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Article What Next for U.K. House Prices?

new_trader

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  • What went into melt down was interest rates.
  • What went into melt up is Government debt.

Naturally, if you want to ignore all the other consequences and potential problems this policy has created and only focus on the aim, keeping house prices afloat for the voting public, then yes, you might conclude it worked. But that is like claiming that the Titanic was a successful voyage because a few of the passengers made it to America.

People are buying houses with Government assistance and interest rates that are artificially being pushed to the floor. It is preposterous to use the supply and demand argument. If it were truly a case of supply Vs demand (because Britain is an island and the population is growing etc...etc) then why has the Government practically BANKRUPTED Britain to keep house prices from falling to affordable levels?

How is the Government going to keep interest rates artificially low without completely destroying the currency?

The cost of living is going up...This is the dilemma.
 
L

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How about foreign money & buyers? If supply doesn't match demand prices will go up.

If more money is made available without a corresponding increase in supply, prices will go up.

This is what has been happening. Look we've had one of the worst crashes almost parallel to 1929 and where are we now? Where are house prices?

I agree about income multiples and buy to rents and all other excellent points raised by you and others, but it is absolutely essential that the housing stock in the UK increase. If it doesn't then prices will continue to go up.


So you guys are saying we are due for another housing crash by 2020 when prices will go in to melt down like the one I missed in the last 5 years?

In fact I had a two year, £200 bet with a fellow blogger and I lost but based on Nationwide figures the housing prices didn't fall by less approx 2% p/a in the worst two years. So all this doom and gloom is well over cooked.

Foreign buyers has been addressed several times and largely applies to London only.
Elsewhere, I still don't understand why you can't grasp the fact that
house prices rising indefinitely leads to lower rental yields or
weakened rental demand (multi occupancy).

Simple fact is house prices continue rising out of sync with income,
yields fall - yes or no?

People simply cannot pay excessive rents, so find solutions to the problem.
So what drives prices higher then?

Most people playing the rising prices game are doing so with leveraged debt.
They are at risk of increasing rates, income / rent ratios and rental demand.

As for 1929 - not even close.
2008 was similar to the first phase of 1929 - which then recovered slightly.
1929 was the initial phase, we have not had a 30's style bear market or anything remotely similar.
http://stockcharts.com/freecharts/historical/djia1900.html
1920-1940:
http://stockcharts.com/freecharts/historical/djia19201940.html
2000 - present:
http://stockcharts.com/freecharts/historical/djia2000.html
 
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Atilla

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Foreign buyers has been addressed several times and largely applies to London only.
Elsewhere, I still don't understand why you can't grasp the fact that
house prices rising indefinitely leads to lower rental yields or
weakened rental demand (multi occupancy).

Simple fact is house prices continue rising out of sync with income, Yes.
yields fall - yes or no?
Not sure as rents continue going up?
People simply cannot pay excessive rents, so find solutions to the problem. Increase supply yes.
So what drives prices higher then? Excess demand over supply

Most people playing the rising prices game are doing so with leveraged debt. Not sure. First time buyers maybe.
They are at risk of increasing rates, income / rent ratios and rental demand.

There are risks yes indeed.

How is the situation any different now compared to 2007/8?
 
L

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There are risks yes indeed.

How is the situation any different now compared to 2007/8?

The situation now compared to the 30's...
What I'm saying is we have not had anything remotely close to
a full 1930's bear market.
If you actually look at those charts I posted you might see what I mean.

As for prices and rents - you say both will continue to rise.
So how do people pay those rents out of wages that are not keeping pace?
Its basic maths...
 

counter_violent

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The situation now compared to the 30's...
What I'm saying is we have not had anything remotely close to
a full 1930's bear market.
If you actually look at those charts I posted you might see what I mean.

As for prices and rents - you say both will continue to rise.
So how do people pay those rents out of wages that are not keeping pace?
Its basic maths...

Oh for goodness sakes LV, now you bringing logic into it. That will never do !:LOL:
 
L

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counter_violent

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Atilla, wot is rong wiff ewe.:LOL:

Do you accept that govt policies are being implemented that artificially keep all kinds of things propped up in an attempt to fool the average Joe into thinking all is well............ or not?


Micawber is known for asserting his faith that "something will turn up". His name has become synonymous with someone who lives in hopeful expectation. This has formed the basis for the Micawber Principle, based upon his observation:

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."

-----------------------------------------------------------------------

Nil desperandum. Never despair. This quotation is commonly attributed to the Charles Dickens character Mr Micawber, noted for his belief that “something will turn up” and that one should remain in hopeful expectation. That this character was destitute for many years does little to support his contention but, as with all good stories, there was a happy ending - but one that first required a change of lifestyle.

Society has changed much in the 160 years since Dickens wrote David Copperfield but there is evidence that many people still place their trust in Mr Micawber’s principle.
This is seen in the housing market, where buyers, owners and sellers often have unrealistic expectations for the future. There is also a host of commentators only too willing to predict future developments based on scant or false information.
An example of this was the analysis of the mortgage lending figures for February. The consensus among commentators was that a 20 per cent uplift in mortgage lending was caused by changes in stamp duty in March, the contention being that this encouraged more first-time buyers and house-movers. A closer look might have revealed that as the comparative was year on year, it may just have been the dreadful weather in December 2010 that made house viewing difficult.

It would be more educational to look at some of the underlying factors before forming a view on how the property market will move in the longer term.

London and the South-east is a special case. Population rises and shortages of all property types are likely to persist, resulting in firm prices at the very least.

Earnings in this region exceed those of other areas but entering the property market will remain difficult for most buyers and many will have to accept smaller properties and possibly longer commutes to achieve their dream.

Elsewhere in the country, there are regional and local variations in prices and availability and here the market demand is greatly affected by the overall levels of economic activity.

Much has been made of lending restrictions and increased deposit requirements making it harder for many to borrow the amount they seek. In fact, some may need to reassess their position. This may also be the most sensible option in the longer term as borrowing costs are not likely to reduce in the foreseeable future and income levels are unlikely to rise significantly until the economic outlook improves.

For those looking to buy property it continues to prove difficult to find a mortgage and, while interest rates seem attractive, lenders are now increasing costs through bigger arrangement fees. Buyers must take into account all the costs when deciding on the most appropriate deal for their needs and look at the real cost to them over the period of their loan rather than relying on the quoted APR, which will be set based on the full term of the mortgage. In short, buyers beware and take advice.
 
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bwge

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The best way the Government can help FTB is to let the market forces to take over and let the correction happen, and if it means a crash then so be it!
we have not had a big enough correction, then the bloody government get in to offer these stupid schemes. They are just making it worse for the future generations
 

counter_violent

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The best way the Government can help FTB is to let the market forces to take over and let the correction happen, and if it means a crash then so be it!
we have not had a big enough correction, then the bloody government get in to offer these stupid schemes. They are just making it worse for the future generations

Govt interference (any colour govt) extends to all areas which in turn distorts all markets to the point where nothing is as it should be, nor as it appears.
 

Atilla

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Back to basics guys...

The only and THE ONLY point I'm making that where ever demand / money comes from or does not come from;

in the absence of any significant increase in housing stock;

prices will continue to rise or remain static at best. :!:



Debating government policies, rent/yields and income/rent/mortgage ratios, looks at demand side of housing.

The 50% of the problem is simply that - THERE ARE INSUFFICIENT NUMBER OF HOUSES IN THE UK TO SUPPORT HUMAN LIFE FORMS ACCORDING TO WHERE THEY WANT TO LIVE.




Atilla is now going out for a walk to enjoy the rain along the beach. Ehemmm that is SE of England in Sunny Worthing. :cheesy:

Life is a beach, make sure you learn to swim... :idea:
 

counter_violent

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Back to basics guys...

The only and THE ONLY point I'm making that where ever demand / money comes from or does not come from;

in the absence of any significant increase in housing stock;

prices will continue to rise or remain static at best. :!:



Debating government policies, rent/yields and income/rent/mortgage ratios, looks at demand side of housing.

The 50% of the problem is simply that - THERE ARE INSUFFICIENT NUMBER OF HOUSES IN THE UK TO SUPPORT HUMAN LIFE FORMS ACCORDING TO WHERE THEY WANT TO LIVE.




Atilla is now going out for a walk to enjoy the rain along the beach. Ehemmm that is SE of England in Sunny Worthing. :cheesy:

Life is a beach, make sure you learn to swim... :idea:

I don't give a tinkers cuss about where they might want to live. They, whoever they are, can just get real, and that will be determined by how much income they allocate to their housing need

People, (i'm being generous here) need to get back to the idea that a house is somewhere to live.
 
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new_trader

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"THERE ARE INSUFFICIENT NUMBER OF HOUSES IN THE UK TO SUPPORT HUMAN LIFE FORMS ACCORDING TO WHERE THEY WANT TO LIVE."


Here are the FACTS! :cheesy:

1981 UK Population 48.5 Million
1981 Av UK House price: £23,730

2011 UK Population: 56.1 million
2011 Av UK House price: £170,000

Gain in UK Population: 15.6%
Gain in UK House prices: 700%
 

darktone

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theres a good chart which i will try to find which plots:
credit supply (mortgage lending)
population growth
house prices

...believe it or not the credit supply (huge increase from the 90s+) tracks the house price (increase) perfectly......our population growth is small, as is house supply & both have little effect on house prices.
Yes, thats exactly it! Around 70% of bank lending (newly created money / credit) goes to mortgage 'lending'. Its not surprising that the two track each other.

encouraging house buy/sell market increases govt tax receipts, but not sure how this gets signed off as a legit strategy when even so called middle classes cannot afford the deposit on a house.

as per most of our infrastructure, our real estate will be owned by rich foreigners (in the SE) in not too distant future.

atilla, not sure what you mean by population demographics? inc immigrants? inheritance tax an issue? i agree re pop growth vs housing supply in london is an issue.

rising house prices

Watch from 11,30.
http://www.youtube.com/watch?v=1BP0RyY1h8w

Where too now? I guess it depends on the games the folks behind the banks wana play.
 
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Atilla

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"THERE ARE INSUFFICIENT NUMBER OF HOUSES IN THE UK TO SUPPORT HUMAN LIFE FORMS ACCORDING TO WHERE THEY WANT TO LIVE."


Here are the FACTS! :cheesy:

1981 UK Population 48.5 Million
1981 Av UK House price: £23,730

2011 UK Population: 56.1 million
2011 Av UK House price: £170,000

Gain in UK Population: 15.6%
Gain in UK House prices: 700%

Factors to consider...
1. Strip inflation from the 700%.
2. 250K increase in population p/a
3. Find out no of properties built p/a
4. Does that figure include migrants or European inflows?
5. Consider more people living on their own?

From 2009 to 2010, only 115,000 new-builds were completed in England

The public sector owns an estimated 40% of larger sites suitable for new buildings. Our aim is to release public-sector land with capacity to deliver up to 100,000 homes between 2011 and 2015. We have already identified sites for over 100,000 new homes. Wow that is a whopping amount of properties to build in 4 years. Great work. :whistling

Over 700,000 homes in England are empty, and around 270,000 of those have been empty for over 6 months. Where are the empty homes? investing £160 million in bringing over 11,200 problematic empty homes back into use

The long-term failure of successive Governments to build enough housing to meet growing need is widely accepted. The 2008-based household projections for England forecast an average annual increment of 232,000 households up to 2033. This exceeds the number of homes added to the dwelling stock in recent years by a considerable margin – in the year ending March 2013 only 108,190 houses were completed in England, 8% less than in the previous year.

Bit disappointed in you NT. I agree with you for a change as in the absence of proportional increase in supply excess demand will lead to price increases. Continued printing of money and other factors lead to rise in prices. Yes absolutely.

However, house price increase unlikely to be proportional to population growth.


Those who are still expecting a housing crash or correction have a long wait for the populace to die out. Natural wastage indeed. ;)
 
L

Liquid validity

Factors to consider...
1. Strip inflation from the 700%.
2. 250K increase in population p/a
3. Find out no of properties built p/a
4. Does that figure include migrants or European inflows?
5. Consider more people living on their own?

From 2009 to 2010, only 115,000 new-builds were completed in England

The public sector owns an estimated 40% of larger sites suitable for new buildings. Our aim is to release public-sector land with capacity to deliver up to 100,000 homes between 2011 and 2015. We have already identified sites for over 100,000 new homes. Wow that is a whopping amount of properties to build in 4 years. Great work. :whistling

Over 700,000 homes in England are empty, and around 270,000 of those have been empty for over 6 months. Where are the empty homes? investing £160 million in bringing over 11,200 problematic empty homes back into use

The long-term failure of successive Governments to build enough housing to meet growing need is widely accepted. The 2008-based household projections for England forecast an average annual increment of 232,000 households up to 2033. This exceeds the number of homes added to the dwelling stock in recent years by a considerable margin – in the year ending March 2013 only 108,190 houses were completed in England, 8% less than in the previous year.

Bit disappointed in you NT. I agree with you for a change as in the absence of proportional increase in supply excess demand will lead to price increases. Continued printing of money and other factors lead to rise in prices. Yes absolutely.

However, house price increase unlikely to be proportional to population growth.


Those who are still expecting a housing crash or correction have a long wait for the populace to die out. Natural wastage indeed. ;)
You didn't bother reading this first time I posted it did you?
http://www.imf.org/external/pubs/ft/fandd/2010/03/pdf/loungani.pdf

Its just another price bubble, simple as that.
The attached chart is from the above PDF.
 

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new_trader

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Those who are still expecting a housing crash or correction have a long wait for the populace to die out. Natural wastage indeed.

I know that house prices have almost zero to do with real supply and demand of housing and almost everything do with supply and demand of credit, which is distorted by Government for Political purposes. This phenomena can be observed world wide. There is nothing to argue about, if the events over the last 10 years haven't convinced you of this then nothing ever will. I'm not expecting a house price crash or correction in terms of £GBP. :smart:
 

Atilla

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You didn't bother reading this first time I posted it did you?
http://www.imf.org/external/pubs/ft/fandd/2010/03/pdf/loungani.pdf

Its just another price bubble, simple as that.
The attached chart is from the above PDF.

Short term price bubbles do occur. Yes.

However, long term fundamentals determine prices. Because the supply of houses are inelastic there is a longer term of adjustment.

One can observe any number of factors in the price fluctuations of houses.

Not disputing all the inputs and factors.

Good interesting article. Read the last paragraph and it simply make inferences pointing out house prices remain above rents and incomes and leads to an uncomfortable conclusion house prices in many countries still have room to fall.

One can not generalize like this imo. Spain has had a major adjustment. UK somewhat of an adjustment perhaps not as much as desired. Factors, countries and pretty much everything else is different.

NT being NT has peddled his angle I know that house prices have almost zero to do with real supply and demand of housing and almost everything do with supply and demand of credit, which is distorted by Government for Political purposes.

Each to their own.
 

new_trader

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"Peddled my angle" And what exactly is my angle? Logic? Facts? Reality? Economics?...or brainwashed ideals? :rolleyes:

Meanwhile, this e-mail from my bank

Help to Buy: mortgage guarantee scheme

We're supporting the government Help to Buy: mortgage guarantee scheme. This will open up more mortgages for people with smaller deposits to help them buy a home sooner.

Fundumentals indeed :rolleyes:
 

Atilla

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"Peddled my angle" And what exactly is my angle? Logic? Facts? Reality? Economics?...or brainwashed ideals? :rolleyes:

Meanwhile, this e-mail from my bank



Fundumentals indeed :rolleyes:

Mate everything with you is one dimensional supply and demand for money.

In your own written words I quoted you...

I know that house prices have almost zero to do with real supply and demand of housing and almost everything do with supply and demand of credit, which is distorted by Government for Political purposes.

Do you stand by your statement?
 

new_trader

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Understanding the supply and demand of money makes me one dimensional now! I suppose that makes me as one dimensional as every Central Bank on Earth.

Prices for everything is driven by affordability. Perhaps you should watch Storage wars as you would learn an important lesson. It doesn't matter how much somebody wants something (demand), they have to have the money to pay for it.

Do you get it? You can rant and rave about a shortage of houses but that still doesn't drive prices up. People who can't afford to buy a house would rent instead, keeping a lid on prices.

How much would the average house in the UK be worth if people had to put down a 50% deposit and there was no Government assistance? How much would a house be worth right now if mortgage interest rates were 15%?

Keep ranting about funnymentals.
 
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