Cameron: House Prices Will "Continue To Rise"

IveSeenTheLight

the_flying_pig wrote: »

OK, maybe the terminology is wrong. Maybe, as you say, everyone who buys property is a 'winner'.

But you know what I mean. In my pretend example the chap who bought the house in 1980 for £25k found its price had increased by 600% by 2010. But if he'd been able to pay the 1940 price when he bought [around £500], rather than £25k, he'd have enjoyed a 34900% profit. And, of course, the person who he bought it from would have been considerably worse off.

Rather than winners and losers what I mean more precisely is probably something like "every extra pound in the pocket of a would-be be downsizer or seller-upper that results from house price inflation is always counterbalanced by an extra pound out of the pocket of, or an extra pound of debt incurred by, a would-be upsizer or FTB".

I do know what you mean.
What other investment provides a return in the future and provides a function throughout the time you own the asset?

the_flying_pig

IveSeenTheLight wrote: »

I do know what you mean.
What other investment provides a return in the future and provides a function throughout the time you own the asset?

That's a whole different debate.

I am not saying that buying a house is foolish, or selfish, or evil, or making any other judgement about it (although my personal opinion on balance is probably that it's the wrong time to buy right now although it's no more than a hunch really).

All I am defiinitively saying as a matter of fact is that house price inflation is zero sum, i.e. that it can only make a person better off by making another person worse off.

HAMISH_MCTAVISH

the_flying_pig wrote: »

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 you stick around and debate for a while, you'll learn I don't just make !!!!!! up..... In fact I probably quote and reference sources more than any other poster on here.

The source for this particular bit of information is the DCLG housing report, as quoted by The Times just this month.

I thought it was quite a commonly known fact amongst those with a genuine interest in debating housing, (as opposed to the trolls like nembot who like to pop on, shout loudly, and run away again) so I didn't feel the need to quote and reference it.

In fact we had a whole thread about it quite recently.

But here you are......

The average house price is now £205,598, the Department for Communities and Local Government (DCLG) said. It found that price rises had disproportionately affected first-time buyers. Prices of homes bought by first-time buyers have risen by 12.6 per cent in the past 12 months, compared with 8.6 per cent for properties bought by home movers.

http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article7125808.ece

As for your comments about upsizers, I doubt very much that most upsizers buy at a level double their first house.

As an example, around here an average 2 bed flat will cost about 150K, and an average 3 bed terrace about 200K. This trend is repeated all over the country. I'm sure there are exceptions, but thats why we deal in averages.....

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.

Actually, you're (almost) right with this one......

In theory, any appreciating asset price, be it housing, stocks, fine wines, art, precious metals, etc, would create an equal number of winners and losers on each and every sale.

But housing, unlike most other assets, is typically bought with finance, so the ticket price of the house itself is only one part of the equation. Given that the average cost of finance has pretty much halved, in the same time the average house price in real terms has pretty much doubled, the house buyers of the last few decades may well be the exception (or close to it) to your "zero sum game" theory.

And given the fact that the new forecast "neutrality level" for base rates over the next decade is likely to be half that of the last decade, this trend may continue for some time yet.....

IveSeenTheLight

the_flying_pig wrote: »

That's a whole different debate.

I am not saying that buying a house is foolish, or selfish, or evil, or making any other judgement about it (although my personal opinion on balance is probably that it's the wrong time to buy right now although it's no more than a hunch really).

All I am defiinitively saying as a matter of fact is that house price inflation is zero sum, i.e. that it can only make a person better off by making another person worse off.

Your stance is all very socially well, however it is not reality.
Nobody is forced to buy, they do so through choice and it is their choice on how much to offer.

Again I'd argue that people are "worse off" when buying.
In my experience, it's a significantly better position to be in than if they have not bought.

Many people invest in shares. Are they "worse off" when they buy the shares?

The reality is that in the UK there is a great desire to become owners of property. That desire feeds into demand and directly affects house prices.

Would people buy property if it was a depreciating asset?
Likely answer is no.
If so, what would be the likely outcome of rents?
Probably much higher, to cover not only rental yield but also a loss in capital.
How would you feel either renting at a higher level than presently or purchasing a reducing value asset that in time will cost you more.

I think in that scenario there would be "losers" and more "losers" and therefore it makes sence that there is something to be gained from owning property as it currently is.
In your eyes your a "loser" taking on a larger debt to buy, but in time you become a "winner".
Far better than a lose / lose situation

Harry_Powell

chucky wrote: »

some posters with very suspect anecdotals claim that house prices rose 100% in less than 6 months

To be fair, I was only aged 15 ten years ago, so have no idea whether house prices have indeed risen by 300%, but it's an oft mentioned statistic on here and I wanted to join the bear gang and get some 'thanks'.

I'm in a devil's advocate mood today, I can't believe that I was arguing for benefits to allow single mums to stay at home and look after their kids rather than work. What I also can't believe is that I was arguing with a female who called for non-working mum's to "get off their fat !!!!!! and get a job". LOL. Solidarity, Sisters!

the_flying_pig

HAMISH_MCTAVISH wrote: »

...
http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article7125808.ece

As for your comments about upsizers, I doubt very much that most upsizers buy at a level double their first house.

As an example, around here an average 2 bed flat will cost about 150K, and an average 3 bed terrace about 200K. This trend is repeated all over the country. I'm sure there are exceptions, but thats why we deal in averages...

OK, but the fact that these particular figures are sourced [cheers for that] doesn't alter the 'zero sum' rule one iota, unless, as per above, there are somehow more sellers than buyers.

HAMISH_MCTAVISH wrote: »

...In theory, any appreciating asset price, be it housing, stocks, fine wines, art, precious metals, etc, would create an equal number of winners and losers on each and every sale.

But housing, unlike most other assets, is typically bought with finance, so the ticket price of the house itself is only one part of the equation. Given that the average cost of finance has pretty much halved, in the same time the average house price in real terms has pretty much doubled, the house buyers of the last few decades may well be the exception (or close to it) to your "zero sum game" theory.

And given the fact that the new forecast "neutrality level" for base rates over the next decade is likely to be half that of the last decade, this trend may continue for some time yet.....

You're conflating. The literal meaning of the word 'analysis' is to break things down into small pieces. Blending lots of different things together makes it really hard to see what's what. What I think you are really saying is:

"(1) Yes, OK, house price inflation is zero sum, meaning that the late nineties to late noughties house price bubble made us no better off as a society, since it was only a transfer from [broadly speaking] the young to the old, BUT
(2) I put it to you that the young people who, other things being equal, lost out because of this over the same period should be a little less churlish about this fact since a similar period saw some or all of the amount by which they became worse off cancelled out by something else, namely lower interest rates."

As I'm sure you're sick of people telling you, the low interest rates scenario is very much a snapshot. They could well go north again quickly enough [yes I know that it's easy to google credible predictions that this won't happen, but no more so than it is to google similarly credible predictions that it will].

But more importantly, the argument is meaningless on a forward looking basis [i.e. in discussing Dave Cameron's comments]. Interest rates cannot now go any lower. The context is this thread, in which you earlier were cheerleading house price increases from current levels, nonsensically claiming that this would be good for almost everyone... I guess you might be saying something like "yes, OK, this would make FTBs and upsizers worse off, but not as badly off as they'd be in a parallel universe in which they had both the high inflation and high rates on top". But I don't think this would be terribly meaningful. The fact is that, comparing two scenarios, namely: (a) rates and house prices as they are today; or (b) rates as they are today but house prices higher, it is impossible to sensibly argue that more people are better off under (b) than in (a).

Anyway, that's all I'll say on the subject for now. You're invariably so desperate to argue that rampant house price inflation is both wonderful and inevitable that the quality of your arguments becomes pretty poor, but I will readily admit that you're peerless when it comes down to quantity.

nembot

Kiss the darkest part of my lily white a-r-s-e Hamish.

I'm not going anywhere and promise here and now to remind everyone how much of a !!!! you really are at random times of the day.

Not that it takes more than a couple of your posts to find that out, but you know it's a personal thing.

kriss_boy

Nothing is selling right now.

I watch the property pages religiously and of the dozen or so properties that have sold in my area this year, most of them are now back on the back.

Meanwhile asking prices are dropping.

A house my girlfriend and I thought was a steal at 225K is now down to 190K!!! Possibly 50K less than youd pay in 2007....

The only way is down right now....

IveSeenTheLight

nembot wrote: »

Kiss the darkest part of my lily white a-r-s-e Hamish.

I'm not going anywhere and promise here and now to remind everyone how much of a !!!! you really are at random times of the day.

Not that it takes more than a couple of your posts to find that out, but you know it's a personal thing.

Instead of posting as above, why don't you debate the points that hamish posts.

This would provide a more mature and reasoned debate for all to decide from which information is better.

The post above does not lend to reasoned debate and only fuels Hamish's points about you trolling him.

IveSeenTheLight

kriss_boy wrote: »

Nothing is selling right now.

I watch the property pages religiously and of the dozen or so properties that have sold in my area this year, most of them are now back on the back.

Meanwhile asking prices are dropping.

A house my girlfriend and I thought was a steal at 225K is now down to 190K!!! Possibly 50K less than youd pay in 2007....

The only way is down right now....

All very anecdotal, but not very reflective of the housing indices
For reflection: -

http://www1.landregistry.gov.uk/houseprices/housepriceindex/report/

http://www.ros.gov.uk/professional/eservices/land_property_data/lpd_stats.html

http://www.nationwide.co.uk/hpi/historical/Apr_2010.pdf

http://www.lloydsbankinggroup.com/media/pdfs/research/2010/HousePriceIndexApr2010.pdf