What price is worth paying for cheaper housing.....

HAMISH_MCTAVISH

Procrastinator333 wrote: »

ok, so you worded your first post badly, fair enough.

So now, please correct me if wrong, your argument is that house prices are solely a function of the number of households (population and house size trend) and the availabilty of mortgage lending?

EDIT: and if you do see other variables, what are they?

House prices are solely a function of supply and demand. Or rather, supply and demand always match perfectly, only the price changes.

There are infinite variables that can impact levels of demand, and also supply, within a market. These include mortgage funding, population density, population growth, planning laws, local levels of employment, average local income, etc.

Procrastinator333

HAMISH_MCTAVISH wrote: »

House prices are solely a function of supply and demand. Or rather, supply and demand always match perfectly, only the price changes.

There are infinite variables that can impact levels of demand, and also supply, within a market. These include mortgage funding, population density, population growth, planning laws, local levels of employment, average local income, etc.

If that is true, then building a few million more houses is not the only way to avoid massive HPI in the near future.

Using only the ones you have mentioned above, the following (which range from possible to likely) will reduce demand and therefore also restrict HPI (if they come about):

Increased unemployment.
Decreasing levels of full time employment - lower avg wages, lower income)
Immigration restrictions -not going to have -ve population growth, but the rate may well decline reducing the upward pressure.
Increased taxes - lower average income.
Rising interest rates - lower disposable income

These are just a few based on only the items you specified. All either reduce upward pressure or create downward pressure. So again, building houses is not the only way to avoid hpi.

toby3000

Wasn't the UK population falling in the 1970s? Therefore isn't it unwise to make long term predictions of population trends based on what is happening now? We don't know for certain what will happen with population.

Anyway, it doesn't explain why prices have risen in areas which have seen minimal or no population growth

HAMISH_MCTAVISH

Procrastinator333 wrote: »

If that is true, then building a few million more houses is not the only way to avoid massive HPI in the near future.

Using only the ones you have mentioned above, the following (which range from possible to likely) will reduce demand and therefore also restrict HPI (if they come about):

I think you fail to grasp the magnitude of the problem.

When we talk about housing shortages and population growth, we are talking about needing to house 10 million more people over the next 20 years or so.

The population growth combined with housing shortage is the big tsunami pushing house prices upwards.

The tax rises, disposable income, unemployment, etc, is like trying to hold it back with a couple of sandbags......

Increased unemployment.

It's been rising all year. As have house prices. We have an extra million unemployed, and prices rose 10% in 10 months.

How many more do you think is likely? And how many more would you need to reduce prices?

Decreasing levels of full time employment - lower avg wages, lower income)

Pay is still rising, even now. Pay rose by 1.6% over the last year, and that is in the worst recession since the war.

We only build 35% or so of the houses we need. Only the top earning 35% of households need to be able to afford them.

Immigration restrictions -not going to have -ve population growth, but the rate may well decline reducing the upward pressure.

As dgl1001 noted, we need to build 10% more houses than we have just to keep pace with decreasing household density. Thats before any immigration at all.

And the ONLY debate amongst all the major parties is in keeping population from crossing 70 million, and even doing that is far from certain. 70 million is absolutely locked in already. It is a neccessity to prevent the pensions crisis from worsening

Increased taxes - lower average income.

They'll rise, but not enough to make a meaningful difference. A couple of percent on consumption, and a couple of percent on income, is simply not enough to prevent HPI.

Housing is a priority, and people will pay it above all else. Other parts of the economy will suffer, for sure, as disposable income is squuezed. That is why the growth forecasts are so anemic. But people will always find a way to pay the mortgage.

Rising interest rates - lower disposable income

Rates will be low for years. BoE says that 4.5% is the same as 10% used to be in demand destruction terms, and demand destruction is why the bank raises rates. It reduces liquidity, and controls inflation.

Merril Lynch reckons 2.5% is the new neutrality level. That is very likely to be true, and very likely that we will see rates average this over the next decade.

But 2.5% base rates is nowhere near enough to kill HPI. We averaged twice that over the last decade, and prices boomed anyway.

Plus fiscal drag is likely to restrain inflation and growth anyway, onthe back of rising taxes, we simply do not need to raise rates very far, or very fast, to control inflation.

These are just a few based on only the items you specified. All either reduce upward pressure or create downward pressure. So again, building houses is not the only way to avoid hpi.

Yes, but not enough to make any meaningful difference.

You're trying to hold back a tidal wave with a 2 inch tall barrier on the beach made of teabags. It's ridiculous to assume it will have any impact at all.

Just think about it...... In the middle of the worst recession in living memory, when the crash was reality in the mainstream media, when price falls had destroyed consumer confidence, with massive rises in unemployment, and even after cutting mortgage availability by 70%, prices rebounded and rose by 10% in 10 months.

What on earth makes you think they'll fall now that the recession is over, and things really are getting better?

Now answer me one question...... Assume for a moment that population does increase as projected. Now also assume that we don't build the millions of houses needed.

How do you propose to ration the supply, if not through price?

Shakethedisease

No holiday homes, no investment properties, no portfolios, no accidental landlords.

In fact 1 home/property per family or per person should suffice if a shortage was acute ? Good old British rationing!

That should see us through any real hardship should tent cities start springing up ?

House prices would probably go a bit tits though !

HAMISH_MCTAVISH

Shakethedisease wrote: »

No holiday homes,

The only one of your points that makes a difference, but there are only 300,000 of them.

So you're now only several million houses short.

no investment properties, no portfolios, no accidental landlords.

All already being used for housing people. Whether owned or rented makes no difference to the housing shortage.

Therefore you're still several million houses short.

In fact 1 home/property per family or per person should suffice if a shortage was acute ? Good old British rationing!

That should see us through any real hardship should tent cities start springing up ? House prices would probably go a bit tits though !

And in forcing state sponsored confiscation and redistribution of houses, you've destroyed trust in the commercial system in Britain and removed any incentive for private companies to build more housing.

Well done. Now you're several million houses short, and nobody is building any more.

Epic Fail.....

DaddyBear

Be careful what you wish for Hamish.
If the situation plays out as you are hoping, with massive housing shortages and rampant HPI then it will alter the demographics of this country even further. We will be left with a very poor economy, huge public deficit, high taxes and high house prices. Under those circumstances the productive and intelligent will leave. You will be left owning a highly taxed castle on an island full of chavs.
I shall make sure that my daughter takes at least 1 language at a-level so that she is more geographically mobile. The only future I see for this country in it's current form is dire.

Graham_Devon

The price we are paying for higher priced houses is obvious.

It's called welfare. For every incriment of price rises, theres another person looking to welfare to house them. It's another person priced out, who needs a roof, and welfare will have to provide it for many many people in this country.

So as prices rise, so does the welfare bill, not only with more claimants, but also with higher costs to service these people. I.e rent, social home building etc.

In my view, it would be far simpler to take abit of pain now, which will allow more people, not all, but more, to afford to put a roof over their heads. That way, taxation can be spent improving the UK, not just keeping it afloat (though that aint really happening at the moment either).

A poster on here is forever talking about the richest 20% being able to buy the housing stock, with no reference to how the other 80% would live. It's shutting your eyes to the consequences of what you spout in my view.

chucky

Graham_Devon wrote: »

The price we are paying for higher priced houses is obvious.

It's called welfare. For every incriment of price rises, theres another person looking to welfare to house them. It's another person priced out, who needs a roof, and welfare will have to provide it for many many people in this country.

So as prices rise, so does the welfare bill, not only with more claimants, but also with higher costs to service these people. I.e rent, social home building etc.

In my view, it would be far simpler to take abit of pain now, which will allow more people, not all, but more, to afford to put a roof over their heads. That way, taxation can be spent improving the UK, not just keeping it afloat (though that aint really happening at the moment either).

A poster on here is forever talking about the richest 20% being able to buy the housing stock, with no reference to how the other 80% would live. It's shutting your eyes to the consequences of what you spout in my view.

whilst not totally disagreeing with the rest of your post - the bold part isn't accurate...

it's the percentage of people (whatever it is) looking to buy now - not 80% of the UK population that can't buy...

DaddyBear

Graham_Devon wrote: »

The price we are paying for higher priced houses is obvious.

It's called welfare. For every incriment of price rises, theres another person looking to welfare to house them. It's another person priced out, who needs a roof, and welfare will have to provide it for many many people in this country.

So as prices rise, so does the welfare bill, not only with more claimants, but also with higher costs to service these people. I.e rent, social home building etc.

In my view, it would be far simpler to take abit of pain now, which will allow more people, not all, but more, to afford to put a roof over their heads. That way, taxation can be spent improving the UK, not just keeping it afloat (though that aint really happening at the moment either).

A poster on here is forever talking about the richest 20% being able to buy the housing stock, with no reference to how the other 80% would live. It's shutting your eyes to the consequences of what you spout in my view.

Absolutely. This is something the bulls either don't get or don't care. Yes their house is increasing in value, but society is slowly degrading as more people are priced out and lose motivation to work.