HPI Warnings Everywhere!!!!!

92203

wotsthat wrote: »

That's true but misses a point. Prices weren't 'normal' in 1999 - they were cheap - and just look at the doom mongering headlines that went with them.

Prices are cyclical. I'd spent the previous decade in negative equity and could easily have made the same argument that you make above. The chances are that anyone buying in 2009 will, on average, turn out to be wealthier than someone 10 years older. At worse if things go really badly maybe we'll have the richest generation followed by the second richest generation - still a result.

I can't see anything to suggest that prices were abnormally low in 1999, either nominally or inflation adjusted. Take a look at the graph below if you don't believe me

92203

HAMISH_MCTAVISH wrote: »

The crux of the problem is we are short a million houses.

And the shortage is worsening by 150K houses a year.

Everything else is just noise, and a BS distraction from the fundamental cause of high prices in the UK.

If you want cheaper houses, build another 3 million in the next decade.

If that doesn't happen, expect HPI to continue at a monumental pace.:cool:

As for me, I don't think this country has a snowballs chance in hell of building enough houses, thanks mainly to the mistakes of rationing credit for the last 5 years and worsening the housing shortage to now epic proportions.

So I've positioned myself accordingly.

And when prices boom to new record high levels, you can blame the idiots who thought it was a good idea to restrict credit and cause the lowest build rate in a century.

Some interesting points Hamish, and I agree, we do need to build more houses and while doing so, use land more efficiently by building higher density accommodation.

Two points I'm interested in though ;

• When was credit loosened and when did 95% and 100% mortgages become the norm?
• Why, during the previous boom, did we not achieve an annual build rate (for private dwellings) greater than the 60s, 70s, and 80s?

HAMISH_MCTAVISH

92203 wrote: »

I can't see anything to suggest that prices were abnormally low in 1999

I said in the 90's.

And they were at around record lows from Q2 1995 until Q1 1999....



Those prices were not normal, they were the cheapest in recorded history.

HAMISH_MCTAVISH

92203 wrote: »

when did 95% and 100% mortgages become the norm?

I was offered a 95% mortgage in 1990.

My parents were offered one in 1967.

And 100% mortgages were available at least as far back as the early 1980's....

Why, during the previous boom, did we not achieve an annual build rate (for private dwellings) greater than the 60s, 70s, and 80s?

Private housebuilding was higher in 2007 than it was in around 70% of the last 60 years.



The shortage though is a result of many decades of underbuilding of all housing types, council, housing associations, and private.

HAMISH_MCTAVISH

BTW, anyone looking for the cause of high house prices doesn't need to look any further than this....

the_flying_pig

HAMISH_MCTAVISH wrote: »

BTW, anyone looking for the cause of high house prices doesn't need to look any further than this....

That population growth line looks a bit made up?

wotsthat

92203 wrote: »

I can't see anything to suggest that prices were abnormally low in 1999, either nominally or inflation adjusted. Take a look at the graph below if you don't believe me

That graph shows the trend for HPI is above inflation - there are well covered reasons for that.

Hamish has posted the key graph that shows, for practical purposes, prices were cheap rather than normal in the nineties. Transactions, I recall, were pretty low - I'm afraid people listened to the media rather than making sensible decisions based on the long term.

Bantex_2

When people talk about "making the right decisions" and "positioning themselves", I would suggest that around 50% of the population are now not in a position to do either due to high prices.

Is that really a good situation despite the overwhelming smugness of some posters ( who mainly got "on the ladder" when prices where much much lower than now?

ukcarper

Bantex wrote: »

When people talk about "making the right decisions" and "positioning themselves", I would suggest that around 50% of the population are now not in a position to do either due to high prices.

Is that really a good situation despite the overwhelming smugness of some posters ( who mainly got "on the ladder" when prices where much much lower than now?

I also don't think high prices are a good thing but the only real solution is to build more property restricting borrowing does not increase the number of people who can buy.

Jason74

HAMISH_MCTAVISH wrote: »

A very good point.

Prices in most of the 90's were the cheapest multiple of income in recorded history... And even in 1999, at the very start of the last upswing, were incredibly cheap by historical standards.

And yet the media then trotted out exactly the same fear-mongering "bubble" scare stories that they are today!!!

It's obvious the media pay absolutely no attention to the fundamentals of supply and demand, and just scream "bubble" the moment prices rise.

And equally obvious that they have a long history of doing exactly that.....

Now the recovery has just started and we're at the very earliest stages of the next upswing, the media will no doubt be proved wrong just as they have many times before.

The recovery is not even complete yet, and then there's the next boom to come after that.

This is only just getting started.:D

The first part of your post is of course 100% right. If you look back at almost any point over the past 40 years or so, prices almost always look cheap compared to 10 years ago, and there's probably no point where they don't look cheap compared to 15 years before. seeing those graphs from 15 years ago, and knowing what has happened since, illustrates that point very well.

But for all that, there will come a point where there simply isn't enough money available to support prices increasing faster than earnings indefinitely (and just to clarify, saying prices can't keep flying up is not the same as saying there will be a crash).

The fact is that over the past 40 years, we've had a remarkable number of factors that support house price growth. We've gone from Mortgages being generally based on one salary to being based on two. We've had downward trend in interest rates for at least the last 20 years, and we've had a general easing of credit over the last 30 years or so, culminating in a period of lendnig madness in the period up to 2007 (albeit that is now behnid us, hopefully for good).

So there have genuiney been a number of exceptional circumstances over the past 40 years that have pushes house prices upwards, and these go a long way to explain why conventional economists have been so consistently wrong footed on this issue. If we're going to have a scenario where prices increase over the next 40 years like they have in the past 40, we will need more exceptional events that support house prices to happen.

The supply / demand imbalance imho is not enough to sustain recent historic price increases forever, as at some point, the lack of people who can afford prices simply has to come into play. That said, people trying to call that point have tended to look rather silly in the past, so we may be a way off that point yet.