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

shortchanged_2

HAMISH_MCTAVISH wrote: »

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.

Yes but to be fair I suppose many of us didn't realise to what lengths this government would go to prop up prices with schemes such as HTB.

It's market manipulation whichever way you look at it.

shortchanged_2

HAMISH_MCTAVISH wrote: »

We're at over 6% today.

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

How is 6% growth normal when wage inflation is running at about 1% along with an increase in other costs of living?

ukcarper

shortchanged wrote: »

How is 6% growth normal when wage inflation is running at about 1% along with an increase in other costs of living?

I think this from OP explains

""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"

System

I guess it's just catching up from the equally not normal 10% falls with stagnant wage growth we had.

Percy1983

HAMISH_MCTAVISH wrote: »

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.

You mean sensible lending caused a reduction in the amount of people able to buy.

If developers built good homes at a reasonable price (perfectly possible) then they will sell, the problem is many failed to see the bigger picture, if the profit per house drops why not build more which brings cost per house down and more profit as they sell more.

Problem is the develoeprs want the easy way, restrict supply and demand high prices.

So yes maybe they have built less, but the old pyramid scheme was no longer sustainable but if thats the only system they wish to operate in.

Think of them as a small child playing football, they have ust learnt the offside rule and don't like it, so said small child takes his ball home, do you then abolish said rule or stand firm knowing they will eventually play ball again?

floridaman

Pearcy - do you own a house or are you renting?

Percy1983

floridaman wrote: »

Pearcy - do you own a house or are you renting?

I am guessing the mispelt name is aimed at me, I am a home owner (well mortgaged if we want to get picky).

floridaman

Ah ok thank you

Generali

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....;)

I'm not sure what the difference between 'real demand' and any other sort is. Not that I think there's a bubble in the UK housing market (yet).

What really pushes a bubble along is a belief that prices will continue to rise quickly so you need to get in while you can and some sort of access to funds to allow you to get in. While the mortgage market remains tight and prices aren't rising fast I don't see a bubble forming.

Help to Buy seems to have cut off so-called 'macro-prudential' regulation from the BoE (that is imposing onerous credit conditions on banks to prevent house prices rising fast) so if prices do take off the only tool the BoE will have is to increase interest rates to choke off affordability.

Interesting times old fruit.

Still if the Americans don't get their act together then we needn't worry about house price bubbles for a while.

HAMISH_MCTAVISH

Generali wrote: »

I'm not sure what the difference between 'real demand' and any other sort is. Not that I think there's a bubble in the UK housing market (yet).

I think this is something that is tricky to define accurately, but also that most people instinctively understand.

Demand for housing can be motivated by, basically, two main things.

1. Need for housing.

2. Speculation on making money.

Now if we take the example of Ireland, they started out with a genuine housing shortage which caused prices to rise.

But somewhere along the line a great big house building boom came along and delivered a massive surplus of housing. Yet prices continued to rise, because of speculation.

At that point, Irish prices became a bubble and were destined to crash eventually.

In the UK, we also started out with a shortage of housing. And prices rose. But we never delivered a surplus, in fact the shortage worsened, so prices were not a bubble as the main cause of price rises remained a genuine deficit of housing compared to the needs of the population.

Not all price rises are a bubble.

This is clear to everyone.

And you can't define whether or not prices are in a bubble solely because of the size of rises.

If prices are supported by strong underlying demand that is genuine demand based on a real shortage versus population growth and household formation, ie, not mostly speculative, then it's not a bubble.

Interesting times old fruit.

On that we can agree.