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Debate House Prices
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It's simply supply and demand - or is it?
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When it comes to house prices, it's a simple explanation for me. Unless there's a manifested shortage in supply (can only be London really), people are thinking with their d*cks.
Prices go up (p.ex. subsidies, short term external factors, etc.), people jump on the waggon for various reasons. Causes prices to move faster. Basically most of the move is due to psychological reasons.
When prices go down, they will not shift more houses, but less... people are stuck on negative equity, others expecting further deflation, and so on.
Equilibrium is achieved over time, this is just a small bump caused by people thinking with their (what I said above) and cause these reversible trends.
clever of you to have such insights into the housing market
shame everyone else is a thicko0 -
Graham_Devon wrote: »He's just a journalist.
Perhaps you should spend more time researching topics and less time posting.
Roger Bootle is one of the City of London’s best-known economists. As well as running Capital Economics, which he founded in 1999, Roger is also a Specialist Adviser to the House of Commons Treasury Committee and an Honorary Fellow of the Institute of Actuaries. He was formerly Group Chief Economist of HSBC and, under the previous Conservative government, he was appointed one of the Chancellor’s panel of Independent Economic Advisers, the so-called “Wise Men’. In 2012, Roger and a team from Capital Economics won the Wolfson Prize, the second biggest prize in Economics after the Nobel.
Roger Bootle studied at Oxford University and then became a Lecturer in Economics at St Anne’s College, Oxford. Most of his subsequent career has been spent in the City of London.0 -
clever of you to have such insights into the housing market
shame everyone else is a thicko
What did you think with the introduction of Help To Buy (subsidy) would happen? D*cks without cash suddenly boosted and swept onto the market, the supply side inflating prices, more movement from late adapters and the game continues.
Prices are just artificial numbers, they don't really exist and have the least to do with an analytically derived market value, but mostly perception creates it. And then the d*cks come into play... and all goes crazy. What else could've happend?
Prices on markets only exist, because there are enough participants matching supply and demand, not because they are in any way justified.0 -
Population has increased, unemployment is falling, the economy is improving, there was already a shortage of housing. Demand is increasing as a result.
House supply is particularly inelastic in the UK due to the planning process - the expectation that this will persist is probably increasing demand even further.
Demand was suppressed by the financial crisis. It was entirely predictable what was going to happen when we started coming out the other side.
We need more houses EDIT: and to increase the elasticity of supply
That doesn't apply to the who country though.
The government should be moving as many public sector jobs out of London & SE as possible. (more so as wages & property are cheaper & the Tories are always banging on about taxpayers getting VFM)
Interestingly, there was a report in the People newspaper which claimed in the 1st 18 months of the coalition government the number of London & SE public sector jobs actually increased.
Whilst places like the NE which are taking the brunt of the cuts (especially in local government), have recorded increases in unemployment from the last 2 or 3 announcements. Population is declining/stagnating as many are moving away to find work. Which is the exacerbating the southern housing problem.0 -
That doesn't apply to the whole country though.
No it doesn't but does provide a useful comparison.
In those areas where population has increased, unemployment fallen, where the economy is improving fastest and where there was already a housing shortage prices have increased rapidly.
In areas where population has fallen (I'll take your word for it), unemployment is rising, economic improvement is late arriving and where there is sufficient housing prices continue to fall.
That sounds like supply and demand at work rather than whatever the article writer thinks is happening.
TBH it looks like a stealth HTB froth piece.0 -
That doesn't apply to the who country though.
The government should be moving as many public sector jobs out of London & SE as possible. (more so as wages & property are cheaper & the Tories are always banging on about taxpayers getting VFM)....
As far back as I can remember, people have always been saying that sort of thing. The trouble is that all those public sector employees in London & SE don't want to bl00dy move and have unions to fight their corner....Interestingly, there was a report in the People newspaper which claimed in the 1st 18 months of the coalition government the number of London & SE public sector jobs actually increased. ....
Given that the Coalition government has now been in office for 4 years, of what relevance would be a measure for the first 18 months?
In any case, as far as I can see from ONS data, the headcount for 'Regional public sector employment' in both London and the South-East is lower now than it was in 2010....Whilst places like the NE which are taking the brunt of the cuts (especially in local government), have recorded increases in unemployment from the last 2 or 3 announcements. ....
The unemployment rate for the NE did go up from 9.5% to 9.8%, but paradoxically so did the employment rate from 55% to 55.6% - the explanation is the fall in the economically inactive rate.
Year on year, employment is growing at 4% and unemployment is flat, so it is not an entirely bleak picture...Population is declining/stagnating as many are moving away to find work. Which is the exacerbating the southern housing problem.
There is a tendency for people to move to where the work is. That may well have implications for infrastructure and the suchlike, but it is not neccessarily a problem. It would be more of a problem if there was no work to move to.0 -
Graham_Devon wrote: »I guess we'll see very soon whether it's all about supply.
Credit is now actively being restricted. The MMR...banks have capped their own mortgages in London. And soonish, interest rates will likely rise.
If it's all about supply, then house prices will not fall.
Has anyone suggested that it is all about house prices, or are you resorting to a straw-man to avoid discussing the more rational points other people are actually making.
I'd happily bet if someone would offer equal odds that even when interest rates do rise we won't see house prices fall (in nominal terms), but even if they fell slightly that doesn't do anything to prove that supply isn't the primary reason for house price inflation.Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...0 -
Simon Wren-Lewis is an Oxford economist with a blog discussing this very issue.
There are obviously areas of high housing demand (e.g. London - there is probably an existing housing shortage in the country), but the fact that rents have not increased by anywhere near the rate of house prices is pretty telling. In a low interest rate, low-yield environment, property becomes a more attractive investment. That increases demand - even though houses have not become more profitable to own, nor has there been a corresponding increase in demand from households (i.e. people haven't got richer...). That puts house prices up. (It probably also pushes rents down...) It's not necessarily even anything to do with cheap mortgage lending (though of course that adds to it).
Supply and demand are very complicated words, and calling something 'simply' supply and demand is a bit like calling chemistry 'simply' physics.0 -
As far back as I can remember, people have always been saying that sort of thing. The trouble is that all those public sector employees in London & SE don't want to bl00dy move and have unions to fight their corner.
Given that the Coalition government has now been in office for 4 years, of what relevance would be a measure for the first 18 months?
In any case, as far as I can see from ONS data, the headcount for 'Regional public sector employment' in both London and the South-East is lower now than it was in 2010.
The unemployment rate for the NE did go up from 9.5% to 9.8%, but paradoxically so did the employment rate from 55% to 55.6% - the explanation is the fall in the economically inactive rate.
Year on year, employment is growing at 4% and unemployment is flat, so it is not an entirely bleak picture.
There is a tendency for people to move to where the work is. That may well have implications for infrastructure and the suchlike, but it is not neccessarily a problem. It would be more of a problem if there was no work to move to.
Many civil servants that can be based outside of London are. Many of those who remain need to be close to Ministers.
You can't just move civil servants wholesale to an unattractive location with lower pay and expect the same calibre of staff. Government will become less effective as a result.
The most effective solution would be to make somewhere like Manchester the political capital of the UK (and leave the Houses of Parliament as a museum) but that's not going to happen.0 -
Supply and demand, or what people will pay for something, mean absolutely nothing when assessing the true value of anything.
This is Tellytubby economics.
What is, or how do you assess, the true value of something when supply and demand are absolutely equal?0
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