Is overcrowding to blame for high house prices?

Graham_Devon

I'll put the answer in a nutshell...

"The author is not convinced".

So, on a global scale, population density does not seem to correlate with housing booms. What then caused prices to race out of control?

For me, the answer lies in two things: access to cheap credit and a national mania for getting rich through property.

We Brits certainly had both in the boom years, before our bubble burst in 2007. Similarly, the five countries at the end of my table underwent credit-fuelled booms as get-rich-quick 'property mania' swept these nations.

In summary, I am not convinced that rising population density over the past 20 years fuelled the UK's property bubble. For me, risky mortgages (125% Together loans from Northern Rock, anyone?) were the prime driver of our housing folly!

Large article, including the authors research and reasons can be found by clicking here

One persons thoughts, and it's nothing more than that. Only found it when going to check my e-mail, and though Hamish would like it, so posting it for him really

ukcarper

How does that explain the boom in 70s no easy credit and very little if any BTLs etc.

FTBFun

Obviously the author is so proud of his views that he/she doesn't put their name on the article.

It's a very odd article - he/she goes on about housing density being depedent on habitable land (effectively taking out mountains, dense forest etc from population density calculations) and therefore in certain, metropolitan areas population density far exceeds that of the UK average - but then they ignore all that, post population densities of "16 leading nations with Western style economies", bizarrely including India with its massive inequalities, and then sums it all up by blaming the whole mess on easy credit with no real argument why.

A poor article, all in all.

joe_blotts

Very good article with some nice comparisons to other countries. I too am not convinced by the whole shortage/overcrowding argument but I'm sure there will be a few along to 'set me right'

joe_blotts

ukcarper wrote: »

How does that explain the boom in 70s no easy credit and very little if any BTLs etc.

Inflation was at 30% after a huge increase in the money supply coupled with wage price spirals. At least thats what I remember reading somewhere. Nothing to do with overcrowding I think

ukcarper

joe_blotts wrote: »

Inflation was at 30% after a huge increase in the money supply coupled with wage price spirals. At least thats what I remember reading somewhere. Nothing to do with overcrowding I think

The boom was in the early 70s and it that time property went from 3x average wage to almost 5x average wage.

I don’t think population density on its own tells you anything what about the number of people in each type of accommodation what about the ratio of houses to blocks of flats.

wotsthat

Graham_Devon wrote: »

Only found it when going to check my e-mail, and though Hamish would like it, so posting it for him really

That's nice- why not send him a PM then?

Graham_Devon

ukcarper wrote: »

How does that explain the boom in 70s no easy credit and very little if any BTLs etc.

I think you know what happened in the 70's.

No easy credit by todays standards, no.

But credit was made overwhelmingly easier to get as banks were given the go ahead to lend. Previous to that, only building societes were allowed to lend.

The boom took hold, aswell as the expansion of the credit card.

macaque_2

Graham_Devon wrote: »

I'll put the answer in a nutshell...

"The author is not convinced".

Large article, including the authors research and reasons can be found by clicking here

One persons thoughts, and it's nothing more than that. Only found it when going to check my e-mail, and though Hamish would like it, so posting it for him really

Graham - Thank you for posting this interesting article. It does look like game set and match. I am now expecting a monumental retraction from Brother Hamish.

Hamish - Is there something you would like to say? ..... and I promise not to smirk.

ukcarper

Graham_Devon wrote: »

I think you know what happened in the 70's.

No easy credit by todays standards, no.

But credit was made overwhelmingly easier to get as banks were given the go ahead to lend. Previous to that, only building societes were allowed to lend.

The boom took hold, aswell as the expansion of the credit card.

It wasnt until the 80s that banks started to lend not many people had credit cards in the early 70s i didnt get one until the 80s.

Graham_Devon

ukcarper wrote: »

It wasnt until the 80s that banks started to lend not many people had credit cards in the early 70s i didnt get one until the 80s.

It was the 70's. Doesn't really matter when you got one....the facts are the facts!

The early years of the 1970s, were a period of rapid economic growth.

1. The Bank of England deregulated the mortgage market - meaning High Street Banks could now lend mortgages (not just local building societies). This helped fuel a rise in house prices and consumer wealth.
2. Barber Boom of 1972. In the 1972 budget, the chancellor Anthony Barber made a dash for growth - with large tax cuts against a backdrop of high economic growth.
3. Growth of Credit. It was in the 1970s, we saw the first mass use of credit cards (Access). This helped create a consumer bubble.

Hardly surprising a boom in both credit and HPI stood hand in hand.