We are in a housing bubble

Loughton_Monkey

wotsthat wrote: »

If prices are rising faster than wage inflation then it would seem that people are willing to pay higher multiples of pay to buy a house. That wouldn't happen if there was a glut of housing. Therefore I suspect a housing shortage rather than a housing bubble.

That's what the economist in the OP seemed to miss.

Some interesting figures here:

http://www.bankofengland.co.uk/publications/Pages/news/2013/185.aspx

With full report here:

http://www.bankofengland.co.uk/pra/Documents/regulatorydata/mlar/2013q3/mlar2013q3statisticalrelease.pdf

Key statistics for Q3 2013 are as follows:

• A number of metrics are at record levels. Gross advances, including lending to first-time buyers and buy-to-let lending and new commitments are at their highest levels since 2008. Similarly, interest rates on new lending, the number of new arrears cases and stocks of possessions cases remaining unsold are at their lowest level since the series began in 2007.

• The overall value of the residential loan amounts outstanding was £1,234 billion in Q3 2013, an increase of 0.3% compared with Q2.

• Gross advances of £49.5 billion in Q3 2013 were 19% higher than in Q2 2013 – an upward movement usual in the third quarter of the year, but also 25% higher compared with the same quarter in 2012. This was the highest amount advanced in a quarter since Q3 2008.

• Net advances in Q3 2013 amounted to £7.2 billion, which was 29% higher compared with Q3 2012.

• There was a 40% increase in the value of new commitments to £50.5 billion when compared with Q3 2012 – the largest quarterly amount of new commitments since Q2 2008.

• The value of loans advanced to first time buyers increased by £2.7 billion over the past year to £9.9 billion, an increase of 37% and was the highest quarterly amount since Q4 2007.

• There was a large increase in the value of new lending for buy to let (BTL) over the past year – up from £4.1 billion advanced in Q3 2012 to £5.9 billion in Q3 2013, an increase of 42%. This was the highest quarterly amount since Q2 2008.

• The proportion of gross advances at a high LTV (i.e. over 90%) decreased from 2.5% in Q2 2013 to 2.2% in Q3 2013.

• The proportion of gross advances to high joint income multiple borrowers (i.e. more than 3.00x) also increased in Q3 2013 by 2.4 percentage points to 27.2%, the highest since the series began in 2007.

• The number of new arrears cases in Q3 2013 was 7.9% lower than in Q2 2013 at 29,900, the lowest quarterly number of new cases since the series began in 2007.

• The total number of loan accounts with reportable arrears decreased - from 292,200 in Q2 2013 to 278,400 in Q3 2013, a reduction of 4.7% and the lowest since Q3 2007.

• The performance of loans in arrears – payments received as a percentage of payments due – improved for the fifth quarter in succession to 61.3% in Q3 2013.

• Arrears totalling £29 million on 8,012 accounts were capitalised in Q3 2013, an increase of 4.8% by number compared with Q3 2012.

• New cases taken into possession totalled 7,349 in Q3 2013, a 14% reduction from Q3 2012.

• As possession sales outstripped new possessions, the stock of possession cases remaining unsold reduced for the ninth quarter in succession, down to 11,326 in Q3 2013 and the lowest level since the series began in 2007.

None of this looks particularly "worrying" to me. Just signs of the housing market returning to some sort of normality.

I think you have got to the nub of it. Price rises caused by a shortage would result in the sort of figures shown above. A bubble would show massive rises in income multiples and BTL - more than we are seeing.

cells

In infrastructure a bubble is usually defined as over building.

Has the uk done that or is the uk over building right now?

sabretoothtigger

UK has population growth and many western countries dont. Its mostly as a result of our commonwealth legacy.
USA also has population growth, but its a gigantic country and they have most likely overbuilt in at least some areas.
Plus their houses are wooden so alot more of the costs are in upkeep and maintenance also taxes payable occupied or not