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Stephanie Flanders recently commented on the Nationwide saying house prices are the same as they were a year ago (i.e. no longer dropping), but asked if this is 'too good to be true' ... take a look at a few of the key issues raised below for instance:
"... house prices are rising in a market where very few properties are changing hands. As the Nationwide points out in today's report, the housing turnover rate - the percentage of the private sector housing stock changing hands on an annualised basis - is still only 4%. That's not much higher than it was at the end of last year, when literally no-one in the market wanted to do anything. Before the crash, turnover was 7-8% ...
... you might expect prices to carry on falling in a market with such little activity - because usually low turnover reflects the fact that everyone expects prices to fall. But the relationship breaks down if there's only a tiny number of houses up for sale. That seems to have been true for most of this year and it's still true ...
... if prices stagnate, or fall further, there'll be plenty who worry about the knock-on effects for confidence and the economic recovery. But it would be good news for young people who are otherwise bearing the brunt of this economic bust ...
... from an economic standpoint, the rise in house prices since the early 1990s has been a massive transfer of wealth from young wannabe home-owners to the older generations who bought when the going was good. It's worked like a tax on young people -and a windfall to large numbers of the middle-aged and old ...
... One way or another - whether through higher lifetime taxes or unemployment at a crucial time in the career - young people are going to be paying for this crisis for a long time to come. It would be no bad thing if they could at least come out of it able to afford a home".
A good article ... I've haven't read this blog for a while (partly due to poor journalism and partly due to blog spamming from a small minority) ... but having done so today it's good to see the quality of journalism appears to be improving slightly ... IMHO for economic recovery to resume in a sustainable way we need the folly/obsession with house prices to stop, we need to introduce a 'land value tax' into the economic system and challenge planning regulations / restrictions imposed to serve the interests of just a few (i.e. the landowners - e.g. Duke of Westminster et al).
More houses will then be built and young people will then be able to afford a roof over their head, without having to give most of their hard-earned money away each month to bankers in the way of interest. Some of revenues raised from a land value tax could also be re-invested into real value adding activities that create jobs and wealth (instead of manipulating wealth) which would create a more sustainable economy and reduce our debts, balance of payments and trade deficits.
A few areas your report does not refer to however are when interest rates start to rise again from their historic low (e.g. due to inflation from import costs rising with the increasing demise of the pound), continued job losses (and the impact/cost of this to the taxpayer and public debt), as well as lack of opportunities available to young people and the debt we are asking them to take on to go to University.
They will not forgive us, or the leaders who forced this upon them. We must also remember that hard-working people can choose where to live (ie. work and pay their taxes) and can move freely in the EU now too, and as more of them leave the tax burden placed on those remaining will start to spiral upward until they also decide to leave too ... the outcomes are entirely predictable, but an effective intervention strategy from this Government to deal with the problems we face is not.
