Speculation and public money underpinning housing bubble

cepheus

We don't work any more, only speculate using borrowed money on housing and stocks. Housing bubble will collapse in 24 months

http://www.maxkeiser.com/2013/08/kr4...ult-of-saving/

ACG

I would say atleast 80% of people in this country want to own their own home. As long as that demand is there any "collapse" will soon turn around. We have had a 5 year dip but the demand never faded, just the ability to get the funds. Over the last 6-12 months that has changed and so the prices are now beginning to rise again.

HAMISH_MCTAVISH

ACG wrote: »

As long as that demand is there any "collapse" will soon turn around. We have had a 5 year dip but the demand never faded, just the ability to get the funds.

The UK housing market is complicated, but there is significant upwards pressure on prices over the long run.

Supply and demand:
Given the truly extraordinary housing shortage in this country, the market will have to continue rationing houses in limited supply through price.

And given both the impending large demographic bulge of FTB age people (bigger than the boomer generation) and the lowest house building levels in a century, conditions are strongly in favour of rapidly rising prices.

Affordability:
FTB mortgage payments as a percentage of income peaked in 1990 at 68%.

They're currently 27%, versus a long term average of 38%, and that's with most FTB mortgages being closer to 5% than 0.5% thanks to bank margins being hiked to near record highs.

I think it is likely that the neutrality point for base rates in the next cycle will be 3% or so, versus 5%+ in the last one...

And also likely that bank margins will decrease as competition returns to the market and available funding increases.

So under those circumstances, prices could almost double without affordability meaningfully exceeding long term average levels.

Mortgage Rationing:
The state has implemented policies which have worsened lending availability and artificially repressed house prices, such as changing mortgage rules, failing to fix the dysfunctional credit markets, changing capital requirements for high LTV lending, etc, etc, etc.

Mortgage lending remains, in the words of the CML themselves, "completely dysfunctional".

We have millions of renters paying more in rent than they would for a mortgage, demonstrating their ability to service debt, yet forced into renting thanks to mortgage rationing.

This is politically unsustainable.

So it will not be sustained.

Hence, Help to Buy, Funding for Lending, etc, are schemes that seek to correct previous government policy mistakes and start to repair the broken lending markets.

Summary:
There has been an extraordinary confluence of events conspiring to keep house prices artificially low over the last few years.

Yet in spite of endemic mortgage rationing, high unemployment, record high bank margins, crippling deposit requirements, record high rents preventing saving, doom and gloom all over the media, and an incompetent government that has missed opportunity after opportunity to fix a dysfunctional and broken market, prices remain just 10% below peak and are now are rising again.

Given the next few years are going to see the biggest wave of FTB age people in history, bigger even than the boomers, come crashing into a housing market with one of the worst shortages in history, where building has fallen to the lowest levels in a century, and all in the run-up to a general election..... time is very much running out for how much longer they can keep prices artificially restrained.

When some semblance of normality returns to the currently dysfunctional lending markets, as it eventually and inevitably will, the speed and scale of prices rises will be truly eye watering.

So how high will they go?

I think we'll see prices nearly double in real terms over the next cycle, driven by worsening shortages and markedly lower average interest rates than the last cycle saw.

Peaking in the mid to late 2020's, shortly after the next demographic bulge peaks.

Max Keiser is catastrophically wrong on UK housing.

Masomnia

cepheus wrote: »

We don't work any more, only speculate using borrowed money on housing and stocks. Housing bubble will collapse in 24 months

http://www.maxkeiser.com/2013/08/kr4...ult-of-saving/

Speak for yourself!

chewmylegoff

The nonsense that is the keiser report strikes again. The summary's idiotic attempt to suggest that £12 billion has been diverted from housing benefit to underwrite mortgages demonstrates what palpable nonsense this is. Firstly, guaranteeing mortgages doesn't cost anything unless the debt goes bad and the bank calls in the guarantee, secondly I'm pretty sure housing benefit spending is increasing despite the govt's "reforms".

Given that the number of people in employment is the highest it has ever been, it's fairly clear that the statement that we don't work anymore and just sit around gambling on houses is basically the stupidest conclusion possible. Graham will come along now and say that they're all on zero hour contracts and not actually doing any work.

antrobus

cepheus wrote: »

We don't work any more, only speculate using borrowed money on housing and stocks. Housing bubble will collapse in 24 months...

The general election will be held in 21 months time. Perfect timing!:)

cepheus wrote: »

...
http://www.maxkeiser.com/2013/08/kr4...ult-of-saving/

We discuss how the ‘cult’ of Mark Carney is leading to food inflation, as well as housewives outstripping inflation.

Housewives are outstripping inflation!?! Are there any pictures?

Seriously, do you have any idea who Mark Carney is? He has already predicted the entire collapse of the British economy. So we are, as he puts it "!!!!ed" anyway.

Buy gold and silver. You know it makes sense.


http://www.independent.co.uk/news/world/americas/max-keiser-barack-obama-is-clueless-mitt-romney-will-bankrupt-the-country-8269633.html

cepheus

antrobus wrote: »

The general election will be held in 21 months time. Perfect timing!:)

Keiser makes that point in his slot, the bubble is politically motivated. Glad we agree for once!

PS is anyone on this thread still renting and is not expected to be given a sizeable enough inheritance to be able to buy a property?

chucknorris

Has anyone got an insight into whether Keiser actually believes what he says or does he just make a living out of gullible fools?

chucky

chucknorris wrote: »

Has anyone got an insight into whether Keiser actually believes what he says or does he just make a living out of gullible fools?

And there are a lot of gullible fools on this forum...

antrobus

cepheus wrote: »

Keiser makes that point in his slot, the bubble is politically motivated. Glad we agree for once!...

Clear evidence of a failure to appreciate sarcasm.

cepheus wrote: »

...PS is anyone on this thread still renting and is not expected to be given a sizeable enough inheritance to be able to buy a property?

More to the point. Have you sold your house yet and reinvested the proceeds in gold and silver? You do realise that the British economy is about to collapse, bringing the US dollar and the euro down with it, and that your house will be worth about six pence ha'penny when the dust has settled?

chucknorris

chucky wrote: »

And there are a lot of gullible fools on this forum...

I was thinking further afield than just here. I just wondered if he isn't as daft as he seems, he might be making a fortune from gullible fools. If so, I'm not condoning it, just wondering if that is what is actually going on. Of course he could be both, daft and making a fortune.