OBR notes "genuine demand" is not a bubble....

HAMISH_MCTAVISH

Stephen Nickell, a member of the Office for Budget Responsibility, rejected the idea of a bubble but suggested that demand for homes in Britain was rising faster than their stock.

Quizzed by a lawmaker on his previous comment that Help to Buy could increase prices rather than supply, he replied: "I pretty much said that, and I don't think my colleagues on the (OBR's) Budget Responsibility Committee would be moving up and down to disagree with me."

"You've got a fixed stock of houses... The price has to rise to ration the stock of houses across the people who want to buy.

It's genuine demand," he added.

Nickell expressed little concern about the risk of a housing bubble so far.

"My feeling is that there's quite a long way to go in the housing market before the FPC decides that they want to introduce some sort of restrictions," he said.

http://uk.reuters.com/article/2013/10/10/uk-britain-housing-obr-idUKLNE99900420131010

This one is interesting, because Graham quoted the very same person a month or two ago.

Yet here he is rejecting the idea of a bubble, but accepting prices are rising due to "genuine demand".

Why, it's almost as if not all price rises are bubbles......

Now, where have we heard that before?

the_flying_pig

No. No. No. No. He is not saying what you're trying to make out, not at all.

HAMISH_MCTAVISH

the_flying_pig wrote: »

No. No. No. No. He is not saying what you're trying to make out, not at all.

Interesting.

So he's not "rejecting the idea of a bubble, but accepting prices are rising due to "genuine demand"".

Because that's exactly what the article says....;)

the_flying_pig

What he absolutely is saying is that htb will increase prices and won't materially increase supply - prices will go up because the demand increase brought about by htb is "genuine", i.e. non-trivial.

System

I've got this amusing mental image in my head of the "bears" winning this argument, fist pumping the air and shouting "YES, THERE'S A BUBBLE, WOOHOO".

shortchanged_2

HAMISH_MCTAVISH wrote: »

Interesting.

So he's not "rejecting the idea of a bubble, but accepting prices are rising due to "genuine demand"".

Because that's exactly what the article says....;)

Well lets look at what's happened of late.

Yes, HTB in it's various forms, FFL.

These are all stimulus for the housing market to help fuel demand. And of course as we know the laws of supply and demand, the level demand that is being fuelled is outstripping the level of supply, so yes there is going to be a rise in prices.

HAMISH_MCTAVISH

the_flying_pig wrote: »

What he absolutely is saying is that htb will increase prices and won't materially increase supply - prices will go up because the demand increase brought about by htb is "real", i.e. non-trivial.

We all accept that HTB will increase prices.

But it's already resulted in a significant supply response. Nowhere near enough, but better by far than it was.

It should be obvious that 5 years of severe mortgage rationing have done nothing but create the lowest housebuilding numbers in a century and worsen the housing shortage.

So that can't be the solution either.

HAMISH_MCTAVISH

shortchanged wrote: »

And of course as we know the laws of supply and demand, the level demand that is being fuelled is outstripping the level of supply, so yes there is going to be a rise in prices.

Of course there is.

But not all rises in prices are bubbles.

shortchanged_2

HAMISH_MCTAVISH wrote: »

Of course there is.

But not all rises in prices are bubbles.

Well one of these economic experts is forecasting house price growth in a year or 2 at over 6%.

Now that to me is unsustainable growth if it continues at that level and then brings us in bubble territory, unless of course wages grow at a similar pace.

HAMISH_MCTAVISH

Joeskeppi wrote: »

I've got this amusing mental image in my head of the "bears" winning this argument, fist pumping the air and shouting "YES, THERE'S A BUBBLE, WOOHOO".

Shows how far we've come in such a short time.

They really are on the back foot these days, when so many notable economists state there is no bubble, and now even saying there was no bubble back in 2007, just goes to show how very wrong the bears have been about, well, everything.

HAMISH_MCTAVISH

shortchanged wrote: »

Well one of these economic experts is forecasting house price growth in a year or 2 at over 6%.

Now that to me is unsustainable growth if it continues at that level and then brings us in bubble territory, unless of course wages grow at a similar pace.

We're at over 6% today.

It's not unsustainable, nor bubble territory, just the market behaving rationally as it should.