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Debate House Prices
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What causes HPI ?
Comments
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So you are claiming that for 30 years the operation of a free market involving millions of transactions and billions of £££ has been secretly controlled by a conspiracy of TV reality shows and Sun headlines but no-one except for a few insightful bears has noticed?
No, you are claiming that I`m claiming that.
What I am doing is promoting a discussion about the role of the media in HPI. Further to that, I am claiming that the media`s mostly positive portrayal of the UK property market over the past few years will have had some effect on the level of house price increases.
Nothing to do with reptiles or anything (although I have met a few snakes in the property business).Even more astounding is that even with this manipulation FTBers have continued to be able to afford new houses. So the net effect of the alleged manipulation cannot be very different to what would have happened anyway.
OK, you win.
Or do you ? Using the logic or your argument, I`ll use the example of expensive trainers.
A pair of branded trainers (say Nike or Reebok, for example) can cost well over £100. It may well be that these trainers do cost more to manufacture than a pair of lesser known trainers, but there is no doubt that the manufacturer makes a fair bit more profit per pair. If there were no marketing campaign to promote these trainers, then they wouldn`t sell at the price they were asking for them, or if they did sell at that price level, fewer would be sold. So, Nike spend money on advertising, to subtly encourage potential customers that their trainers are worth the price premium. A lot of psychology is involved, but it obviously works, as Nike trainers are quite popular. I would say that Nike use the media to encourage people to part with more money to buy their trainers. I don`t think anyone can really disagree with what I have just typed. Is this OK with you Linton ? I hope so.
Even more astounding is that even with this manipulation consumers have continued to be able to afford new Nike trainers. So the net effect of the alleged manipulation cannot be very different to what would have happened anyway.
Poor analogy ? (I don`t think it`s too bad).
Try this then.
You dismiss that the alleged manipulation can have had any effect, because FTBers have continued to afford to buy new houses (do you mean buy their first properties, or brand new houses ?).
That`s a bit of a weak argument. If the alleged manipulation did have a large effect, are you suggesting that there would be no FTBers ? Could it possibly be that media manipulation (I think that`s a bit of a strong term, I`d say "encouragement") has increased prices somewhat, to the point where more FTBers are having to get more financial help from their parents, or are more reliant on low interest rates when they take on a mortgage ?
Trainers, especially expensive ones, are very much an optional purchase. Property purchase (or rent) is a much more neccessary and fundamental requirement for far more people. Couple that with a widespread media message of "you can`t go wrong with brick & mortars" etc, then you end up with purchaser paying more than they otherwise would.
Finally, if media manipulation has such little effect, why are those surveyors quoted in the article saying.....
""Media hype is definitely affecting potential purchasers' expectations regarding prices falling over the next few years, with lower offers being made as a result"
"Doom and gloom in the media is resulting in low valuations. A bit of positive talk and the market would pick up"
?30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
A larger reason I suggest is that people see their house as reflecting their perceived status in society and therefore in a sense want to pay more.
(I`ve just read that statement, then looked up at the picture of Martin Lewis in the top left corner of my screen. I`m sure I saw him cringe a little).
Really ? I take it that you are suggesting this of other people, and not yourself, Linton.
If that is true, then the UK is inhabited by far more short-sighted, snobbish, vane, insecure fools than I thought.
So people don`t just want to buy a house, they want to pay more for it ! :rotfl:
Buyer : How much do you want for this property ?
Vendor : £184,000 please.
Buyer : I`ll give you £200,000, if that`s OK. People will think I have a higher status in society.
Me : I think you are an idiot.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
Cheap, easily accessible credit and a herding mentality. (more on herd mentality here: http://en.wikipedia.org/wiki/Herd_behavior)
Of course people also forgot that little disclaimer that appears on the bottom of all adverts for financial products: past performance is no guarantee of future results.0 -
HPI at wage inflation level is perfectly normal.
HPI above this is caused by d*ckheads borrowing more than they can afford.
That statement is only true if nobody ever gets a pay rise above average wage inflation.
People who tend to be in a position to borrow money to buy a property tend to be in long term full time employment.
If someone's earning 4x their starting salary after 10 years in the job climbing the corporate ladder that's equal to 15% p.a. wage inflation.
That's where your above average wage inflation property rises are coming from. House prices ignore the bottom end earners flipping burgers on 2% increase in line with inflation who never aspire to owning their own home.0 -
Wrong, it was easy credit and greed that lead to an unprecedented rise in prices and the other factors you mention are negligible in comparison. The same factors are applicable to every Country, in which the same thing occurred.
Without the above, it'd be impossible to be in the current situation and we'd have houses prices in line or maybe a little over inflation, rather than inflated to such a degree as we have today.
Greed is the desire is possess wealth or goods. Where do you think the perception of wealth came from with respect to property?
I think it is very naive to think that the emerging economies did not in fact play a part. The demand, not all of it, had to come from somewhere.
I do agree that cheap credit played part in it all, but it is not the biggest reason by anymeans0 -
Blacklight wrote: »That statement is only true if nobody ever gets a pay rise above average wage inflation.
People who tend to be in a position to borrow money to buy a property tend to be in long term full time employment.
If someone's earning 4x their starting salary after 10 years in the job climbing the corporate ladder that's equal to 15% p.a. wage inflation.
That's where your above average wage inflation property rises are coming from. House prices ignore the bottom end earners flipping burgers on 2% increase in line with inflation who never aspire to owning their own home.
So, the gap between higher earners and low earners get`s wider and wider, leading to more property being owned by higher earners, and the low earners being left out.
Of course, if this carries on, it`s not just the low earners who get priced out, people on closer to average salaries eventually get left out. That seems to be happening right now.
Anyway, I don`t think it`s 15% p.a.wage inflation for people getting promotion that cause HPI, I think it must be wage inflation for those particular jobs that people get promoted to, or more people are getting promotion. Just because someone aged 20 earns £17K, but ends up in management at 30 earning £53K, doesn`t cause HPI in itself. If relatively more people get promoted, that that could cause HPI.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
So, the gap between higher earners and low earners get`s wider and wider, leading to more property being owned by higher earners, and the low earners being left out.
Of course, if this carries on, it`s not just the low earners who get priced out, people on closer to average salaries eventually get left out. That seems to be happening right now.
Wasn't this the case 100 years ago.
Less people able to afford their own homes.
Only the rich could afford to own.
Could it be that the last 30-40 years is an anomoly in the history of house prices and ownership?:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »Wasn't this the case 100 years ago.
Less people able to afford their own homes.
Only the rich could afford to own.
Could it be that the last 30-40 years is an anomoly in the history of house prices and ownership?
Indeed it could.
More people being able to afford their own homes is surely a good thing. I would call this progress. I think most reasonably minded people would say that the higher the % of the population that can afford to own their own home, the better.
HPI discourages this from happening, especially when HPI is relatively high.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
So, the gap between higher earners and low earners get`s wider and wider, leading to more property being owned by higher earners, and the low earners being left out.
Of course, if this carries on, it`s not just the low earners who get priced out, people on closer to average salaries eventually get left out. That seems to be happening right now.
That's exactly right. If people who can afford are willing to purchase then obviously the ones at the bottom of the pay scale will be priced out. If, all of a sudden, those that could afford decided they didn't want to buy, prices would fall.
The same economic fundamentals apply to all sorts of things, including rare and expensive sports cars. I'm certainty priced out of buying most of them because of the higher earners wanting/willing to pay for them. There is a limited supply, thus the prices are high.
Unfortunately there's not much you can do on this island to fix that.0 -
Indeed it could.
More people being able to afford their own homes is surely a good thing. I would call this progress. I think most reasonably minded people would say that the higher the % of the population that can afford to own their own home, the better.
HPI discourages this from happening, especially when HPI is relatively high.
I'm in full agreement, however you seem to be in contradiction.
More people with the choice to own is indeed much better.
It seems however that this was only achieved by the easing of credit, which in turn helped to fuel HPI.
What do you want?
a) People to have access to credit and the choice to own albeit with the likely impact it will have on demand and house prices
or
b) There to be less access to credit such that less people have the option to buy and own.:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0
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