Mortgage Lending Rising Again

Jason74

HAMISH_MCTAVISH wrote: »

To be expected.

Rising prices have tempted some people to sell that otherwise wouldn't have, they have also enabled some people to sell that couldn't or wouldn't before, so you'd absolutely expect the number of houses on the market to increase now that prices have risen so high in some of these London areas.

That supply rises when prices do is a text book economic response and actually quite healthy for the market. After all it's not really practical for prices to rise 40% a year (as you noted had happened "round your way") for very long.

We've seen supply rise with new builds over the last year as prices have gone up, and we're now also seeing it with existing houses.

However the numbers of people swapping existing houses around doesn't address the housing shortage in any way.

So while local area prices can and do fluctuate as supply and demand ebbs and flows, it will have little or no meaningful impact on prices in aggregate.

The new build increase over the last year is very welcome, but also nowhere near enough to reverse the housing shortage, or to send prices crashing, as the shortage is the primary cause of high prices.

Nothing that we're seeing here looks like the early stages of a crash, but it does look like the balance between supply and demand is easing, down from 14 candidates for every house to 9 candidates for every house.

In London that effect will be even more pronounced, as prices have risen so much lately. There can be no doubt that when prices for a flat shoot up 100 grand or 200 grand in a year or two, significant numbers of potential buyers will have been priced out. Which is again the market working exactly as it should to ration scarce goods.

This should reduce the upwards momentum and let the rate of growth in prices ease as the market pauses for breath.

But it's nowhere near enough if what you want is prices to fall significantly and over the long term.

Only building millions more houses can achieve that.

Hard to argue with any of that. I'd suggest that how exisating stock is used is also part of the equation given that we do have a shortage, but fundementally I think you're bang on the money here (hence why I even quoted your theory in my previous post :T)

Bubble_and_Squeak

Jason74 wrote: »

True. Land registry provides the most comprehensive picture of what has happened, nobody with any understanding of the market would argue with that. But, Bubble does have a point (albeit perhaps made in an unhelpful way) when he points out that it is a backward looking indicator.g a Land registry tells us whatwas being agreed typically 3-6 Months ago, and in a fast paced market, that can far enough out of date to be of little relevance. Certainly, anyone looking at Land Registry stats in March (reflecting SSTC prices of sept - Oct last year) would have found them of little help because prices had risen so much.

As for supply, well of course in big picture terms we still have a housing shortage, but ibn terms of supply in the marketplace, it is a simple statememnt of fact (in my area at least) that there has been a dramatic increase. In one postcode I watch , there were 34 3 bedroom houses available in May. Now there are 82. From a practical point of view, that is an increase in supply of over 150% for anyone looking to actually transact in the marketplace.

Hamish has often talked about prices rising until a balancde between supply and demand was reachedh, and in my part of the world, it appears that (for now at least) that's exactly what has happened. Indeed, there are strong signs that prices have actually overshot a tad, albeit this is a long way from saying that we're about to get a crash.

can i just throw in an anecdote at this point
i friend of mine agreed a sale on a house on this road in october 2013 for £380k
http://www.rightmove.co.uk/property-for-sale/property-47417453.html
the sale completed about 3 weeks ago so the time lag in this case has been around 10 months
in that time asking prices shot up to £450k
the one prior to this link had the price reduced several times before finally going STC at £370k

Bubble_and_Squeak

HAMISH_MCTAVISH wrote: »

To be expected.

Rising prices have tempted some people to sell that otherwise wouldn't have, they have also enabled some people to sell that couldn't or wouldn't before, so you'd absolutely expect the number of houses on the market to increase now that prices have risen so high in some of these London areas.

That supply rises when prices do is a text book economic response and actually quite healthy for the market. After all it's not really practical for prices to rise 40% a year (as you noted had happened "round your way") for very long.

We've seen supply rise with new builds over the last year as prices have gone up, and we're now also seeing it with existing houses.

However the numbers of people swapping existing houses around doesn't address the housing shortage in any way.

So while local area prices can and do fluctuate as supply and demand ebbs and flows, it will have little or no meaningful impact on prices in aggregate.

The new build increase over the last year is very welcome, but also nowhere near enough to reverse the housing shortage, or to send prices crashing, as the shortage is the primary cause of high prices.

Nothing that we're seeing here looks like the early stages of a crash, but it does look like the balance between supply and demand is easing, down from 14 candidates for every house to 9 candidates for every house.

In London that effect will be even more pronounced, as prices have risen so much lately. There can be no doubt that when prices for a flat shoot up 100 grand or 200 grand in a year or two, significant numbers of potential buyers will have been priced out. Which is again the market working exactly as it should to ration scarce goods.

This should reduce the upwards momentum and let the rate of growth in prices ease as the market pauses for breath.

But it's nowhere near enough if what you want is prices to fall significantly and over the long term.

Only building millions more houses can achieve that.

its almost a convincing argument
however
do you really think that supply and demand alone can determine the direction of a market with as many variable factors as london?

HAMISH_MCTAVISH

Bubble_and_Squeak wrote: »

do you really think that supply and demand alone can determine the direction of a market with as many variable factors as london?

Yes.

It is always, always, always, all about supply and demand.

There is nothing else.

Which is not to say that both supply and demand are not elastic.... they clearly are.... nor indeed to deny that the other factors you speak of (credit availability, confidence, etc) can be components of either supply or demand.... they clearly can.

But don't think for one second that we're confusing housing need (which is huge) with effective demand (which is much smaller).

We're well aware of the difference....

wotsthat

Bubble_and_Squeak wrote: »

can i just throw in an anecdote at this point
i friend of mine agreed a sale on a house on this road in october 2013 for £380k
http://www.rightmove.co.uk/property-for-sale/property-47417453.html
the sale completed about 3 weeks ago so the time lag in this case has been around 10 months
in that time asking prices shot up to £450k
the one prior to this link had the price reduced several times before finally going STC at £370k

Wow! Prices have crashed to October 2013 levels?

Bubble_and_Squeak

HAMISH_MCTAVISH wrote: »

Yes.

It is always, always, always, all about supply and demand.

There is nothing else.

Which is not to say that both supply and demand are not elastic.... they clearly are.... nor indeed to deny that the other factors you speak of (credit availability, confidence, etc) can be components of either supply or demand.... they clearly can.

But don't think for one second that we're confusing housing need (which is huge) with effective demand (which is much smaller).

We're well aware of the difference....

ah, effective demand
now we're singing from the same hymn sheet

Bubble_and_Squeak

wotsthat wrote: »

Wow! Prices have crashed to October 2013 levels?

my anecdote was intended merely as an illustration that land registry figures are many months behind the curve

on a separate note, its ridiculous that we have a housing market were asking prices can fluctuate to such a massive extent in such a short space of time

AndyGuil

Bubble_and_Squeak wrote: »

my anecdote was intended merely as an illustration that land registry figures are many months behind the curve

on a separate note, its ridiculous that we have a housing market were asking prices can fluctuate to such a massive extent in such a short space of time

Asking prices are super volatile and with such a tiny selection to look at they are very unreliable. All you need to do is look back at previous asking prices and see they jump all over the place whilst the selling price is more stable with trends. This time of year is renowed for having asking prices step back a bit. Despite this they have averaged up 0.85% in London and 0.57% UK MoM.

HAMISH_MCTAVISH

Bubble_and_Squeak wrote: »

on a separate note, its ridiculous that we have a housing market were asking prices can fluctuate to such a massive extent in such a short space of time

On that we can agree.

I think in the London market in particular there is a real temptation for some people to cash out at these levels.... The thing is though, that temptation ceases to exist if prices fall back in any meaningful way, so supply falls back as well, which causes prices to rise again, and on it goes.....

We've seen that to a large extent throughout the UK over the last 7 years. When prices fall, supply falls, then prices rise again, so supply rises again, but still to nowhere near the levels we need to meet housing need.

It would be good to have more stability with less of the wild swings, but that's a symptom of the market being far too tight with nowhere near enough spare capacity.

If you think high prices are a problem, the only sustainable long term solution is to build a few million more houses....

wotsthat

Bubble_and_Squeak wrote: »

my anecdote was intended merely as an illustration that land registry figures are many months behind the curve

on a separate note, its ridiculous that we have a housing market were asking prices can fluctuate to such a massive extent in such a short space of time

I know it's all about today but aren't you setting yourself up for disappointment when land reg catches up and prices didn't fall by £80k in Walthamstow in August?