# House Prices May Fall



## PeteBurns (16 Jun 2004)

"House prices may fall"  says the governor of the Bank of England.

news.bbc.co.uk/1/hi/business/3806961.stm

Did anyone hear this news item?  If house prices fall in the UK, would that have any knock-on effect on us?


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## gimme (17 Jun 2004)

*house prices*

Of course it will effect here.


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## yaddayadda (17 Jun 2004)

*house prices*

Clever fellow that Governor, being able to predict that prices might fall.  I've just heard another prediction - prices might rise.  Now, I wonder who's right?


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## MAC (17 Jun 2004)

*Please be sensitive *

Hey Pete,

Please be sensitive to other people feelings when posting. There's at least 147 people out there who don't like those throwaway comments

[broken link removed]

MAC


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## Guest (17 Jun 2004)

This topic about analysts might be pertinent in this context:


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## PeteBurns (17 Jun 2004)

QUOTE: "Clever fellow that Governor, being able to predict that prices might fall. I've just heard another prediction - prices might rise. Now, I wonder who's right?"

Yes, I realise analysts predictions can vary wildly.  Though when the governor of the Bank of England makes a prediction about house prices it does give the prediction a little more gravitas.


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## Gov (18 Jun 2004)

*direction*

He is in the best position to know whether interest rates are going to go north and how quickly they will go up, so he has to be taken seriously I think


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## Guest (18 Jun 2004)

No matter how much gravitas he has he still can't predict the future any better than you or I or Mystic Meg...


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## N0elC (18 Jun 2004)

From my own limited knowledge of economics, I don't think the Bank of England has had a direct influence on interest rates in Ireland since, oooh, 1979 ?

I could be wrong, though.


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## PeteBurns (18 Jun 2004)

-"I don't think the Bank of England has had a direct influence on interest rates in Ireland"-

Please note from original message, the question was in relation to UK house prices, and if a fall there would have any knock-on effect on Irish house prices.


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## Nostradamus (18 Jun 2004)

*house prices*

The gov'nor cannot see the future in a "Nostradamus" sense of the word.

Though as it is the gov'nor of the Bank of Englands job to make a prediction on u.k. house prices every month (he sets the interest rate), I would guess he is probably better placed to make more accurate u.k. house price predictions than either you, me or mystic meg.


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## Guest (21 Jun 2004)

*house prices*

Not necessarily. The Governor's job is to assess and set the price of MONEY (i.e. the Central Bank base interest rates) rather than the price of PROPERTY. Even if the former may affect the latter it's not his job to predict the future behaviour of the property market.


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## mary (22 Jun 2004)

*house prices*

Mayby it is not his job to predict the housing market but it is his job to keep a lid on inflation and the biggest inflation is house prices.  Fortunately, he has the power to increase interest rates for this purpose.


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## Guest (22 Jun 2004)

*house prices*

Are you sure about that? As far as I know Ireland's main measure of inflation (the Consumer Price Index) does NOT include mortgage costs and so is not affected by house price inflation. I'm not sure if the UK's main measure of inflation is similar. I am not saying that the Governor doesn't take an interest in the property market(s) but I AM saying that he can no more predict future performance of the market(s) than any of the rest of us.


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## Tommy (22 Jun 2004)

*Re: house prices*

Governments (and more particularly their Central Banks) have, at least in modern times, always used interest rates as a tool to stimulate or inhibit economic activity. The idea of inhibiting economic growth may seem perverse, but it is a basic tenet of economics that rapid or uncontrolled growth in economic activity will cause prices to rise sharply - with seriously negative consequences in the long run. Although property prices may not be included in indices of consumer prices, they are a key component of inflation, and for that reason Central Bankers have always been careful to monitor and control property market price movements.


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## Protocol (22 Jun 2004)

*CPI*

Unregistered user, it is true that the CPI does NOT include the price of *houses*, as they are an *asset*, not a good or service.

But the CPI does include mortgage costs as one item in the large basket of items whose prices are tracked.

They have an average mortgage size, and a typical rate, and this gives an average repayment.

So a rise in interest rates, aimed at cooling the general economy and inflation, would actually push up this small component of the CPI.

Do you get me?

I do like imparting economics, and I know you are an avid listener and learner, and this gives me pleasure.


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## WizardDr (24 Jun 2004)

*Re: CPI*

So as Protocol rightly says ...

as the price of houses goes to the moon 

and if interest rates fell ...

we would be showing lower inflation.

Magic!

[Given the indifference in owning houses here .. and the relatively low portion of household income devoted to purchase ..this makes absolute sense p.s. this refers to residents of the moon]


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