6 ms·

What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Therefore every time it should have

by junto 12y ago

What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Therefore every time it should have crashed big time (2001, 2008), the BoE has propped it up by making sure that borrowing remained dirt cheap and the government made sure that the market stayed liquid (raising stamp duty levels for example). Every time they do this, they just exacerbate the problem long term, which is quite simply, that the market needs a correction, and the longer they put it off, the more painful the correction is going to be (like it was early 1990's in the UK but worse). I for one say let it burn.

brianmcc 12y ago
In many places in the UK, it did crash big time. Plenty of people I know even today are in homes well below their 2007 levels or have sold for painful losses. London is unusual in that many properties sell for cash, to investors, and in fact the BoE and mortgage lenders have surprisingly little influence in terms of rate changes. Not sure letting anything "burn" particularly helps anybody. Edit: I suspect "let it burn" reflects a certain frustration, you have my sympathy if you or your family/friends are finding the situation a barrier. Facts and figures can mask the very personal cost of being unable to achieve fundamental goals in life such putting down roots for one's family.
- awjr 12y ago
  My mother just recently bought a studio flat in Wales for 31k. Prices are dropping around the country. London prices are forcing people away from living in London. Businesses are moving away. (If you are a young developer, I'd suggest moving to Bristol.)
  - jgraham 12y ago
    The data doesn't seem to support that view [1]. The headline claim there is that average property prices across the country rose by 7% last year, with London more than double that and no area showing an annual fall. It seems like your example of Bristol is only becoming cheaper relative to London, not cheaper in any absolute sense. [1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/398604/December_HPI-2014.pdf https://www.gov.uk/government/uploads/system/uploads/attachm...
    - brianmcc 12y ago
      Agreed; in Scotland, we're now seeing steady, but not excessive, growth in volumes and prices. I'd say it's recovering, not worsening.
  - deepvibrations 12y ago
    I second that! Best city in the UK in my opinion- It has an amazing selection of bars, clubs and independent shops, a buzzing music scene and of course a great tech scene with plenty of meetups etc. Compared to London I would say it's much more friendly, you can cycle from one side to the other in under an hour, escape to the countryside or the coast in under an hour and you never feel trapped in a towering concrete jungle (often felt this in London!).
    - collyw 12y ago
      Almost anywhere in the country is more friendly than London
  - barrkel 12y ago
    You'll severely limit your career and earning potential if you do that, particularly if you're not a founder or otherwise in a position to insulate yourself from pure market salaries. Dev salaries are not high in Britain as a whole, outside of London.
    - pjc50 12y ago
      Depends on whether you measure earning potential in pounds or houses. Someone earning £50k in an area of £250k houses is being paid 0.2 houses per annum. If they can get £40k in an area of £100k houses their spending power has gone up not down. If only it weren't so necessary to be physically present for the work.
      - barrkel 12y ago
        I tend to measure things in disposable income: how much money I have left over after paying the big bills. And this is a fairly absolute measure, rather than relative to living costs, as I spend much of my disposable income on stuff that costs similar amounts no matter where I live. 50k is a mediocre salary, mind.
        pjc50 12y ago
        50k is a 90th percentile salary for the UK as a whole and competitive for non-London non-senior management software dev jobs.
        barrkel 12y ago
        Perhaps the context of this thread has been lost. It started out with me asserting that you get poor return outside of London. Personally, I think there's little point in living in the UK outside of London. There's far nicer places to live if you're willing to take a hit in salary. (And no, I'm not British.)
        pjc50 12y ago
  - JimmyM 12y ago
    > Prices are dropping around the country. > London prices are forcing people away from living in London. Businesses are moving away. Wouldn't this force prices higher across the country? As someone living in Bristol, I have to say that there's been a (noticeable) influx of people from London, and that this is what I believe has forced local prices up to the point where many can no longer afford to stay. Friends of mine, who are local (I am an Essex import), have scattered as far as Darwen and Bournemouth.
matthewmacleod 12y ago
I don't think you achieve much by 'letting it burn,' as it were. All you do is force a large number of people into a bad financial situation – that's not good for anybody. The market needs correction, but it needs to be well-managed. That basically means long-term house price stagnation and investment in social housing to remove the incentives for buy-to-let landlords and multiple property owners.
- justincormack 12y ago
  Property is a zero sum game. People without houses lose the equivalent in future spending as homeowners gain. So propping up a market is directly taking money from the young and increasingly old non homeowners. So not doing anything is putting a large number of people in a bad situation.
  - pjc50 12y ago
    Zero sum, unless more houses are built...
  - notahacker 12y ago
    Property isn't quite a zero sum game; as the last few years have show the overall losses from a crash outweigh the benefits of lower prices and greater liquidity to people without houses (especially if the result is that people without houses can't get mortgages even after the prices have fallen) That's not to say there shouldn't be more pressure put on property price appreciation, not to mention confiscatory levels of capital gains tax on property speculators that aren't tax-resident in the UK. But inducing a property price crash (as opposed to slowing property price inflation) would be a bad move for the economy as a whole, as well as electoral suicide in a country where the majority of the population have a mortgage or own their house outright.
    - lentil_soup 12y ago
      Doesn't "losses from a crash outweigh the benefits of lower prices" depend on who you're talking about?. For me this has to be looked at from the point of who it affects the most. A person that already has a house is much better suited to "take the hit" of property prices than someone that doesn't have one (in general terms). Obviously you have to manage it, but in the end you should strive to protect those that are more vulnerable.
prostoalex 12y ago
> What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Exactly. Moreover, the housing value is tied into things such as total wealth (which is why after the 2008 crash the wealth of middle-income and low-income Americans crashed, too much of it was tied up into housing equity), which then ties into economic outlook and consumer spending, which then ties into lending and all things finances. Presidents and parliament members do get voted out when there's a severe contraction in consumer spending and generally depressive feelings about economic outlook.

by junto 12y ago

brianmcc 12y ago

In many places in the UK, it did crash big time. Plenty of people I know even today are in homes well below their 2007 levels or have sold for painful losses. London is unusual in that many properties sell for cash, to investors, and in fact the BoE and mortgage lenders have surprisingly little influence in terms of rate changes. Not sure letting anything "burn" particularly helps anybody. Edit: I suspect "let it burn" reflects a certain frustration, you have my sympathy if you or your family/friends are finding the situation a barrier. Facts and figures can mask the very personal cost of being unable to achieve fundamental goals in life such putting down roots for one's family.

awjr 12y ago
My mother just recently bought a studio flat in Wales for 31k. Prices are dropping around the country. London prices are forcing people away from living in London. Businesses are moving away. (If you are a young developer, I'd suggest moving to Bristol.)
- jgraham 12y ago
  The data doesn't seem to support that view [1]. The headline claim there is that average property prices across the country rose by 7% last year, with London more than double that and no area showing an annual fall. It seems like your example of Bristol is only becoming cheaper relative to London, not cheaper in any absolute sense. [1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/398604/December_HPI-2014.pdf https://www.gov.uk/government/uploads/system/uploads/attachm...
  - brianmcc 12y ago
    Agreed; in Scotland, we're now seeing steady, but not excessive, growth in volumes and prices. I'd say it's recovering, not worsening.
- deepvibrations 12y ago
  I second that! Best city in the UK in my opinion- It has an amazing selection of bars, clubs and independent shops, a buzzing music scene and of course a great tech scene with plenty of meetups etc. Compared to London I would say it's much more friendly, you can cycle from one side to the other in under an hour, escape to the countryside or the coast in under an hour and you never feel trapped in a towering concrete jungle (often felt this in London!).
  - collyw 12y ago
    Almost anywhere in the country is more friendly than London
- barrkel 12y ago
  You'll severely limit your career and earning potential if you do that, particularly if you're not a founder or otherwise in a position to insulate yourself from pure market salaries. Dev salaries are not high in Britain as a whole, outside of London.
  - pjc50 12y ago
    Depends on whether you measure earning potential in pounds or houses. Someone earning £50k in an area of £250k houses is being paid 0.2 houses per annum. If they can get £40k in an area of £100k houses their spending power has gone up not down. If only it weren't so necessary to be physically present for the work.
    - barrkel 12y ago
      I tend to measure things in disposable income: how much money I have left over after paying the big bills. And this is a fairly absolute measure, rather than relative to living costs, as I spend much of my disposable income on stuff that costs similar amounts no matter where I live. 50k is a mediocre salary, mind.
      - pjc50 12y ago
        50k is a 90th percentile salary for the UK as a whole and competitive for non-London non-senior management software dev jobs.
        barrkel 12y ago
        Perhaps the context of this thread has been lost. It started out with me asserting that you get poor return outside of London. Personally, I think there's little point in living in the UK outside of London. There's far nicer places to live if you're willing to take a hit in salary. (And no, I'm not British.)
        pjc50 12y ago
- JimmyM 12y ago
  > Prices are dropping around the country. > London prices are forcing people away from living in London. Businesses are moving away. Wouldn't this force prices higher across the country? As someone living in Bristol, I have to say that there's been a (noticeable) influx of people from London, and that this is what I believe has forced local prices up to the point where many can no longer afford to stay. Friends of mine, who are local (I am an Essex import), have scattered as far as Darwen and Bournemouth.

matthewmacleod 12y ago

I don't think you achieve much by 'letting it burn,' as it were. All you do is force a large number of people into a bad financial situation – that's not good for anybody. The market needs correction, but it needs to be well-managed. That basically means long-term house price stagnation and investment in social housing to remove the incentives for buy-to-let landlords and multiple property owners.

justincormack 12y ago
Property is a zero sum game. People without houses lose the equivalent in future spending as homeowners gain. So propping up a market is directly taking money from the young and increasingly old non homeowners. So not doing anything is putting a large number of people in a bad situation.
- pjc50 12y ago
  Zero sum, unless more houses are built...
- notahacker 12y ago
  Property isn't quite a zero sum game; as the last few years have show the overall losses from a crash outweigh the benefits of lower prices and greater liquidity to people without houses (especially if the result is that people without houses can't get mortgages even after the prices have fallen) That's not to say there shouldn't be more pressure put on property price appreciation, not to mention confiscatory levels of capital gains tax on property speculators that aren't tax-resident in the UK. But inducing a property price crash (as opposed to slowing property price inflation) would be a bad move for the economy as a whole, as well as electoral suicide in a country where the majority of the population have a mortgage or own their house outright.
  - lentil_soup 12y ago
    Doesn't "losses from a crash outweigh the benefits of lower prices" depend on who you're talking about?. For me this has to be looked at from the point of who it affects the most. A person that already has a house is much better suited to "take the hit" of property prices than someone that doesn't have one (in general terms). Obviously you have to manage it, but in the end you should strive to protect those that are more vulnerable.

prostoalex 12y ago

> What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Exactly. Moreover, the housing value is tied into things such as total wealth (which is why after the 2008 crash the wealth of middle-income and low-income Americans crashed, too much of it was tied up into housing equity), which then ties into economic outlook and consumer spending, which then ties into lending and all things finances. Presidents and parliament members do get voted out when there's a severe contraction in consumer spending and generally depressive feelings about economic outlook.