Why interest rate increases will fuel house price rises.

Tycoon

Rate rises are a disincentive to house builders so there will be less new houses on the market in the future.

House prices are mainly controlled by supply and demand so less houses available means higher prices in the future.

MickKnipfler

Great, let's raise the interest rates to 10% then....that's the answer!

jamminjamaica

very interesting. where did you get your information from?

whambamboo

jamminjamaica wrote:

very interesting. where did you get your information from?

he made it up as he is a one-post troll talking garbage.

dougk_2

Seeing that many house developers are large commerical companies who get corporate loan rates and many that make vast profits, interest rates won't affect them as much as it affects Joe Bloggs. True demand is the biggest pressure on house prices and for that reason I don't think much will happen if the rates rise 0.5% or so in the next few months (the fact its winter and a traditionally slower period for house buying/selling will be of more interest to most people).

meanmachine_2

Lack of supply, caused by sky high moving costs, coupled with banks abandoning 1000 years of strict lending critieria don't help, surely.

In the States, which is a much more transparent market, the ave house price is, I believe, around £110,000.

And that's despite them earning the same as us. Which gives them far more disposable income, which means they're much less likely to hit recessionary problems in the future.

Throttle supply, send houseprices through the roof and you can buy votes for a short time, then it all starts going horribly wrong.

sanfrancisco

Tycoon wrote:

House prices are mainly controlled by supply and demand

This is debatable. What about all the cheap money flying around? Things never exist in a vacuum. It is always more complex than that.

dougk_2

meanmachine wrote:

Throttle supply, send houseprices through the roof and you can buy votes for a short time, then it all starts going horribly wrong.

The big difference is the US is huge and the UK is tiny, we don't have the space the Americans have without losing half our countryside and ruining our quality of life (and air) even further. Lookup the population densities on wiki and you will see the UK is the 3rd most densely populated country in Europe (behind Netherlands and Belgium) with 246 people per square KM.... The US has only 31 people per square KM.

Also if you look at the figures despite the "cheaper" house prices in the US larger numbers of people rent (and are happy doing so). Cheap rented accomodation also keeps prices down as there is lots of choice.

You can't make a straight forward corrolation between the UK and US.

leftieM

whambamboo wrote:

he made it up as he is a one-post troll talking garbage.

Ouch! That's a little harsh.

Gorgeous_George

My trollometer is reading high.

The thing that stops buiders building is low prices. They hold onto land until prices are higher to maximise profit.



GG

dips_3

Tycoon wrote:

Rate rises are a disincentive to house builders so there will be less new houses on the market in the future.

House prices are mainly controlled by supply and demand so less houses available means higher prices in the future.

House prices are controlled by credit and money supply.

There are plenty of houses - if there weren't there would be people living on the street.

Houses prices are high because interest rates are low (borrowing is cheap). When interests rates rise - house prices will stop rising/go down.