Are rapidly rising house prices a good thing?

[Brendan Burgess]

Robert Shiller has a good article in the Financial Times

The Property Predicament

The idea that rapidly rising home prices are positive is often based on unrealistic expectations

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What would happen if, as so many people are hoping, home prices were to go up dramatically again as they did in the early 2000s? Would such a change really benefit society?

I thought that this had been discussed on askaboutmoney but I couldn't find it.

 

[Chris]

I guess it may not have been discussed as such a discussion could quickly result in speculation on where house prices are going.

My opinion is that the cheaper house prices are the better, but the price should only be set by market forces of supply and demand. This has two main benefits for the economy and society:
1) Cheaper house prices generally benefit everyone, as everyone needs to live somewhere, whether through owning a house or renting. Cheaper accommodation costs are especially beneficial to the poorest in society
2) Real estate is essentially unproductive, and the less money that is tied up in real estate the more is available for productive investment in the economy.

I think many people all over the world are to an extent deluded about the perceived wealth in their home; the value of which is completely irrelevant as everyone has to live somewhere.

 

[dewdrop]

I feel very many people are deeply depressed at the continuous drop in house prices reported in the media monthly and any little uplift might help to lift the gloom.

 

[Spear]

I guess it may not have been discussed as such a discussion could quickly result in speculation on where house prices are going.

My opinion is that the cheaper house prices are the better, but the price should only be set by market forces of supply and demand. This has two main benefits for the economy and society:
1) Cheaper house prices generally benefit everyone, as everyone needs to live somewhere, whether through owning a house or renting. Cheaper accommodation costs are especially beneficial to the poorest in society
2) Real estate is essentially unproductive, and the less money that is tied up in real estate the more is available for productive investment in the economy.

I think many people all over the world are to an extent deluded about the perceived wealth in their home; the value of which is completely irrelevant as everyone has to live somewhere.

Chris, although your points are well made, you didn't address the thesis in the article.The article was about rising prices, as opposed to low prices.

 

[Bronte]

I guess it may not have been discussed as such a discussion could quickly result in speculation on where house prices are going.

.

Exactly.

 

[W200]

I wonder what the effect of massive capital gains tax on profits would have on the housing market . Would it stop the " flipping " and " gazumping " that sowed the seeds of ruin in the past ten years, when buying a house was seen as a way to make easy money as prices rose rapidly.
The idea would be to apply a capital gains tax of 95% on the profits made in selling a house within one year of purchase.
90% on the profits if selling within two years
85% 0n the profits if selling within three years and so on.
The gaps and percentages could widen as the years go on to end up with no capital gains liability after perhaps 14-20 years.
This idea is just idle speculation on my part and i will leave it up to the readers to ponder the merits / or not of such a plan.
Have a nice weekend.

 

[Spear]

I wonder what the effect of massive capital gains tax on profits would have on the housing market . Would it stop the " flipping " and " gazumping " that sowed the seeds of ruin in the past ten years, when buying a house was seen as a way to make easy money as prices rose rapidly.
The idea would be to apply a capital gains tax of 95% on the profits made in selling a house within one year of purchase.
90% on the profits if selling within two years
85% 0n the profits if selling within three years and so on.
The gaps and percentages could widen as the years go on to end up with no capital gains liability after perhaps 14-20 years.
This idea is just idle speculation on my part and i will leave it up to the readers to ponder the merits / or not of such a plan.
Have a nice weekend.

Problem is that capital gains doesn't apply to principal residence.

 

[Brendan Burgess]

I guess it may not have been discussed as such a discussion could quickly result in speculation on where house prices are going.

Hi Chris

Maybe because it was an FT article in a different context, it hadn't occurred to me that it might lead to speculation about Irish house prices.

Shiller is an interesting guy and I think his ideas are worth thinking about.

We could restructure the question and ask "Was the property bubble a good thing?"

The answer is clearly not.

But if we ask if a recovery after a bubble would be a good idea, we probably would get into speculation about house prices. So people can read the article if they wish and maybe discuss it elsewhere.

Brendan