House Price Crash Discussion Thread

Turnbull2000

Gladly raise the points. Had a few drinks but I'll still answer anyhow

You can understand why if the UK has an aging population without enough births to support the aging population, that the government is only too happy to allow the immigration to rise.

Being one of just three European nations allowing unlimited immigration from the accession countries has less to do with supporting the ageing population, but more to do with suppressing salaries in an inflationary environment and prolonging economic growth to support high government borrowing, a historic current account deficit and expanded public sector.

The reason you've suggested is futile. The immigrants themselves will one day retire and require support, or if they depart, leave us with a shortfall once again. This is something that cannot be avoided - only delayed. Japan is currently experiencing this very problem and are trying to face up to it.

Replacement levels amongst the native population is falling short dramatically - due in part to the high cost of living and housing. EU immigrants are typically here for economic reasons. With a dramatic downturn in the economy coming this way, this large transient population may head back home. Poland and other Easter Euro countries are currently playing catch-up with the West, remember.

Only established landlords will come through strongly, whose numbers remain a drop in the ocean.

unless the politicians turn off the tide of immigration fast, a housing shortage and rising house prices seem to be guaranteed.

There is no current shortage of housing nationwide. That has already been debunked. The fuel for the price bubble has been credit and sentiment... both of which are unwinding.

Even if prices were currently dictated by supply, there's an affordability limit that will always come into play. If the the population were to increase 20%, house prices would not dramatically rise. Instead, the job market would become saturated and earnings suppressed through competition for employment. White collar workers will come under pressure, not just blue.

Landlords with the financial resources to take advantage of this would be limited. The political pressure for house building would be too large to resist. The only effect would be a reduced standard of living. I guess that fact that some landlords would welcome such circumstances reinforces the perception held by some on this board that they've nothing but leeches. Though I disagree, there's a good number of landlords out there who provide an excellent and much needed service.

Many other nations around the globe that have 'suffered' from massive HPI have no housing shortage either. The rise is interconnected... again, through credit and sentiment.

I'll continue this tomorrow when I've sobered up. Sorry if it's a bit incoherent!

IveSeenTheLight

Turnbull2000 wrote: »

Being one of just three European nations allowing unlimited immigration from the accession countries has less to do with supporting the ageing population, but more to do with suppressing salaries in an inflationary environment and prolonging economic growth to support high government borrowing, a historic current account deficit and expanded public sector.

You raise a few valid points which I need to consider, however with approximately an net immigration increase of 200,000 per year for the last 6 years and 100,000 per year for the 5 years before that does support the aging.

Surely much of the pension that the government pays out is helped by the additional income tax received by these working immagrants.

It may well be that this also suppresses salaries and in turn help them with the inflationary figure, but suppressing the inflation figure does not help to support the aged.

m00m00

immigration, the last straw being clutched by the desperate bulls.

as turnbull2000 points out, hpi has been driving far more by sentiment and cheap credit than any notional immigration

actually suppressing inflation DOES help the aged, as inflation has a much greater impact on those on fixed incomes, ie pensioners.

merlinthehappypig

From today's FT:

In the UK, the headline manufacturing PMI is expected to decline from 54.4 in November to 53.5.

The service-sector survey is very important to policymakers, and its weakness in November was a key factor behind the decision to cut interest rates in December. The consensus forecast is for a modest decline from November’s reading of 52.

The slowdown in the housing market looks set to continue even if interest rates are cut. Mortgage approvals dropped to 88,000 in October, and a decline to 80,000 is expected in November’s data on Friday.

In the eurozone, inflation data for December, due on Friday, could fuel expectations that interest rates will increase in spite of the credit crisis. Headline inflation rose to 3.1 per cent in November and no change is expected in December

bluejake

m00m00 wrote: »

immigration, the last straw being clutched by the desperate bulls.

as turnbull2000 points out, hpi has been driving far more by sentiment and cheap credit than any notional immigration

And the house price inflation bubble is not unique to the United Kingdom. Like all bubbles the optimists believe this time it is different. This time the normal rules of economics don't apply. There may be a shortage of housing in London and the South East but this inflation has happened everywhere.
In Wigan house prices have maybe tripled in the last 5 years. Has there been a flood of immigrants? Has the population increased dramatically? No.
Have we now got lots of empty new build flats owned by landlords in London?Yes.

EdInvestor

Generali wrote: »

If there's a shortage of housing, why aren't rents rising quickly? .

Rents are rising, but competition from all those new BTL landlords has moderated the increases in the past.However there should be an increase in demand this year as people delay buying to see what will happen to prices/interest rates/mortgage availability etc, so that may well mop up the additional supply.

samihostan

dreado wrote: »

Ok, I’ll get this (re)started. I’ve been thinking about buying my council flat for a while and am wondering how this predicted ‘price crash’ could effect a council flat: Should I wait? How long for?

i totally agree. what is going on? should we wait and how long?

sami hostan

Generali

EdInvestor wrote: »

Rents are rising, but competition from all those new BTL landlords has moderated the increases in the past.However there should be an increase in demand this year as people delay buying to see what will happen to prices/interest rates/mortgage availability etc, so that may well mop up the additional supply.

I agree with you - IMO, the first sign that the retail housing market is in trouble will be rising rents and a lack of sales. We are seeing that and the next thing to watch will be how BTLers will react - do they hold on as their cashflow position improves or do they try to sell before prices start to fall.

For me this is the great imponderable about where we go from here. We've not had hard times in the house market while BTL has been a mass phenomenon. Time will tell. My suspicion is that investors will try to cut and run but that's little more than a guess. Nobody really knows.

Turnbull2000

IveSeenTheLight wrote: »

You raise a few valid points which I need to consider, however with approximately an net immigration increase of 200,000 per year for the last 6 years and 100,000 per year for the 5 years before that does support the aging.

Surely much of the pension that the government pays out is helped by the additional income tax received by these working immagrants.

It may well be that this also suppresses salaries and in turn help them with the inflationary figure, but suppressing the inflation figure does not help to support the aged.

The demographic time bomb remains a few years away. These immigrants will only ease the tax burden if they depart to another country when the Baby Boomers are 6 foot under. If they remain (the immigrants), the the problem remains as they will eventually need catered for themselves. It's unavoidable.

The current net economic 'benefit' of immigration as of today is diluted GPD per head, strained public services and the effects I've already outlined.

To tackle the issue you raised would take a great deal of forward thinking at the risk of upsetting the electorate. If our current Government were capable or willing to take this approach, we wouldn't be risking a recession, record current account deficit, public/private sector pensions apartheid, PFI spending, record levels of debt, huge welfare bill, and a highly damaging housing bubble. This will just intensify the pain, rather than ease it.

This government will only think short-term. i.e. keeping themselves in office.

Generali

Turnbull2000 wrote: »

The demographic time bomb remains a few years away. These immigrants will only ease the tax burden if they depart to another country when the Baby Boomers are 6 foot under. If they remain (the immigrants), the the problem remains as they will eventually need catered for themselves. It's unavoidable.

IMO, if the 'demographic timebomb' can be delayed then the problems should clear up of their own accord. The biggest problem we face with soon to be retirees is that they've been promised incredibly generous pensions. Promises that have (for the most part) been denied to younger people. If those higher pensions can be paid for by the taxes of immigrants, much pain can be avoided.

Turnbull2000 wrote: »

The current net economic 'benefit' of immigration as of today is diluted GPD per head, strained public services and the effects I've already outlined.

My feeling is that many of the migrants (esp those from Eastern Europe) are often young and productive and are certainly highly motivated to work and succeed. They bring skills that are needed (such as the ubiquitous 'Polish Plumber') and so stop wage inflation from running away, as we would have expected to happen by now after 12 years or so of continuous economic growth.

Certainly in my line of work (banking) migrants have brought good skills, a good work ethic and are bringing skills that are in very short supply in The City and can't be taught quickly.