Radio 4: Bricks and Bubbles

HAMISH_MCTAVISH

In_For_A_Penny wrote: »

I'm no economist and have only a basic understanding of these things but I would consider a "healthy economy" to mean prices rising in accordance with what people can afford. Ideally in line with wage increases?

And if there was adequate supply of housing then that would be a likely outcome.

However where you have a shortage of housing then prices must rise until sufficient people are excluded from the market and forced to share, stay at home with parents, etc, that supply and demand fall back into balance.

That is what you are seeing in the UK market as a whole. There are obviously local variances, but overall we have a pretty big shortage, and these large price rises are just the market rationing scarce good via price..... Exactly as it's supposed to.

Reactor_2

In_For_A_Penny wrote: »

I'm no economist and have only a basic understanding of these things but I would consider a "healthy economy" to mean prices rising in accordance with what people can afford. Ideally in line with wage increases?

The meaning of what Mr Carney said is the same answer the Spice Girls gave to a young fan when asked: 'What is a 'zig-a-zig ah'?' - It's whatever you want it to be. I wouldn't read too much into what he says unless he is definitely doing what he says.

CLAPTON

In_For_A_Penny wrote: »

I'm no economist and have only a basic understanding of these things but I would consider a "healthy economy" to mean prices rising in accordance with what people can afford. Ideally in line with wage increases?

if people can't afford to buy then the houses wouldn't sell.


if prices are rising then properties are selling; some people can afford to buy




the problem is the shortage of supply so that people with less money can also buy




the government over the last 15 years has allowed an enormous increase in population without enabling sufficient housing to be built.


no bubble, but unless we build a lot more and/or restrict the population increase then prices will continue to rise.

Thrugelmir

Reactor wrote: »

I don't think we are in bubble territory, yet, as I've yet to hear random people talk (gloat) about how much money they have made on their property and how they didn't need a deposit with their mortgage.

We need to see the crazy 100%+ mortgages appearing too and the offsetting mechanism (CDO equivalents). If a company can repackage this rubbish (subprime mortgages) and sell them as 'guaranteed notes' paying 5%, then mortgage buyers will be able to finance for free, savers will get 5%, the repackaging company gets it's fee, creating jobs all round. It's a win, win scenario! (Another phrase I heard people saying a lot at the peak).

However, instead of the banks taking a hit this time, normal people will, losing all their life savings, as they have bought a structured product, which is not insured against losses.

Sounds like you are of touch with the real world and what the long term implications are of current policies.

In_For_A_Penny_2

CLAPTON wrote: »

if people can't afford to buy then the houses wouldn't sell.

if prices are rising then properties are selling; some people can afford to buy

.

What people think they can afford today might not be what they can actually afford tomorrow.

CLAPTON wrote: »

the problem is the shortage of supply so that people with less money can also buy

the government over the last 15 years has allowed an enormous increase in population without enabling sufficient housing to be built.

no bubble, but unless we build a lot more and/or restrict the population increase then prices will continue to rise.

Is this really the issue though? I just think the supply/demand argument may be a gross simplification. Its so hard to make sense of all the data out there but with a greater proportion of the UK population owning houses than most other developed nations can there really be this gross shortage that we all talk about?!

Really I'm just being devils advocate. I really don't have all the answers and am still struggling to make sense of it all!

HAMISH_MCTAVISH

In_For_A_Penny wrote: »

Is this really the issue though?

Yes....

In_For_A_Penny_2

HAMISH_MCTAVISH wrote: »

Yes....

And yet the average number of persons per household is unchanged over the past 20 years. Where are all these people going?

HAMISH_MCTAVISH

In_For_A_Penny wrote: »

Where are all these people going?

You should probably ask Shelter.

After all, they're the ones moaning about millions living in overcrowded conditions, while the number of single person households also grows.

Thrugelmir

CLAPTON wrote: »

if people can't afford to buy then the houses wouldn't sell.


if prices are rising then properties are selling; some people can afford to buy

The one certainty is that life is an escalator. We all fall off the end. So putting aside temporary factors like the post war baby boom. Ultimately the bottom of the market has to function properly. As in the end there'll be no buyers for all these overpriced properties.

the_flying_pig

HAMISH_MCTAVISH wrote: »

Yes....

couple of half serious questions rather than attempts to make a 'point' [i think we're beyond that]:

(a) why were so many more houses built during the 90s [a decade in which house prices barely increased, & indeed fell substantially in real terms] than the boomtastic 00s - even the 'high point' of 2007, in which a 'four walls to a fortune' mentality was dominating the national consciousness like never before, complete with liar loans, interest only, negative deposits, etc etc, there were still houses built than at, well, any point during the 90s, including years in which there were very meaty falls.

(b) given this trend mightn't it be better to try to recapture whatever it was that was getting houses built in the 90s rather than a [doomed given MMR etc] attempt to bring 2007 lending practices back, given that the latter carries risks and more importantly for someone like yourself who's [cough] only interested in building rather than high prices never got as many houses built as even the 'worst' point of the 90s?