the house price problem

Pobby

Been a mad old time. The 90`s, a nasty time what with huge interest rates. By the end of the 90`s they came down to more reasonable levels and then, whoosh, the insanity started. Brakes came off the economy, lending got more and more lax. Suddenly silly deals appeared ( Northern Rock an example ), Gordy becomes the greatest economist ever. Year after year, property became more and more expensive. Yet against all of that, the stock market did horribly with 2 crashed within 10 years.

Wages still pretty stagnant against a low inflation base, well if you leave housing out of the picture. Suddenly the banks realised they had acted fast and loose. Panic sets in. Gordy, sorry the bank of England, drops interest rates to an amazingly new low. The Scottish person pumps billions into the economy just to stop the whole thing from crashing in on its self.

At some point this emergency will have to be faced. I was a member of the 50% house price crash but since we have had voodoo economics, nothing seems clear to me. The one thing I am sure of is that this whole, dreadful scenario has a long way to go yet.

HAMISH_MCTAVISH

Kohoutek wrote: »

As you can see, in the early 80s recession, there's a dip of 20% from 75k to 60k. In the early 90s recession, there's a dip of 40% from 110k to just over 70k.

As you can see, that is a "real" house price graph. Not to mention it is outdated, prices did dip slightly below long term trend before rising again.

But back to the past, in nominal terms, the falls were far, far smaller. And inflation adjustment only helps you if wages also rise......

The bears are fond of telling us that wages are also falling in real terms, not rising..... If thats true then further falls in "real" terms do you no good at all in terms of housing affordability.

So seeing as how last time around nominal prices fell by just 17%, and this time they fell by 23%, it does seem likely you've had your crash.

Of course, the HPI morons insist that 'this time is different', despite the fact that QE and ZIRP cannot go on forever.

Actually the "HPI morons" insist that no two crashes are alike in depth, duration, and recovery, and relying on the past crash to predict the next one is an excercise in futility.

Given that this has proven to be exactly right in this crash, it is little surprise you feel annoyed at being outsmarted by "morons".

Anyway..... One further question to make your head spin.....

What happens to the long term trend line if the next boom is twice as big as the last? And what mistake do you think the hpc mob of 20 years from today will make when they look back at it and proclaim that "crashes always overshoot"?????;) Just as some people are making that same mistake today.....

In 20 years, today's prices will appear to be below the long term trend, despite the fact that today, they are not......

ninky_2

HAMISH_MCTAVISH wrote: »

If this was true, then you would not be able to buy a terraced house for 50K in parts of the North of England. When a terraced house of similar size and construction in London can cost 500K.

Credit was available equally everywhere.

Only supply and demand explains the differences between house prices in different parts of the UK.

nonsense. this is about desirability not demand and an unequal access to credit.

for example, there are plenty of handbags in the world but some still go for silly money. even within london some properties will sell for a lot whilst others are relatively affordable.

credit is not available equally everywhere. people in london have on average access to more credit as a result of higher salaries or owning more capital. or are you suggesting the average person in the north of england has access to a mortgage for 500k but chooses only to buy a 50k property??

spaceboy

ninky wrote: »

i agree that new builds are often shonky. but part of the reason is that at the same time households are becoming smaller. single person households have increased and people are having fewer children.

Doesnt explain why room sizes are so small these days in new builds. And even family houses and flats are small!

spaceboy

There is definitely a supply problem, I dont care what some of you say, yet the lending got out of control but it was partly supply driven too - especially in the 2000s when Labour's secret immigration policy really kicked in.

This is a factor which keeps being ignored - a fast increase in population without an adequate increase in housing is bound to cause a problem and make the credit problem worse - everyone fights to get enough money to buy.

Blacklight

I would urge you to look at property prices in Venice for an example of what happens when there is demand with a ceiling on supply.

At some point in the future that's the model that this island nation will face too. Unless we can build bits to stick on the edge like they have done in Dubai.

ninky_2

Blacklight wrote: »

I would urge you to look at property prices in Venice for an example of what happens when there is demand with a ceiling on supply.

the case of venice is to do with desirability not supply. it is like comparing a constable painting to an amateur watercolour. the value is not so much in use but in something more undefineable to do with taste, status etc. people who buy property in venice are not buying there because they can't find a home elsewhere. just as people who buy a chanel handbag don't buy one because they'd sold out of handbags down walthamstow market.

same with the uk housing market. there are always houses for sale or rent. but they may not be in the desired location, have the right look etc. now if there were no houses on the market or available for rent i might agree with you. but in advanced capitalist society the price of something is not merely a supply and demand equation.

Really2

ninky wrote: »

the case of venice is to do with desirability not supply.

Not true because if it had the supply to fill all the spaces for people who desired to live there the prices would not be so high.
Prices rise if demand is higher than supply.

pingu2209

westv wrote: »

New houses are also far more energy efficent than those built in the past and property takes up less land than in the past so not so much needs to be used for an equal number of properties.

I know that houses being energy efficient is a good thing. However, the fact they take up less land than in the past is not a good thing, in my mind anyway. People want bigger family homes. Perhaps there are lots of flats being built or small 2 bed houses. However, they are not any good for families.

Families want decent sized gardens and storage space. New homes do not offer those things.

Blacklight

ninky wrote: »

the case of venice is to do with desirability not supply.

I'd have to agree with Really2 on this, if Venice were the size necessary to cater for everyone who wanted to live there (size of Manchester perhaps, who knows...) then prices would not be as high as they are.

Maybe there's a case for desirability based on the fact that the place is so small, but then the same argument could be applied to the UK as a whole.