I follow the logic of the government when they say they must cut the cost of housing benefit. The sums of money are enormous and nobody wants to be paying taxes if the money is being wasted but how can we judge if money spent supporting people and helping them stay in their homes is in all our interests.

There is talk of a mass exodus from city centres, particularly for London. There is talk of many people losing their homes. There are two conclusions I believe can be drawn from this. House prices are still too high and rents are often beyond what the true market can bear.

We can now also confidently say that owning property is not for everyone which is rather interesting since it was a Conservative government that went to such lengths to encourage people to buy their own homes.

The breaking down of financial barriers with the associated encouragement to buy. The previously unheard of availability of mortgages for all and the the selling off of much of the publicly owned council house stock around the country, in a wave of new home ownership, contributed to the large growth in house prices to help get us to where we are today.

So where are we today? House prices are beyond the reach of many first time buyers because they are unable to raise the larger deposits required or obtain mortgage funds.

It can be no coincidence that the stabilising of house prices and the difficulty of raising a mortgage has coincided with the halt in the upward march of house prices. The cost of buying a house has had very little to do with the actual material cost of building a property or it’s true value. Demand was created by the availability of mortgages and the generous terms that were offered to anyone looking to buy.

Unfortunately the flood of available loans pushed prices higher and higher which was great if you owned property but was hard for first time buyers who took on huge debts to buy a house. Many of those people who did what everyone told them was the right thing, i.e. invest in a home of their own are now finding themselves struggling to pay the bills.

For those who have found themselves made redundant or have become medically unfit to work the problems are even greater and the stress such problems cause can only add to their difficulty in finding work.

We live in a world where your financial worth is far more important than anything else. To business and largely to government, you are just a number on a computer roll. As a person you simply do not count unless you are buying things and paying lots of tax. It seems harsh but voters problems only really matter when there is an election looming.

The country faces huge problems balancing the books and it is important we do so. Pushing people out of their homes is I suppose one way to do it though it is one I am, to say the least, very uncomfortable with that policy.

It is ridiculous that a taxpayer on a low income has to help foot the bill to keep a family in a large home that they could never afford to live in. We do need to find a balance.

So, to come back to my original headline for this article. Will reducing housing benefits reduce the price of houses? It seems certain that it must. When the government takes away support for a sector of the homes market that must have an impact.

It will reduce average rents and this may well lead to a reduction in let properties and that reduction will lead to more homes being put up for sale. Those landlord owners will make sure their properties will be priced to sell. i.e. lower prices to sell quickly. That must surely reduce the balance of supply and demand and cause lower house prices.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Do you want to get a new mortgage? The news that Northern Rock is about to start lending again to the tune of £14 billion is good news for the housing market and most likely good for the economy as well. The question is whether there are the potential buyers out there looking to buy houses.

After months of falls in the value of property nobody knows how much further that might continue and if most people think that it will, they might be unwilling to commit to buy right now. There is the additional problem that with the economy balanced so precariously people are concerned about their prospects for the future and the possibility of suddenly finding themselves unemployed and their income reduced.

The Northern Rock mortgages will help improve availability of mortgages and it may signal a start to turning things around. There are many people who do feel secure in their jobs and will be ready to buy houses and it may be that we are nearing the bottom of the slump and it could be a good time to be buying but there are many questions and few answers right now.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

What is the value of a house? A year ago it may have been one figure but today it is very different. I have heard it said that news reports and commentators reporting the fall in values of property are making the market worse but those people were not saying anything when the market was being talked up and news reports were saying that house prices were rising at astonishing rates.

About eight years ago a friend who was saving very hard to buy a property found property prices were rising faster than she could save her deposit. She was a typical first time buyer and those first time buyers are at the heart of the property market. If the first time buyer could not buy then house prices should have stopped rising. The rapidly increasing house prices were leaving more and more first time buyers behind and there was no way an average person could get on the housing ladder.
We then had the era of easy credit with 100% mortgages and self certified mortgages and a surge in buy to let which opened the floodgates and new buyers poured into the house buying, and investing, market.

As I write this I hear the housing minister on the radio talking about helping first time buyers raise their deposits to help them buy a house and a year or two ago we heard the prime minister talking about helping first time buyers but all these plans do not solve the problem. A house price should reflect the market and if nobody can afford a house then that value is overpriced. The government can try to support an unrealistic price but ultimately that is doomed to fail unless they plan to support buyers forever.

The problem with the housing market is that hopes, expectations and easy credit raised prices far beyond the true market value of property. The sudden disappearance of no deposit and low deposit mortgages took a huge chunk of potential buyers out of the market which imediately reduced the numbers of first time buyers who could afford to buy with the obvious result that prices started to slide.
The housing market has to find it’s own level. Until buyers have the required deposits, which is no small matter at current house prices, and they can get mortgages for the property they want to buy, prices will stagnate or fall further. When buyers exceed sellers house prices will begin to rise again but everything suggests that prices will fall further before we get to that more stable position again and perhaps we would all be happier if house prices did remain stagnant for a few years so we could treat houses as homes rather than investments.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)