There was an interesting poll the other day from MORI, which found only 20% of people agreeing that rising house prices were good for the country, with 57% disagreeing. This was generally reported as being against the conventional wisdom, and perhaps suggesting that increasing house prices might not be a political positive for the government after all.

Regular readers will be familiar with Twyman’s Law – if a bit of data looks unusual or interesting it is probably wrong. If a poll finding is particularly surprising, then be careful of it. In this case there’s nothing wrong with MORI’s poll, but the reality is a bit more complicated than it suggests. It doesn’t take much hunting about to find other polls showing that more people want to see house prices rise than fall. For example, MORI again from their Halifax housing tracker last year found 33% wanted an increase, 23% a decrease, 31% to stay the same. Much more recently this June YouGov found 32% of people wanted prices to rise, 28% to fall, 30% to stay the same.

These polls make the public look more positive about house price rises, but aren’t actually contradictory. YouGov, for example, might show 32% of people wanting to see house prices rise, but add together those who’d like to see a fall and those who like them to stay the same and 58% don’t want to see a rise. More importantly, they aren’t actually asking the same thing. What people think would be good for the country, and what people actually want to see, are not necessarily the same. In a perfect world we might all wish housing was cheaper, but if house prices fell it would bring with it problems of negative equity and more bad mortgage debts in the banking sector. On a simpler level, what’s good for the country is not necessarily the same as what is good for the respondent personally – the YouGov poll went on to ask homeowners what they would like to see happen to the price of THEIR house, and miraculously support for falling house prices vanished! 64% wanted their own house to increase in value, only 4% wanted it to fall. Presumably people would only like to see the price of other people’s houses fall.

Anyway, from a purely political point of view I suspect we are being somewhat distracted anyway. As with so many things, the political impact of issues is much more than just simple approval/disapproval, it is the wider associations. Increasing house prices are a positive because they are part and package of economic growth, associated with a growing economy, the feel good factor and with homeowning people feeling more prosperous and well off (even if in reality we aren’t, as if we sold our houses we’d only have to buy another one at a similarly inflated price!). Falling house prices are associated with economic decline, falling prosperity and negative equity. Perhaps a day will come when there will be economic growth but falling house prices, and perhaps at that point those associations will change. Until then I suspect that rising house prices will continue to be a political good, whether or not they actually are one.


278 Responses to “Do people want to see house prices rise?”

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  1. First.

  2. First?

    I want the price of my current house to rise, and the price of the next house I buy to fall.

  3. House price rises;

    Good – I feel I am worth more, so am more confident to spend some savings with all that equity in the bag. Great for growth.

    Bad – socially bad as pricing young people out of the market and creating a two tier system of people who rent or buy. Also makes to an extent, even state education biased towards the well off, as house prices rise near good schools.

    On balance I think it’s good for the economy, but with some significant caveats.

  4. As a wise, old and slightly dead man once said:

    “It depends greatly on your point of view”

  5. Rich
    Disagree on the ‘great for growth’ bit. House price booms are great for growth in the short run but dreadful for the economy at the end of the debt cycle.

    Property boom = increased lending leading to increased spending = higher asset prices = increased lending leading to increased spending (but largely on financial assets, as they have higher returns than production spending, due to the asset boom) etc.

    Ultimately you end up with a crash as the ‘newly created wealth’ evaporates because it didn’t really exist in the first place (because nothing new was actually produced).

  6. Undeniably, there aren’t enough houses, hence such high prices and that’s where the political debate should be but it’s beyond our politicians.
    With monthly average pay around £2000,monthly average mortgage about £600,government and opposition alike prefer the much easier playground of average energy bills of less than £120 per month .

  7. Having left my compuer on while i dined, my immensely significant posting at the end of the previous thread was ignored. As it was about management of the Eire football team, perhaps for the best.

    On this thread, respondents are simply lying if they say they do not want a price rise of their house. I am astonished that anyone could think otherwise.

  8. When you see my released posting it was ‘computer’ and I suspect the word ‘E*re’ that triggered it. Clearly still a dodgy subject.

  9. Oh, I also used the word ‘ly*ng* -that was the one!

  10. too many people on one small island is the problem ….

  11. @Howard

    With Keane and O’Neill in charge, those half time team talks will not be quiet….

  12. “and with homeowning people feeling more prosperous and well off (even if in reality we aren’t, as if we sold our houses we’d only have to buy another one at a similarly inflated price!)”

    ———-

    This is often said, but in reality, there are numerous ways one can in fact be financially better off with rising house prices.

    1) You can downsize and release a greater amount left over in the process.

    2) You have a greater amount to leave to your kids

    3) You can release more equity in the meantime, say to help grandkids with tuition fees etc.

    4) You have more equity against which to borrow for starting a business, say. Or many other things…

    And, rising house prices gives an increasing advantage over all those who cannot get on the ladder, or who can just about, but with much higher repayments…

  13. My point is very simple – increased house prices = increased personal debt to own the same thing.

    Increased personal debt to fuel an asset bubble only leads to one thing – at some point the bubble will burst. Just like the banks with assets tied to sub-prime mortgages, the correction is painful and damaging.

    I would love to see a decade of below inflation house price rises.

  14. Surely ever rising, above inflation house price rises is akin to a dodgy pyramid scheme.

    Those who get in early do well, those who get on just before it collapse pay a high price.

  15. And guess who mostly got in earliest? Babyboomers!!…

  16. I read today, may have been in the Indie, that there’s a twenty percent chance of interest rates having to rise in 2015. Nice VI present for whoever wins the election…

  17. Well I suppose rising house prices are politically gold as long as you are not left holding the ball when they inevitably collapse, along with the inevitable collapse of the banks who are left holding loans with no collateral.

    At that point you lose the next election. You can blame the bad bankers, seems to have worked last time. But maybe that only works when the whole world collapses at the same time. When it is only the UK that has a housing bubble, and only the UK that has a resulting collapse people may look beyond the bankers next time.

    Short term political gain with devastating long term consequences for everyone.

    I wonder who will be holding the ball the next time it all collapses? It may just make them unelectable.

  18. How about: do people want to see house prices rise by say 10% per annum if in response the BoE acts and the monthly interest they pay on their mortgage increases by say 100% (or maybe even more)?

    Answers (based on direct self interest alone, ignoring interests of your wider family etc):

    – for homeowners with no ambition to move to a more expensive home and a relatively small or no mortgage – Yes (especially if you also have savings)

    – for homeowners with ambitions ultimately to move to a much larger home, with a mortgage already close to their affordability limits – Probably no

    – for any tenant, except perhaps pensioners living off the income from large savings of their own – No

  19. Unless people plan to sell up and leave the country, how is it good for anyone?

    If House A goes up in price, so does House B.

    There is no real rise.

  20. too many people on one small island is the problem ….

    —-

    Not so.

    Too many unused properties. (eg. Flats above shops, office spaces etc.. )

    Too strict planning laws in the greenbelt.

    Too many people down south and not enough up North.

    Too much short-termism on behalf of successive governments.

    There are many reasons that have led to house prices being too high.

  21. On this thread, respondents are simply lying if they say they do not want a price rise of their house. I am astonished that anyone could think otherwise.

    —-

    I do not want to see house prices rise.

    And I am not lying.

  22. MYTH11
    Like the colour (or rather Mrs H does -her favourite). I thought AW was to scotch them but I like them. It makes no difference to how unbiased people are but if someone coloured is so not partisan, one appreciates that even more.

    Neil A comes out blue on my computer so I have him clocked anyway.

    What are the 11 myths or is this another cricket association like Crossbat11?

  23. This is often said, but in reality, there are numerous ways one can in fact be financially better off with rising house prices.

    1) You can downsize and release a greater amount left over in the process.

    2) You have a greater amount to leave to your kids

    3) You can release more equity in the meantime, say to help grandkids with tuition fees etc.

    4) You have more equity against which to borrow for starting a business, say. Or many other things…

    —-

    [snip]

    1. You can only “downsize” to a smaller property or a poorer area. Who would swap a detached house for a terrace? Who would move to a worse area?

    2. As prices rise, the amount you leave to your kids remains the same. There may be more zeros on the end of your will, but just as many more zeros have been added on the end of house prices.

    3. And if you do that and interest rates rise? You could lose your home. And where do your grandchildren hope to live with prices going through the ceiling?

    4. As for 3.

    House price rises = A BAD thing. Why do only the British fail to see this? Other economies are built on real growth.

  24. TOB

    Not so.

    At least you haven’t lost out and if you have a mortgage, the debt to capital percentage is lowered. That’s what folk want, security.

    Besides all that and what Carfrew said, you must recognise human nature.

  25. Does it make any sense to talk of “rising house prices” in a general UK context?

    There is the phenomenon of London and its environs. and that bears little resemblance to market conditions in most of the rest of the country.

  26. too many people on one small island is the problem ….

    Do you say that about Hong Kong too?

    maybe too many people on one small planet is the problem….

  27. TOB

    We are festooned around here (SW) with early retirees who sold their terraced house in South London, bought a detached property in ‘the leafyness’. Not a poorer area, just a preferable one.

  28. Old Nat
    You are spot on , huge areas of the rural north,midlands ,Wales and South west are seeing negligible increases, if not actual decreases in house prices. I presume it is the same in Scotland outside certain urban pockets?

  29. I think the feelgood factor that arises from rising property values isn’t so much to do with what the owner gets, or could get, when selling their home, but more about the ability to liquefy equity. Accordingly, houses become not so much homes and places to live but cash cows that deliver disposable income to spend on the good things in life.

    Some may define this as wealth derived from unearned income, and I have some sympathy with that view, but what cannot be argued is that soaring house prices do have a marked reflationary effect on an economy, especially one such as ours where such a high proportion of the population own their properties. Politically, it’s always tempting, especially in the short term to initiate and then preside over a property price boom and both Thatcher and Blair reaped dividends from doing so. That said, following the crash in 2008, I think the canny politician might spy a poisoned chalice now.

  30. @crossbath,

    Agreed.

  31. SSE’s director of Policy and Research is quoted in the Telegraph as saying “We are heading for a critical period. We worry that [the Department of Energy and Climate Change] and National Grid have been over-optimistic…”

    SSE think that National Grid’s estimates of peak demand are too low, as they are now 2GW below actual demand experienced in December 2012, and that they are also counting on 1.5-2GW of supply from generation stations that SSE don’t believe will be available this winter.

    If SSE are correct, this will be very big news. They are expecting to see sharp price spikes as the markets respond to supply shortages, and they also expect National Grid to have to take big industrial users off line in order to reduce demand to prevent uncontrolled blackouts.

    This is perfectly possible as many large users have interruptible supply contracts (they pay less, but could have supplies cut at short notice) but this isn’t helpful for industrial output or general business confidence.

    There is a need to be cautious in interpreting SSE’s statements, as they are a major generator and are currently campaigning with the other 5 big companies for greater capacity support (price guarantees etc) so they have a vested interest in hyping up fears of under capacity, but even so, even if they are only half right we’re in some trouble.

    Related to energy matters, the Guardian today reports that the big 6 earn £36m pa from interest on customer balances when we are in credit.

    Ovo Energy are an example of a small energy supplier that tackles this by paying customers interest on bills in credit – they give 3%, which is very favourable with most bank rates.

  32. EWEN LIGHTFOOT

    The last report that I saw was that Scottish house prices had remained pretty stable over the past year.

    Like any country, there is variability within that. Economically declining areas like Ayrshire have tended to drop compared with vibrant economies on the East Coast.

  33. It’s impossible to have a proper discussion about house prices without exploring the role of money creation by the financial industry, but seeing as I.have gone over this many times and have no wish to bore the crap out of you(plural, stupid English doesn’t have a plural’you’), I will resist the urge to pontificate at length

  34. RinN
    Thanks.

    Crossbat11
    Who are these canny politicians then?

    I see no end to the boom and bust cycles whatsoever and I see no evidence that politicians, canny or otherwise, will not continue in the ways previously followed.

  35. Well there’s ‘yous’ if you’re from Brooklyn and ‘y’all’ for US southerners.

  36. RiN

    “Youse” is a plural form of you that still exists in a number of types of English. I’ve heard it in the USA and Australia – as well as the West of Scotland.

  37. Brummies make the singular with ‘yow’. What do they do with plural? Scousers say ‘yous’ don’t they?

  38. But why is English so backward that it doesn’t have a plural ‘you’, it must be the only language that doesnt

  39. RiN
    You lot !

  40. Richard in Norway:

    “You” is the plural – with “thou” being the singular. Since the latter dropped out of favour with most people, “you” has been used for both.

  41. @TOB

    Yup

  42. @Kitsune

    I always though ye was the plural of thou.

    House prices

    Having been a home buyer/owner most of my life, I moved into private rental when I divorced and intended to stay that way, with proceeds of 1/2 ‘matrimonial home’ invested in something more useful.
    But prices where I live (Brentford) have gone up about 10% in less than a year. Rents will follow and I have no real option but to buy.
    My daughter (24) is determined to take advantage of the ‘help to inflate’ scheme – she’ll carry on living with her mum, use the scheme to get into buy to let and flog it after the election for the capital gain. Meanwhile the banks take the risk guarantee from the taxpayer (kerching) and ramp up the costs of supported mortgages way above normal ones (kerching again).
    And another generation conclude that it’s a mug’s game to put money anywhere but houses.

  43. RiN,

    People often think that English is more informal than its continental counterparts. But…

    “you” = “vous”, with no modern English equivalent of ” tu”.

    In days of yore they used thee (s) and thou (pl).

    These later morphed into ye and you.

    So ye see our language is not so singular after all.

    Paul

  44. @Kitsune

    I knew thee would say that…. :-)

  45. Guymonde – according to the Concise Oxford Dictionary, which I checked before posting in case I was havering, “you” was originally restricted to accusative and dative plural uses, but gradually replaced “ye” as the nominative plural, coming into common use to replace “thou” and “thee”.

  46. @Guymonde

    Yup

  47. Kitsune – I bow to your erudition and research

  48. Thanks for the etymology lesson, this site is amazing

  49. Guymonde – no need to do that! I just rather like languages and dictionaries and rarely resist an opportunity to look things up.

    :)

  50. ‘Yous’ is North East, not North West.

    Having spent a week with four Geordies last Easter, I was finding myself saying it, much to the bemusement (and amusement I suppose) of my other friends, and family.

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