Cameron: House Prices Will "Continue To Rise"

the_flying_pig

HAMISH_MCTAVISH wrote: »

...Rising house prices benefit......

• Millions of people whose next move will be to downsize
• Millions of people with a mortgage who can get a better renewal rate for a lower LTV
• Millions of people who wish to leave something to their children
• The million or so second home and BTL investors
• Millions of people whose pension funds have invested in property related companies or investments
• Millions of bank shareholders and pension funds, whose income is enhanced through a booming property market
• Millions of people who either work in construction, manufacturing and sales of home components, furnishings, renovations, etc

Falling house prices benefit......

• A few hundred thousand potential FTB's, but only until they buy when rising prices then benefit them more.
• A small percentage of upsizers, making a very big leap up the ladder... but most did not benefit from the recent crash as the differential grew due to typical FTB houses falling further than typical 2TB houses.

...

Strewth, Hamish.

HPI benefits prospective sellers, and disbenefits prospective buyers. Every transaction consists of one buyer and one seller.

The daft mistake you're [very likely deliberately] making in listing all of your "millions" of people is failing to count all of the children or as-yet unborn people [as opposed to just the people who are genuinely likely to buy in the next year or two - if you're only going to count these people then you should only count on the other side the few hundred thousand people who are genuinely likely to sell in the next year or two, otherwise you're left in a bizarre fantasy construction with tens of millions of sellers & only a few hundred thousand buyers] who would in their life have a higher total amount of debt to repay if house prices were to rise further.

Your 'argument' about the impact on upsizers betrays a fairly serious lack of numeracy.

Let's say, for the sake of the argument, that HPI for small houses will vary and that HPI for large houses will always be 5 percentage points higher (e.g. if HPI for small houses is -2% p.a., HPI for large ones will be +3% p.a.), and consider a case of a young couple looking to upsize from a £100k place to a £200k one. If house prices for small places rise by 5%, then large ones will rise by 10%, so to upscale rather than needing to find £100k [£200k - £100k] they need to find £115k [£220k-£105k]. bad news. If, on the other hand, house prices for small places fall by 15%, then large ones will fall by 5%, meaning that they'll need to find £95k [£180k - £85k]. Falling prices are better for the young couple, obviously.

I'm not going to go into some sort of HPC 'the little baby jesus cries whenever house prices go up' rant but your equally blinkered approach, especially dressed up with stupid figures plucked out of the air, is at least as risible.

HPI brings about exactly the same number of winners [broadly speaking the old] as it does does the old [broadly speaking, the young]. Well, this isn't exactly true, the rise of multiple property ownership means that there are more losers than winners, but what is true is that the amount by which the somewhat smaller group of winners benefits is more or less exactly equal to the amount by which the somewhat larger group of losers disbenefits, it's just shared out amongst somewhat fewer people.

HAMISH_MCTAVISH wrote: »

...House prices will rise dramatically over the long term because there is a massive and growing shortage of housing...

Ha, well, I'm sure there's an "in my opinion" missing somewhere . Not [if I may be so bold to say so] for the first time you've correctly listed a plausible argument for rising prices whilst overlooking some rather important contrary arguments. Which set of arguments is the more compelling is a subjective matter of course but [etc].

IveSeenTheLight

the_flying_pig wrote: »

The daft mistake you're [very likely deliberately] making ......................

Let's say, for the sake of the argument, that HPI for small houses will vary and that HPI for large houses will always be 5 percentage points higher (e.g. if HPI for small houses is -2% p.a., HPI for large ones will be +3% p.a

It is a daft mistake to assume that one set of property will always be 5 percentage points higher than another.

The markets don't work in such a way

HAMISH_MCTAVISH

IveSeenTheLight wrote: »

It is a daft mistake to assume that one set of property will always be 5 percentage points higher than another.

The markets don't work in such a way

Indeed.

But what we have seen in this last crash, is that typical FTB properties fell by a higher percentage than typical 2TB properties. So instead of narrowing as the bears hoped, the gap actually widened.

And in the recovery of the last year or so, typical FTB properties increased by 12% on average, whilst typical 2TB properties only increased by 8% on average. So despite the bears proclamations, the gap actually narrowed for most upsizers.

Like so many of the bear memes, this crash has thoroughly debunked the myth that market segments all rise and fall in synchronicity, so the idea that HPI makes it harder to upsize, and crashes make it easier, has turned out to be false for most...

the_flying_pig

HAMISH_MCTAVISH wrote: »

...in the recovery of the last year or so, typical FTB properties increased by 12% on average, whilst typical 2TB properties only increased by 8% on average. So despite the bears proclamations, the gap actually narrowed for most upsizers.

Like so many of the bear memes, this crash has thoroughly debunked the myth that market segments all rise and fall in synchronicity, so the idea that HPI makes it harder to upsize, and crashes make it easier, has turned out to be false for most...

Be careful with these numbers you're blithely chucking around, Hamish.

Assuming that the figures you quote are true (inflation on FTB properties half as high again as inflation on 2TB properties, although I can't begin to imagine how such figures could be reliably obtained or which area they would apply to), such inflation would only benefit upsizers if the house they were trading up to was, pre-inflation, less than 50% more expensive than their first time buyer home. If the people looking to trade up were after something at twice the price of their starter home then you'd need the inflation on starter homes to be twice the 2TB home level for it to be beneficial to the upsizer. So the type of inflation you describe would only help someone making a small, rather than big, step up [i.e. someone not very successful/who has experienced fairly modest earnings growth since buying their starter home].

This, of course, assumes that the inflation on the more expensive property doesn't push the purchase into a higher stamp duty band.

And what about someone looking to upsize from a second home to a third home - was the inflation on third homes lower still than on second? And what about [say] young people inheriting a small share of an elderly 2TB home & looking to become a FTB? Isn't their FTB home further off than ever?

I repeat, house price inflation is zero sum. Unless there are somehow more sellers than buyers, there cannot be more winners than losers. It's a mathematical impossibility.

rosa_luxembourg

I think house prices will stay more or less the same (in numbers), but that inflation will rise to 5pc and up. The authorities will only intervene if it approaches double figures. Wages will also stagnate. The pound will continue to lose value against the dollar. The authorities will only intervene if it approaches around 1.15.

smamst

HAMISH_MCTAVISH wrote: »

Good grief, you really have no clue at all, do you?


Rising house prices benefit......

• Millions of people whose next move will be to downsize

Millions of people going to downsize.

There in one statement is why Hamish is a troll.

IveSeenTheLight

smamst wrote: »

Millions of people going to downsize.

There in one statement is why Hamish is a troll.

Is it not conceivable?
There are millions of people with property.
Many retirees are finding that the pension they thought they were going to receive is not as much as expected.
One option for them is to sell and rent back or to downsize to release equity to cover the pension age.

I'm not aware of the exact numbers, but on reflection, it certainly would seem possible

nembot

He's not a troll, just a man with a passion for what he believes in - some would say too much passion.

This wouldn't be an issue, if he didn't slag everyone off at the same time.

IveSeenTheLight

nembot wrote: »

This wouldn't be an issue, if he didn't slag everyone off at the same time.

Do you believe you are devoid of posting similarly?

the_flying_pig

IveSeenTheLight wrote: »

Is it not conceivable?
There are millions of people with property.
Many retirees are finding that the pension they thought they were going to receive is not as much as expected.
One option for them is to sell and rent back or to downsize to release equity to cover the pension age.

I'm not aware of the exact numbers, but on reflection, it certainly would seem possible

millions of people almost certainly will downsize eventually, but unless the millions of properties that they sell are going to be bought by non-existent people, any house price inflation or deflation in the period leading up to said sales will create exactly as many winners as it does losers.