Why have house prices increased so much over the last twenty years?

economic

matthewpoll13 wrote: »

Buy to let landlords are doing it purely for profit. If they hadn't bought properties it would be cheaper for first time buyers, but instead, first time buyers are out-competed by buy to let landlords. I don't see why any buy to let landlord should be honoured, as they are doing it just for themselves, & make the property market worse, not better.

It is true that buytolet landlords buy for a profit. However this does not mean that that results in FTB being priced out of the market. BTL buyers wont buy a property at any price, there is a price level after which a BTL buyer will give up. A FTB buyer does not care about profit, he wants a home to live in so is much more flexible in terms of what price he will pay. He has the "purchasing power".

BTL landlords serve a purpose in property market. They provide homes for those who cant or wont buy.

GreatApe

economic wrote: »

There is a lot of wealth being accumulated because people do not know what to do with it. They prefer to save it in the bank then risk it (pensioners, risk averse people, companies with hoards of cash) or they risk it in the stock market or property because they are forced to or see it as a good way to get a real return (pensions funds, people in their 30s-50s, fund managers).

This is the result of wide scale deflation in the economy as a result of deleveraging. There is very low levels of innovation happening, in fact the only innovation that seems to be creating any wealth is tech and even that hasn't had much positive impact on all our lives relative to the innovation that occurred in the 50s and 60s. Sure iphones and google make things easier or makes you feel good about yourself but so what? There are also bad effects to tech like social media causing an increase in suicides in young people.

We have had huge innovations in the 50s and 60s and some in the 70s and 80s. Hardly anything nowadays.Therefore capital does not get invested in innovation and so you have people and companies buying shares (companies doing buybacks), hoarding loads of cash, buying property etc etc.

Once you have wide scale innovation happening (in things like biotech, engineering, space, energy, tech, AI, automation etc etc etc), watch real rates rise (and bonds fall, inflation rise) and return on capital become positive. its questionable what will happen to risk assets at that point, maybe you see a crash before a major stock market bull to coincide with a innovation led global economic boom. but prior to that you could see capital divest in the general stock market to get to work in innovative products and ideas.

The question is IF we get the innovation boom. Only a capitalistic system will allow for that and the US has the best chance of that occurring given what Trump is doing.

We have innovation it never stops

The problem is that the coming innovative is not going to be capital intensive unlike a lot of the innovation of yesteryears
Inventing self drive cars is going to be huge boost in productivity and wealth.
But the marginal cost of the software is going to be zero. The hardware is going to be very cheap
So it won't boost real returns on capital as it won't increase the demand for capital.

If everything is heading towards tech and data and we are automating that then its going to mean real returns are going to go negative.

Imagine someone invents general AI what happens to share prices?
Surely they tank towards zero

What happens to bonds gilts and other debt?
Surely they crash towards zero

What happens to non prime property?
Surely they crash towards zero

Well what if instead of AI we take steps towards AI with near AI inventions what will that do. Probably similar reduce the demand for capital. Eg self driving cars are not self aware general AI but self drive bear AI tech will surely reduce the demand for capital as it will allow more efficient use of capital

My view is everything is going to go zero and then negative real returns.
Of course tining is everything in investing but I have a gut feeling the right thing to do is not save and spend spend spend as its all going to go down in real terms was AI advances

GreatApe

economic wrote: »

It is true that buytolet landlords buy for a profit. However this does not mean that that results in FTB being priced out of the market. BTL buyers wont buy a property at any price, there is a price level after which a BTL buyer will give up. A FTB buyer does not care about profit, he wants a home to live in so is much more flexible in terms of what price he will pay. He has the "purchasing power".

BTL landlords serve a purpose in property market. They provide homes for those who cant or wont buy.

To add to this BTL only caters to demand

I know the crash cheerleaders believe BTL creates its own demand but this is nonsense.
From 1990-2004 the rental stock was contracting (even though prices were increasing)
From 2004-2018 the rental stock was expanding (both during the price falls in the recession and during the HPI post recession)


It shows clearly BTL moves with demand not price nor does BTL direct price.
The reason renting increased post 2004 is primarily due to the mass migration post 2004 and also mortgaga rationing and changing lifestyles

economic

GreatApe wrote: »

We have innovation it never stops

The problem is that the coming innovative is not going to be capital intensive unlike a lot of the innovation of yesteryears
Inventing self drive cars is going to be huge boost in productivity and wealth.
But the marginal cost of the software is going to be zero. The hardware is going to be very cheap
So it won't boost real returns on capital as it won't increase the demand for capital.

If everything is heading towards tech and data and we are automating that then its going to mean real returns are going to go negative.

Imagine someone invents general AI what happens to share prices?
Surely they tank towards zero

What happens to bonds gilts and other debt?
Surely they crash towards zero

What happens to non prime property?
Surely they crash towards zero

Well what if instead of AI we take steps towards AI with near AI inventions what will that do. Probably similar reduce the demand for capital. Eg self driving cars are not self aware general AI but self drive bear AI tech will surely reduce the demand for capital as it will allow more efficient use of capital

My view is everything is going to go zero and then negative real returns.
Of course tining is everything in investing but I have a gut feeling the right thing to do is not save and spend spend spend as its all going to go down in real terms was AI advances

Yes all tech - as i said tech is the only sector which is innovating on a large scale. Its impact thus far has not been big compared tot eh innovation we have seen in the 50s 60s.

Software has 0 marginal cost. But hardware by definition does not. Why has NVIDIA stock price gone up so much over the past few years? NVIDIA pretty much has the market in terms of chipsets for AI and other intensive processing applications. Their products are expensive and they will charge a lot to driverless car manufacturers for buying their chipsets. they are more or less a monopoly that why. I bought a desktop PC recently. It came with a nvidia graphics card (top of the range). 80-90% of the cost of the PC was the graphics card itself.

It is questionable if it really would drive return on capital to zero. I think it will be a long time before that happens. That means we would need AI in all sectors and industries. Will take a very long time.

As i said there are so many other areas with zero or low levels of innovation. If innovation in those areas was brought about, you will not see zero return on capital. Sure AI will bring it about eventually. But when was the last time there was some new engineering technique to build tall buildings or even the fact that we don not have a cure for many diseases. AI can only help once we have innovated new products and ideas in those areas. Then AI can help in automation and delivery. It is humans who bring about innovation. Not AI itself.

economic

If you had invested in Google, or Nvidia or Tesla or other companies a few years back involved in AI and driverless cars, your return on capital would not be zero or negative. It would be in real terms a fairly large positive number. this is because these companies need capital to deploy in the development of these new innovative products and are expected to generate large sums from the sale of these products. return on capital in this sector is clearly not negative.

Once driverless cars hits our roads, sure productivity would rise. more wealth would be created as you say. but wealth can not be created with zero or negative return on capital. its impossible. There are other areas that need innovating as we are not nearly there yet in terms of full scale automation and AI across all areas of our lives. I think what you are trying to say is that return on capital would fall to zero as the wealth generated from our own productivity has no where to go. Well that may be the case but its not a certainty.

triathlon

People have always adapted to their environment and the times. The strong, brightest and more creative will always end up in the best living conditions and with the best lives with their alpha male or female.

In the old days the bitter and weak just sat at home letting their anger eat away at them. Today of course they can group complain on the Internet which is just fine with me, let them, because.nothing is going to change. It is just good old fashioned natural selection, enjoy your bed sits and poor quality of life, I am sure something will be along soon to save you, LOL

triathlon

Just what event does the likes of crashy and Brit think is going to happen where all the strongest members of society are just going to be turfed out of their homes by the the.non achievers of this world and let them move in.

I love the Internet for the knowledge that is available on it if used correctly, but for some people it has just made them delusional.

Have you ever seen HPC, reading those posts is just shocking and pitiful, it seems like they are just happy talking about the world as they would like to see which will.never happen, surely approaching 2 decades has taught them something

Cakeguts

matthewpoll13 wrote: »

Buy to let landlords are doing it purely for profit. If they hadn't bought properties it would be cheaper for first time buyers, but instead, first time buyers are out-competed by buy to let landlords. I don't see why any buy to let landlord should be honoured, as they are doing it just for themselves, & make the property market worse, not better.

This is a huge generalisation probably due to reading certain newspapers.

I am a landlord and we don't buy 1st time buyer properties. We let to families so a 1st time buyer property suitable for a couple or single person is no good to us.

triathlon

Here is another simple equation that he bitter and twisted HPC doom mongers just will not fathom.. right now myself and nearly everyone I know and I am sure millions of other live in big lovely homes because we have the funds to do so through hard work and application. Guess why you lot are sitting in empty bedsits glued to HPC. Com on your outdated laptop and only possession
How prices are not expensive to us

GreatApe

economic wrote: »

Yes all tech - as i said tech is the only sector which is innovating on a large scale. Its impact thus far has not been big compared tot eh innovation we have seen in the 50s 60s.

Software has 0 marginal cost. But hardware by definition does not. Why has NVIDIA stock price gone up so much over the past few years? NVIDIA pretty much has the market in terms of chipsets for AI and other intensive processing applications. Their products are expensive and they will charge a lot to driverless car manufacturers for buying their chipsets. they are more or less a monopoly that why. I bought a desktop PC recently. It came with a nvidia graphics card (top of the range). 80-90% of the cost of the PC was the graphics card itself.

It is questionable if it really would drive return on capital to zero. I think it will be a long time before that happens. That means we would need AI in all sectors and industries. Will take a very long time.

As i said there are so many other areas with zero or low levels of innovation. If innovation in those areas was brought about, you will not see zero return on capital. Sure AI will bring it about eventually. But when was the last time there was some new engineering technique to build tall buildings or even the fact that we don not have a cure for many diseases. AI can only help once we have innovated new products and ideas in those areas. Then AI can help in automation and delivery. It is humans who bring about innovation. Not AI itself.

I think you are confusing a few things.
Innovations don't mean more demand for capital. Almost always it means less demand for capital
To give you an example if in the past you wanted to expand a railway you might have had to spend £10 billion to build a new line. Today you might just upgrade analog signaling to digital signalling for £10 million and get double the capacity that way. The demand for capital has gone from £10 billion to £10 million in that example

For 30 years gilts and binds have been falling.
Today UK index linked 20 year gilts have a yield of negative 1.5%
The demand for capital fell and the supply increased so the returns on debt fell
I see this continuing. Government paper (one of the huge asset classes worth tens of trillions) will yield zero or sub zero real returns.

I think you are arguing about innovations making companies more profitable.
That might be possible in some sectors where there are monopolies natural or cartels but why would it be true for competitive markets?
For instance let's say a shelf stacking robot is invented cheap reliable and works. If all the supermarkets have access to this technology their profits won't go up nor will their margins. It is a competitive market so it will result in lower prices.


With regards to computer hardware. Almost all the hardware needed for self drive can be found in a $100 smartphone. GPS Accelerometers Multiple HD cameras Microphones Ultrasound IR Proximity sensors GPUs CPUs ASICs Cellular Wifi Storage etc. The hardware side is cheap. Its all the software side. Maybe an expensive processor is needed for now but I dont think that will last. Application specific integrated circuits will be built to power the software as they are much faster and much much more energy efficient than general purpose CPUs or GPUs. Even Tesla seems to be getting into the game saying their have taken in an in-house team to build ASICs for their self drive efforts. Expects performance energy and price improvements.

With regards to AI there is of course a massive difference between application specific AI and general purpose AI. The latter is a human only one that gets smarter by the second and will exceed the sum of all human knowledge within days of creation