Property market 'heading for a fall in 2008'

jpvic

Same day, different paper..


http://www.express.co.uk/ourpaper/view/2007-04-02

Sisyphus

jpvic wrote: »

Same day, different paper..
http://www.express.co.uk/ourpaper/view/2007-04-02

through some fascinating new, Nobel Prize winning, economic theory the Daily Express have concluded:

"Prices to Soar even faster in Rush to Sell before Labour's £700 home pack comes in"

you couldn't make this stuff up!

increased supply = higher prices, brilliant.
Does anyone agree with this?

Generali

So prices will definitely fall unless they rise. Hmm.

Having said that the Express talks about this Spring whereas those other articles talk about 2008. Actually the article mentions a boom and bust as a result of HIPs.

We should remember that The Express is a piece of rubbish owned by a pornographer of course.

AManOfKent_2

I share the view mentioned above that not enough mention is made of supply or demand. People need to live somewhere. It is either with their parents , private renting , social renting or buying. There are simply not enough houses , and unlikely to be so for the foreseeable future . Despite Mr Prescott wanting to build so many houses in the South East there are still not enough to cope with the huge inward population migration to the country. So if FTB's can't afford to buy then they have to rent. Councils and Housing Associations are simply not building enough to rent out so private landlords fill the gap. Who are private landlords ? Mostly BTL ones. So if a FTB or ladder climber doesn't buy a property then a BTL one will. Until the situation where there is an excess supply then demand will continue. I grant you demand may slow but not stop. I've sat through even the 80's crash and heard all the warnings time and time again but my property price graph keeps on going in an upward trend. Regards , Andy

danm

think the peeps at the express have their supply curve round the wrong way

Melissa177

Rather than get hysterical, let's analyse why a crash occurs. I'm no expert, but let's think through why a crash might occur before we all panic.

A crash might occur because:

- there is a huge drop in demand
- a sudden massive increase in supply

Why might there be a drop in demand?

- I don't see a social trend to people living in larger groups together - if anything, this is going the opposite way, as more and more people buy alone or as couples. With the birth rate going down, however, this might impact the market in 20 years time. Immigration will counter this to some extent, although immigrants are often only here short-term, and don't buy. This wouldn't be a sudden effect either.

- The proportion of rented property is 11%, and has remained at 11% for the past ten years (according to the Sunday Times). Some BTL may sell up and move their investment elsewhere, but I'm not sure I see much evidence of this on a large scale so far. Also, the people have to live *somewhere*, so if they're not buying, they must be renting. If anything, rented properties keep the number of prospective buyers down, as a rented property often has many people sharing it (students; groups of young professionals etc) who would buy separately were they to purchase their own property.

- people buying together in groups. I know a couple of friends who have done this, but it's not that prevalent.

- a recession. This is the most likely cause of a crash. I don't know if we're heading for one at the moment. I very much doubt it.

- interest rates go through the roof. Would the BoE let this happen? I don't think inflation is so excessive that they need to do this.


So what about an increase in supply? How would this work?

- The government grants PP to lots more developers all of a sudden. Well, the number of new households being created each year is already significantly less than the number of new properties being built, so there would have to be a massive surge in developments. Unlikely to happen, and unlikely to cause a crash.

- Companies start relocating elsewhere (ie, to the North, where the housing market is less stretched than it is in the SE) to lower their costs. This would free up a lot of housing in the SE. This isn't a sudden effect, however, and would impact the trend in house prices, versus a sudden crash.



Basically, the way I see it, the only way this is going to happen is that if a bunch of houses become repossessed. This would happen either through a recession, or interest rates rise excessively. Then the BTLers are in the money as the council struggles to rehouse people.


This is a massively simple analysis, but I think it's better to examine the reasons for a crash rather than reading headlines and getting in a tizzy fit. The Express is reporting a massive surge in house prices this morning incidentally!

Sisyphus

AManOfKent wrote: »

I share the view mentioned above that not enough mention is made of supply or demand. People need to live somewhere. It is either with their parents , private renting , social renting or buying. There are simply not enough houses , and unlikely to be so for the foreseeable future . Despite Mr Prescott wanting to build so many houses in the South East there are still not enough to cope with the huge inward population migration to the country. So if FTB's can't afford to buy then they have to rent. Councils and Housing Associations are simply not building enough to rent out so private landlords fill the gap. Who are private landlords ? Mostly BTL ones. So if a FTB or ladder climber doesn't buy a property then a BTL one will. Until the situation where there is an excess supply then demand will continue. I grant you demand may slow but not stop. I've sat through even the 80's crash and heard all the warnings time and time again but my property price graph keeps on going in an upward trend. Regards , Andy

So where are people living now? How often do we hear these shortage of supply arguments without sufficient data to back them up.

There is a difference between having 8 potential buyers for a desirable property for sale and a shortage in accomodation.
Our local comprehensive gets over 2000 applictions for 200 places, it doesn't mean that 1800 kids will not go to school in September.

If you search in the Dept for Communities website you will find statistics that show the number of dwellings in the UK easily keeping pace with the population even if you allow for BNPish immigration numbers. The same shortage of supply argument was used right up until the correction of the early 90's. It doesn't explain a 200% - 300% price hike in the last 10 years.

Melissa177

AManOfKent wrote: »

I share the view mentioned above that not enough mention is made of supply or demand. People need to live somewhere. It is either with their parents , private renting , social renting or buying. There are simply not enough houses , and unlikely to be so for the foreseeable future . Despite Mr Prescott wanting to build so many houses in the South East there are still not enough to cope with the huge inward population migration to the country. So if FTB's can't afford to buy then they have to rent. Councils and Housing Associations are simply not building enough to rent out so private landlords fill the gap. Who are private landlords ? Mostly BTL ones. So if a FTB or ladder climber doesn't buy a property then a BTL one will. Until the situation where there is an excess supply then demand will continue. I grant you demand may slow but not stop. I've sat through even the 80's crash and heard all the warnings time and time again but my property price graph keeps on going in an upward trend. Regards , Andy

Couldn't agree more with Andy, I think his analysis is spot on.

Incidentally, all the sellers rushing to put their houses on the market before June will have to buy somewhere else, so there will be no net increase in supply, surely?

Melissa177

Sisyphus wrote: »

So where are people living now? How often do we hear these shortage of supply arguments without sufficient data to back them up.

There is a difference between having 8 potential buyers for a desirable property for sale and a shortage in accomodation.
Our local comprehensive gets over 2000 applictions for 200 places, it doesn't mean that 1800 kids will not go to school in September.

If you search in the Dept for Communities website you will find statistics that show the number of dwellings in the UK easily keeping pace with the population even if you allow for BNPish immigration numbers. The same shortage of supply argument was used right up until the correction of the early 90's. It doesn't explain a 200% - 300% price hike in the last 10 years.

Don't forget the increase in population doesn't tell the whole story - it's the increase in households too, as we trend towards people living alone in smaller family units.

I also agree with this "8 buyers per property" nonsense. I suspect it's calculated by the number of potential buyers on EA's books, which is silly, as I was registered with 20+ EAs when I was looking to buy! Does this mean I am counted as a buyer 20 different times?

Sisyphus

The Express is reporting a massive surge in house prices this morning incidentally!

which they say is due to an increase in the supply of houses.

- second line of the article.