Nationwide +0.5%

Generali

I've gotta say, I think Graham Devon is basically right here. To take the mythical Ferrari, demand is low for Ferraris not high as is commonly imagined. Yes, lots of people quite fancy buying a Ferrari but few can afford them at current prices because supply is also low.

Demand is the ability and want to buy at any given price. There is no such thing as 'pent up demand' as such, just people on the demand curve below the current market price. Those are people that would be able to buy if the price fell but as much as they want can't or won't buy now.

To look at the future, perhaps more people can try to enter the market if mortgage lending becomes easier to get and if people remain inclined to pay a substantial premium over renting to buy. That's a lot of 'ifs' and a 'perhaps' too. On the supply side there are a lot of baby boomers heading towards retirement age that may well find that their pension isn't going to be quite what they hoped as the stock market has gone sideways for a decade. Their big asset in many cases will be their house. Would you want to sit in poverty in a half a million quid house? I wouldn't.

julieq

Graham, it's a competition.

Not everyone needs to be able to pay the price. Just those competing. Where people can't compete, the average means of those competing increases.

We're stagnating because a large number of people who would be competing under normal circumstances are excluded from mortgages. Ironically they are putting prices up now because the rent they're being forced to pay as an alternative is making BTL more attractive (source is today's BoE survey). When you exclude people you create pent up demand, it remains pent up until supply they can afford arrives (prices fall) or they're provided with finance (which according to the BoE is starting to happen) in which case prices rise because they are competing with each other.

Pent up demand = desire in your terms. Allow it to be satisfied and prices rise. It's still supply and demand.

The fact is that prices are being sustained EVEN without allowing this pent up demand to be satisfied. 3.8% available houses has become 3% in 4 or 5 years. The inevitable outcome is rising prices over time.

HAMISH_MCTAVISH

julieq wrote: »

3.8% available houses has become 3% in 4 or 5 years. The inevitable outcome is rising prices over time.

Just to be pedantic, they're empty, they're mostly NOT available.

22% are former flats above shops or pubs now mostly used for business storage or office space. Another 50% are being refurbished or in probate at any given time. Others are derelict, or simply in the wrong place for current demand.

Very, very few are available and suitable for occupation.

.

geneer

julieq wrote: »

Erm, what I said was that you don't need FTB's for prices to rise. Which you don't. You just need strong demand for housing, As it happens, it appears that FTB price inflation is higher than elsewhere in the market. And did you see the lenders report which explained that BTL was increasing as a response to increased demand for rented housing?

Do please support your assertion that FTB price inflation is higher than elsewhere thanks.

Did you see my comment that its unsurprising that demand for rented accomodation is rising?

Aside from that, you appear to have, yet again, selected two points and tried to sell it as the whole picture.

julieq wrote: »

There's a good general principle Geneer, which is that when someone stops arguing with you, it's not necessarily because you're right. It's because spending time arguing with the class thickie is ultimately a bit of a waste of time and you may as well just wait for events to prove you right.

As a general principle Jules, it appears that when someone takes the huff, throws the toys from the pram then storms around the forum constantly grumbling about me (despite us only having limited interaction), its a fairly good sign that I'm right.

In the case of Hamish, when he "ghosts" away from a thread he's previously taken a lot of interest in, its a fairly good indicator that someones right.

I do of course want to add that despite your claims you tend to spend a considerable amount of time arguing with the "class thickie" and its only when it becomes apparent that you don't have a let to stand on that you decide its not worth it.

All in all I guess its a coincidence that you reserve the greaters ire for the posters who demonstrably have pulled you spurious arguments apart.

julieq wrote: »

Did you see that prices are up YOY? Another year's rental down the drain I guess Try not to be bitter.

Yeah. Because your statement makes me appear to be the bitter one right? :rotfl:

Generali

julieq wrote: »

Pent up demand = desire in your terms. Allow it to be satisfied and prices rise. It's still supply and demand.

It only becomes demand if people can and want to bid more. At present they are either unable or unwilling to do so.

Don't imagine that the mortgage market is about to do a about turn either. I don't think that the implications of Basle III have really hit home outside of the banking world yet but if it is implemented as agreed you can forget 95% mortgages without MIG and even then rates are likely to be punitive.

ruggedtoast

Graham_Devon wrote: »

You don't need to explain it to me, as in all of your explanations you totally ignore ability to pay the price.

You are still ignoring the ability to pay the price.

As prices rise, less people can afford to pay the price. That means fewer people have desire turned into demand.

It's as simple as that. It's something you ignore continually, and then suggest you have led horses to water but by god you can not make them drink it, someone drown the horse, make it drink the !!!!!!! water.....still won't drink...someone....shoot the stupid ignorant horse....it won't agree with me and drink the water.

You've now written off desire and the price of the asset as "unecessary additional concepts". That's up to you. But don't go round stating people don't understand. That's your theory.

If you ignore desire, as you obviously wish to do...then why are house prices not rising now...instead of simply falling, rising, stagnating?

I have no idea what you two are even talking about anymore.

geneer

julieq wrote: »

Graham, it's a competition.

Not everyone needs to be able to pay the price. Just those competing. Where people can't compete, the average means of those competing increases.

We're stagnating because a large number of people who would be competing under normal circumstances are excluded from mortgages. Ironically they are putting prices up now because the rent they're being forced to pay as an alternative is making BTL more attractive (source is today's BoE survey). When you exclude people you create pent up demand, it remains pent up until supply they can afford arrives (prices fall) or they're provided with finance (which according to the BoE is starting to happen) in which case prices rise because they are competing with each other.

Pent up demand = desire in your terms. Allow it to be satisfied and prices rise. It's still supply and demand.

The fact is that prices are being sustained EVEN without allowing this pent up demand to be satisfied. 3.8% available houses has become 3% in 4 or 5 years. The inevitable outcome is rising prices over time.

There you go.

Falling FTB demand = increasing prices. Brilliant!

Cleaver

Generali wrote: »

I don't think that the implications of Basle III have really hit home outside of the banking world yet

I've got to be honest and say that I wasn't too keen on Basle II, so not really sure I'll bother with Basle III. It lacked plot depth and I wasn't impressed with the ending. Is Zack Galifianakis in Basle III? He seems to be in most things at the moment.

Cleaver

And I wouldn't buy a Ferrari even if they were £10,000, as they make you look like a complete c*ck.

I'm not helping on this thread, am I?

julieq

Generali wrote: »

I've gotta say, I think Graham Devon is basically right here. To take the mythical Ferrari, demand is low for Ferraris not high as is commonly imagined. Yes, lots of people quite fancy buying a Ferrari but few can afford them at current prices because supply is also low.

Demand is the ability and want to buy at any given price. There is no such thing as 'pent up demand' as such, just people on the demand curve below the current market price. Those are people that would be able to buy if the price fell but as much as they want can't or won't buy now.

To look at the future, perhaps more people can try to enter the market if mortgage lending becomes easier to get and if people remain inclined to pay a substantial premium over renting to buy. That's a lot of 'ifs' and a 'perhaps' too. On the supply side there are a lot of baby boomers heading towards retirement age that may well find that their pension isn't going to be quite what they hoped as the stock market has gone sideways for a decade. Their big asset in many cases will be their house. Would you want to sit in poverty in a half a million quid house? I wouldn't.

Gen, Graham was explaining that you don't look at progressions in trends to look at supply and demand. I'm arguing - and so are you in fact - that that's all you do pretty much because the end point is a forecast.

Clearly absolute demand for purchasing a house is constrained by availability of finance. I've never disagreed with anyone about that, not even Graham. But that doesn't necessarily result in falls, because if there are sufficient numbers of people able to pay the price it'll sustain a particular price level. Those competing have higher average means because those of lower means drop out UNTIL there is more supply than those remaining in the game need at which point price falls start.

And we have a complicating factor with housing in that everyone needs to live somewhere, and there is very little slack in the system (around 3% empty homes according to Hamish's numbers). That means there is strong demand for the rental sector which makes a house an investment opportunity and will keep its value high. It is not necessary to have a mortgage to buy a house, and the reduction of mortgage finance excludes not all potential purchasers but only those needing mortgages. That is a very important point here. The absolute value of a house is determined by the demand for housing overall, rented or purchased, as a function of potential yield essentially.

If you can accept that argument - which frankly I've been making throughout, however it gets distorted and misrepresented, then we're just discussing supply/demand trends at the household creation/home creation level. Because they are the dominant effects.

To use your example against you, ( ) baby boomers die. That doesn't depress house prices, it just satisfies some of the residual excess between demand and supply. A baby boomer selling to raise funds before they die just swaps a lower price house for their higher price house. Unless the house is divided into flats, no net home gain takes place and the supply/demand equation is unchanged. Ultimately you only cope with supply/demand differentials by equalising the rate of supply to the rate of demand.

What you might do is to create localised effects where there is more demand for "granny flats" and lower demand for larger houses. But overall the only solution is to build more, otherwises prices will rise.