When will London burst ?

antrobus

purch wrote: »

Gold, is a good store of something, maybe not value, but a good store none the less. It is basically bright and shiny and good for not a lot.

Everything fluctuates relative to the price of Gold, just as every currency fluctuates in value relative to all other currencies (apart from those that are "fixed").

For Gold to be an absolute store of value, it would need to be accepted as that by everyone, but it isn't so it can't be.

I believe that there is something like a long-term real price of gold - around $500 an ounce in current USD terms. Academics write papers showing that the salary of a Roman soldier was (in terms of gold) the same as that of an American GI, and that sort of thing.

mwpt

wotsthat wrote: »

It doesn't depend on any of those things - there's a housing shortage.

I am not convinced there is a chronic housing shortage even in London. I lived in Wimbledon for many years, my rent didn't increase in six years in the house I rented. Two bed flats can still be found for around £1500 pm in Wimbledon, which is roughly what they were renting for 5 years ago. Maybe some areas have gentrified and rents rocketed but for stable areas, rents seem to have risen broadly with inflation, not indicating a supply/demand problem. Rent prices have risen at nowhere near the rate of property sale prices. These are credit driven.

Quick test, what would the average property price be in an area you are familiar with, if mortgage rates were at 6%?

lisyloo

Saying that interest rates will rise one day and prices will go down one day is absolutely no use to anyone.
No-one disputes this.

antrobus

ciaccino wrote: »

So why have central banks kept on buying gold in the last 30 years? If gold has no meaning as a currency, why not just sell the whole lot?

How long do you think that a currency system backed by nothing can survive? Forever? Another 10-20-30-50 years?

In the UK, we adopted the gold standard in 1821 and abandoned it in 1914, revived it in 1925, and finally dumped it for good in 1931. So we have not had the gold standard for 84 years, compared to the 99 years that we had the gold standard.

Is there anything else you don't know?

antrobus

lisyloo wrote: »

Saying that interest rates will rise one day and prices will go down one day is absolutely no use to anyone.
No-one disputes this.

Yes, but if you keep saying it, eventually the time will come when interest rates do rise and prices do fall, and then you can revel in your reputation as a financial oracle.:)

wotsthat

mwpt wrote: »

I am not convinced there is a chronic housing shortage even in London. I lived in Wimbledon for many years, my rent didn't increase in six years in the house I rented. Two bed flats can still be found for around £1500 pm in Wimbledon, which is roughly what they were renting for 5 years ago. Maybe some areas have gentrified and rents rocketed but for stable areas, rents seem to have risen broadly with inflation, not indicating a supply/demand problem. Rent prices have risen at nowhere near the rate of property sale prices. These are credit driven.

If there's no shortage of housing and renting is such good value then the sensible thing to do is to rent and wait for the credit driven sale prices to crash. There's a website dedicated to such a practice but they've discovered that they're either a) completely wrong or b) markets can stay irrational longer than expected.

mwpt wrote: »

Quick test, what would the average property price be in an area you are familiar with, if mortgage rates were at 6%?

I'd expect they'd be lower because I'm not denying there's a link between credit and price the same way some deny there's insufficient supply.

Not guaranteed to be that way of course - I keep records of such things - the last time my mortgage was anywhere near to 6% was in February 2007 (5.48%) and now it's 2.29% - I track my house price against Halifax quarterly and, currently, my house is worth 1.6% more nominally.

It's not in London, of course, so you might be better off trying to work out what makes my area different to London because it's not the cost of credit.

Anyway, prices are driven by what people want rather than fulfilling there absolute basic human needs. People complaining about high house prices want to buy one so whilst it might be interesting to do these quick tests it's very little help to find increased mortgage rates have reduced prices but the cost of their housing provision has increased.

movilogo

ciaccino wrote: »

That's half of Netherlands gold reserves (612.5), 1/3 of Switzerland and 1/26th of US gold reserves. Practically insignificant by pre-1971 standards.

http://en.wikipedia.org/wiki/Gold_reserve

mwpt

wotsthat wrote: »

If there's no shortage of housing and renting is such good value then the sensible thing to do is to rent and wait for the credit driven sale prices to crash. There's a website dedicated to such a practice but they've discovered that they're either a) completely wrong or b) markets can stay irrational longer than expected.

I'd expect they'd be lower because I'm not denying there's a link between credit and price the same way some deny there's insufficient supply.

Apologies, I misunderstood your post. I thought you were saying the high prices were entirely only due to lack of supply. I'm just trying to point out that lack of supply, _should_ push rent prices much higher, but for some reason, it isn't. So I'm not convinced there is a chronic lack of supply. I bought a house last year because I don't expect rates to go up anytime soon and therefore I don't expect prices will come down anytime soon.

I'm aware of housepricecrash website, as you suggest, in fact, I was banned from there (probably for saying the above, that I don't expect prices to crash because rates won't rise).

wotsthat

mwpt wrote: »

Apologies, I misunderstood your post. I thought you were saying the high prices were entirely only due to lack of supply. I'm just trying to point out that lack of supply, _should_ push rent prices much higher, but for some reason, it isn't. So I'm not convinced there is a chronic lack of supply. I bought a house last year because I don't expect rates to go up anytime soon and therefore I don't expect prices will come down anytime soon.

There are reasons why rental yields may be lower in London Despite a lack of supply. People may be willing to accept lower yields in expectation of future capital gains, they might be expecting rental yields to rise there are less voids and hassle than other parts of the country or the data could just be wrong or difficult to calculate (the ONS did say they'd underestimated rent inflation earlier this year).

Just the sheer nominal cost of renting in London vs the rest of the country indicates a certain level of increased competition for supply.

mwpt

wotsthat wrote: »

There are reasons why rental yields may be lower in London Despite a lack of supply. People may be willing to accept lower yields in expectation of future capital gains, they might be expecting rental yields to rise there are less voids and hassle than other parts of the country or the data could just be wrong or difficult to calculate (the ONS did say they'd underestimated rent inflation earlier this year).

Just the sheer nominal cost of renting in London vs the rest of the country indicates a certain level of increased competition for supply.

No offence but my understanding differs from yours. Rents aren't determined by landlords or what they are "willing to accept". We'll just agree to disagree