How low will property go?

lisyloo

We know old people die.

Eventually but in the meantime some of them sit in big houses where the equity is doing nothing at all.
Sure someone will get it eventually and some of it will pass down whilst people are young, but I don't agree with you that all that £8.8T is being put to good use. A lot of it is in bank account or in housing equity and it cannot all be passed down prematurely because those who don't have excessive amounts simply don't know how much they'll need for their own needs. That would be most ordinary people.

ukcarper

sann420 wrote: »

Maybe you have some long standing disagreements with p1212 but the post that I quoted was really on the money. I have hardly seen a better explanation of London "Housing Crisis".

London has had a population of 6-8 million people for better part of half a century. This city has the capacity and the history to handle such a large population. Its not like a plastic chinese city that was propped up within past decade. I dont see how dynamics have changed so much in the past 5 years or so that young professionals are struggling to buy a 1 bedder in a shoddy area. The prices to wages ratio is beyond belief.

Its all propped up by the govt to get out of the 2008 recession. Basically the fiscal numbers look good on paper which in turn helps the credit based economy tick. But there is nothing solid underneath these numbers.

BTW I am saying this as a person who is sitting on a very decent profit through property by buying in 2013 but I dont see how this house price madness can or should continue.

You don't think an increase in population of 30% over 20 years is not significant and has no impact?

cells

sann420 wrote: »

Maybe you have some long standing disagreements with p1212 but the post that I quoted was really on the money. I have hardly seen a better explanation of London "Housing Crisis".

London has had a population of 6-8 million people for better part of half a century. This city has the capacity and the history to handle such a large population. Its not like a plastic chinese city that was propped up within past decade. I dont see how dynamics have changed so much in the past 5 years or so that young professionals are struggling to buy a 1 bedder in a shoddy area. The prices to wages ratio is beyond belief.

Its all propped up by the govt to get out of the 2008 recession. Basically the fiscal numbers look good on paper which in turn helps the credit based economy tick. But there is nothing solid underneath these numbers.

BTW I am saying this as a person who is sitting on a very decent profit through property by buying in 2013 but I dont see how this house price madness can or should continue.

London has been booming for the last 20 years its not new.

The recession caused a ~2 year blip when things were on pause

London did not go from correctly valued 20 years ago to over valued today. It went from very cheap 20 years ago to the correct price today

cells

lisyloo wrote: »

Eventually but in the meantime some of them sit in big houses where the equity is doing nothing at all.
Sure someone will get it eventually and some of it will pass down whilst people are young, but I don't agree with you that all that £8.8T is being put to good use. A lot of it is in bank account or in housing equity and it cannot all be passed down prematurely because those who don't have excessive amounts simply don't know how much they'll need for their own needs. That would be most ordinary people.

I dont see why this is difficult, if the wealth of the country is £8.8 trillion or thereabouts and this wealth is not decreasing then clearly the old who hold the wealth but are going to die are going to pass this on. The argument of timing is weak because of the following...

If a 100 year old die and gives their capital to their 65 year old. The 65 year old who already has all they need, he needs to rent that capital out. Other 65 year olds dont need to borrow capital so the only choice is to rent the capital out to the next group the 30 year olds so the 30 year olds either have direct access to inherited capital or they can rent it cheap as there is too much of it


100 year old leaves a £100k house to his 65 year old son. He already has a house so rents it out to a 30 year old. With 1.5 children per women, the number of people dieing and leaving (to sell or rent out) homes exceeds the number of people born 30 years ago needing housing today. So you have a situation whereby more homes come to the market than are needed. When women were having 4-5-6 children the number dying and leaving homes would be much lower than the number of kids needing them


So the #children per women will drive the rate of return on capital down. be that the rate you need to pay to rent cash or the rate you need to pay to rent a house or the rate you need to pay to rent a factory

Edit: We kind of see this in the real world. Japan went below 2 kids per woman about 20 years before Europe/USA and entered a low rate of return world about 20 years before Europe/USA. Some countries are just making the transition (eg turkey) and they are in the process of entering lower rate of returns. If this theory of mine holds they too will enter the zero (or negative) rate world in about 30 years time (I think it will be sooner for the developed countries due to technology differences. What took Japan or Germany 40 years is going to take possibly closer to 25 for the developing world

p1212

cells wrote: »

I used to think the two were linked but there is no evidence for this. For example the total fertility rate in Scotland is worse than England even though house prices in Scotland are cheaper




Again this is simply not true, both on a global and local scale, poorer countries and poorer people have more children




That simply does not make sense, if all 20 year olds had a house then we would need a very great number of single occupancy homes.




your idea of cheap homes already exists in stoke-on-trent. are the yoof of stoke really much better off and having kids in their early 20s?




Long term we have to go back over 2 children per women or the species will die out. Problem is, worldwide the fertility rate is falling and is now about 2.35 worldwide. The replacement rate is actually 2.3 worldwide (as a lot of girls die before having children of their own) so we area globally already entering the stage of falling demographics. the population is still growing as globally life expectancy is increasing but that is temporary.





there is no need with total fertility in the region of 1.5 children per woman in developed countries we will end up in a situation of too much of an excess. look at germany

http://www.spiegel.de/international/germany/demographic-shift-in-germany-leaves-thousands-of-empty-homes-a-866298.html

What poorer countries you talk about exactly? In easter europe for example, which is way poorer than UK, but there is still speculative money and people still live in a financial stress, it is very hard to buy an accomodation for the locals and the population is actually decreasing because of this reason.

If you go to even poorer parts of the world where there is zero speculative money invested in housing, you will see they have much more children, but that's just proves my point, that missing speculative money means lower barrier for starting a family.

The question here is not poor or rich, the question is do they have speculative money investing in housing (and supporting regulations) or not.

Without speculative money and better planning system, price would be set by natural demand and supply, and houses could be built when prices (due to increasing population hence demand) reaches a point when it is worth building. This would keep housing costs more or less in line with building costs.

In the current system housing stock cannot increase due to strict planning and more and more people fight for the same houses + with the exploding government supported speculative demand (which would eat up all the new houses anyway if we'd built) + big builder companies buying up and sitting on land. Imagine a closed cube with more and more tension inside, that is what ends up in 20% yearly increases in London.

What needs to be understand is that money will always flow towards easier profit, if you can just walk into the bank, assign a house to your name with free money that you just got from your former properties capital gains and then watch it gaining 20% per year, you will never start a real business.

Until this is allowed, real economy will never start working and all new money from cheap credit and QE will flow towards this easier direction, into speculative investments, stock market, house prices making the gap between reality and asset prices bigger.

cells

p1212 wrote: »

What poorer countries you talk about exactly? In easter europe for example, which is way poorer than UK, but there is still speculative money and people still live in a financial stress, it is very hard to buy an accomodation for the locals and the population is actually decreasing because of this reason.

If you go to even poorer parts of the world where there is zero speculative money invested in housing, you will see they have much more children, but that's just proves my point, that missing speculative money means lower barrier for starting a family.

The question here is not poor or rich, the question is do they have speculative money investing in housing (and supporting regulations) or not.

Without speculative money and better planning system, price would be set by natural demand and supply, and houses could be built when prices (due to increasing population hence demand) reaches a point when it is worth building. This would keep housing costs more or less in line with building costs.

In the current system housing stock cannot increase due to strict planning and more and more people fight for the same houses + with the exploding government supported speculative demand (which would eat up all the new houses anyway if we'd built) + big builder companies buying up and sitting on land. Imagine a closed cube with more and more tension inside, that is what ends up in 20% yearly increases in London.

What needs to be understand is that money will always flow towards easier profit, if you can just walk into the bank, assign a house to your name with free money that you just got from your former properties capital gains and then watch it gaining 20% per year, you will never start a real business.

Until this is allowed, real economy will never start working and all new money from cheap credit and QE will flow towards this easier direction, into speculative investments, stock market, house prices making the gap between reality and asset prices bigger.

you need to join hpc.co.uk to keep all the ******* on one site

I dont even agree with your starting premise, which is that house prices are expensive/in-a-bubble. House prices are cheap in most of the country so much so that in most of the country its cheaper to buy than it is to rent the council stock

mwpt

Maybe it is that the people who complain the most about house prices live in London, South East or Bristol?

It would be nice if some of the posters who say that prices are out of touch or way too expensive in other areas (ie. up north), post some example over priced properties in areas that may be familiar with. That would be an objective way of looking at things.

I am not at all familiar with northern cities but I just did a search for three bedroom houses within a five mile radius of Manchester city centre priced under £150k. There were over 1000 results. I assume there are quite a lot of decent jobs in Manchester.

I also assume that much like the past, it is mostly couples who would want to buy three bedroom houses. If each person had started saving £5000 per year, three years ago, they would now have a 20% deposit. Borrowing £120k at current loan rates, 30 year term, 2% repayment mortgage, that is £444 per month.

To me, that seems pretty reasonable for a three bedroom house.

Of course, you have to accept that rates are not going to rise for a long time. Or you pay slightly more and fix for 10 years.

westernpromise

p1212 ticking pretty much all the crash troll definitional boxes there...

p1212

westernpromise wrote: »

p1212 ticking pretty much all the crash troll definitional boxes there...

Anyone cares about your name calling? If you are not able to add anything to the argument, better to stay quiet.

In London 99% of the people admits prices are too high, even landlords know it, then here comes the clever guy on MSE saying:

"London did not go from correctly valued 20 years ago to over valued today. It went from very cheap 20 years ago to the correct price today"

Then all londoners, deutsche bank and other banks analysts, hedge funds, investment banks who have all warned for years and now betting AGAINST overpriced London property surely are crash trolls and the random guy on MSE forums calling people in names must be the real deal...

Even Carney himself just said it might not be a good idea to max out mortgages right now.

westernpromise

p1212 wrote: »

Then all londoners, deutsche bank and other banks analysts, hedge funds, investment banks who have all warned for years and now betting AGAINST overpriced London property surely are crash trolls and the random guy on MSE forums calling people in names must be the real deal...

Even Carney himself just said it might not be a good idea to max out mortgages right now.

Wait a minute, you said Carney and the banks were all part of the big conspiracy against you. They're all manipulating the housing market against you, aren't they?

Which of the following propositions do you not agree with?

1. Waiting 5, 10 or 20 years to buy after a dip is economically rational.

2. Because a crash is always imminent, you will never buy.

3. The only good times to buy were in the past.

4. Nobody who took a risk that paid off 10 years later took any risk at all, because everyone knew there wasn’t going to be a crash.

5. You have never worked out the NPV of your future rents if you didn't buy.

6. Rising property prices mean an area is becoming less and less attractive to live in.

7. Other people’s gains from house price inflation are illusory. Losses from house price deflation are, however, real.

8. Everyone should be able to buy a house in the place they grew up in for 3x their own salary.

9. You use certain terms (tulips, Ponzi, boomer) and acronyms (TPTB, VI, EA, ZIRP). You are dismissive of economists, especially those who don’t forecast crashes.

10. You think other existing homeowners are greedy idiots, but you'd like to have bought in when they did.

11. All economic policy is about keeping house prices high. Low interest rates serve no other purpose than to deny certain people a house.

12. High house prices have been caused by low interest rates, which must be higher in Stoke-on-Trent, which doesn't have high house prices.

13. Buyers play no role in setting house prices. They just pay whatever sellers decide.

14. Mortgaged houses are legally owned by the lender. If a bank lends against a house, and the value of the house falls, the bank takes a hit to its balance sheet.

15. Selling a house at its current market value is greed. Wanting it buy it for 70% less than its current market value is not.

16. Recessions are wholly benign and house prices simply become affordable. Bigger deposits will not be required by lenders, nor will salary multiples shrink, nor will property availability fall, nor will rents rise, nor will anyone lose their job.

You must believe roughly all of those. Am I right?