In the United States, the post-sub prime housing crash has meant that consumer spending has stagnated. People are simply not remortgaging their homes to buy boats or other such consumer goods anymore, because there is no longer the expectation that price rises will pay for the boat. This is because prices are slumping due to excess supply built during the peak years. For people who don’t own property in the United States, this price crash has allowed them to get a foot on the property ladder, which is broadly a good thing. Keynesians might argue that the slump in consumer spending is broadly a bad thing, but it’s not: it was never sustainable in the first place. Boosting GDP through unsustainable spending is a short recipe for bubbles.
In the United Kingdom, the story is different. Property prices haven’t really crashed:
Housing is still expensive relative to wages:
This is because restrictive planning laws during the boom years meant that far fewer houses were constructed. Government, ever since the era of Margaret Thatcher, has pandered to its chief constituency — house owners — by pumping up the money supply, while restricting the housing supply, and creating equity for house-owners.
And because wages are still very low in comparison to houses, young people too young to benefit from the house price boom of the last twenty years currently find it very hard to get onto the housing ladder at all.
But — priced in gold (of which governments cannot just print more) — the housing market is going through a climactic crash:
The current conservative government is relaxing planning laws. This will mean that more houses get built to satisfy demand. That would mean house prices will probably fall priced in wages, priced in gold, and priced in pounds sterling.
For those who don’t own property, this is going to be a great chance for them to acquire it. For property owners, this is more bad news.