House prices - winners as well as losers
The good news for first-time buyers is that if you want a 100 per cent mortgage, Gordon Brown will lend you 30 per cent of it interest-free for five years. He’ll also waive stamp duty.
The bad news is that if you invest in a home of your own, there’s a serious risk it will be worth ten per cent less in a year’s time.
Prices fell 10 per cent in the last 12 months and the experts think they’ll tumble further.
Still, if you’re really unlucky and can’t pay the mortgage, Gordon will stop you being kicked out onto the streets.
His housing rescue package has been condemned as “too little, too late”. But do we really want prices to roar away again?
The housing market may be in the doldrums and a 10 per cent fall in prices sounds bad. But it isn’t when you consider that last year, houses were ludicrously expensive.
International economists say Britain is the only major industrial nation facing a recession and warns the total value of our houses is falling by £1 billion a day.
That’s pretty apocalyptic stuff. No wonder it’s not just estate agents who are demanding that the Government “kick-start” the market.
But a ten per cent fall in house prices should be a cause for celebration not panic.
There’s little to be said in favour of soaring house prices unless you’re planning to trade down or you’ve just inherited granny’s old place.
For most people, most of the time, house prices are relative. If the place you’re in rises in price, so will the one you want to buy. As a result you don’t really benefit from the increase.
Rising prices give us all a false sense of wealth. We think that because we paid £125,000 for a house and we can sell it for £150,000, we’re magically much richer.
But if you move, you discover the next house is much more expensive as well and, actually, you’re really no better off.
The great house price illusion fooled so many of us for so long we can’t imagine a market where prices don’t jump in leaps and bounds.
Mr Brown believes a booming housing market benefits the economy.
But soaring prices mean young couples can’t afford to buy. And Mr Brown has already introduced housing subsidies for public sector workers in expensive places like London and the South East because otherwise there would be shortage of firemen and nurses there.
It’s true that people who hoped to cash in on the value of their homes lose out when prices fall.
But they’re out-numbered by winners – notably first-time buyers who might at last be able to find a home they can afford.
And amid all the gloom, let’s not forget that house prices are still far higher than they were eight years ago.
Average earnings since the year 2000 have gone up 34 per cent. Inflation has risen 50 per cent.
But the average semi in Wolverhampton – even taking the fall over the last 12 months into account – has risen in price by 132 per cent to £122,000, an increase of £69,000.
It’s a similar story all round the Black Country. Flats in Walsall have increased 124 per cent and detached houses by 138 per cent. In Dudley, flats cost £88,000 today compared with just £40,000 in 2000, according to the Land Registry.
Average house prices for the West Midlands rose from £68,807 to £147,046 in just eight years.
So a “correction” was long overdue. The faster house prices rise, the harder it is to keep up without borrowing far too much money.
Greedy banks created this disaster with their mad lending spree. They were selling money like it was going out of fashion, dumping it on people who were just not capable of paying it back.
Where’s the business sense in lending thousands of pounds to someone who hasn’t got a job, or any capital, to buy an over-priced house somewhere no-one wants to live?
That’s what the banks did to get us into this hole. Now they expect the taxpayer to dig them out again.
At the moment, they’re so cowardly they won’t lend anyone anything – they don’t even trust each other. But they’ll get over it.
When they do, let’s hope they don’t encourage people borrow six times their income to finance 110 per cent of the asking price.
Everyone who profited from the boom, having trousered their fat bonuses, is demanding action (that is, money) from the Government to stop them going bust.
The taxpayer is expected to pick up the housing market, put it back on track and send it on its way to a profitable future.
Mr Brown should leave well alone. Let the market sort itself out. Prices may fall further but eventually they’ll hit rock bottom and start to recover.
Unfortunately our Prime Minister can’t stop himself meddling. He thinks that if he is seen to be working really hard, he can postpone the day the bailiffs turn up on the doorstep of Number Ten.
The bad news is that if you invest in a home of your own, there’s a serious risk it will be worth ten per cent less in a year’s time.
Prices fell 10 per cent in the last 12 months and the experts think they’ll tumble further.
Still, if you’re really unlucky and can’t pay the mortgage, Gordon will stop you being kicked out onto the streets.
His housing rescue package has been condemned as “too little, too late”. But do we really want prices to roar away again?
The housing market may be in the doldrums and a 10 per cent fall in prices sounds bad. But it isn’t when you consider that last year, houses were ludicrously expensive.
International economists say Britain is the only major industrial nation facing a recession and warns the total value of our houses is falling by £1 billion a day.
That’s pretty apocalyptic stuff. No wonder it’s not just estate agents who are demanding that the Government “kick-start” the market.
But a ten per cent fall in house prices should be a cause for celebration not panic.
There’s little to be said in favour of soaring house prices unless you’re planning to trade down or you’ve just inherited granny’s old place.
For most people, most of the time, house prices are relative. If the place you’re in rises in price, so will the one you want to buy. As a result you don’t really benefit from the increase.
Rising prices give us all a false sense of wealth. We think that because we paid £125,000 for a house and we can sell it for £150,000, we’re magically much richer.
But if you move, you discover the next house is much more expensive as well and, actually, you’re really no better off.
The great house price illusion fooled so many of us for so long we can’t imagine a market where prices don’t jump in leaps and bounds.
Mr Brown believes a booming housing market benefits the economy.
But soaring prices mean young couples can’t afford to buy. And Mr Brown has already introduced housing subsidies for public sector workers in expensive places like London and the South East because otherwise there would be shortage of firemen and nurses there.
It’s true that people who hoped to cash in on the value of their homes lose out when prices fall.
But they’re out-numbered by winners – notably first-time buyers who might at last be able to find a home they can afford.
And amid all the gloom, let’s not forget that house prices are still far higher than they were eight years ago.
Average earnings since the year 2000 have gone up 34 per cent. Inflation has risen 50 per cent.
But the average semi in Wolverhampton – even taking the fall over the last 12 months into account – has risen in price by 132 per cent to £122,000, an increase of £69,000.
It’s a similar story all round the Black Country. Flats in Walsall have increased 124 per cent and detached houses by 138 per cent. In Dudley, flats cost £88,000 today compared with just £40,000 in 2000, according to the Land Registry.
Average house prices for the West Midlands rose from £68,807 to £147,046 in just eight years.
So a “correction” was long overdue. The faster house prices rise, the harder it is to keep up without borrowing far too much money.
Greedy banks created this disaster with their mad lending spree. They were selling money like it was going out of fashion, dumping it on people who were just not capable of paying it back.
Where’s the business sense in lending thousands of pounds to someone who hasn’t got a job, or any capital, to buy an over-priced house somewhere no-one wants to live?
That’s what the banks did to get us into this hole. Now they expect the taxpayer to dig them out again.
At the moment, they’re so cowardly they won’t lend anyone anything – they don’t even trust each other. But they’ll get over it.
When they do, let’s hope they don’t encourage people borrow six times their income to finance 110 per cent of the asking price.
Everyone who profited from the boom, having trousered their fat bonuses, is demanding action (that is, money) from the Government to stop them going bust.
The taxpayer is expected to pick up the housing market, put it back on track and send it on its way to a profitable future.
Mr Brown should leave well alone. Let the market sort itself out. Prices may fall further but eventually they’ll hit rock bottom and start to recover.
Unfortunately our Prime Minister can’t stop himself meddling. He thinks that if he is seen to be working really hard, he can postpone the day the bailiffs turn up on the doorstep of Number Ten.
posted by nigel hastilow at 7:31 AM
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