Senin, 02 Februari 2009

House prices and 'saving'

The good news about house prices (see yesterday's post) is reported again today, with the usual daft crying and carrying on. I won't go over that again, but one particular bit of reportage has particularly nettled me.

Clancy Yeates in the Herald characterises falls in house prices as 'eroding the wealth households have stashed in bricks and mortar.'

Wealth stashed away in bricks and mortar conjures images of gold bullion in the wall cavities, but it's actually not too bad a description of the strategy pursued by many in the housing market. Let's be clear, though: while there is a degree of literal truth in this description (some households really have bought more bricks and more mortar and built great big houses), the 'stashing of wealth' is figurative. What households have done is spent a lot on housing – they've paid higher prices – and they call this 'wealth' because they think some other household will come along later and pay even more.

Yeates goes on:

The slowing property market is welcome news to first home buyers, but it also lowers the net wealth of property owners because many households put most of their savings into their home.

Okay, I have to draw the line at describing this strategy as 'saving'.

Spending lots of money – that isn't saving.

Borrowing lots of money from the bank to do so – isn't saving.

Paying lots of interest on all that borrowed money – isn't saving.

Boo to Clancy Yeates and everyone else who tries to bestow dignity upon house price speculation by calling it 'saving'.