Addicted to the Apocalypse

Fella

HAMISH_MCTAVISH wrote: »

'lax credit', whether global or otherwise, was not the primary cause of UK house price rises.

HAMISH_MCTAVISH wrote: »

In my opinion, the only thing that has held prices down has been the severe mortgage rationing of the last 5 years

Dear oh dear make your mind up.

HAMISH_MCTAVISH

Fella wrote: »

Dear oh dear make your mind up.

Is that seriously the best you can do?

I used to think you were one of the few bears capable of articulate debate.

However having to resort to extracting quotes out of context is the sort of thing Devon does....

Thought you were a bit better than that.

Fella

Availability of credit either has an affect on prices or it doesn't. You're claiming it has no effect when they're going up but is the sole cause when they're going down.

HAMISH_MCTAVISH

Fella wrote: »

Availability of credit either has an affect on prices or it doesn't. You're claiming it has no effect when they're going up but is the sole cause when they're going down.

Of course availability of credit has an effect on prices. I've never claimed it didn't.

However it clearly was not the main cause of price rises.

You're trying to claim that credit was the main cause of very significant price rises, yet ignore the fact that prices only dropped a little bit and then recovered very quickly when credit was withdrawn.

Any market needs a normal level of liquidity to function.

If you withdraw that liquidity, prices will crash, even if it was not a bubble.

And even if a shortage, not lax credit, was the primary cause of price rises.

Fella

I would argue that it was the main cause of price rises: There's a housing shortage, but that shortage did not increase by anything like the amount that you'd need to explain an approximately tripling of house prices in the short space of about 10 years. But that period did coincide very neatly with relaxation of credit.

I agree that prices didn't fall much, at least not in actual terms, but I wouldn't expect them to as long as IRs are so low. Prices generally fall when there are lots of forced sellers & there definitely aren't at the moment. In fact many home-owners are better off since the credit-crunch, due to lower mortgage payments. Ironically the recession has probably saved plenty of them as without it their mortgage payments would likely have been far higher.

And also of course, the housing market tends to be very liquid when rising & very illiquid when falling (one of the reasons that waiting for house prices to fall in order to buy is often a strategy doomed to fail).

We probably don't disagree as strongly as you may think on where house prices will go from here although for very different reasons (you think they're undervalued still, I think they're overvalued but that Govts of all hues will do literally anything they can to keep them that way & that's a powerful force). So I certainly don't think prices are guaranteed to fall (although they could). Also you think rising prices are a good thing & I think the opposite, I think most countries would benefit in general from cheap housing.

HAMISH_MCTAVISH

Fella wrote: »

I would argue that it was the main cause of price rises: There's a housing shortage, but that shortage did not increase by anything like the amount that you'd need to explain an approximately tripling of house prices in the short space of about 10 years. But that period did coincide very neatly with relaxation of credit.

It also coincided very nicely with something else.....




Remind me again, what happened to prices starting in the late 90's....

I agree that prices didn't fall much, at least not in actual terms, but I wouldn't expect them to as long as IRs are so low.

Prices generally fall when there are lots of forced sellers & there definitely aren't at the moment.

That's certainly a plausible sounding explanation, at least superficially.

But it simply doesn't seem to stack up when we look at the experiences of elsewhere.

Ireland and America had near ZIRP interest rates. Prices fell 60% and 40% respectively.

Northern Ireland had exactly the same monetary policy and forbearance as the mainland UK.

Prices fell 50% anyway.

Republic of Ireland had virtually zero repossessions throughout the years of it's crash. A grand total of just 73 in the entire country in 2011, for example.

Yet prices tanked.

What exactly is it, do you think, that is so different about the UK's version of low interest rates that makes it so special?

Or is it just possible that our low interest rates had no more effect than theirs did.

And that the real reason for the difference is something a bit more like this.....

Empty homes as a percentage of total housing stock in 2010.

Ireland 17%
Spain 16%
USA 11%
UK 3.2%

It is no coincidence that the countries with the highest vacancy rates suffered the biggest crash.

And the countries with the lower rates suffered least from falling prices when the credit crunch disrupted lending markets.

It really is as simple as supply and demand.

In fact many home-owners are better off since the credit-crunch, due to lower mortgage payments. Ironically the recession has probably saved plenty of them as without it their mortgage payments would likely have been far higher.

If it weren't for the recession causing incomes to fall and unemployment to rise, then the few that did struggle wouldn't have needed "saving" to begin with.

There's nothing ironic about it.

UK mortgage lending was, on the whole, responsible, prudent and sensible.

There were of course a few abuses, but they were tiny by comparison to the size of the market, and not a significant contributing factor to HPI.

And also of course, the housing market tends to be very liquid when rising & very illiquid when falling (one of the reasons that waiting for house prices to fall in order to buy is often a strategy doomed to fail).

On this we agree.

We probably don't disagree as strongly as you may think on where house prices will go from here although for very different reasons (you think they're undervalued still, I think they're overvalued but that Govts of all hues will do literally anything they can to keep them that way & that's a powerful force). So I certainly don't think prices are guaranteed to fall (although they could). Also you think rising prices are a good thing & I think the opposite, I think most countries would benefit in general from cheap housing.

Fair enough.

Agree to disagree on most of that.

Thrugelmir

Fella wrote: »

So I would call it a correction rather than a crash - & a correction that successive govts are doing everything possible to prevent. It's unsure how long they'll succeed for, could be another year or another 20 years.

"Successive Governments" are fully aware of the issues. Hence why there's been co-ordinated support for the banking system. Finance is so interlinked globally it's going to a decade at least to unwind. Then we'll see who the ultimate winners are.