This is the thing I never see addressed. Wouldn't fixing the housing crisis necessarily involve slashing down property values? Which are for a lot of people their only form of savings?
Genuine question by the way, I would like an answer.
Genuine question by the way, I would like an answer.
It's fake savings unless you are speculating on properties.
Most people only own the place they actually live in and only resell to buy another place. A general property market crash doesn't affect the value of your house compared to other house so it's mostly neutral in this regard.
Of course people who borrowed before the crash will be in debt for longer than people who bought after but that doesn't actually change their debt situation. You might say it's unfair but well, not wanting other to be better of doesn't seem like a good reason to not solve the housing crisis.
In the end the only people who trully stand to lose are multi-owners but they are a significant part of the problem in the first place so that doesn't make me sad.
And that you will be able to keep the expensive property with expensive costs. Plus compare if living in the expensive vs cheap place gets you more savings...
No, it does not make sense. I can see holding a property for a child, but not as retirement.
Using properties as store of value or betting on them becoming more expensive have too many externalities.
Your case for exemple is directly leading to people actually living and working in the less expensive places being displaced by retirees from the city which is very much undesirable for local life.
This is true, but it also creates vacancies in the cities. The retired have to live somewhere..
If you're in negative or reduced equity your mortgage costs can increase dramatically when you refinance. This alone can easily cripple a large % of the population and tank the consumer economy
Of course that doesn't eliminate the economic impact. It just shifts it elsewhere.
An decent case can probably be made for the government to take on such loans and offer some scheme to forgive the difference if certain criteria are met.
Forced variable rates are a scam.
I think the premise is worth questioning though: It's true that many people have most of their wealth tied up in their house. But unless they want to substantially downsize, they can't access these savings.
In general it seems bad that it's common for people to have most of their wealth in an illiquid, undiversified investment that they also live in.
I think the solution is to artificially build new cities with ideal logistics. Distant cities inevitably draw away housing consumers but by least influential first and are outside each others influence for NIMBYs.
However to do this would require inflation of other goods, matched by wage rises, which would require actions that the British political establishment is not willing to take.
It's probably only something you can fix across generations.
It would also involve building more houses, which is bitterly and loudly opposed by a subset of home owners. Home owners are also richer, older, and vote much more than the (generally) poorer, younger renters.
The only difference it makes it that if your lender gives more favourable interest rates when your loan to value ratio improves. So if you purchase a house and the price doubles, your LTV is already 50%. Conversely if it drops after you paid off half the mortgage, your LTV might be shit
LTV <50%: 3.75% €2668pm
LTV >80%: 4.15% €2762pm
However, if, over the first 10 years of the mortgage, your house halves in value due to a recession then you won't break the 50% LTV mark until year 15 (2040).
On the other hand, if house prices were to increase by 50% over that period then you might hit the 50% LTV mark within 7 years (2032).
The difference between the total mortgage interest in these two scenarios is €9216. The only thing that changed was the valuation of the home.
This is the core issue with all modern capitalist economies. They rely on infinite unbounded growth.
Obviously real estate prices cannot trend to infinity or the system collapses. You are here.
It's unfortunate, and at an individual level you can't blame people that felt compelled to purchase a home (only one!). However, if people are honest with themselves, they would admit that the only reason they were willing to pay such a high price is because they expected the price to increase. In other words they were speculating. After a certain point, nobody was buying for the actual ROI (i.e. income potential or substituted rental value). Not only was this mistake made, but it was made using massive leverage in most cases.
TLDR; Nobody was willing to admit that they were making a risky investment. A risk that it may turn out that they couldn't afford to make.
Seeing as the olds control almost all of the wealth of industrialized nations, they should as a group be held entirely responsible for paying for entitlements and benefits for other elderly. The young should not be burdened with this. They have more burdens than they can handle already and are soon genetically extinct unless the olds take the boot from their neck.
I have more things in common with any young person from the other side of the world than I have with the olds from my own nation, city or street. It is what it is.
The olds have been waging a vicious economic war of extermination against the young for the entire 21st century. And now the cycle has to stop, because there are almost no more youth to exploit, and will be even less in the future.
No previous generation behaved like the current olds. We have to be much better than them, and let their twisted ways be forgotten.