Mortgage help will release a surge of pent up demand.....

Graham_Devon

wotsthat wrote: »

Land Reg has data from 1995. During this time as prices increased so did transactions levels

Transactions levels hardly increased.

The highest levels of transactions was actually 2002.

This has been discussed before. It was categorically proven that transactions did not increase with prices.

You can't link to it, but I suggest you look at the sales volumes on land registry.

For quick reference: (tansactions)

1998 - 90k
1999 - 92k
2000 - 93k
2001 - 101k
2002 (highest point since 95) - 135k
2003 - 92k
2004 - 103k
2005 - 82k
2006 - 103k
2007 - 107k

Were simply at the same level of transactions we saw in the 90's house price falls. This is nothing new. But to say transactions increase with prices is abviously guff.

2005/6 and 2007 in particular are difficult to quantify as thats when mortgages went crazy as is started to teeter in 2005.

wotsthat

Graham_Devon wrote: »

Were simply at the same level of transactions we saw in the 90's house price falls. This is nothing new. But to say transactions increase with prices is abviously guff.

I chose North-West 1995 to 2013 - as prices increased so did transactions and vice versa - looks like a strong correlation. Where the causation is not clear but it's unarguable that they are inversely linked.

We'd need some more data to say we're 'simply' at the same level of transactions as the mid-nineties as if that's a sensible benchmark. Prices were the lowest for a generation (compared to wages) but people wouldn't touch them with a barge pole.

House price falls aren't necessarily bad but the reasons for them usually are which is why it's not obvious that more people will buy houses if they get cheaper.

Graham_Devon

wotsthat wrote: »

House price falls aren't necessarily bad but the reasons for them usually are which is why it's not obvious that more people will buy houses if they get cheaper.

Which is why I'm keen to keep using the words "natural level".

That level will always be found. Prices won't just keep declining. They will reach a level and then increase. That level will be the natural floor.

I don't know what that level is and I don't care to guess, but looking historically, it appears a level of around 3.5x wages seems to appear quite frequently.

Arguing that increasing the prices helps more people buy is ludicrous when you look at how they have to keep making the schemes bigger and bigger just to try and keep things floating.

wotsthat

Graham_Devon wrote: »

Which is why I'm keen to keep using the words "natural level".

I'm sure - it means nothing.

Graham_Devon wrote: »

That level will always be found. Prices won't just keep declining. They will reach a level and then increase. That level will be the natural floor.

It appears to have happened already. Prices declined, reached a level and are now rising. There's plenty of scope for the government to !!!!-up the mortgage guarantee scheme but we passed the (nominal) floor in 2009 and unlikely to see it again. I'm expecting some more real term falls before increasing but, nominally, it's all over.

Graham_Devon wrote: »

I don't know what that level is and I don't care to guess, but looking historically, it appears a level of around 3.5x wages seems to appear quite frequently.

I think shortchanged had a similar idea which translated to £135k? It's possible I suppose but I just think it's more likely to be wrong than right.

Graham_Devon wrote: »

Arguing that increasing the prices helps more people buy is ludicrous when you look at how they have to keep making the schemes bigger and bigger just to try and keep things floating.

Straw man. Increasing prices don't make things easier to buy but it doesn't follow that more people will buy just because they're cheaper either.

Graham_Devon

wotsthat wrote: »

It appears to have happened already. Prices declined, reached a level and are now rising.

It's obvious you are going to continue ignoring what I say about natural levels and continue banging on and pretending I'm talking about something else, so theres little point in continuing.

grizzly1911

wotsthat wrote: »

During this time as prices increased so did transactions levels - I'm not arguing about which causes which but there's a clear correlation during this time - there's an inverse relationship between price and transaction levels.

Isn't this also true of investments. People are pouring into stocks and shares because they see the indexes climbing (also carp savings rates). There will be a fall at some point people will panic, sell, get burned and won't touch them again.

The cycle starts over.

I guess as property buying and selling is such a tortuous process, people can get caught with negative equity, akin to an albatross, that peak and troughs are delayed/extended somewhat.

wotsthat

Graham_Devon wrote: »

It's obvious you are going to continue ignoring what I say about natural levels and continue banging on and pretending I'm talking about something else, so theres little point in continuing.

You haven't properly defined 'natural levels'. Too arbitrary -I suspect 'natural levels' just means whatever you want the current market price to be.

John_Pierpoint

grizzly1911 wrote: »

Isn't this also true of investments. People are pouring into stocks and shares because they see the indexes climbing (also carp savings rates). There will be a fall at some point people will panic, sell, get burned and won't touch them again.
.

I have a horrible feeling that they are being pushed, they are not jumping.
They like me can see the return to 1970's "government" and the collapse of the value of money; not any intrinsic surge in corporate profits.

"Crisis what Crisis"

I can still remember where I was when the FT index (not the footsie) bottomed out at something like 135 ie 35% better than when it started in 1935 (or was it 1945 when the FT took over its rival daily paper?).

The longest running of these was the former Financial News Index, started on 1 July 1935 by the Financial News. The FT published a similar index, which was replaced by the Financial News Index—and the Financial News Index was then renamed the Financial Times (FT) Index on 1 January 1947

wotsthat wrote: »

It appears to have happened already. Prices declined, reached a level and are now rising. There's plenty of scope for the government to !!!!-up the mortgage guarantee scheme but we passed the (nominal) floor in 2009 and unlikely to see it again. I'm expecting some more real term falls before increasing but, nominally, it's all over.
.

I think you must be quoting London not Belfast ?

Belfast Zed-Index
£168,437
stats for
Value change
£63,514 (-27.38%)
from 5 years ago
Value change
£22,262 (-11.67%)
from 4 years ago

It is like the Tory sophistry "We are a wonderful success in fixing the deficit" (compared to the idiots opposite) It is still dangerously unsustainable but it is getting bigger slower.

Thrugelmir wrote: »

The price of corn. Depends on the weather globally. The weather is unpredictable.

Sorry I was just going one step further back.

I think the insight was gained at a time when corn imports were restricted, and new industrial classes in a rapidly growing population were being fed the line, "have you seen the size of my rent, I have to charge you a high price for flour because of the wicked landlord's rent". Then the wicked landlord would reply "do you know what I had to pay to buy this estate and the interest on my mortgage, I am hardly covering my costs". Wow we are back to the wicked banker now, "Of course I have to charge these interest rates if these land owners want to compete with the high returns available from the new industrialists - they are hard at work trying to reduce the ridiculous costs being imposed by these hand loom weavers and replacing them with well paid but very productive, machine loom semi skilled weavers. They are exporting all over the world and people are flocking to the new factories".

These are the people demanding cheap bread:

It is the demand for corn that pushes up the price of corn.

It is the price of corn that pushes up the price of land.

I suppose we could get onto the topic of Giffen goods:
Q, Why did the impoverished Irish try to spend more of their money on scarce potatoes thus driving up the price of potatoes even further?
A. Because potatoes were still the cheapest food available.

Q. Why do more and more tenants chase up rents.
A. Because they have virtually no capital and insecure jobs so cannot buy and so far have not resorted to squatting.

The sad thing is that all this money locked up in bricks and mortar, trying to protect itself from inflation, is indeed dead money. It won't be financing any modern equivalents of machine looms in the near future on behalf on the hopefully skilled and educated under employed, scratching at tax credits.

dktreesea

eelsoup wrote: »

It will be very interesting to watch the impact of this policy and see whether it achieves it's desired results.

I am sceptical of how much this will actually help the people it is allegedly aimed at. Most of the young people I know (my daughter included) do not have savings which amount to 5% of a deposit for a house. Many are in negative territory, as they have loans and overdrafts from their university days.

Interestingly these plans have brought with them greater acknowledgement in the media that the housing market is still in bubble territory.

I too am skeptical about how effective this will be too. The average price of a house where I live is just over £210k. While it has fallen this past year, it is still quite high.

The people who I know who are looking to buy alreadyboth have deposits of almost 20%, but even with those deposits they still can't get a mortgage because their combined incomes aren't enough for the size of the mortgage they would need. One couple has a fairly good combined income of just over £40k, and where told by their bank that the most they could borrow would be £140k. They thought that was quite low, but ringing around other baniks that was the highest offer they had. So even for an average priced house here, they would have to save another £30+k on what they have now.

dktreesea

Graham_Devon wrote: »

Which is why I'm keen to keep using the words "natural level".

That level will always be found. Prices won't just keep declining. They will reach a level and then increase. That level will be the natural floor.

I don't know what that level is and I don't care to guess, but looking historically, it appears a level of around 3.5x wages seems to appear quite frequently.

Arguing that increasing the prices helps more people buy is ludicrous when you look at how they have to keep making the schemes bigger and bigger just to try and keep things floating.

That natural floor though is capable of being manipulated. Historically housing has been priced at just over 4 x annual income (source: The Telegraph)



Even though we have ever increasing demand for housing, if the price to annual wages ratio continues to rise, so stays well above the price that banks are willing to provide mortgages for, then the buying price, in the absence of any wage rises, is probably going to fall. And with it transaction volumes, since there would be fewer and fewer willing sellers as the price tanks.

I'm not surprised insufficient new housing is built each year, a trend I expect to continue. The pound is tanking, so anything imported that is needed to build the house will cost more. So it costs more to build the house, yet they can't even sell at current rates, let alone an enhanced rate to give them a decent profit, simply because those who would buy don't earn enough to secure a mortgage.

So I conclude the only people the government's latest scheme will help are high income, low deposit buyers. They sound like the tories "natural" supporters.