Saturday, 19 July 2008

Great News - House prices Set to Fall Further

According to a BBC interview with the CEO of Citibank there is some great economic news for workers - House prices are set to fall further, perhaps eevn for the next two years. With concern about the steadily rising prices of everything, from fuel to food, that the price of, that other large component of workers expenses, housing, is set to continue to fall is marvellous news. After all, in the last few years the BBC itself has run many stories about the plight of ordinary working class people who cannot afford a home of their own. Now, with house prices falling many more of them will be rescued from that plight.

But, its not just first time buyers who set to be much better off, existing home owners stand to benefit too. Most people tend to move from a less expensive house to a more expensive one. So if say you have a £100,000 house, and were looking to move up to a £200,000 house, you might find that your earnings and savings are not sufficient to make that move up. However, suppose house prices fall by 50%. Your existing house is now priced at only £50,000, but the house you want to buy costs only £100,000. Where before you needed to find an extra £100,000, you now only need to find £50,000, so the fall in house prices has made you £50,000 better off. As I said what wonderful news!

Of course, some people stand to lose. If you have come to a point where you want to move to a smaller house in your later years then the relative change in prices would leave you worse off, but just think how much better off your kids are as a result! And if house prices fall that will affect inflation in general, which always badly affects people on fixed incomes.

Of course, there are others who will lose out. The speculators who bought houses not to live in themselves, but who thought they could screw a profit out of others as prices rose will lose out. But, they are a tiny minority who get what they desrve anyway. Landlords will lose out, both because the Capital value of their properties falls, and because falling house prices means more people can buy instead of rent so reducing rents. Again they are a tiny minority who gets what it deserves. The final group that will lose out are the Banks and other financial sharks that have lent too much money to people - often who they knew had no chance of paying it back - and who thereby pushed house prices up to ridiculous levels that meant many ordinary workers could not afford houses. If those loans go bad as thy have in the US, and the houses they were lent against are now worth less than the loans the Banks and other vultures will make a loss. But again, they and their billionaire shareholders represent a tiny minority, who more than all the others will have got what they deserve.

From where I stand that's a win win situation. Workers gain from cheaper houses, capitalists and landlords lose out. Wonderful news. Yet, despite the fact that the BBC have run all those stories about how bad it is that workers can't afford houses because they are too expensive, the BBC present this news too as though it were bad news. Could it be that their interview with the Head of Citibank, and their interpretation of this as bad news simply tells us from what class perspective the BBC actually views things?

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