So Fred Harrison was right!

Sir_Humphrey

Alan_M wrote: »

It is very easy to overcomplicate theories, often the simplest explanation is the best explanation and whilst I agree that not everyone has the memory of goldfish, I'd hazard a wild guess (based on nothing more than my life experiences and the fact I run a business connected with the construction industry) that 90% of the general populous do have goldfish memories (or selective memory as I prefer to describe it)

If the simplest explanation does not fit the facts then it is not the best explanation.

Fred Harrison argued there was a cycle that led to an HPC every 18 years. That does not fit the facts, so the argument is false.

I think we probably agree to a great degree. Personally, I think that is nothing inevitable about the having a housing cycle and it is a consequence of financial deregulation. Saying that some inevitable mystical cycle exists is a bit like saying that God is doing it...hardly an informative theory.

John_Pierpoint

Exactly! Any graph of prices without a bar chart of volumes under it tells us nothing.
With the bar chart you will discover Mr Numpty buys near the top and then has to wait until near the next top to try to jump the next rung in the ladder.

Quick question: How is it that repossessions don't appear in the statistics; or are they in the main flogged to speculators with deep pockets, so don't need a Halifax/Nationwide mortgage?
At least this time round there must be thousands of FTB's saved from their own folly by being out bid by the BTL gang.

Alan_M_2

John_Pierpoint wrote: »

Quick question: How is it that repossessions don't appear in the statistics; or are they in the main flogged to speculators with deep pockets, so don't need a Halifax/Nationwide mortgage?

Any set of statistics can be compiled from any set of parameters, if the powers that be (in this case the government) deem that it would not be indicative to include distressed sales within these figures, then thats fine, it produces historical data with this missing......

There's no right and wrong with any set of statistics, the most pertinent question you ever ask when reviewing a set is "From what data were these statistics compiled"...ergo the data (or more importantly often what's excluded) is more important than the actual result.

Alan_M_2

Sir_Humphrey wrote: »

If the simplest explanation does not fit the facts then it is not the best explanation.

Fred Harrison argued there was a cycle that led to an HPC every 18 years. That does not fit the facts, so the argument is false.

I think we probably agree to a great degree. Personally, I think that is nothing inevitable about the having a housing cycle and it is a consequence of financial deregulation. Saying that some inevitable mystical cycle exists is a bit like saying that God is doing it...hardly an informative theory.

As I clearly stated, the question of frequency of the cycle is open to interpretation, the fact a cycle exist is fact and indisputable. After all, for capitalism to operate there has to be a cycle of highs and lows. When these highs and lows become exaggerated we find ourselves with boom and bust.

Housing in the UK, like every other asset is subject to the anomalies of capitalism, therefore a cycle is inevitable, to suggest otherwise is suggesting that housing is not subject to the basic economic rules of capitalism. The frequency may change but the fundamental pattern won't.

Sir_Humphrey

Alan_M wrote: »

As I clearly stated, the question of frequency of the cycle is open to interpretation, the fact a cycle exist is fact and indisputable. After all, for capitalism to operate there has to be a cycle of highs and lows. When these highs and lows become exaggerated we find ourselves with boom and bust.

I agree with all of that, as I made clear. The only point I was making is that to say that a crash happens every 18 years is not true, and there is nothing special about a particular number. One of the roles of government should be to smooth out the cycle.

I think we may be in agreement now.

Jonesya

I think his book makes some very good points about the land market - everyone talks about house prices but actually the cost of a new house (eg. the physical structure) rises very slowly at around the rate of inflation and old houses steadily fall in value as they deteriorate. The huge swings in value come mainly from the scrap of land it is built on.

fc123

The bit that I found the most poignant is that 'Land prices and rents' rise to absorb any extra profits.
So an invention that yields high profits eventually gets absorbed by high rents / land costs.
I haven't explained it very well (but , hey, there is a big fat book out there with v small print waiting to be read!) but it added up to me esp. in relation to my own business.

Mary_Hartnell

The purchase price/rents of land are high when the price of grain is high - not vice versa.
That is why subsidising FARMERS is a nonsense, it all gets capitalised into the LANDOWNER's asset value/rent. A lot of farmers get confused because they are both farmer and landowner.
So that is why property in Aberdeen and farms are the few bright spots in the current property market.

It is not a new concept David Ricardo sussed this out when the Corn Laws were an issue after the Napoleonic wars, nearly 200 years ago.