House prices and economic illiteracy

If there is one thing a new political party on the scene in Northern Ireland would need to be, it is economically literate. There is still no evidence of such a grouping.

It was reported last week that it would take at least another decade for house prices to reach 2007 levels again.

This is bad news, but not for the reason the media were hinting at. Quite the reverse – house prices should never reach 2007 levels again – at least not in real terms.

Have we learned nothing? Insane house prices enabled insane borrowing (against the supposed “house value” which turned out to be grossly inflated) which enabled insane spending which created insane debt – which left the country bust.

Already, the UK-wide media are slow to acknowledge that we cannot “spend” our way out of debt – either as a country on bureaucracy or as individuals in shops. The last thing we now need is house prices back to the nutty levels they were at to enable yet more unsustainable spending through unsustainable borrowing.

Even if politicians could do something directly about house prices (a laughable suggestion made on Good Morning Ulster last Friday), they would be keeping them at reasonable levels – frankly, not far above where they currently are. That way, people would have some chance at getting on the housing ladder; while at the same time people would not be able to borrow against a sum twice the real value of their property.

Meanwhile, we need to get back the basics – we do not have the right to drive German cars home to sit on Swedish furniture to watch American TV on Japanese sets while drinking French wine or Italian coffee and phubbing on our Chinese-made Korean-branded smartphone without ourselves trading something in return. Real exports are what will lead to real economic recovery – not unsustainable retail, and certainly not inflated “house prices”.


2 thoughts on “House prices and economic illiteracy

  1. So on a macro scale I completely agree with you Ian. Inflated house prices and cheap money a good economy do not make. However the challenge for me is what this actually means for people caught in the 2008 crash. Thousands caught in negative equity, facing the possibility of not being able to get back in the black before late into retirement or not at al!

    You’re quite right of course that politicians both can not and should not actively interfere with the market, but as I say, it’s the micro, personal impact I struggle with.

  2. The Listener says:

    Quite excellent, comment Ian. Let us see how many supporting blogs you get. The problem with NI is that the height of many parental aspirations for their children tended to have been, “a good job in the Public Sevice”. The aspirations of all should be for manufacturing skills and entrpreneurship. The latter not particularly in the service industries for home consumption but mainly in the export of products made here in Northen Ireland by skilled Northern Irish people. Intellectual products, light weight products with low transport costs, modest prices, made up for, with quantity and quality of production and sales, and world beating heavy industrial products which are competitive. Once upon a time that was ships, and industrial machinery. Might only be achieved now with investment and a work force ready to take low wages for the general good, but perhaps that is “pie in the sky”.

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