Why exactly are houses so expensive?

HAMISH_MCTAVISH

shortchanged wrote: »

So why aren't house prices continuing to boom with IO's rock bottom and the same population issues as a decade ago if not worse?

Because virtually nobody can get a mortgage!!!

So rents have boomed instead. Reaching a new record high despite the recession, high unemployment, benefits cuts, etc.

It's easy to keep house prices down when you prevent most people from buying houses they could comfortably afford.... If they could actually get a mortgage.

But you'd have to be a complete idiot to think the "solution" to high house prices is to prevent millions of people from buying houses.

Graham_Devon

HAMISH_MCTAVISH wrote: »

But you'd have to be a complete idiot to think the "solution" to high house prices is to prevent millions of people from buying houses.

The only thing preventing them from buying is lack of funds. This was the same in 2005/6, so 110% / 125% mortgages were invented to overcome those issues.

Sorry for muddling again.

shortchanged_2

HAMISH_MCTAVISH wrote: »

Because virtually nobody can get a mortgage!!!

It's easy to keep house prices down when you prevent most people from buying houses they could comfortably afford.... If they could actually get a mortgage.

Well thanks for finally seeing the point Hamish. At least you now realise that access to easy credit was fueling rampant HPI.

As you obviously now realise there are always two sides to a coin.

We've had the property boom caused by loose lending and now we have the stagnant market being helped by low interest rates, forbearance etc etc and lack of access to credit.

So it's blatantly obvious that it is access to credit that fuels the housing market.

Graham_Devon

shortchanged wrote: »

Well thanks for finally seeing the point Hamish. At least you now realise that access to easy credit was fueling rampant HPI.

Now no short....quit the muddling

HAMISH_MCTAVISH

shortchanged wrote: »

Well thanks for finally seeing the point Hamish. At least you now realise that access to easy credit was fueling rampant HPI.

No.

Access to normal credit was enabling people to get on and buy a house.

The housing shortage was what drove up prices.

We've had the property boom caused by loose lending

See above.

the stagnant market being helped by low interest rates, forbearance etc etc and lack of access to credit.

Wrong again.

So it's blatantly obvious that it is access to credit that fuels the housing market.

If that was the case, then prices would be a lot more than 10% down here now we've removed 65% of lending.

They're down 50% in Ireland, 35% in Spain and 40% in the USA, despite all the low rates, forbearance, lack of access to credit, bank bailouts, help for homeowners, etc.

Because those places have massive oversupply of houses, and we have a shortage.

shortchanged_2

Hamish I've never denied that supply and demand has an effect on the market and yes I grant you that a shortage of supply as we are told we have in the UK will help prevent a crash of sorts.

But why can't you admit that 6+ times income mortgages, liar loans, huge increase in IO loans and 100%+ mortgages pushed house prices up to levels they are now?

Hence they are now still overpriced in relation to earnings.

HAMISH_MCTAVISH

Graham_Devon wrote: »

The only thing preventing them from buying is lack of funds. .

That's absolute nonsense though.

If a million FTB-s went to the banks tomorrow with 25% deposits, the banks would have to move the goalposts again to require 30%, or 35% or 40% deposits until enough people were rejected that the pool of buyers shrank to meet the pool of funding.

People have the ability to pay mortgages, they have the ability to save historically normal deposits, but they're not able to get them because banks have to ration funding by setting criteria guaranteed to exclude most potential buyers.

The game is rigged. It doesn't matter how many people have a 10%, or 20% deposit. Banks will still have to change the rules and reject them until borrower numbers drop to meet limited funding.

Graham_Devon

shortchanged wrote: »

Hamish I've never denied that supply and demand has an effect on the market and yes I grant you that a shortage of supply as we are told we have in the UK will help prevent a crash of sorts.

But why can't you admit that 6+ times income mortgages, liar loans, huge increase in IO loans and 100%+ mortgages pushed house prices up to levels they are now?

Hence they are now still overpriced in relation to earnings.

Hamish thinks 100% / 110% / 125% lending is normal.

You can pull out figures from history suggesting this isn't in any way normal, but he's one of those posters who just contnue to trott things out regardless. I don't honestly think he would care if he had every single person on the forum disagreeing with him....his view would not change.

Therefore, theres little point trying to reason. Especially since when he is stuck with a point you make, he'll simply turn around and write you off then as muddling the discussion.

It's better just to write him off as a very silly boy!

Graham_Devon

HAMISH_MCTAVISH wrote: »

That's absolute nonsense though.

If a million FTB-s went to the banks tomorrow with 25% deposits, the banks would have to move the goalposts again to require 30%, or 35% or 40% deposits until enough people were rejected that the pool of buyers shrank to meet the pool of funding.

Supply and demand as you have already said hamish.

You cannot invent supply from thin air. In terms of what you have said, you cannot invent enough money to lend out to everyone. So your argument appears to be simply that there is not enough money...though you are arguing this from the lender side, rather than the buyer.

In effect, what you are arguing is the buyer doesn't have the money, therefore they require lending. But at the same time, you argue the lender hasn't got the money either and only has a certain amount, so will lend to the lower risk categories.

That's business through and through, and unless you invent an endless supply of money, that will always be the case.

So all you are complaining of here is that house prices are too high (as the available money cannot cater for the amount required),....or, you are complaining of there not being an endless supply of new money simply invented.

You can up the supply of money to lend, or you can reduce the amount required to lend on (house price).

Reducing the house price will see the pool of money go further.

Increasing the lending will see prices increase and the same point of needing to increase the money supply again.

I know which I'd prefer...as I have children following behind me who will be responsible for our actions today.

I know which you prefer....as you don't.

HAMISH_MCTAVISH

shortchanged wrote: »

Hamish I've never denied that supply and demand has an effect on the market and yes I grant you that a shortage of supply as we are told we have in the UK will help prevent a crash of sorts.

Alright then, at least it's a start.

But why can't you admit that 6+ times income mortgages, liar loans, huge increase in IO loans and 100%+ mortgages pushed house prices up to levels they are now?

Because those things are gone, and prices remain high!!!

It's so blindingly obvious, I'm genuinely amazed you can't get it.

In what's probably a vain hope that you might understand, I'll give you another example.....

Monetary policy, forbearance, social safety nets, housing benefits, etc, are the same throughout the UK. Yet in Northern Ireland, prices have fallen 50% on average. In the rest of the UK it's just 10% on average.

Because Northern Ireland is a good example of a genuine, speculative, credit fuelled, housing bubble, where hot money flowed in from ROI and drove up prices. All the props in the world cannot hold up prices when that's what you have, and you remove most of the lending.

On the mainland however, credit was not the main cause of house price rises. So even though we removed most of the credit, prices are just 10% down on average . Despite having exactly the same monetary policy (or "props" as you'd call it) to Northern Ireland!!!

Exactly the same "props" are in place there as here. Yet prices have fallen 50% there, and just 10% here.

How on earth do you explain that if credit/IR's is the main reason?

It's exactly the same in both!!!