Thursday, July 31

And they'll pay for this how exactly?

Perhaps it is my pessimist tendencies, but I've been reading the news reports on falling house prices for some time with a "I said so" feeling. Particular sensations of smugness emanate in that I've been shown to have been right when so many of the pronouncements of people who actually work in the industry have been shown to be utterly wrong. While I'm not normally in favour of people's gut instincts and "it stands to reason, dunnit" arguments trumping those with expertise in the field, when the experts appear to be lacking an explanation for why something has suddenly changed for ever (in the housing market case, how can people with a large amount of personal debt already afford to suddenly spend far more on a mortgage without increasing their income), I do have to wonder if they really know what they're talking about.

So here's a rant about some witless reasoning going on in this quote from a BBC News report:

But the National Housing Federation said that it was expecting house prices in England to rise by 25% by 2013.

It said that the number of new homes being built was not keeping up with rising demand as a result of people living longer, getting married later and getting divorced more.

How? How can they rise 25%? Who will have the money? I could afford another 25% per month expenditure, but I'm just about the only person I know who can. The banks won't lend more than they were lending last year, as they've realised that last year's lending was unsustainable. Living costs will have gone up hugely. Wages won't. So seriously - how can house prices go up 25% without people being able to pay 25% more in mortgages? Answer - they can't. People living longer won't mean house prices going up, it'll mean more poor old people unable to pay their heating bills, and more rich old people occupying family sized homes that young couples can't afford to buy - so they won't start a family. Marrying later? Well, they'll be sharing and renting instead, because they can't afford to buy on their own. Getting divorced more? Well, they'll have to move to a smaller house or get a lodger, because people who could only just cover the mortgage on one property between them aren't suddenly going to be able to manage one each. And the people they appear to think are going to be able to suddenly pay all this extra money are the young, the very old, and the newly divorced!

Perhaps the fact that an organisation called the National Housing Federation can come up with some patent rubbish is an indicator of how we managed to get in such a mess to begin with...

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