Myth-Busting. Proving Bears Wrong, again.

julieq

digipeep wrote: »

You trolling again Hamish?

Even you know deep down this is a bull trap funded by a desperate government.

Get ready for AT LEAST another 20% drop in house prices.

Why would it be a bull trap when in fact we're back to long term trend?

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julieq wrote: »

Why would it be a bull trap when in fact we're back to long term trend?

Perhaps because if we were using proper economic fundamentals, not what for instance what was announced yesterday, or all the borrowing that's taking place, it's likely we wouldn't be anywhere near the trend.

The price falls have stopped and been kicked into the next parliament, that's pretty much all that's happened, it's likely to be worse though now as the debt we are taking on to kick the problems into next year and beyond have a hefty interest tag attached to them. Time will show us I'm sure.

HAMISH_MCTAVISH

dfh wrote: »

120000 new households from immigration.Hopefully,when the tories come to power next year,they will put a stop to this madness and there will be enough affordable houses for the native population.

Ahhh, the old "The Tories Will Save Us" myth, combined with a bit of the "immigrants are ruining this country" myth.

David Cameron appointed Kirsty Alsopp as the Tories housing advisor. That should tell you all you need to know about Conservative housing policy.

Immigration will continue apace, as the simple fact remains that behind the rhetoric, the Tories know full well that we need immigration on a mass scale if we are ever to keep enough young people around to pay for the pensions of our growing old native population.

Myth Busted.

Next.....

Thrugelmir

HAMISH_MCTAVISH wrote: »

But seriously, it's all about velocity. There is no reason why prices will not continue to rise based on lower volumes. Requiring less funding. And driven by lower supply for many years.

A rising but lower velocity market. The ultimate destroyer of bear memes.

It;s entirely possible. And it;s the bears worst nightmare.

Because rising asset prices means improved balance sheets for banks, meaning more funds available to lend, which leads to rising prices again, and so on and so on and so on.

The virtuous circle, as another poster put it.

Why do rising house prices mean improved balance sheets for banks?

The asset a bank holds is the mortgage (the amount owed) by an individual borrower. The value of the underlying asset that is security has no relevance to the banks until default occurs. Its the ability of the borrower to repay the debt thats important to the bank.

Rising house prices do not allow banks to lend more. Please explain how they this occurs?

In the current market rising prices do little more than reduce the potential exposure on a mortgage default. Banks require people like you and I to deposit money to lend to borrowers.

So still still haven't answered my question as to where the money is going to come from. As banks across the world contract their balance sheets by reducing lending. Its a fundamental issue.

drc

HAMISH_MCTAVISH wrote: »

This is not a boom, and it's certainly not a bubble.

This is merely the first mild stirrings of an awakening housing market.

The boom will not start for many years yet, growth at first will be slow and erratic, like this year has been so far.

But 10 years from now prices will have doubled in real terms, and then they'll double again before the next peak.

Sorry to burst your bubble like that, but thats life.

If house prices double and double again, who is going to afford to pay £500k for a tiny one bed shack? And if there are as many households as you say being created there need to be jobs and money. If this island gets too crowded and the quality of life becomes unbearable, people are going to vote with their feet, not elect to buy a crappy property for the 'priviledge' of living in a crowded country, working all hours in order to pay high taxes and receive very little back. Presumably people will still be able to leave the UK and will vote with their feet for cheaper property, better quality of life abroad. There is nothing so special about this country that would warrant people staying and paying over the odds if they can find a better all-round deal abroad in sunnier climes.

julieq

The long term trend is under 3% annual compounded HPI over 30 years. Why is that unsustainable?

julieq

drc wrote: »

If house prices double and double again, who is going to afford to pay £500k for a tiny one bed shack? And if there are as many households as you say being created there need to be jobs and money. If this island gets too crowded and the quality of life becomes unbearable, people are going to vote with their feet, not elect to buy a crappy property for the 'priviledge' of living in a crowded country, working all hours in order to pay high taxes and receive very little back. Presumably people will still be able to leave the UK and will vote with their feet for cheaper property, better quality of life abroad. There is nothing so special about this country that would warrant people staying and paying over the odds if they can find a better all-round deal abroad in sunnier climes.

There aren't that many places many people can go. You need marketable and valuable skills and in many cases you need to speak another language. This cuts down the numbers to fairly insignificant proportions.

Probably the "that's it, I'm leaving" crowd would find themselves taken more seriously if they actually left.

I think Hamish goes further than I would, but it's a well argued piece. The fact is that most of the counter arguments have been mindless parroting of fairly well worn slogans and basic personal insults, which is a pity.

One thing the bears could get their story straight on is whether we have the inevitability of hyper inflation because of QE, higher interest rates, and all that comes from that, or whether we are to have general deflation, wage cuts, and massive house price drops and all that comes from that.

At the moment it seems the idea is that we will have deflation, inflation, and vastly elevated interest rates all at the same time. It's worst case a la carte really, doesn't seem to make much real sense. Perhaps you could have a quiet huddle on HPC and come back with a proposal?

Thrugelmir

julieq wrote: »

The long term trend is under 3% annual compounded HPI over 30 years. Why is that unsustainable?

Between 1999 - 2004 the compound rate of HPI was 15%.

Creates a distortion on 30 year trend figures. So the longer term trend will actually fall back below 3%. Until the excesses of 1999-2008 are traded out through time. As the market conditions to generate such an increase will never be seen again.

Thrugelmir

julieq wrote: »

One thing the bears could get their story straight on is whether we have the inevitability of hyper inflation because of QE, higher interest rates, and all that comes from that, or whether we are to have general deflation, wage cuts, and massive house price drops and all that comes from that.

At the moment it seems the idea is that we will have deflation, inflation, and vastly elevated interest rates all at the same time. It's worst case a la carte really, doesn't seem to make much real sense. Perhaps you could have a quiet huddle on HPC and come back with a proposal?

QE will generate inflation. Pumping money into the economy will have that effect. The "inflation" could result in a bubble in the stock market or another asset class. Not in goods or services that effect daily lives.

QE will be reversed at some point. What impact will this have?

We have wage deflation for middle earners on a sizable scale.

As for interest rates. With low inflation on the amount that say companies can charge for goods and services. Interest rates are a significant cost at the moment. There's no inflation to devalue debt. Hence why Eurpoean quoted companies have already raised £320 billion in rights issues to not only strengthen their balance sheets but to reduce the cost of borrowing.

It is costing LlloydsHBOS around 3.5% to raise retail deposits. So don't be mislead by a .5% base rate. Money isnt cheap on the markets.

Really2

Thrugelmir wrote: »

QE will generate inflation. Pumping money into the economy will have that effect. The "inflation" could result in a bubble in the stock market or another asset class. Not in goods or services that effect daily lives.

What about the argument that the QE is only filling a hole left by asset deflation.

Basicaly going down a debt plug hole.

Inflation is by no means a given.