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Debate House Prices


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"Oversupply the cause of house price crashes"

HAMISH_MCTAVISH
HAMISH_MCTAVISH Posts: 28,592 Forumite
Part of the Furniture 10,000 Posts Name Dropper Photogenic
in Debate House Prices & the Economy
http://www.ft.com/cms/s/0/31fb355a-4f5d-11e0-8632-00144feab49a.html#ixzz1He4CUWP9

Sir, Let me declare my interest: we are large shareholder in Barratt Developments.

We were interested to read the item on house prices in the Lex column of March 9. Here at Phoenix we have spent a lot of time over the past two years striving to understand what drives house prices. We looked at housing markets all over the world and over time.

Much to the disbelief of almost everyone we speak to, we have not found evidence that interest rates have a great effect on house prices, or more specifically that rising rates are certain to cause house price falls. The overwhelming common factor in all house price crashes that we have seen in the US, Spain and other parts of the world over the past few years has been an oversupply of housing. In countries where the supply of housing exceeded demand, price falls have followed.

Tightly supplied housing markets, of which the UK is a prime example, have been protected from significant house price falls. We think this explains why UK house prices bounced back so strongly following the falls of 2008 and early 2009 and why prices continue, on average, to be holding up. (Granted, the house price indices have shown some modest falls over the latter part of 2010 but no British housebuilder has reported falling average prices for well over a year.)

The primacy of supply and demand can even be seen in parts of countries where at the national level there have been falls in average house prices. Take the US: house price falls in areas such as Las Vegas have exceeded 50 per cent and yet prices around Boston have fallen much less. It is no coincidence that the former experienced a supply glut and yet Boston’s stringent planning laws constrained housing supply. The interest rates available to finance properties in both those locations have been the same.

The UK in 2011 probably is not an environment for significantly rising house prices, but so long as the undersupply of new houses continues to lag behind household formation we think that a material and lasting fall in UK house prices is unlikely.

Tristan Chapple,

Phoenix Asset Management Partners,

London SW13, UK

Immensely unsurprising.

I think most people already figured that out.
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
«134567…10

Comments

  • 1984ReturnsForReal_2
    1984ReturnsForReal_2 Posts: 15,431 Forumite
    --. .. ...- . / .. - / .- / .-. . ... -
    Not Again
  • HAMISH_MCTAVISH
    HAMISH_MCTAVISH Posts: 28,592 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    1984ReturnsForReal wrote: »
    --. .. ...- . / .. - / .- / .-. . ... -

    Morse code? :)
    “The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

    Belief in myths allows the comfort of opinion without the discomfort of thought.”
    -- President John F. Kennedy”
  • Wookster
    Wookster Posts: 3,795 Forumite
    Are you really daft enough to believe that some random's opinion that interest rates have no bearing on house prices is really important?

    Yawn
  • 1984ReturnsForReal_2
    1984ReturnsForReal_2 Posts: 15,431 Forumite
    hamish_mctavish wrote: »
    morse code? :)


    .... --- .-- / -.-. .- -. / -.-- --- ..- / .-- --- .-. -.- / - .... .- - / --- ..- - ..--.. / .--. . .-. .... .- .--. ... / .. - ... / - .... . / -.. --- - ... / .- -. -.. / -.. .- ... .... . ... / - .... .- - / --. .. ...- . / .. - / .- .-- .- -.--
    Not Again
  • HAMISH_MCTAVISH
    HAMISH_MCTAVISH Posts: 28,592 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    1984ReturnsForReal wrote: »

    .... --- .-- / -.-. .- -. / -.-- --- ..- / .-- --- .-. -.- / - .... .- - / --- ..- - ..--.. / .--. . .-. .... .- .--. ... / .. - ... / - .... . / -.. --- - ... / .- -. -.. / -.. .- ... .... . ... / - .... .- - / --. .. ...- . / .. - / .- .-- .- -.--

    Yes, it's the dots and dashes that give it away.
    “The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

    Belief in myths allows the comfort of opinion without the discomfort of thought.”
    -- President John F. Kennedy”
  • HAMISH_MCTAVISH
    HAMISH_MCTAVISH Posts: 28,592 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    -... --- .-. . -.. - --- -. .. --. .... - ..--..
    “The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

    Belief in myths allows the comfort of opinion without the discomfort of thought.”
    -- President John F. Kennedy”
  • purch
    purch Posts: 9,865 Forumite
    You'd have to be totally out of touch with reality to believe that one single factor causes HPI or falls.

    Of course over/under supply will have significant effects, but the drivers of demand, or lack of demand are far more complex.
    'In nature, there are neither rewards nor punishments - there are Consequences.'
  • nearlynew
    nearlynew Posts: 3,800 Forumite
    McTittish, you still don't even know the difference between demand and desire.


    You silly boy.
    "The problem with quotes on the internet is that you never know whether they are genuine or not" -
    Albert Einstein
  • purch
    purch Posts: 9,865 Forumite
    Need & Greed :eek:
    'In nature, there are neither rewards nor punishments - there are Consequences.'
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Much to the disbelief of almost everyone we speak to

    They seem surprised by this?
This discussion has been closed.
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