House prices will only rise when there is cheap enough finance to allow it to happen.
One problem is the psychology of the UK public - we seem to have some sort of ‘Englishmans Castle’ type of thing going on, when historically this has not been actually true for almost our entire national history - not for the working masses anyway. This attitude is simply a construct of the last 40 years, eagerly fed by politicians with tax breaks on interest repayments and the nasty politics of envy which pushed out to us especially over the last two political regimes.How we all lapped it up too!
Who puts out these stories that house price decline is bad? Ever wondered?
Almost every month certain ‘market leaders’ in the home finance industry tell us either hourse prices are rising, or recovery is around the corner - they consistantly tell us everything is fine, or will soon be fine. Halifax bank, Abbey National Bank are the main culprits. Yet both these ultra major players in the UK mortage market overstreched themselves and have recently changed hands and have had to be bailed out.
Houses can only cost us the amount of finance we can raise, and at one time you could only borrow 2.5 times your income - not surprisingly house prices were static. With a low inflation economy the interest repayments declined, so these organisations ramped up the gearing, so you could borrow 4 or five times your income.
What actually happened is that house prices went up, as did land prices etc The actual effect was that you borrowed more money, but ended up with the same house, or less than you would have done, but now you owe more money out on it.
In the UK, houses around where I am are supposed to be around £170k, but these are very modest homes - my income is not too bad, and I know of nobody at all who could finance that sort of loan across two incomes. I certainly could not.
Far too much of our economy is dead, it is tied up with repayments and not in the purchase of goods and services, house finance has reduced disposable incomes but the increased value of a house can only be realised upon downsizing, or death and inheritance - our Tory party keeps complaining about the low ceiling on inheritance tax which is based upon values of estates including the house - this is usually the largest asset, however if house prices were significantly lower, this would not be anything like as much of an issue.
If we had a proper and prudent system of lending, house prices would fall a lot further, but then the large financial institutions that make large contributions to various political parties would not make as much profit - that irresponsible greedy lending has bitten them in the arse, along with lots of trapped homeowners who were just trying to make their way in life.
With the decline in Western economies of long term secure well paid employment, longer term financial products are inevitably more risky - this is just one effect of globalisation, where everything is cheaper but no-one benefits at the consumer level, we all pay somehow such as less long term security, fewer well paid low skill jobs leading to higher unemployment in the rust belt, its a fact that around some of the former mining villages around where I live are now crime ridden drug havens.
How do we improve it? We need to view our homes as somewhere to live. The value tied up in our homes is a pointless waste of money that the inhabitants cannot realise except by scandalously poor financial products which claim to ‘unlock the value in your property’ but in reality are just a rip-off.
The multipliers given to potential homebuyers need to drop dramatically, yes the value of you house falls, but then so does the cost of the next house you need to buy.
Somehow people think there is a free lunch, they can sell their house for the supposed full value, but exploit the market of the declining value of other people houses for sale. People are greedy and dumb - pretty much sums up the whole housing industry, from the landowner, the builder, the fiancier right through to the hiomeowner who thinks a house is an investment.
