Speculation and public money underpinning housing bubble

CLAPTON

sensibly_insane wrote: »

Definitely it is misuse of the term ponzi but ponzi is the closest term to describe what is being done.

If I have to suggest ways of the reducing the prices of the property, what is the use of these politicians and their highly paid advisors, why are they paid millions of tax payers money if they can't figure out the solutions they are paid for.

Building more is not a solution as all the newly developed property will vanish in the black hole of the foreign investors. I am specially referring to the institutional and individual overseas property investors who are devouring the newly built properties in London e.g. British land and British properties should be preferably for the ones who are living in U.K. and not for the super rich sitting in the BRIC economies. Can we ban the foreign investors investing in the British properties who would never live in these properties ?

Secondly, these newly built properties will be swept by the buy to let in country investments. Housing is one of the basic human needs and we are in nothing short of an emergency situation. We do ration in the emergency situations, Can we ban people owning more than one properties?

IMHO, the basic principle here is wrong. Basic needs like housing, medical, education, electricity, things without which we can't live a civic modern life, should not be vehicles of profiteering. No wonder, we have allowed this and now we see the prices of all of these souring higher and higher.

Oh yes, in the the Soviet Union all the basis needs were meet by the state with no profiteering: millions died of starvation.

the_flying_pig

HAMISH_MCTAVISH wrote: »

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.

i hope for your sake that this was a copy & paste from somewhere else [it does look kind of familiar] rather than a new, uh, composition.

Loughton_Monkey

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?

These two are mutally explusive and so the 'whether/or' doesn't get into it.

I think it's the other way round.

Keiser is a gullible fool.

But he makes a living from people who believe it. Maybe the OP sends him donations....

chewmylegoff

CLAPTON wrote: »

Oh yes, in the the Soviet Union all the basis needs were meet by the state with no profiteering: millions died of starvation.

To be fair that is because Stalin was deliberately trying to starve part of the population not because the soviet system was unable to provide enough food to the population to keep it alive.

chewmylegoff

Loughton_Monkey wrote: »

These two are mutally explusive and so the 'whether/or' doesn't get into it.

I think it's the other way round.

Keiser is a gullible fool.

But he makes a living from people who believe it. Maybe the OP sends him donations....

Whether he's stupid or clever, like any other tv evangelist, he can still afford more large gin and tonics than the people who lap up the verbal diarrhea he spews forth.

sensibly_insane

chewmylegoff wrote: »

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.

That's what exactly happens in a bubble and he is rightly pointing out it is bound to happen. Bubble will burst, house prices will fall, interest rates go high, people go bankrupt, houses go in negative equity repossessions, auctions end up bank books going negative and rest is history.

chewmylegoff wrote: »

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.

I don't see any industries coming back to UK or any sector growing. Germany has current reserves of 208 Billion US dollars while we are in a debt of 57 billion US dollars. To bridge this gap we need more than Pushing people to the non-paid, low paid temp/part time jobs.

sensibly_insane

CLAPTON wrote: »

Oh yes, in the the Soviet Union all the basis needs were meet by the state with no profiteering: millions died of starvation.

With due respect, read my post again please. I am talking about the middle way between the two extremes of what USSR was and where we are heading to right now. Owning one house is fine but hoarding a portfolio of tens of properties is plainly wrong while there is only a limited supply of property.

CLAPTON

chewmylegoff wrote: »

To be fair that is because Stalin was deliberately trying to starve part of the population not because the soviet system was unable to provide enough food to the population to keep it alive.

strange that the USSR had to import grain from USA simply from choice

some may have seen this as a bit of an ideological failure

Thrugelmir

sensibly_insane wrote: »

That's what exactly happens in a bubble and he is rightly pointing out it is bound to happen. Bubble will burst, house prices will fall, interest rates go high, people go bankrupt, houses go in negative equity repossessions, auctions end up bank books going negative and rest is history.

Central banks have spent the past 6 years engineering a soft landing. The UK banks are reaching the point where the worst is past.

sensibly_insane

Thrugelmir wrote: »

Central banks have spent the past 6 years engineering a soft landing. The UK banks are reaching the point where the worst is past.

Everyone knows how banks engineer things, creating money out of thin air, right? You can't simply give people more money to spend on more expensive things. It has happened many times in the past and it will happen again because of one simple reason: Everyone cannot be winner in a game, someone has to lose.

Past are the days, when things were brushed under the carpet, thanks to the internet. At least, this time this bubble will be very short lived, as compared to the previous ones I am sure.