Worried about losing their coveted title to one of the entrants at the heat arranged by the TUC, the Conservatives cover the 'house prices falling' story under the headling "House price fall adds to cost of living fears".
Wot?
Rents are largely unaffected by house prices, so tenants won't be bothered. Those with mortgages care primarily about interest rates, and those who own outright probably do care about prices (but whatever happens, price falls don't affect their cost of living).
But of course, for potential FTB's, price falls reduce their cost of living; they don't have to save up such a large deposit (on top of paying rent); and their mortgage repayments will be correspondingly lower when they do buy, in a couple of years' time.
So, to conflate 'house price falls' with 'cost of living' is f***wittery of the highest ordure. They are opposites, if anything.
Update - re CU's comment: ARLA: Average rent down 9%.
Friday, 6 June 2008
Economic illiterates of the day (5)
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3 comments:
To be fair to the Conservatives (and, believe me, it's a struggle) although the headline is nonsense, the drift of the article is that falling house prices have added gloom to the economic picture[*]. Although this has a truth limited to those who are seeking to flog their houses it is nevertheless "true".
[*] the fall would add to the "gloom that families already feel from soaring prices, stagnant earnings and seemingly endless tax hikes."
one slight quibble. Falling house prices in a market short of supply has led to rising rents.
So it is having effects on living costs; just not of those who own houses.
Rents are the most stable factor in the whole housing market, they rise (or indeed fall) in line with wages (renting is a 'normal' good).
The counter argument to yours is that people who can't sell will rent out their houses instead (as evidence by my local property papers) so that leads to a greater supply of properties available to rent.
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