Has CMD developed a backbone???
Discussion
DonkeyApple said:
Is it too much to ask our current leading generation to just simply take a hit on the price of their home to do the same?
For various reasons, yes:-- The current generation (and some of the one past) have become VERY materialistic. This will be seen as a slap-in-the-face by many, not something "for the good of the country". Social cohesion is much lower than it was 2 generations ago.
- ...as is the number of couples having children. A lot of people who haven't had kids will be saying "What's it to me? Not my kids/future, not my problem."
- The Sun/Mail etc. have actually increased 'class polarisation', so everyone will be pointing fingers at others saying they should bear the burden, I worked hard for this, yadda yadda...
- The benefits classes wouldn't lose out one jot, so you'd have a LOT of antipathy there (and IMHO justifiably so).
- Economically, you'd put millions of people in negative equity, preventing them from moving house. Which will restrict the mobility of labour.
- Further, that will hamstring the housing market even more than the current inability of many to 'get on the ladder' in the first place.
- ...and worse, you'll be asking Joe taxpayer to take a massive financial hit only a few years after his taxes were used to bail-out the "fat cat bankers in London"...who then went on to pay themselves big bonuses only a year later!
There IS a way to devalue everyone's property equally though...it's called inflation. Which has the added advantage of reducing the country's external debt (albeit possibly increasing our borrowing costs in return). It'll just take 5-10 years to take effect, AND it relies on salaries keeping up (which they're not at the moment).
8 years at the current 5% RPI will be a compound of nearly 50%. If actual-value house prices stay flat, and if salaries have gone up by say 40% in that time, then the real cost of housing will have reduced by 40/140, or about 30%. Which will bring things back to early-2000s levels. Not great, but manageable.
(And yes, I know there are plenty of other risks with inflation, but this is a long post already)
null said:
Only problem with that is that it hits those who didn't splurge on property they couldn't afford, which just perpetuates the same problems.
How? As long as wages keep pace, I don't see how someone renting property gets hit, except with regard to imports...which hits everyone equally.havoc said:
True. I suspect that the majority of people in this country have far more debt than savings though...
The problem would be that 'savings' would also need to include 'pension funds', whether private or state does not matter. So one way or another you destroy most pensions and thus either force people to work (doing what?) well into old age or .... look for ways to otherwise foreshorten people's retirement time.
I don't think people, whether tax payers or tax consumers, would feel good about taking a hit so long as Government chooses or is forced to to barf money on external projects where the wastage is probably even greater than the domestic scene can manage. The problem is, of course, that if we don't pay the EU things might get sticky. And of we are not seen handing out dosh to, say, India then the inward investment that, for example, means Jaguar and Landrover continue to build cars in the UK and rake in US dollars and open markets in Russia etc, may dry up. Of course if we shell out to INdia then Pakistan will expect a quid or two as well ...
The public at large may not fully appreciate the reasons for the largesse even if they believe them.
And in any case all you are doing is resetting the status quo over time and encouraging the same sort of thing to happen again quite soon.
Realistically the last thing that Government wants is for people to stop buying stuff and pay off their debts. They lose too much tax revenue that way and they are already taking as much as they dare from other sources which are less obvious. Brown's raid on pensions funds was a good example. Persuade and cajole people to take out their own pension so the state is off the hook. Then when many have and the pot is in a nice controlled place in the finiaacial services market, purloin some extra dosh by changing the rules of investment and stuff the whole industry overnight.
The property thing is just about attempting to get into and out of the at the right time to make income. Beyond that it's just a lottery on value at time of disposal - as are pension funds when annuities are involved. Or, indeed, almost anything else come to that. Property bubbles will always burst for some of those who are in for a limited time investment. The headline values and 'profits' may or may not be what people believe them to be and 'running costs' are almost universally ignored when people announce how much they have 'made' on their home.
Having said all of that I'm not at all sure that the current 'property owning' generation(s) taking a hit today would result in benefits for future (currently not property owning) generations. They would still have a burden, albeit a different one
However if there is a hit to take issues about social and work mobility could be overcome with a little creative thinking. There is really no reason why 'house swaps' or similar could not be developed in a legally acceptable and cost effective way. After all a mortgaged property at a certain price should represent a similar 'risk' and asset value to a lender so the only cost is admin and maybe a small adjustment to payment.
I can't see the legal bods being too happy with the idea then no market in which to operate would just as bad for them anyway.
Meanwhile many of those likely to be in the higher earnings bracket will be forever (potentially) burdened by a student loan. And lifelong aggravation trying to deal with SLC (and HMRC, etc. etc.
So, worldwide, which societies are not burdened with an overblown belief in the fiscal value of accommodation? They might be good places to be.
LongQ said:
So, worldwide, which societies are not burdened with an overblown belief in the fiscal value of accommodation? They might be good places to be.
Very few in the developed world:-- Prices in N.America are lower, like-for-like, but they don't do 2-bed terraces and 3-bed semi's over there so you end up with a big house as soon as you're out of the cities, and in the big cities apartments are still quite steep, unless you're in an undesirable area...much like the UK!
- Japan prices are silly
- Dutch prices are just as silly
- France/Italy are only 'better' away from the centres of industry...at which point where's the point in moving there.
Pick a developing country and buy there - much like people did in e.g. Croatia several years ago. But then that's speculation, as the developing countries (a) want the "Western dream", and (b) find themselves exposed to Western property speculators who start pushing the price up anyway...
havoc said:
LongQ said:
So, worldwide, which societies are not burdened with an overblown belief in the fiscal value of accommodation? They might be good places to be.
Very few in the developed world:-- Prices in N.America are lower, like-for-like, but they don't do 2-bed terraces and 3-bed semi's over there so you end up with a big house as soon as you're out of the cities, and in the big cities apartments are still quite steep, unless you're in an undesirable area...much like the UK!
- Japan prices are silly
- Dutch prices are just as silly
- France/Italy are only 'better' away from the centres of industry...at which point where's the point in moving there.
Pick a developing country and buy there - much like people did in e.g. Croatia several years ago. But then that's speculation, as the developing countries (a) want the "Western dream", and (b) find themselves exposed to Western property speculators who start pushing the price up anyway...
AstonZagato said:
havoc said:
LongQ said:
So, worldwide, which societies are not burdened with an overblown belief in the fiscal value of accommodation? They might be good places to be.
Very few in the developed world:-- Prices in N.America are lower, like-for-like, but they don't do 2-bed terraces and 3-bed semi's over there so you end up with a big house as soon as you're out of the cities, and in the big cities apartments are still quite steep, unless you're in an undesirable area...much like the UK!
- Japan prices are silly
- Dutch prices are just as silly
- France/Italy are only 'better' away from the centres of industry...at which point where's the point in moving there.
Pick a developing country and buy there - much like people did in e.g. Croatia several years ago. But then that's speculation, as the developing countries (a) want the "Western dream", and (b) find themselves exposed to Western property speculators who start pushing the price up anyway...
The original point was not that there were maybe better places to go for a property deal. Rather that other parts of the world don't have and wouldn't have a care about the sort of fiscal and social concerns that absorb the west. At least not yet.
It seems to me that they, and the baggage that comes with them, might be ones that gain influence and control over global events for the next period of human development.
As for proporty in Germany, a pal of mine bought a place in a small town in what was East German about a year ago. Quite large - 10 rooms iirc. Convenient location and the town seems to offer some great views as does the house form its location.
The downsides are ... that it's a long way from where he currently works in Munich and that although they fully expected to spend on renovation they had not bargained for some structural issues - like a main wall that turned out to be doing nothing much at all and was on the point of collapse. Not good expecially as it is on a hillside.
I suppose you can't expect much for £11k but from an investment perspective the danger would be that the spend to fix is greater than the return expceted should they decide to cash in. Locally there has been movement from the countryside and smaller towns to the larger cities and people rent in the cities - which is a fairly traditional situation in Germany as I understand things. Perhaps having fewer people snarled up in the property ownership dream is part of the reason for the relative success of the German economy?
AstonZagato said:
I believe Germany has not had a property boom in the same way as he rest of Europe.
They did have at the unification of east and west, as the government gave a 10 year tax write off privilege for any property investment made to help stimulate growth in the east, so they could basically buy property and write the cost off against their tax bill for their other income.It was a very sucessfull scheme with huge money going into the property market, however at the end of 10 years, the property market collapsed because the tax benefit went and they found a massive oversupply problem, typical burst bubble scenario.
So whilst the rest of the civilised world was starting out on their property bubble, Germany at the same time hit the end of theirs, which meant they didnt get any growth in that area. It's probably in the long run saved them from what the rest of the world faced in 2008.
DonkeyApple said:
AJS- said:
This is so much less of a problem than many think. Interest rates are low, people are paying these debts down, and a couple of years of relatively high rates of private defaults will not tip us into oblivion in anything like the way a government default would.
I do see it as a big problem. The equity release scenario and excessive use of unsecured debt went on for so long that the whole economy adjusted to this extremely high level of synthetic buying power.
This buying power has been halved but we have not rebased our economy yet. The plan seems to be to hope that we can muddle along and for growth and inflation to do the work for us but when you look around you see that we have far too many shops, retail and office rents are too high, residential property is too expensive etc etc.
When a starter home is up to 10 times the value of starter incomes, when independent shops cannot open on a high street because the rates and rents are too high then it is very clear that we have given ourselves a serious problem by massive over spending and the asset and cost inflation as a direct result.
If Europe defaults then they will have a truly massive advantage over us. Rebasing all their debt while we struggle on.
My view is that through history one generation has taken a big hit to secure the future of all others through direct personal sacrifice.
We should have burned the debt ridden generation to ensure that our kids and theirs had a better economic life than they are going to.
Housing, and indeed property in general has it's own built in problems with supply, especially around the planning laws, that ensure bubbles in certain areas. I could see a 10 year stagnation in house prices, hence a fall in real terms. I believe something similar happened throughout the 1990s in most of Europe.
In that case we really have to find an alternative source of growth, which is a good thing.
AJS- said:
In that case we really have to find an alternative source of growth, which is a good thing.
Something radical like working to produce things people want to buy might be a good start, radical as it may seem.That and repealling the HRA, Equality legislation and removing all but the most clear cut cases of need from the benefits system.
Bing o said:
AJS- said:
In that case we really have to find an alternative source of growth, which is a good thing.
Something radical like working to produce things people want to buy might be a good start, radical as it may seem.That and repealling the HRA, Equality legislation and removing all but the most clear cut cases of need from the benefits system.
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff