Sunday, Mar 23, 2008
It's different here
Telegraph: UK house prices will escape America's crash
Blah blah blah blah it's different here blah blah blah strong fundamentals blah blah blah annual rate of HPI is still positive blah blah blah correction not a crash blah blah blah.
Posted by little professor @ 12:50 AM (1185 views) Add Comment
14 Comments
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1. quiet guy said...
I posted a comment on the Telegraph article. I'm curious to see if they will print it:
When are mainstream journalists going to understand the relationship between credit supply and asset prices? The idea that the recent house price boom was caused by immigrants, single households and so on is just ridiculous! I do not know how long it will take the bad loans to wash their way out of the banking system but the end result is obvious: house prices will correct and our standard of living will drop along the way. This would be bad enough in itself but we are also facing ever increasing energy prices which will increase the economic pain. Anybody who thinks that population density guarantees ever higher house prices would do well to study the Japanese and Hong Kong property markets over the last couple of decades.
2. Matt_the_hat said...
Has supply and demand changed so much in 10 yrs? No, so why use this as the reason for over-inflated house prices. Per-capita we are in as much debt as america. The only difference here is employment rights, therefore stopping the rubbish being cleared out and the new guy anouncing the bad news. The US will clear up this mess in a few yrs we will be dealing with this for decades.
3. Mikelivingston said...
I posted something very similar.
4. japanese uncle said...
In 12 months time, we may wish to repost this article for a laugh.
5. Jonb said...
If by not as bad as America, they mean you won't be able to get a three bed house for £50, or a habitable looking one for £400, then they are probably right. I don't think they will fall that far, but they will fall far enough to make a big difference.
6. alan said...
The 2nd page has a useful comment on Government stats:
"Half the public now think politicians interfere with official data, according to a survey published last week by government statisticians. That’s a scandal.
Official statistics matter. They drive headlines and help us judge if ministers are any good. Trusted data is the key to good policy-making – and the currency of public debate.
In 2000, New Labour set up the Statistics Commission – to “improve trust in official data”. Now it’s being disbanded".
7. Fed Up said...
Strange reallly. Of late Mr Halligan has been very hawkish on inflation. He has overlooked that the debt-to-GDP ratio is greater here than in the US and that is really the salient issue. He also ignores that a recession will lead to net outward migration, making redundant the 'shortage' argument.
8. confused76 said...
The journalist is happy reporting that the house price inflation has come down from 9 to some 2%, far from falling off a cliff.
Well, any house price growth less than 3 or 4% puts the entire BTL brigade into loss making
therefore the market break-even point has already been crossed downwards
9. cyril said...
We had a small country in 1990 but it didn't stop the crash.
and what is Britain's 'strong' economy built on exactly? Financial services?
10. Faustus said...
To be fair to Mr. Halligan he declares his interest right at the start of the article and furthermore describes how he has been bearish on inflation in spite of the fact that lower interest rates would be advantageous to himself as a mortgage holder. Consequently I think his point of view should be respected if not necessarily agreed with out of hand, he himself admits it is possible that sharp falls in house prices may occur however his analysis indicates that this will not be the case. His argument is almost entirely predicated on the familiar "supply shortage" argument which is in some ways compelling when compared to similarly overheated (until recently) housing markets in the USA, Spain and Ireland where massive house building booms occurred which have in no way been matched in the UK due to NIMBY-ism (bar the now notrious city centre developments in certain city centres which will likely be the nemesis for rafts of naive BTL'ers over the coming months). The earlier posters have highlighted the absence in Mr. Halligan's articles of the relationship between credit supply and asset prices and I think that is a valid response. However I think the "truth" may lie in between these two perspectives, that of small falls in the short term (as have been experienced recently) perhaps totally 5% this year followed by stagnation in the medium term (say 2-4 years) due to the impaired supply of credit due to bank's rebuilding of their balances sheets or additional Government regulation in response to the credit crunch. This of course won't be a good outcome for the majority of users of this site (including myself) since whilst it may lead to "real" falls of up to 10-15% this will take years and can hardly be described as a "crash" (it would hardly correct for a single year's gains in the "boom times" of 2002, 2003, 2006, etc) and waiting up to 5 years for such a modest correction would seem hardly "worth it", to me at least. There will be big losers in the correction, notably city centre flats but as I've stated before who in their right mind would want to live in one of those on a permanent basis (one parking space, no garden, cramped living space, etc, etc) which is why they are only suitable for short term renters and not even for them at the moment it seems....... I believe as I stated months ago that ultimately the banks, and by proxy existing mortgage holders, will be be bailed out by the tax-payer simply because house prices have become so integral to the success of this economy that the Government will do anything to keep the "plates spinning" even at the cost of tear away inflation (ie. over 3%). This process has already begun in America and here via Northern Rock and the fact that interest rates are being cut in a rising inflationary enivironment, I suspect if market conditions deteriorate further they will be much more "socialisation of risk" to come........
11. bystander said...
absolutely right cyril and teh UK governmnet and BoE will do everything and anything to safeguard the UK's biggest money making sector. The the point of massaging figures and punishing sterling.
12. Icarus said...
Financial services is the leading UK sector in the good times, but now 'City madness' is distinct from 'real British businesses'.
13. Letthemfall said...
Funny how the assumed shortage is cited again and again but never with figures to support it. One of those mantras that gets repeated ad infinitum. But I don't see a huge increase in people sleeping on the streets. And I don't see where the money is going to come from to keep prices up. But then I'm not a financial commentator, which is why I don't see anything.
14. Orwell said...
In 2000, New Labour set up the Statistics Commission – to “improve trust in official data”. Now it’s being disbanded".
Priceless!
Too expensive of course...?