What's so good about rising house prices anyway?

House prices are going up. Most people seem to think that's a good thing. But it's not, says Merryn Somerset Webb.

Everything's great. No doubt about it. Why? Because house prices are rising again. All the most recent surveys show strong rises almost everywhere, and that has made a good many commentators very happy. Not me. And, I am pleased to say, not Evan Davis either.

We don't always agree, but when I went on the Todayprogramme this morning, we were, I think, pretty much as one on the subject. A rise in house prices might feel nice to homeowners, but it is economically useless. We know why prices are going up, and it isn't because incomes are rising or because prices were getting too cheap (although in lots of places they have properly crashed and do represent some value).It is because a variety of state subsides from super-low interest rates to Help to Buy are pushing them up. But what use is a rise in asset prices really?

Those of us who already own houses don't gain unless we are downsizing, and those of us who do not own houses don't gain for the simple reason that seeing something we want, but don't have, go up in price is more bad than good.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The average first-time buyer borrowed £112,500 in May. In June, they had to borrow £117,000. What's good about that? I missed the politician who came on after me to talk about all this (I was talking to my taxi driver about how his hourly earnings come to less than £5 even during the Edinburgh Festival), but my guess is that he was pretty pleased with the recent housing numbers. Shame.

What I would really like to hear on the radio is not a politician explaining that he and his party have policies that allow you to buy houses by making debt affordable in the short term, but rather that they intend to leave the market alone so houses themselves become affordable. Different things.You can listen to the discussion here.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.