Some facts for a change, instead of speculation......

Really2

the_ash_and_the_oak wrote: »

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An increase in people alone is not an increase in demand imo. An increase in people with access to sufficient credit is an increase in demand. The former does not necessarily lead to the latter. The latter can occur without the former

I would argue neither are.

Only people willing to buy and can get credit to finance a purchase in the current market (sale price) is an increase in demand.

My demand idea is that desire, reason or need has to be fist otherwise any other reasons are fairly irrelevent.

People not buy in the boom just because credit was available (or maybe more on here would have purchased but they chose not to buy as they thought housing was over valued). But it may have been a factor in why more people with a desire, need or reason did.

HAMISH_MCTAVISH

Emy1501 wrote: »

Prices have risen due to saving rates being poor therefore meaning many savers using their savings to invest in property.

Right then, so that is an increase in demand.

Last time I looked the average FTB deposit was 25%. Do people really think FTB's are able to save up 25% this money is all coming from the bank of Mom and Dad.

Actually, according to the CML, the average deposit is not greatly higher than it was in 2007. And there is a marked increase in mortgages available at 15% deposits now. This trend is increasing, as increased liquidity in the markets provides more funding to lend at higher LTV's. 90% mortgages will be the next sector to see increases in availability, although I suspect it will end there for now. 100% mortgages will not be common for many years to come.

Most purchases this year are by Cash buyers, the bank of mom and dad and people who have STR'd.

Around 70% of purchasers this year are mortgage purchasers. The number of STR's is tiny. The bank of mum and dad had about a 20 year supply left in it at current rates of drawdown, last time I looked.;)

The above will start too run out soon and once it does its likely prices will struggle again.

See above. There is no shortage of buyers at current levels of mortgage availability and deposit requitements. All the funding made available is taken, and there is a demand for more.

Also the government is forcing banks not to repossess properties again they cannot do this for ever, at sometime banks will have to repossess and when they do these properties will come bank onto the market.

On the contrary. Banks cannot afford to flood the market and sell at depressed prices, as doing so would adversely impact their balance sheets, which they have struggled to rebuild.

We are already seeing the banks create wholly owned shell companies for commercial property reposessions, so they can keep them on the books at high values til the market recovers. There can be little doubt that the current aversion to reposessing residential property is motivated by similar issues.

the_ash_and_the_oak

Really2 wrote: »

People not buy in the boom just because credit was available (or maybe more on here would have purchased but they chose not to buy as they thought housing was over valued). But it may have been a factor in why more people with a desire, need or reason did.

Thats fair enough - tbh I was kind of including the desire/sentiment factor as implicit as imo its almost always high (would be v surprised to see it fall - don't really think it took any kind of a hit since 2007 either imo )

chucky

Graham_Devon wrote: »

I believe there is far more effecting the housing market than supply and demand, as HAMISH used the description. Sentiment, employment, taxes etc.

this where you fall over Graham - this is exactly what i've said from the begining of the thread. you've now adopted it this but refused to acknowledge it at the time. so either you've changed your mind during the thread or you're agreeing with me. you can't have it both ways...

Graham_Devon wrote: »

Supply and demand must be the new buzz word.

In the last 2 months, it seems thats all that's talked about as if it's the be all and end all.

here you're trying to dismiss the supply and demand argument

Graham_Devon wrote: »

Yet when prices drop, and I ask "well if supply and demand is the only measure, then why did prices drop".....the answer, is to use another market bearing factor and blame that.

You cannot have it both ways and suggest supply and demand is the only thing that matters therefore prices up up up, and then only bring other market factors into the equation when you are picked up.

supply and demand in general terms is correct - drilling down into what drives supply and demand is what you have to understand.

you're trying to make this a bull vs bear debate - it's not.

Graham_Devon wrote: »

Right, ok, I got it.

Supply and Demand encompasses everything.

Unless prices fall, and obviously then, other factors come in to play.

Brrrrrrr-illiant.

again you're dismissing it and then trying to make it a partisan bull vs bear argument. again it's not.

Graham_Devon wrote: »

It's boring for everyone else to read this day in day out, so I quit on this thread. My point, I believe, has been made. Demand has NOT appeared from no where within the last 8 months. If it has, where on earth were all those that are creating the demand living before.....under a bridge?

you've done this before havne't you... so why are you still posting 50 posts later...

HAMISH_MCTAVISH

ruggedtoast wrote: »

So lets get this straight - in your head the demand for Ferraris is limited because not many people want them, and they dont want to make many anyway - and then they set the price to stop too many people wanting them because they cant be bothered to make more.

Are you really that dense?

You brought up the comparison to Ferrari.

I then pointed out there is a difference between current and vintage Ferrari cars, in that with current cars Ferrari can identify the demand and then supply accordingly. So they are able to control prices through matching supply to demand. With Vintage cars they cannot. So prices are far higher because demand outstrips supply.

Now if you wish to compare this to the housing market, there are some similarities, in that the housing market DOES NOT supply enough houses to meet demand. Therefore prices rise.

When you form 250,000 housholds a year, and only produce 80,000 houses, prices WILL rise, which is what we are seeing today.

Rather than the market setting the price?

Which is exactly what is happening today. Supply and demand IS the market setting prices. Prices have risen because demand outstrips supply.

But houses are totally different.

This is getting tedious now.

And you replied with more ignorance about supply and demand - and another dig at Graham, which is mean.

OK genius, why don't you explain your version of supply and demand to us all.

Really2

Graham_Devon wrote: »

Yes, because in the way Hamish used it (low sellers vs high buyers), it's NOT the be all and end all. Theres much more out there to effect his version of supply and demand, which your all saying I don't understand, but I was the first to pick up on!

I'm sure you can agree with that!?

Or are you agreeing with Hamish?

Again, you cannot have it both ways.

Sorry graham I have only just read Hamish's quote.

HAMISH_MCTAVISH wrote: »

the hard fundamentals of supply and demand, how on earth does any sane person expect to see significant price falls in the near future?

I think if demand was great than stock houses entering the market, the market would find a price that the market dictates. That would not be a lower price.

Price will only fall again when demand (for what ever reason) declines or more stock enters the market or both.

What he said was not actually wrong based on how a market works.

A very basic anology would be.

Think of it as a auction without reserves on items you want but you have to hit a criteria to get in (10% deposit).
The prices they get to will be dictated by the amount of people there, there access to funds and what they want to buy.
More people are let in the lower the entrance criteria is but that will only change prices if people want to buy or can compete.
If you then half the number of lots available only the ones with the most cash will win auctions.

It's the same on the way down if prices are falling less people want to go or can afford to go. Add to that an increase in entrance criteria (25%) and the auction will be half empty.
Then add 200% more stock and prices will fall for sure.

It is basic and does not take in to account many reasons that may effect supply and demand but gives an idea of what a change in supply or demand can do to bidding.

I think my final point would be people will always try pay as little as possible but current market conditions will always dictate what that price is.

ruggedtoast

HAMISH_MCTAVISH wrote: »

Are you really that dense?

You brought up the comparison to Ferrari.

I then pointed out there is a difference between current and vintage Ferrari cars, in that with current cars Ferrari can identify the demand and then supply accordingly. So they are able to control prices through matching supply to demand. With Vintage cars they cannot. So prices are far higher because demand outstrips supply.

Now if you wish to compare this to the housing market, there are some similarities, in that the housing market DOES NOT supply enough houses to meet demand. Therefore prices rise.

When you form 250,000 housholds a year, and only produce 80,000 houses, prices WILL rise, which is what we are seeing today.



Which is exactly what is happening today. Supply and demand IS the market setting prices. Prices have risen because demand outstrips supply.



This is getting tedious now.




OK genius, why don't you explain your version of supply and demand to us all.

Just read back Hamish. I can't be bothered to go through it with you again. It's all cost and no benefit from my perspective.

Well done for posting without insulting Graham again by the way. This shows an admirable development in your character!

julieq

Graham_Devon wrote: »

Can you explain that a bit further please.

Say I want to buy a house now.

How does my future earnings help please.

The bank will only take into account what I earn now.....not what I may or may not earn in the future. And as you have said this before, I know you are talking 20 years in the future.

I was also talking about stimulus in terms of tax rises, interest rate rises etc.

Erm, Graham, you were asking where the money to sustain prices comes from, you've then changed the question to one about why you personally can't afford to pay the prices on the basis of your earnings.

Banks lend on current salary at specific multiples, currently the maximum is around 3.5x joint salary (comparing with 2.5x joint salary). This means that to sustain prices, the condition is that there are more people wanting to buy who can meet the lending criteria than houses available they want to buy. This hooks into the supply and demand argument, which I see has been raging since last night.

Ignoring salary increases, this leaves plenty of money to cover the repayments and interest from future earnings over a 25 year period.

Simples (as I think the word is)

It really doesn't matter that EVERYONE can't afford a house. The sustaining factor is that there is throttled supply against general availability of finance (and hence competition for the supply), and the money that's being used to sustain the house prices comes from a cautious view of future earnings potential.

Graham_Devon

Really2 wrote: »

Sorry graham I have only just read Hamish's quote.

Thankyou.

You will now see why I responded with what I did.

Hopefully you can see why I get so frustrated having to explain myself over and over while being told I don't understand and being told I'm dense.

No one picks Hamish up on his use of supply and demand, but if I respond to his use and say that's not quite correct, I'm lambasted. It's getting tiring. Maybe a name change is called for, as I can't seem to shake off people homing in on something I have said, regardless as to what it's in response to.

Graham_Devon

julieq wrote: »

Erm, Graham, you were asking where the money to sustain prices comes from, you've then changed the question to one about why you personally can't afford to pay the prices on the basis of your earnings.

Oh come off it Julie.

I never said or turned anything round to any of that. I asked you to explain your "future earnings" as it was so vague.