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Debate House Prices
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Guardian takes on VI's.
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Best of luck explaining that one, if anyone can.
Easy credit creates the demand.
I can see two sides here. I can see what those saying "supply and demand is all there is" are saying. But I can see what others are saying, i.e, demand is held up artificially.
What you are doing is breaking down the demand and looking at what's made it etc.0 -
Oh please spare me the supply and demand rubbish, the biggest factor without a shadow of a doubt why prices are so high was the easy credit. Not one poster on here has come even close to debunking that fact, of course there were obviously other factors at work - but ultimately, the knock on effect from these had minimal impact.
We've had alleged supply and demand issues in the last two years, where are the prices rises we saw from 2001 onwards - now lending criteria has tightened?
Best of luck explaining that one, if anyone can.
I have been trying to prove, or at least suggest that other factors at work.
Maybe it was a poor attempt, but my "Gizmo" example was trying to show that even if there is enough supply, prices can rise (with a little market manipulation and media backing). If that can happen where there is plenty of supply, then in a market where supply is a little more limited, the effect of "manipulation" (especially where you keep telling everyone there is limited supply) is that prices rise more quickly, and for longer.
I agree totally that the biggest factor in increasing property prices is easy and cheap credit. When that cheap easy credit runs out, it would be logical to think that property prices would fall (without taking any other factors into consideration), due to some of those who took on a lot of easy credit not being able to afford the repayments. Those who want to buy property for the first time won`t be able to afford such high repayments, so will not be able to afford such high asking prices, putting further downward pessure on prices. Of course, what I`m stating here is totally obvious.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
Graham_Devon wrote: »Easy credit creates the demand.
I can see two sides here. I can see what those saying "supply and demand is all there is" are saying. But I can see what others are saying, i.e, demand is held up artificially.
What you are doing is breaking down the demand and looking at what's made it etc.
I see this also.
If there is a geniune lack of supply of property, allowing a supply of easy credit will generate more demand. Generating more demand will push up prices, which will need a further supply of credit to support. Those who are willing to take on this cheap credit will feel they`ve made a good investment as prices rise further. Those who are unable or unwilling to take on the cheap credit at any one time will either get left out of the market, or have to rely on more cheap credit being available in the future. This doesn`t sound like a sensible or sustainable situation to me.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
I see this also.
If there is a geniune lack of supply of property, allowing a supply of easy credit will generate more demand. Generating more demand will push up prices, which will need a further supply of credit to support. Those who are willing to take on this cheap credit will feel they`ve made a good investment as prices rise further. Those who are unable or unwilling to take on the cheap credit at any one time will either get left out of the market, or have to rely on more cheap credit being available in the future. This doesn`t sound like a sensible or sustainable situation to me.
No, and that's why the "supply and demand" argument, at it's most simple level is so annoying. It can be used to simply snuff out any argument, but it's not all that helpful.
Supply is easy. There is only really one aspect..the amount of houses. The only real factors here are the types of houses, how many are being built etc.
Demand however, is made up of many factors. The frustration comes in when you try and explain that demand could never have been as high 2005-2007 if credit was not flowing like champagne at a bankers bonus party.
Therefore, demand wasn't just people wanting something and going out and buying it off their own backs. It was many people wanting it, and the ability to pay being tweaked every year. 100% mortgages....110% mortgages....125% mortgages.
Demand tailed off significantly when those mortgages were taken back. Demand can tail off significantly through many scenarios.
The trouble with the supply and demand "thats all there is" argument, is supply and demand is mainly used to state house prices will rise due to lack of supply. The demand part always seems ignored, as if the demand is made up solely of someone wanting to buy a place.0 -
nice one - he's got itGraham_Devon wrote: »Easy credit creates the demand.
I can see two sides here. I can see what those saying "supply and demand is all there is" are saying. But I can see what others are saying, i.e, demand is held up artificially.
What you are doing is breaking down the demand and looking at what's made it etc.
0 -
Graham_Devon wrote: »No, and that's why the "supply and demand" argument, at it's most simple level is so annoying. It can be used to simply snuff out any argument, but it's not all that helpful.
Supply is easy. There is only really one aspect..the amount of houses. The only real factors here are the types of houses, how many are being built etc.
Demand however, is made up of many factors. The frustration comes in when you try and explain that demand could never have been as high 2005-2007 if credit was not flowing like champagne at a bankers bonus party.
Therefore, demand wasn't just people wanting something and going out and buying it off their own backs. It was many people wanting it, and the ability to pay being tweaked every year. 100% mortgages....110% mortgages....125% mortgages.
Demand tailed off significantly when those mortgages were taken back. Demand can tail off significantly through many scenarios.
The trouble with the supply and demand "thats all there is" argument, is supply and demand is mainly used to state house prices will rise due to lack of supply. The demand part always seems ignored, as if the demand is made up solely of someone wanting to buy a place.
:beer:
chucky won`t agree, but GOOD POST.
It`s the reply I hear the most when debating HPI and the reason for it.... "supply and demand, innit. We are a small island" :doh:30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
Graham_Devon wrote: »Demand however, is made up of many factors. The frustration comes in when you try and explain that demand could never have been as high 2005-2007 if credit was not flowing like champagne at a bankers bonus party.
Therefore, demand wasn't just people wanting something and going out and buying it off their own backs. It was many people wanting it, and the ability to pay being tweaked every year. 100% mortgages....110% mortgages....125% mortgages.
I agree, but why do so many on here go back to the peak as the norm for house transactions? (which is also frustrating).
People on here argue so often there is no demand because transactions are so low, I have post on here before the range of transactions which is around stagnation (75,000 - 85,000 if i remember correctly).
It is interesting we are at that amount (86,000 CML report) yet people are still banging on about a massive crash because volumes are so low.0 -
Oh please spare me the supply and demand rubbish, the biggest factor without a shadow of a doubt why prices are so high was the easy credit. Not one poster on here has come even close to debunking that fact, of course there were obviously other factors at work - but ultimately, the knock on effect from these had minimal impact.
We've had alleged supply and demand issues in the last two years, where are the prices rises we saw from 2001 onwards - now lending criteria has tightened?
Best of luck explaining that one, if anyone can.
Supply and demand arent transient issues. They are the permanent environment under which any market works.
Para (1) If supply and demand doesnt drive prices why should extra credit lead to an increase in price? What is the non-supply and demand force that raises prices in response to a rise in credit availability?
Explaining why tighter credit reduces prices is easy when you look at supply and demand.
Para(2): Tighter lending reduces demand. Why? Because the demand comes from those people who:
a) Want a house
b) Are cash buyers or can afford a mortgage
c) Can get a mortgage
d) Have the deposit in cash
With tighter credit the number of potential buyers is reduced by (c) and (d). So there are fewer people seriously looking for houses and so prices need to be lower to ensure that this number of people matches the number of houses available.
But prices dont reduce as much as buyers would like because there are countervaling forces on sellers. At the simplest they can decide not to sell reducing the supply and thus raising prices.0 -
Graham_Devon wrote: »No, and that's why the "supply and demand" argument, at it's most simple level is so annoying. It can be used to simply snuff out any argument, but it's not all that helpful.
Supply is easy. There is only really one aspect..the amount of houses. The only real factors here are the types of houses, how many are being built etc.
Demand however, is made up of many factors. The frustration comes in when you try and explain that demand could never have been as high 2005-2007 if credit was not flowing like champagne at a bankers bonus party.
Therefore, demand wasn't just people wanting something and going out and buying it off their own backs. It was many people wanting it, and the ability to pay being tweaked every year. 100% mortgages....110% mortgages....125% mortgages.
Demand tailed off significantly when those mortgages were taken back. Demand can tail off significantly through many scenarios.
The trouble with the supply and demand "thats all there is" argument, is supply and demand is mainly used to state house prices will rise due to lack of supply. The demand part always seems ignored, as if the demand is made up solely of someone wanting to buy a place.
We do talk about demand - endlessly. Trouble is you dont listen. Try again....
Our first observation is that most people without a house once they have settled down with a job, spouse etc want to buy a house.
Our second observation is that most of those people who want to buy a house are prepared to sacrifice almost everything else beyond basics to get one.
The third observation is that people tend to chose to buy a house whose quality commands a price close to the maximum they can afford to pay even when structurally sound cheaper ones are available which would satisfy their basic human needs.
Do you disagree with these observations?
Now why these factors are present is something that is really quite interesting. When you think about it they arent all that rational. I cant think of any other purchase where they apply.
But whatever the cause these factors are surely more than sufficient to ensure that the raw demand exceeds the number of houses available.0
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