Monday, Feb 01, 2010
HPC back on - Roger Bootle
Telegraph: Weakening recovery threatens double dip
"US house prices have fallen a long way. Prices are still falling in just about all of the markets that got overblown – including Ireland, Spain and France. But here in the UK house prices have been rising. I find it difficult to believe this makes sense. The correction may take the form of a crash or a gentle, gradual decline, but this market has a major adjustment to make. "
Posted by chrisch @ 02:47 PM (1503 views) Add Comment
17 Comments
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1. will said...
phew...........
2. Veronica said...
About time too! Over-priced shoe boxes, silly loans made on these. We have to get real and stop writing cheques to each other and calling it moving up the house ladder. I'm sorry for all of us that were pushed into this pyramid con. but now perhaps we will the return of council house starts for most of us--with no sell off, so that others can have a chance of having a roof over their heads
3. This comment has been removed as it was found to be in breach of our Blog Policies.
4. mrflibble said...
There would have been no shame in letting UK house prices fall in the middle of a recession - it was good enough for other countries. We collectively decided not to allow it, both government and population. Now the Sheeple are been fed stories of massive rises in the years to come.
We will regret not having this crash and not having it at the right time. Through greed and stupidity we have crippled our own chances of coming out of recession and are now stuck. Forced to keep the base rate on the floor to keep the zombie economy lurching forward at a snails pace, while at the same time pretending everything is 'back to normal' and we can somehow 'recover.'
The hpc is still there, still sitting in the room, still being ignored...
5. tenant super said...
OCTOBER 2008 "The UK property market is likely to bounce back before those of other countries because "we failed" to build enough houses, Gordon Brown has said. The prime minister told a City audience the US and Spain had "overbuilt" homes during the years of rising prices. In contrast the UK had a "pent-up demand", as not enough had been built. He said the UK problem was not shortage of demand for homes at "the right prices" but a shortage of mortgages "at the right prices for people to buy".
So failing to build enough houses and keep prices high is just fantastic. An Veronica, I am sorry to have to break the news to you but even if the most optimistic figure for new social housing was met, it would only meet the needs of maybe the top 20% of the people already on waiting lists.
With lunacy in vogue, though there is a point about a correction being overdue, maybe it will happen through currency devaluation only. And maybe, if prices start to crash they will bulldoze a few million houses to exacerbate the shortage and support prices, that's a golgafrinchanly stunning plan!
6. cynicalsoothsayer said...
Buy-To-Let is the elephant in the room. They are the speculators that have been pushing up the bottom rung of the housing ladder, going from under 60 thousand BTL mortgages in 1999 to over 1.2 million today. When the 'fundamentals' start pushing house prices down, Buy-To-Let is going to look like bad investing. This is also the difference between this country and others that have had their HPC: we're still in the grip of an asset bubble in BTLs.
7. 51ck-6-51x said...
tenant said "maybe it will happen through currency devaluation only"
- How will this work exactly?
As I see it, if sterling collapses while nominal house prices remain the same they would still be unaffordable, no? (except by overseas investors, who will see these assets as 'cheap' but won't want to touch them with a barge pole).
Or am I missing something?
8. letthemfall said...
Through inflation as in the 70s? But since wages are unlikely to rise much in the near future this does not seem likely.
9. 51ck-6-51x said...
High wage inflation in this scenario would certainly help affordability; but I can't see it either, a big chunk of private employment is competitive at a global level, and I don't see the public sector taking up the slack in that situation! Maybe a devaluation would be followed by a crash in house prices, due to it becoming such an unattractive asset anyway.
10. mrflibble said...
@7. 51ck-6-51x
I agree. A few savvy investors will have diversified early on into Gold and other currencies and seen the effective housing drop that way, but for the average man on the street the problem of unaffordable housing is still very much the same.
So now we've a eye-watering pile of debt, unaffordable housing and a broken currency. Hard to see a good side to this government meddling from where I'm standing, especially since I'd bet my bottom Dollar we have not seen the end of the hpc.
11. tenant super said...
Six - If sterling crashes, as a result of QE and low interest rates which also keeps house prices up, they would be unaffordable but they have been unaffordable for years. I admit though my comment is wrong since link between weak sterling/ and house prices is correlation not causation. Or rather weak currency is one of the side effects of not allowing the correction to occur.
LTF
I have been wondering what will happen if we see very high inflation (due to weak currency and rising import costs) which does not feed through to wages. For example social housing rents are set according to inflation. Private rents are distorted by housing benefit but wages do have some influence on market rents. In this scenario, if played over for many years, would social housing rents reach private rent level (especially on smaller properties where the disparity is smaller). If income support/ incapacity benefit also rise with inflation but wages don't, how many low income families will soon be far better off by not working?
12. another alan said...
Great comment on the Telegraph's site under this article:
Our addiction to increasing house prices is a crying shame, we are a species enslaved to meet one of the most fundamental needs - "shelter". what a waste of our lives,
13. hpwatcher said...
Because of the complete decline of the manufacturing industry, house prices have become the key economic measurement that everybody is watching.
What an absolutely pathetic country.
14. Crunchy said...
12. another alan
And who hijacked our fundamental need for shelter? The same people that are planning to hijack our increasing need for the internet?
I will be vindicated.
Le Crunch.
15. braindeed said...
13. hpwatcher said...
Because of the complete decline of the manufacturing industry, house prices have become the key economic measurement that everybody is watching.
What an absolutely pathetic country.
Aye - that'll be Broon's fault.
16. Nobody777 said...
As a kid like all kids I played with frogs and tadpoles just a kids thing anyway the bog had two sides the main side and a boggy side which dried up in summer on seeing the tads dying I used to get them and put them in the good side later I decided to get the spawn and move that as years passed the good side was so full of tads it was black very good results.
I was going to school mid week and I saw two white swans in the pond and they had eaten the lot nothing left so their you go worse than when I started the laws of nature can be minipulated for a while but it will always balance.
The laws of economics requires balance this too will correct to a level and on a global stage the UK needs a massive drop including housing so QE is moving the frogspawn to the good side but when the white swan comes as a (sterling crises) things will balance.
17. fallingbuzzard said...
Housing equity is 75% of UK household wealth, £2.5 trillion, about £100k per household. About five times net household income. No wonder its the key economic measurement. If the investment manager decides to charge an annual management fee or charge for selling, they might not be so obsessed, but that would be a bad thing.