Shock Rise in House Prices.........

Sibley

Bears 2011 predictions were drops.

Bulls said stagnation or small rises.

Nuff said?


Front page of a daily newspaper. Nearly every homeowner in the UK will see this. At the supermarkets, garage forecourts the message will be got across loud and clear.

Sellers will be asking for more and not accepting less.


http://www.express.co.uk/posts/view/292744

HOUSE prices have defied gloom-mongers to record an unexpected rise.


They ended 2011 up by a healthy one per cent compared with this time last year.

The figures from Britain’s biggest building society show a marked improvement from 12 months ago, when prices were down 0.5 per cent year on year.

Robert Gardner, Nationwide’s chief economist, said the housing market had performed remarkably well considering the very tough economic climate.

“Against a backdrop of anaemic economic growth and a deteriorating labour market, UK house prices were surprisingly resilient in 2011,” he said.

“Thanks to continued low interest rates, the number of forced sales remained low. Together with a dearth in building activity in recent years, this prevented a glut of unsold homes from accumulating on the market.


Against a backdrop of anaemic economic growth and a deteriorating labour market, UK house prices were surprisingly resilient in 2011

Robert Gardner, Nationwide’s chief economist



“This meant that although demand and supply were both weak, they remained relatively well matched.”
The increase took the average price of a house to £163,822, up £1,573 – the equivalent of £131 a month.
The figures confound predictions that the market was set for a double digit crash in 2011. They also provide further evidence of the long-term investment strength of bricks and mortar, with property values far outstripping shares, which were six per cent down over the year.
The rise in house prices has been fuelled by record low Bank of England interest rates and increasing mortgage availability. A BBC poll of 27 leading economists yesterday provided further hope that rates will stay at their current 0.5 per cent through 2012 and beyond.
The Nationwide end-of-year report showed that nine out of 13 UK regions saw house prices rise during 2011.
London saw rises of 5.5 per cent but prices were down in north and north-west England and in Scotland. Northern ­Ireland was the worst performing region with prices falling 8.7 per cent.
Separate figures from the Land Registry yesterday showed a monthly house price rise of 0.3 per cent in England and Wales. They also revealed that 729 homes sold for £1million or more in September, one per cent more than the same time last year.
David Newnes, director of LSL Property Services, owners of Your Move, said: “Mortgage finance is currently highly affordable. The next year will certainly bring its fair share of economic challenges, but buyers should remember there are plenty of excellent investment opportunities out there”.
Housing Minister Grant Shapps said low interest rates were vital to help first-time buyers. “The doubling of house prices in the decade from 1997 blocked an entire generation from getting on the housing ladder.”

AD9898_2

Rising house prices is not in itself a bad thing, what is bad is a bubble that was fuelled by wrong IR decisions, very poor lending practises and people lying on mortgage applications.

This is what happened in the 2000-2007 era. We, along with the USA and others were part of the problem and other countries that weren't part of it are suffering the same fallout. This along with peak oil has snuffed out any chance of a normal recovery, as we are seeing.

After all it's been over 4 years now since the crisis hit, along with the plateau of oil production, and as far as I can see there is no light at the end of the tunnel.... wonder when the penny is going to drop ?

Wookster

Sible hasn't figured out that 'surprisingly resilient' in this context means defying the fundamentals.

Clearly that cannot continue indefinitely.

JonnyBravo

Wookster wrote: »

Sible hasn't figured out that 'surprisingly resilient' in this context means defying the fundamentals.

Clearly that cannot continue indefinitely.

It's not defying the fundamentals though is it?

It is decreasing in real terms and will continue to decrease. His nominal increase (on one index, with at least two others showing nominal drops) is meaningless.

They might be decreasing more slowly than expected but they are decreasing.

System

JB you just made the rookie mistake of trying to apply logic and reason to one of the classic catchphrases.

julieq

Wookster wrote: »

Sible hasn't figured out that 'surprisingly resilient' in this context means defying the fundamentals.

Clearly that cannot continue indefinitely.

They're not "defying the fundamentals". The fundamentals of market pricing are related to supply and demand, and the rate of household creation is higher than the rate of home creation. That leads to upwards pressure on pricing. At the moment that's balanced by lack of confidence and inability of FTBs to raise deposits, but that situation can and will change.

And the light at the end of the tunnel Ad? Spring. Things will look better then. Like most people you extrapolate in straight lines and when things look bleak you can't imagine them getting better. But they will. There has been concerted effort to solve the eurozone problems, and that will have an effect on confidence.

There are some risks, but when they're being stated now even by the doommongers at the BBC they're having to use rhetorical tricks like "one in five economists believes a country will leave the eurozone". A few weeks ago it was 50/50, now economists believe there's an 80% chance of survival. That is a massive positive sentiment shift. Honestly, if you stopped listening to the commentary and looked at the numbers, you'd be far happier generally.

AD9898_2

The issue with fundamentals here and the supply and demand argument is this...

Unlike bananas, apples and milk, houses require vast amounts of credit, if that credit had been restricted by proper IR decisions and lending practices in the decade from 2000 onwards it would have gone a long way in stopping the bubble forming as probably 99% of people need credit to buy a house.

So, no matter how much someone wants a house, if the credit is not there they can't buy it, thus negating the supply and demand argument. Also the added benefit of correct credit control would have been to keep house prices in check.

shortchanged_2

As I've said for ages now it's like a Mexican standoff at the moment and until one thing or another changes then very little will change.

The ultra low interest rates are preventing a glut of many forced buyers so many buyers can sit and wait.

On the other hand there is still the strict (and appropriate) lending criteria so many buyers still can't afford to pay the high prices and this combined with many realising that it could well be a stupid decision to buy with rates so low knowing that they will eventually go up.

So there we are the result being a very low number of transactions, price drops in most places with the UK avergage price being skewed by London and the South East.

DervProf

AD9898 wrote: »

The issue with fundamentals here and the supply and demand argument is this...

Unlike bananas, apples and milk, houses require vast amounts of credit, if that credit had been restricted by proper IR decisions and lending practices in the decade from 2000 onwards it would have gone a long way in stopping the bubble forming as probably 99% of people need credit to buy a house.

So, no matter how much someone wants a house, if the credit is not there they can't buy it, thus negating the supply and demand argument. Also the added benefit of correct credit control would have been to keep house prices in check.

^

:T

The meeting of nails, heads and hammers.

Although I will add that had credit been sensibly controlled, then house prices would still not be "cheap", but the wealth tied up in property may have been more evenly shared, and our banks would be in better shape that they are now. Party hard, suffer the hangover - good advice, given today's date.

chewmylegoff

Sorry, I mistakenly called your other thread the worst thread of the year. In fact this thread is even worse.

It's a shame that hpc site bans half of its idiots, as you'd be far better off over there with the other equally but oppositely obsessed lunatics.

HAMISH_MCTAVISH

AD9898 wrote: »

The issue with fundamentals here and the supply and demand argument is this...

OK, lets break down this argument into it's component parts.

houses require vast amounts of credit, if that credit had been restricted by proper IR decisions and lending practices in the decade from 2000 onwards it would have gone a long way in stopping the bubble forming as probably 99% of people need credit to buy a house.

So, no matter how much someone wants a house, if the credit is not there they can't buy it, thus negating the supply and demand argument. Also the added benefit of correct credit control would have been to keep house prices in check

So your premise is that if lending had been restricted between 2000 and 2007 then prices would not have risen as much.

That is probably correct, to a point, but the real question should be how does that mechanism work?

Because what you're really saying is that if interest rates had been higher, and lending standards had been stricter, then fewer people would have been able to buy a house.

Which brings us right back to supply and demand.

If fewer people can buy because of restricted credit, like today, then of course prices will be (slightly) lower, like today.

But because there is such a shortage of housing, rents have soared to new record highs instead.

So the total lifetime housing cost for an individual has not reduced at all, but rather increased as they are now being forced to rent for years, and rent at higher prices, while saving a deposit. And because rents are higher, saving the deposit takes longer.

Effectively what you've done is artificially delay demand into the future, so the limited pool of housing is no longer being rationed through price, as was the case before 2007, but is now being rationed by forcing a generation to wait on the sidelines for 5-10 years while they save a deposit.

This hasn't reduced demand, it's only delayed it.

All you've done is create a modern day equivalent of waiting lists....

Now the only way this can translate into permanently lower prices is if in the meantime we build more houses than will be needed. And of course we're doing the opposite.... Restricted lending is ensuring that fewer houses are built, the lowest level since 1923, and around a third of what we need.

So any reduction in prices will only be temporary, and this wave of delayed demand will at some point crash into the biggest house building shortage in a century, with strongly rising prices being the inevitable result.

If you think high prices are a problem, then credit rationing is not a cure. It's at best a sticking plaster that can delay HPI by a few years while generation rent are forced to wait and save up larger deposits.