prices lead to building. We then step on the hose by refusing to build infrastructure and restricting planning permission and subsidising people to stay in homes that are too big for them and they cannot afford. But we won't stop doing those latter things. So if prices drop a lot, building will stop and the shortage of available housing will get worse not better. Similarly anyone in negative equity will likely have no option BUT to sit there and hope it gets better, further reducing supply. Also falling prices means lenders will charge much higher rates and demand bigger deposits. This will further reduce the effective supply. Could you buy a mansion for 100k? Not unless you have it in cash if no one will lend to you... The same point applies to rent: if your landlord's mortgage goes up, so does your rent. And you don't even own it. Forth is the political dimension. No one cares about 5%. But I don't think the UK political or economic system could tolerate a 20% (let alone 60%) drop. There is a scene in (I think) Yes Minister where the PM says a minister has his full support and everyone knows they will be gone by the end of the day as a result. "We believe that the private mortgage market should be allowed to operate freely and without interference" will mean nothing the moment 51% of people want a cheaper mortgage. Of course that's just my cynical opinion.