Age of home ownership coming to an end...

the_flying_pig

HAMISH_MCTAVISH wrote: »

It's not supported by the chart, as the chart does not cover the time range of the recovery. It ends in mid 2009 for the price to income series comparing ireland to the uk.

I note that the price series, which does stretch to Q2 2010 for both countires, proves my point very well indeed though.



And the supposed credit bubble, that you focus on so obsessively, does not explain why Spain, the USA and Ireland's house prices fell by 30% to 40% and are now either flat or still falling, whereas the UK's house prices recovered strongly.

Yet "the supply of credit, the supply of credit, the supply of credit", fell by around 70% in all those countries.

Those "insignificant specks" of supply are the only difference between the countries.

Your theory has already been proven wrong, yet you repeatedly fail to accept it.

If credit expansion was the SOLE determining factor in house prices, then UK price falls would be at a similar level to that of the USA, Ireland or Spain. All of those countries have engaged in similar levels of monetary and fiscal stimulus, yet prices in the UK have behaved very differently.

So, your assertion seems to be that credit expansion ALWAYS creates an unsustainable bubble, and that ALL price spikes are bubbles regardless of underlying fundamentals.

Whereas my assertion is that Credit Expansion enabled the effective fulfilment of underlying demand in some countries, and created credit fuelled bubbles in others. But to determine which is which, we really need to look at the performance of the different housing markets once the credit tap was turned off.

And nothing in your posts so far explains why those differences in performance happen, AFTER the credit taps are turned off.

Whereas this does.....

Empty homes as a percentage of total housing stock.

Ireland 17%
Spain 16%
USA 11%

UK 3.2%

If 'supply' constraints are so important why, during the boom, did Ireland's prices increase by so much more than UK ones??

Are they a factor that tend to put a floor under prices after they've risen but doesn't particularly push them upwards? Plausible but hardly obviously uniquely correct in the way that you attempt to portray it.

I look at the Irish experience and part of me simply thinks, in bubble terms, 'the bigger they are, the harder they fall.

More obviously though don't you also think the fact that the Irish had their austerity budget nearly two years ago [a point in time at which their price to income ratio remained higher than the UK's] might be a factor? Just generally the falls they experienced in their real economy [GDP. employment] were of an order of magnitude greater than the UK's.

I accept that housebuilding rates may have played some part in the UK-Irish price differences but how much of a part? Half of it? Most of it? A little of it?? Might it just be that we're a couple of years behind them?

I also draw your attention to the following which suggests that recently [March 2010] Irish property was much more overvalued on a price-rent basis than UK property.

http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000254693.pdf

see page 5 for rental yields stuff [note - you probably won't like the report much because it tries to be holistic, i.e. take all factors into account rather than cherry-picking]... but then, of course, thinking about rental yields at all is generally troubling for pwoperdee bulls because in terms of simple demand for a roof over one's head, a 'property shortage' should not impact on rental yields at all - rents and pwoperdee prices would both increase [don't bother trotting out some ludicrous micro-survey that suggests that rents increased by 5% on the South side of Aberdeen's Acacia Avenue in the second quarter of 2010, we all know that rental yields are very low indeed by historical standards]... in fact, it seems that the demand for owning properdee has increased rather more than the demand for simply living in it... why might that be... not possibly anything to do with, uh, the supply of credit [sorry, just a hunch]?

i'm getting a horrible sense of deja vu now that you've been clobbered with logic in this fashion fairly comprehensively & possibly quietened down a tad before only to pop back up drivelling the same old mantra as enthusiastically as ever within a couple of days so i'll take my leave for now but...

sjaypink

treliac wrote: »

You mean you fancy him (or at least the 'him' in the avatar) sj!


.....

Oh no!!! Now I realise why I miss the *sarcastic* smiley

To clarify, I think JD is a pretty vile creature, but the cheesy smiling permatan face make me laugh

HAMISH_MCTAVISH

the_flying_pig wrote: »

If 'supply' constraints are so important why, during the boom, did Ireland's prices increase by so much more than UK ones??

Are you being deliberately obtuse, or are you just so blinkered by hpc dogma that you are incapable of considering any other viewpoint?

What I have said is that the expansion of credit can EITHER enable the effective fulfilment of underlying demand, OR create credit fuelled speculative bubbles. But we don't know which is which until the credit taps are turned off.

A shortage of supply will certainly create upwards price momentum, if credit is available to support it. Even without available credit, a shortage of supply will eventually create upwards price movement anyway.

Credit shortages/restrictions do not prevent HPI, they merely delay it.

A speculative bubble can form with or without a shortage of supply, or indeed, can take over from a moderate supply shortage to become a primary driver of upwards price momentum.

The size of the price increase, in isolation, is not a particularly good indicator of whether a market is in a bubble or whether price increases are fuelled by a genuine supply/demand imbalance.

Instead, one has to look at the underlying factors of housing supply, population growth, household formation, etc.

For example, if your population size is stagnant, households are reducing, house building is continuing at record levels, 17% of your housing stock is empty, and prices are rising anyway, then it is clearly a speculative bubble.

If your population is growing at 400,000 a year, household formation is at record levels, housing shortages are estimated at a million units and climbing, house building is at it's lowest level since 1924 and has underperformed targets for a decade, just 3% of your housing stock is vacant, and your house price growth is lower than many others without all those factors, then it should be obvious to anyone with a modicum of critical thinking ability that it's probably not a bubble.

Are they a factor that tend to put a floor under prices after they've risen but doesn't particularly push them upwards? Plausible but hardly obviously uniquely correct in the way that you attempt to portray it.

See above.

If price rises are primarily driven by genuine supply shortages, then a price floor will tend to exist at a higher level (as a percentage of peak) if prices crash due to external events, such as a catastrophic failure of global credit markets.

If price rises are primarily driven by speculation and a credit bubble, then prices will fall far further (as a percentage of peak) if prices crash due to external events, such as a catastrophic failure of global credit markets.

I look at the Irish experience and part of me simply thinks, in bubble terms, 'the bigger they are, the harder they fall.

Probably because your blinkered obsession with bubbles and credit leads you to ignore any other possible explanation.

More obviously though don't you also think the fact that the Irish had their austerity budget nearly two years ago [a point in time at which their price to income ratio remained higher than the UK's] might be a factor? Just generally the falls they experienced in their real economy [GDP. employment] were of an order of magnitude greater than the UK's.

So essentially you are building the case that the Irish experience was a speculative bubble without any economic or demographic foundation to support it.

Unsurprisingly, I agree.

With a 17% housing vacancy rate, it cannot be anything else.

I accept that housebuilding rates may have played some part in the UK-Irish price differences but how much of a part? Half of it? Most of it? A little of it?? Might it just be that we're a couple of years behind them?

House building rates alone are not the issue. House building rates in conjunction with existing shortages of stock, high population growth, high new household formation numbers, etc, are pretty much the only issue.

I also draw your attention to the following which suggests that recently [March 2010] Irish property was much more overvalued on a price-rent basis than UK property.

http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000254693.pdf

see page 5 for rental yields stuff [note - you probably won't like the report much because it tries to be holistic, i.e. take all factors into account rather than cherry-picking]... but then, of course, thinking about rental yields at all is generally troubling for pwoperdee bulls because in terms of simple demand for a roof over one's head, a 'property shortage' should not impact on rental yields at all - rents and pwoperdee prices would both increase [don't bother trotting out some ludicrous micro-survey that suggests that rents increased by 5% on the South side of Aberdeen's Acacia Avenue in the second quarter of 2010, we all know that rental yields are very low indeed by historical standards]... in fact, it seems that the demand for owning properdee has increased rather more than the demand for simply living in it... why might that be... not possibly anything to do with, uh, the supply of credit [sorry, just a hunch]?

Oh dear, not this tired old discredited bear meme.

It is entirely possible to have an imbalance of supply between the rental and owner/occupied segments of the housing market skew the rent to price ratio, all within the context of an overall shortage.

The buy to let boom increased the supply of private rented accomodation by 100% whilst only decreasing the supply of owner occupied accomodation by around 5%.

I'll let you see if you can figure out the implications for price of each category all by yourself.

i'm getting a horrible sense of deja vu now that you've been clobbered with logic in this fashion fairly comprehensively & possibly quietened down a tad before only to pop back up drivelling the same old mantra as enthusiastically as ever within a couple of days so i'll take my leave for now but...

:rotfl:

Sadly, you wouldn't understand logic if I printed it in 6 inch capital letters on the side of a giant Haggis and slapped you around the face with it.

Your endless, tedious, repetitive waffling about credit supply being the sole cause of any and all price rises, and blinkered obsession with bubbles, flies in the face of the available evidence and ably demonstrates why you crashaholics were so very badly wrong in predicting the outcome of the recent crash.