There will not be a crash

The_Dangerman

Generali wrote: »

It's true that people have to live somewhere but they also have to pay for it and that's the bit that impacts on demand. If they have less money then that reduces demand, as you say people won't leave the parental home as young or people will share housing or cram their family in somewhere smaller. That is where the main substitution effect exists in housing - people substitute larger for smaller or rented for owner occupied. If needs be I could live with the wife and 2 kids in a 10x10 ft room. I wouldn't want to but if it's all I could afford then I'd have little choice.

If you think logically about the thing about households then it's clear that something has to give as it's impossible for more households than properties to be created forever unless people start to create households under Waterloo Bridge out of cardboard and Special Brew. If there's a serious risk of running out of houses in the UK then the political pressure to build more would be immense.

I've met people that think they know nothing about economics that have a great grasp of supply and demand and met economics lecturers that have almost no idea. It's a really simple concept that's impossible to understand until the penny finally drops one day.

Why do people now have LESS money? I though we as a nation were still getting richer?

I'm getting an above inflation increase in pay this year, and I am not alone. So I, and other, have MORE money, and therefore can pay more for rent.

I can't predict what will happen to the number of households being created at an unspecified point in the future. What we can look at is what happens now.

I agree, more people will cram into smaller houses, with young people stopping at home longer and more friends sharing together. But you put more wage earning adults in a smaller space then they have more money to pay the rent or mortage. I'm sure there area even familes who take into account their offsprings board and lodgings in order to pay the mortgage. We were one of them! But that was all the way back around 1993. The Nationwide accepted it, too, apparently, although I was quite young at the time.

The_Dangerman

dolcevita wrote: »

You obviously haven't read what the Gen said because you still don't seem to understand what demand is!

Please, enlighten me then!

(meant with no sarcasm or malice)

Lotus-eater

The_Dangerman wrote: »

Why do people now have LESS money? I though we as a nation were still getting richer?

I can answer that for myself and say that my personal inflation rate must be about 15+% we have definitely seen a increase in the amount that goes out, but not that comes in. We're both self employed and the amount we charge has hardly gone up in the last 5 years (through market pressures .ie what everyone else charges), but our costs have shot up.

The_Dangerman

Lotus-eater wrote: »

I can answer that for myself and say that my personal inflation rate must be about 15+% we have definitely seen a increase in the amount that goes out, but not that comes in. We're both self employed and the amount we charge has hardly gone up in the last 5 years (through market pressures .ie what everyone else charges), but our costs have shot up.

Sorry to hear that, and I'm sure that you are not the only one, however, doesn't mean everyone is feeling it as bad. I've had above inflation rises for the past 3 years.

The_Dangerman

But you have to live somewhere! Ergo demand for renting is strong. If there is strong demand for renting, then I'm going to buy a BTL there!

So you still creating demand for housing, because you need a roof over your head, which is what I meant, so I still feel I have a grasp on this

The_Dangerman

The_Dangerman wrote: »

But you have to live somewhere! Ergo demand for renting is strong. If there is strong demand for renting, then I'm going to buy a BTL there!

So you still creating demand for housing, because you need a roof over your head, which is what I meant, so I still feel I have a grasp on this

I'm sure I just responded to a post that has been deleted? Or am I going mad?

Lotus-eater

The_Dangerman wrote: »

Sorry to hear that, and I'm sure that you are not the only one, however, doesn't mean everyone is feeling it as bad. I've had above inflation rises for the past 3 years.

Thats alright, I didn't tell you that for you to feel sorry for me, we're fine we've never overspent and have always had a buffer zone and we're no-where near strapped for cash.
The thing is, I don't think we are that uncommon, well the self employed bit maybe, but I get the feeling its getting tighter for many.

Lotus-eater

The_Dangerman wrote: »

I'm sure I just responded to a post that has been deleted? Or am I going mad?

Too many crash threads

teabelly

http://www.communities.gov.uk/news/housing/717700

HPI is a mere 8% pa. Average house is now over 220k. London has seen HPI jump in January to 13.8% from 12.2% of December.

It will be interesting to see what the figures are around June/July. If there is still an annual increase then there isn't going to be a crash however many people wish it were so and HPI may continue indefinitely. If sold prices continue to climb even when lending is tricky then the property market is obviously pretty much immune to wider issues. Banks want to make money and they do so by lending. Much better to lend on an asset you can do something with rather than lending on depreciating consumer goods...

brit1234

teabelly wrote: »

http://www.communities.gov.uk/news/housing/717700

HPI is a mere 8% pa. Average house is now over 220k. London has seen HPI jump in January to 13.8% from 12.2% of December.

It will be interesting to see what the figures are around June/July. If there is still an annual increase then there isn't going to be a crash however many people wish it were so and HPI may continue indefinitely. If sold prices continue to climb even when lending is tricky then the property market is obviously pretty much immune to wider issues. Banks want to make money and they do so by lending. Much better to lend on an asset you can do something with rather than lending on depreciating consumer goods...

Teabelly don't you see we are on the slow part of the curve between rapid house price inflation and deflation. It simply doesn't go from one end of the spectrum to the other over night. Patients it will all unfold in front of your eyes in the next 6 months as the lending criteria bites and repossession rapidly increase.:j