The next boom.....

HAMISH_MCTAVISH

So in real (inflation adjusted) terms then, what's the next boom going to look like?

In my opinion the current artificial repressing of house prices through mortgage rationing is starting to end, and the lowest house building in a century is about to meet the biggest generational bulge of FTB age people in history.

As soaring population and the existing million house shortage, worsened by 5 years of mortgage rationing causing century low house building, have now all but ensured the next boom will be the biggest ever.

Leading to the likeliest outcome by far being a near doubling in house prices in real terms over the next cycle....



Of course, other opinions may vary..... But they've mostly been wrong so far

thescouselander

Have you actually got any proof there is mortgage rationing? Personally I have not seen any. The financial system is awash with cash due to QE and the banks are falling over themselves to lend. Some people might struggle to get finance but we shouldn't confuse sensible lending with rationing - it's not the same thing a all.

vivatifosi

Looking at previous economic booms, they had different triggers. For example the tech boom in the nineties and big bang and the little bangs in the eighties contributed to the long post winter of discontent boom.

Housing ought, by right, be a lagging indicator. Prices should go up in response to comfort levels with the economy. A boom led by house prices is worrying imo. It suggests a far from perfect housing market.

I'm hoping that there will be be other triggers that are catalysts for growth. Construction too normally is a lagging indicator so I'd be worried too if that aided early growth.

I don't know what the new growth drivers will be. There is almost always a technological one,so it will be interesting to see where that comes from. Maybe fracking, or graphene, or 3D printing... currently these feel too small though.

the_flying_pig

Gr8 thread, m8.

UK GDP is about £1.5trn a year. I reckon the next peak will see that kind of amount buy a couple of smallish houses at most :beer:

ILW

Can't help but think that life would be a whole lot better for the vast majority of people if you could still buy a decent house for £60k or so.

Just think what could be done with all that spare cash in the economy.

HAMISH_MCTAVISH

thescouselander wrote: »

Have you actually got any proof there is mortgage rationing? .

It's been so widely reported over the last 6 years that you'd have had to be living under a rock not to realise what's going on.

Mortgage rationing becomes worse, Bank of England warns

Home buyers will find it even harder to obtain a mortgage in the coming months, the Bank of England says.

Rigorous mortgage rationing has been in force in the UK since 2007 and the onset of the international banking crisis.

http://www.bbc.co.uk/news/business-16425582

Mortgage rationing 'likely to continue'

Other groups, including the part-nationalised Royal Bank of Scotland, have raised their rates, as the market continues to be dogged by funding constraints.

Average mortgage rates have also risen despite the recent falls in wholesale funding costs, as lenders widen the margins they charge on the deals to record levels.

The Council of Mortgage Lenders warned that mortgage rationing was likely to continue until the wholesale money markets were working more effectively, and as a result there was unlikely to be much easing in lending criteria in the near term.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/6200760/Mortgage-rationing-likely-to-continue.html

Mortgage rationing leaves borrowers stuck

Mortgage rationing has left many borrowers unable to take advantage of interest rate cuts as lenders' margins on fixed and tracker rates have soared.

http://www.thisismoney.co.uk/money/mortgageshome/article-1650804/Mortgage-rationing-leaves-borrowers-stuck.html#ixzz2duT0IBji

HAMISH_MCTAVISH

ILW wrote: »

Can't help but think that life would be a whole lot better for the vast majority of people if you could still buy a decent house for £60k or so.

Just think what could be done with all that spare cash in the economy.

What spare cash?

If I buy something from you for 100K exactly the same amount of money is in the economy as would be if I buy it for 50K and keep 50K myself.

The total amount of money in the economy doesn't change.

The distribution of it may change.

But ultimately, all wealth in housing gets redistributed to younger generations, and always will unless we find a way to abolish death.

Loughton_Monkey

HAMISH_MCTAVISH wrote: »

So in real (inflation adjusted) terms then, what's the next boom going to look like?

Thanks Hamish. A real boon to planning our wealth.....

Just a small suggestion - to help the .... er... 'less sophisticated' posters around here [you know who they are] - would it be a good idea to re-draw the graph. Instead of adjusting by inflation (assume RPI or CPI) they might like to see historic (and future) house prices adjusted for... er... House Price Inflation.

HAMISH_MCTAVISH

Loughton_Monkey wrote: »

Just a small suggestion - to help the .... er... 'less sophisticated' posters around here [you know who they are] -

You are a naughty Monkey sometimes....:D

would it be a good idea to re-draw the graph. Instead of adjusting by inflation (assume RPI or CPI) they might like to see historic (and future) house prices adjusted for... er... House Price Inflation.

Hmmm, interesting.

I may have a bash at that in between large G&T's this evening.;)

michaels

ILW wrote: »

Can't help but think that life would be a whole lot better for the vast majority of people if you could still buy a decent house for £60k or so.

Just think what could be done with all that spare cash in the economy.

I do agree that planning retrictions artificially increase house prices - however I don't see why it should be possible to buy for less than the material and labour cost and you struggle to build anything bigger than a small flat for 60k building and labour cost. Factor in that in theory every extra house requires some infrastucture (roads, drains, gas, eletric, rail-link, sewerage, water, schools, etc etc) and I suspect we are taling 100k for a 2 bed terrace, 140 for a 3 bed semi and 200 for a 4 bed detached even if we price land at what it would be worth otherwise for farming.

My theory on housing is that being at the bottom of the needs/wants pyramid it will be very inelastic in demand - ie people will pay whatever they have to to house (feed and clothe) themselves and that the remainder will be disposble income to spend on wants. Thus if incomes increase the proportion of income spent on housing can also increase and thus the house price to income ratio hould not be seen as a constant. This is demonstrated in the real world by lenders who are willing to lend higher multiples to those on higher incomes.

wotsthat

That doesn't look too far fetched - real terms increases of 2.9% will just about double prices in 22 years.

2.9% is nationwide's average since 1975 so a continuation of trend.

At some point though there would sure be a decent supply response?