Zero Inflation How Does It Affect Land Investment And The Housing Sector-diying

Real-Estate Deflation can sound good to consumers ears, but it also alters economies and investment decisions. UK deflation is new and housing investors need to pay heed. The UK is in a stage of exceptionally low inflation – even deflation in some sectors – which any student of macroeconomics knows has its pluses and minuses. Consumers love paying lower energy bills, but some businesses suffer if they have to cut prices to attract buyers. Borrowers suffer if they are paying back on debt incurred when prices were higher. Investors in new home building might take notice as well. For example, capital growth land opportunities provide individuals and institutions a means to participate in the high demand for housing – finding UK land that can be converted to housing (with council approvals) and establishing homes where the local economy needs them. But with all the moving parts of the UK economy, within the context of global economic shifts (petroleum pricing among them), where to apply money and capital is a question that isnt easily answered. These publications have offered some perspective in 2015: FT.. – The Financial Times online UK economy at a glance provides a rundown on more than a dozen economic indicators, including both inflation (at -0.1% as of October 2015) and the housing market. The annualised house price rise that month across the country was 6.1%, but 5% when factoring out London and the South East. Relative to inflation, the papers economists note, Exceptionally low inflation, driven largely by falling oil prices, supermarket price wars and the strength of sterling keeping down the costs of imports, has been a boom for household finances. It cites the Bank of Englands prognostication that very low/zero inflation is due to external factors and not indicative of a looming deflationary spiral. Relative to home buying, the value of mortgage lending also rose by the largest amount in almost seven years, with 69,300 mortgage approvals in October 2015, perhaps due to demand that was held back earlier in the year during the lead up to the national election. The Telegraph – The papers property correspondent interviewed economists on how a deflationary cycle might affect housing prices. Making distinctions between good and bad deflation, the head of JLL residential research says a bad cycle could include flat or falling house prices. The impact could be a cooling of transactions because existing homeowners wont feel .fortable about trading up; if they do anyway, with lower proceeds from the sale of their old home their deposits will be smaller, forcing some to accept a higher loan-to-value mortgage on their new home. Would you buy if you think prices are going to go lower? posed the researcher. Homeowners like buying into a rising market. But this would require a sustained and persistent deflation cycle, which he says is not yet evident. – This advocacy group campaigning for affordable house prices says that nearly 3.5 million private renters are unable to afford the average house and this number will increase further if house prices continue to rise faster than wages. Citing how the average cost of houses is seven times that of average in.e, it points out how rising home prices have a perverse inflationary effect: Rising house prices hinder the ability to build enough houses because it increases the market value of land, thereby increasing costs to the developers … attract[ing] more speculators to the housing market as … it makes houses more expensive. The proposed solution is to set a target of zero per cent house price inflation, levy a higher rate of capital gains tax on property (to make speculative buying less attractive), liberalising planning policies, and otherwise encourage a zero-per cent house price inflation rate. So regardless of whether you invest in market-traded securities or alternative investments such as land, house building, antiques or .modities, there is this unusual dynamic of very low inflation and perhaps deflation to consider. But the chief property economist at Capital Economics, the independent macroeconomic research firm, told FT.. that the shortage of homes for sale causes an upward momentum defined by tight .petition by more buyers chasing after too-few homes. For the most part, thats what capital growth investors look for in alternatives to securities. No investor can be expected to understand the many interrelated factors of any economy, deflationary or inflationary. This is why third party advice from an independent financial advisor is almost always re.mended. About the Author: 相关的主题文章:

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