House Prices

[Mike]

House buyers in England with a combined annual income of less than £60k will be eligible for a free loan worth 30% of their house value in an attempt to boost the economy and housing market.

Personally I think it is another misguided effort to shore up an economy, it increases the tax burden on everyone when they try to store up something that needs to go down in value (or wages need to naturally go up?!) and balance. The result. Obvious really, the value of houses will rise unnaturally by 30%, we will be in a worse position because people will be even less able to afford to buy.

I think we need to get over the obsession with house ownership as a country. Yes it is nice in one way but as Lizzie and I are discovering, it can be expensive when you need to maintain the property.

[Andy]

On the whole I agree with you Mike. What else do we ever buy that we sell on for as a profit? A new car? Nope. Furniture from Ikea? Nope. Etc, etc, etc.

The only thing that we are ever really bothered about a house is whether or not it is comfortable enough for us, suits us for travel and work and if it is in a decent area. If it is then we will keep it that way and renovate it when we feel like it. I know some people who live in the middle of Higher Folds and they think it is great and say they wouldn't live elsewhere because it has everything they need. Of course I'd like to live in a mansion/stately home with views to the sea and surrounding countryside but that is unlikely to happen and besides I like where I live. I know how much I have spent on this house and I am apparently still in profit but that doesn't mean I am not going to do up a room because it will put me at a loss, that is ridiculous. Eventually we'd like to move but not for the sake of keeping up with the Joneses, we'd like to move to a more relaxed village when we're about 50/60 because we like the idea of country walks, etc.

The only thing I would ever say about renting is that I always considered it to be 'dead money' and it annoyed me not being able to paint the porch and front room a decent colour instead of that horrendous bright illuminous yellow that the owner had put in. Plus, it is nice to say ''This is my house''.

On the subject of this new loan, I am not sure but I don't really trust it. It sounds like it could plunge people further into debt because if they are struggling with repayments to warrant a massive loan then they have presumably not bought sensibly in the first place and money that is considered easy to get will probably easily go on material items.

[johnriley1uk]

House prices may be falling, but if we buy a house to live in that doesn't really matter. Eventually prices will rise far more than they fall anyway, but we can only realise this value if we sell.

If house prices fall then first time buyers sghould find it easier to get on the housing ladder, but unfortunately at the moment the banks don't have enough cash to fund this. That's the real problem.

The solution is probably do nothing and the market will eventually sort itself out all by itself. A reduction in interest rates might be helpful as UK rates are far too high compared to other countries.

[Mike]

But we also have the rampant inflation which is why the interest rates need to be so high! We are stuck in a Catch-22 situation really, lower interest rates and inflation goes up or lower interest rates and the economy picks up.

The problem with economy is its part science and part vodoo. With the best will in the world I don't believe that we have the ability to predict the system due to the chaos influence that is human stupidity. Northern Rock is a prime example. Government says we will guarantee your savings yet people still ran on the bank trying to withdraw all their cash thus making the company's situation massively worse. Everyone was working on the principle that 'I don't want to be the person who loses everything'.

PS By everything I suppose they mean all but the first £35k - obviously not too much of a problem for me! lol, not like I have any savings with NR anyway.

[johnriley1uk]

The government might have said it would guarantee the savings, but when it comes to the crunch and you try to make a claim wait and see how long it takes and how they wriggle and squirm their way out of paying up. I do not trust anything this government says.

Did you hear the Dithering Chancellor on "The World at One" yesterday? A dismal performance. They obviously have no idea how they will pay for the rescue package for housing, apart from "changing their priorities" or in other words taking it from somewhere else.

[liz.brownlloyd]

The prices around here seem to have fallen, but only to the level they were two years ago when I was originally looking. My neighbour has taken his off the market as it wasn't selling but he was being plain greedy - buying a property to sell it on for 10k more within the month and then the property sat on the market for a year. I would of course want as much as I could for mine (who wouldn't) but I also understand you have to be realistic...

[mr_e]

From this decent paper (pdf) that covers a few issues, pretty good considering it was written in 2005.

"Seen from this perspective, the performance of the UK housing market has been lamentable. The current stock of housing is too small and is increasingly located in the wrong parts of the country. House prices have been volatile, conferring windfall gains on those lucky enough to buy at the right time, and catastrophic losses on those who bought at the top of the market. Lastly, large regional disparities in prices thwart the inter-regional migration of people and firms, leading to mismatches between supply and demand for different kinds of workers in different kinds of areas."

As ever, the government are pissing around the issue: under-supply of housing. They'd do better to make sure builders and local authorities get the finance they need to continue building houses that people need (as opposed to expensive flats that sit empty) given the current lack of credit. There's a real risk of cementing a lot of financial inequalities for at least a generation if they screw this up.

Like John, I'd like to see a natural correction with minimal government intervention. That and a change to the "houses as homes" mindset which too many people seem to lack.

[Mike]

You can now get an apartment in Manchester for £124,500.00 or £99,950 with an eqity share! This is a new building too which seems to be a good price, though saying that I have not managed to see inside yet!