Should the government "cap" house values?

[Maxf]

All that would happen is that a system would develop similar to that in Russia. You pay the price for the house, plus carrier bags of cash to secure it.

[Jasandjules]

Mike400 said:

What do you guys think?

Just a random thought, but if local councils or whoever had the power to set local house values depending on area / size etc etc etc would this be such a bad thing?

Obviously its way more complicated than that, but if it was possible, could it help us move away from the idea of property as an investment?

Im no communist but to me a house is a place to live and enjoy your free time, and whilst some are obviously better / nicer than others for a million reasons, its still not something that should be an investment...

Are you serious?

No, you can't be serious, no-one is that dumb.. Wait, do you work for the council/Govt?

[bosscerbera]

swerni said:

I agree with a lot of what you said Phil, apart from the bit that said...

bosscerbera said:

If all deposits and loans were written down by that factor, that factor is how much every depositor's account would go down and every borrower's loan should go down too. That would be equitable and in the public interest -

If I understand this correctly, you are suggesting, everyone who was prudent should have a chunk of their savings taken away and it should be given to the very people who spent what they didn't have and caused the problem in the first place?

Already 40% (soon to be more...) of income of prudent people is given to the feckless in the form of handouts, and to the ambitionless in the form of "jobs" advertised in the Guardian. It's a distortion of what, respectively, should be compassionate support for those who need support (not a lifestyle choice) and the need for public services. As if this isn't disgusting enough, we can now look forward to servicing colossal borrowing taken out on our behalf.

For all I know, you might be sat on squillions and a write-down of ??% of it would be a horrible thought. But you've already lost a couple of % (and will lose more) with interest rate cuts...

As for the notion of taking some of your savings to give to somebody with a bloated mortgage... no. Most people who have these vast mortgages didn't get them through fecklessness. OK, there are examples who remortgaged their "profit" out to blow on handbags and holidays but the fact is that most people with big mortgages didn't have a fat lot of choice - the house prices were too high. The banks caused that. Is it to anybody's advantage for someone whose stuck with a £200K mortgage to be saddled with the prospect of paying even more tax and living in a house worth a fraction of the loan secured upon it?

So my argument in alternative to bailouts and interest rate cuts is DEBT CUTS and, yes, part of the revaluation of banks would hit depositors. On the flip side, if you have a mortgage alongside those savings, you'd probably still be better off. Also, if you're a shareholder, you're not diluted out by public debt and can see a profit returning at some point (important for pension fund dividends).

Stimulating lending and spending is WRONG. Has nothing been learned from this clusterfk? Earning (through PRODUCING) and spending within in one's means is what should be encouraged from hereon in.

[Mike400]

bosscerbera - fantastic couple of posts and just the sort of debate i was hoping to stir up, rather than "you are a communist idiot" at no point did i say i agreed with the principle, just interested in peoples take on it. Jasandjules - im not completely serious! I do work for local government and as a consequence i know how useless the powers that be are

[MOTORVATOR]

The ability to control stupid increases in prices of housing stock has always been there for the gubbernment.

Release more than sufficient land for housing development demands, and it would not escalate into fantasy levels. Secondly reduce the bureaucratic nonsense attached to actually developing that land so that it actually delivers.

Supply matches or exceeds demand and prices stabilise. Simple ain't it Gordon you prick!

[Andy Zarse]

The really worrying thing is that there's about ten people on here who've voted yes.

[catso]

Mmmmm let me think so if I pay £500k for a house and then 'Greedy-Gordon' decides it's only worth £200k, I lose £300k.

Am I missing something here?..........

[thehawk]

I have no problem with house values based on desirability and being driven by the market.

However I have very strong views that people should only be able to own a single dwelling, possible 2 if the other is a holiday home. Maybe not prevent people from owning homes but certainly have prohibitive capital gains or other disincentives.

[Fittster]

MOTORVATOR said:

The ability to control stupid increases in prices of housing stock has always been there for the gubbernment.

Release more than sufficient land for housing development demands, and it would not escalate into fantasy levels. Secondly reduce the bureaucratic nonsense attached to actually developing that land so that it actually delivers.

Supply matches or exceeds demand and prices stabilise. Simple ain't it Gordon you prick!

There has never actually been a property shortage:

http://www.moneyweek.com/investments/property/what...

[catso]

anonymous said:

[redacted]

Yep, that's what I was missing.

http://uk.youtube.com/watch?v=ovAfRU2oF8g&feat...

[speedy_thrills]

thehawk said:

However I have very strong views that people should only be able to own a single dwelling, possible 2 if the other is a holiday home. Maybe not prevent people from owning homes but certainly have prohibitive capital gains or other disincentives.

Change the tax structure then to make real estate investment less appealing to potential investors. Of course you'll create a shortage in the long term and drive up prices .

If I wanted to make housing cheaper I'd find a way to increase supply by relaxing local planning laws or offering incentives to increase new developments.

I have never seen price caps work in a free market economy.

[cymtriks]

Another way of putting a cap on house prices is for lenders to lend responsibly.

This is the way it used to be done.

Surely most would agree that as you pass the traditional x3 income limit on the market value minus a deposit the lending becomes progressively more and more irresponsible. Once you get to x6 income or 125% of value or somesuch nonsense then it is obviously irresponsible.

I propose a cap via lending. Lenders can do what they want but an additional stamp duty is payable for every multiple of income over x3, so if you borrow x3.5 you must pay half as much again stamp duty.

Alternatively lenders could be told that they cannot pursue any debt greater than x3 income in the event of reposession on the basis that they are partly at fault for acting irresponsibly.

Either way would work.

[Fittster]

speedy_thrills said:

thehawk said:

However I have very strong views that people should only be able to own a single dwelling, possible 2 if the other is a holiday home. Maybe not prevent people from owning homes but certainly have prohibitive capital gains or other disincentives.

Change the tax structure then to make real estate investment less appealing to potential investors. Of course you'll create a shortage in the long term and drive up prices .

If I wanted to make housing cheaper I'd find a way to increase supply by relaxing local planning laws or offering incentives to increase new developments.

I have never seen price caps work in a free market economy.

Where is the evidence there was ever a shortage of supply?

[speedy_thrills]

Fittster said:

Where is the evidence there was ever a shortage of supply?

The demand increased with the availability of cheap money but supply did not, therefore there was a lack of supply which drive prices up.

Does that make sense?

[catso]

cymtriks said:

I propose a cap via lending. Lenders can do what they want but an additional stamp duty is payable for every multiple of income over x3, so if you borrow x3.5 you must pay half as much again stamp duty.

I don't care what limits lenders might wish to impose but Stamp Duty (along with inheritance tax) should be abolished not increased.

[Fittster]

speedy_thrills said:

Fittster said:

Where is the evidence there was ever a shortage of supply?

The demand increased with the availability of cheap money but supply did not, therefore there was a lack of supply which drive prices up.

Does that make sense?

From my pervious link:

"The Empty Homes Agency estimates there are 840,000 empty homes in Britain, almost 4% of the total housing stock.The National Land Use figures indicate that a further 420,000 homes could be established in disused commercial properties in England, including former pubs and space above shops. So that’s 1.26 million extra homes. And a Halifax survey published in December 2007 found that 288,763 private homes in England in April 2006 had been empty for at least six months – equivalent to 1.6% of all privately owned houses. It hardly all adds up to a picture of a major shortage.

Indeed, even the Federation of Master Builders (FMB) puts the number of empty houses in Britain at around 700,000."

The conventional wisdom is there is/was a housing shortage but maybe its not so clear cut. Prices have dropped a lot over the last 12 months but this is nothing to do with an increase in supply, so maybe there isn't really a shortage.

[trumpet600]

cymtriks said:

Alternatively lenders could be told that they cannot pursue any debt greater than x3 income in the event of reposession on the basis that they are partly at fault for acting irresponsibly.

Thats more like it. Forget my previous response.

Oh, and shoot estate agents through their stupid fat gobs. That will keep the prices from going silly again.

No doubt the crunch is going to bring the houses down even further, which will help those that have been saving deposits for some time, a lot of values will be brought down to mortgage value, while those that constantly chased what they couldn't afford will be the hardest hit.

[speedy_thrills]

cymtriks said:

Either way would work.

Or fail?

What about situations where there is a low income but the individual has a high net worth?

If the company a person works for folds and he has to find a new job but it takes time would you force him or her to sell?

How would you police the illegal secondary lending market you created?

Would you make an allowance if a family on a medium income managed to save very effectivly (i.e. proven to be fiscal responsible) and own their house outright, but then wanted a bigger house that would require a loan greater than the amount they should borrow? Still going to deny them a bigger house?

I can see no point in capping lending if the individual can meet obligations to a far greater extent.

[speedy_thrills]

Fittster said:

speedy_thrills said:

Fittster said:

Where is the evidence there was ever a shortage of supply?

The demand increased with the availability of cheap money but supply did not, therefore there was a lack of supply which drive prices up.

Does that make sense?

From my pervious link...

There is a shortage is people won't sell, regardless of if those properties are occupied or not.

Edited by speedy_thrills on Monday 1st December 23:09

[MOTORVATOR]

Fittster said:

MOTORVATOR said:

The ability to control stupid increases in prices of housing stock has always been there for the gubbernment.

Release more than sufficient land for housing development demands, and it would not escalate into fantasy levels. Secondly reduce the bureaucratic nonsense attached to actually developing that land so that it actually delivers.

Supply matches or exceeds demand and prices stabilise. Simple ain't it Gordon you prick!

There has never actually been a property shortage:

http://www.moneyweek.com/investments/property/what...

There has been a shortage of affordable housing for the last few years.

Just because they're not selling doesn't mean there isn't a shortage. It just means they are priced at a level that is out of reach. i.e. demand has been stifled by escalating prices.

Wipe 40% off current values and guarantee that prices will be stable in line with inflation over the coming years and there would be next to nothing left on the market.

What creates the boom and bust in the housing market is the land value and development costs (outside of actual build) escalating beyond sustainable levels. When we finish this recession we will be back to land values being in the order of 25% - 30% of overall development costs and the end to ridiculous calls on minimum levels of housing association gifts and section 106 monies.