Planning permission not the hold up to building houses

mwpt

cells wrote: »

there was not low building in the 1990s the uk arguably had an excess of homes in the 1990s (London definitely had an excess of homes in the early 1990s)

The tide started to turn somewhere around 2004 when population boomed so build rates had to go up. The building industry did actually increase building from 2004-2007 but then the recession hit and mortgages were rationed which combined resulted in a crash in new builds

Things are better but 10% down mortgages spreads should not be as high as they are they should be closer to 25% down mortgage spreads.

Also it is not the price that is limiting buyers it is the criteria. Lets say there is lots of food and its cheap but if your name is bob you are not allowed to buy any. well there is a shortage of food for bob and he will starve.

There needs to be a return of interest only and a return of self cert for anyone putting 20% down (by that i mean just ticking a box labelled 'i am confident i can service this mortgage', rather than fake pay slips).

why dont we do the opposite? why dont we make getting mortgages even harder? prices will fall a bit and we will end up with less risk according to you. Its all correct but the net result will be fewer people can buy so the owner pool will shrink

simply.
more rationed mortgages = less owners
less rationed mortgages = more owners

You've shown no correlation yet with house build rates and loose credit. Build rates fell from 90s while availability and cost of credit eased.

Of course you can argue the reducto ad absurdum that we could prove your view if we cut off mortgages we'd see build rate fall. That would be true. But it's not a valid argument for the same reason that I can't say you should make credit free and everyone would have houses.

You say that the spreads are wrong. Why? What basis in fact do you have for making this statement? If you decrease cost of mortgages people will bid up asset prices again and we'll be back to square one with more risk.

Conclusion:
- We have the cheapest mortgage rates in history with no adverse lending criteria and we still have low build rates.
- Credit costs fell for the last 20 odd years and lending criteria loosened to the point that it was dangerous, and build rates decreased in all of that time.

Your view isn't supported by evidence. But it would increase house prices, which would be great for those who hold lots of houses.

mwpt

wotsthat wrote: »

When prices fell in 2008, mortgages dried up and better off people were able to buy cheap houses and rent them out to the people who could've bought the same house themselves a few short months before.

Evidence doesn't support your view, see my posts to cells.

wotsthat

mwpt wrote: »

Evidence doesn't support your view, see my posts to cells.

Credit was restricted (aka credit crunch). Prices fell. Buyers couldn't get mortgages. They rented off rich people who could (or didn't need them). % renters increased. The rich got richer.

You've said evidence doesn't support this view but have neglected to provide any.

mwpt

wotsthat wrote: »

Credit was restricted (aka credit crunch). Prices fell. Buyers couldn't get mortgages. They rented off rich people who could (or didn't need them). % renters increased. The rich got richer.

You've said evidence doesn't support this view but have neglected to provide any.

You're ignoring a bunch of other factors and ignoring the inconvenient time periods. Is it worth my time to type out long replies pointing out this stuff 16 times when I don't believe it'll make any difference to your view? You could simply read my reply to cells.

mwpt

By the way, here is the strongest argument yet that we need more houses built and population growth is causing the HPI. Courtesy of your (plural) nemesis site, HPC:

http://www.housepricecrash.co.uk/forum/index.php?/topic/195761-is-prime-london-crashing-merged-threads/?p=1102706347

The trend down is pretty clear. I really do not see a strong correlation in upward pressure on building with cheaper and easier credit. You can look at cost of credit graphs over the same period and notice the downward trend, and no upward trend in build rates.

I do see the the large problem since 2008 and yes, I admit this would have been caused in large part by credit. But, there are other factors involved here. The world was in a global recession.

On top of that, we have had cheap credit and relatively easy financing (vs historical, rather than vs the few crazy economy destroying years) since around 2009 and it doesn't seem to be kick starting building. Making this credit *even* cheaper and looser does not seem to be the sensible solution to the building problem particularly since all that data does not show an uptick in build rates during the easy credit years.

What we really need to see is the builds completed in private sector pa vs availability of credit. That data would go some way to make the case. In the mean time, I just see demand side stimulus pushing up asset prices and not helping much.

HAMISH_MCTAVISH

mwpt wrote: »

What we really need to see is the builds completed in private sector pa vs availability of credit. That data would go some way to make the case. .

Here you go then....



Build rates as a percentage of transactions. Since 1979 no less....

Transactions are quite obviously a useful proxy of mortgage lending volume, however if you feel the need to argue, just reference the charts I posted earlier to save me reposting them....;)

mwpt

HAMISH_MCTAVISH wrote: »

Here you go then....



Build rates as a percentage of transactions. Since 1979 no less....

Transactions are quite obviously a useful proxy of mortgage lending volume, however if you feel the need to argue, just reference the charts I posted earlier to save me reposting them....;)

Thanks. Is this total residential transactions, new build and existing stock? What is the source of the data please? (link, so I can check)

mwpt

I found this:
http://brickonomics.building.co.uk/tag/property-transactions/

It is somewhat hard to digest and doesn't seem to reach a firm conclusion but it does corroborate your transactions vs build starts proposition. That is intriguing because he suggests it is almost always exactly a 1:10 ratio. Why would this be?

If that is indeed the case then I am pro mortgage lending to increase transactions but not in the form of cheaper and riskier credit. Does it not just suggest that we've reached a horrible stalemate where prices are too high for many people to afford, even on the cheapest mortgage rates in history?

What is going on in the north of England, why are people not buying property which clearly seems to be affordable vs rents?

HAMISH_MCTAVISH

mwpt wrote: »

That is intriguing because he suggests it is almost always exactly a 1:10 ratio. Why would this be?

Nobody is quite sure but the correlation holds true in other markets, like the USA, as well.

My best guess is that it is closely linked to the volume of transaction chains which is closely linked to the number of mortgages being issued.

New builds are usually more expensive than existing stock, so historically have not been the entry level of choice for most FTB-s.

They've more often been a 2nd or 3rd step in the market, so most people start off in existing flats, build a bit of equity, increase their earning power, move up again, and then again. And some of those will be into new builds.

As the number of transactions declines, the number of transaction chains declines, and so does the number of new builds.

If that is indeed the case then I am pro mortgage lending to increase transactions but not in the form of cheaper and riskier credit.

No need for cheaper credit.

Very much a need for greater availability of credit.

As to whether or not that credit is "risky", I suggest you read this article, which may make you rethink your position somewhat....

"The banks made mistakes", these wise heads will say, "but really it's all our fault, for running up so much debt. We all had a binge, and now we have to pay."

It's an excellent morality tale, which chimes well with the British tendency towards self-flagellation.

There's just one problem. It's not really true.

http://www.bbc.co.uk/news/business-17398014

Neither UK house prices nor UK residential mortgage lending standards had the square root of anything to do with why the British banking system nearly collapsed.

Had UK banks resisted their insane urge to expand overseas, and just stuck to UK residential mortgage lending, the banking bailouts would not have been required at all.

Does it not just suggest that we've reached a horrible stalemate where prices are too high for many people to afford, even on the cheapest mortgage rates in history?

No.

Mortgages as a percentage of income are close to record lows, and rents in 90% of areas are more than a mortgage would be, even at 95% LTV and even if base rates were closer to 5% than 0.5%.

What is going on in the north of England, why are people not buying property which clearly seems to be affordable vs rents?

Hmmm.....

Was there a part of 'mortgage rationing" you didn't understand the first time I said it?

cells

mwpt wrote: »

You've shown no correlation yet with house build rates and loose credit.

that is because in the real world there are more than one variables so I cant just show you a nice graph with lending on one axis and build rate on the other. Or maybe I could but it would be a pointless graph

As I tried to tell you in my other post, the degree of shortage or excess impacts on the build rate. If there is an excess of homes builders will tend to build less and there was an excess of homes in a lot of areas in the early 1990s. Some so much so that people were buying homes for prices below the material cost valuing the land and the labour at zero