Thursday, Apr 13, 2017

What else can they throw at it?

Dailymail: Property market in doldrums

looks like chickens coming home to roost...I keep an eye on central London property/prices
and the amount of stock for sale is unbelievable...prices of 1/2 bed flats have plunged imo
what else can they throw at it

Posted by taffee @ 10:15 AM (10975 views) Add Comment


1. libertas said...

This is in fact a report of the trend since the year 2000 of falling inventories per Surveyor. Whilst I would be concerned, as a surveyor, for my job, note that the reporting is that this limited supply driver behind higher prices and lower transaction levels.

The hidden story is, that this is being driven by out of control immigration levels, where house builders cannot keep up. The problem with new entrants is that they do not have a rental to pass on on a house to sell. They mop up scarce supply without contributing any stock to the market. There will be a rush of Europeans front running future potential limitations on house purchases or residency after Brexit.

Buy to let has a similar affect, because investors rarely have to sell to buy, rather, they remortgage to buy.

A double whammy could be that as transactions fall, interest rates also fall, boosting prices further for the very thin market, which could head towards hyperinflation in some desirable locations if the supply simply fails to materialise, but again, if higher prices bring forth more properties and they continue to be hoovered up by new entrants to the market who have nothing to sell into the market, with house builders failing to take up the slack, this market condition will persist and amplify.

Note, the stock per surveyor started its secular fall soon after Blair opened visa free access for Eastern Europeans. Has nobody considered that a few million more people with very meagre building rates would not impact on the housing market?

Saturday, April 15, 2017 09:19AM Report Comment

2. nickb said...

Has it occurred to you that you may be in the grip of a theory and so prevented from seeing the facts? I'm sure it would suit you very will if all this were true, but it's not. Prices show very little correlation to population levels. Think 2008 - was there an exodus? And according to DCLG figures there have never been more dwellings per capita. Your theory would suit you very well, but have a think about which facts would show it to be false.
Then again, tasting my own medicine, it's been shown on here time and again that you do not engage constructively with criticism, so I guess I should have learned by now ...

Sunday, April 16, 2017 10:29AM Report Comment

3. icarus said...

nickb - but what's the correlation between number of households (which increases faster than population growth) and house prices? A report a couple of years ago by Migration Watch (admittedly not necessarily unbiased) claimed that two-thirds of new UK households (those formed between 1997 and 2015 - 1.8m of 2.7m) were headed by someone foreign-born. As for 2008, no-one claims that population (or household numbers) are the sole determinant.

Sunday, April 16, 2017 01:19PM Report Comment

4. tom101 said...

Do immigrants live in the dark or are they unaware of how to operate a lightswitch?

The amount of uninabited places in London is quite remarkable. There has never been a shortage just too few owners owning property be it forreign buyers, BTL's, land bankers or companies etc

Monday, April 17, 2017 03:05PM Report Comment

5. nickb said...

Hallo Icarus,
Fair point, but I´ve no idea about that correlation, nor how the number of households is measured e.g. in official statistics. How is it done in the report you have in mind? If the number of households was a constant function of population size it would not make a difference. But household size is decreasing over time, it seems. I guess this reflects aspirations as much as realised numbers of households? But OK it seems reasonable to infer number of households in some sense has increased, but i) don´t know if this counteracts increased dwellings per capita and ii) can´t infer causation to house prices given other relevant factors.
Re 2008, all the hullaballoo about house prices in the media and sometimes in commentary on here is about a lack of building. (Why? Is it because a build more solution serves all the powerful vested interests in the housing market? developers, landowners, banks, and the politicians who get funding from them, the media who get advertising revenue from them.) So whilst people are not explicitly saying "population (or households) is the only determinant of prices", I think it is good to have this as a contradiction of what is implicit when other stuff is conspicuously not being talked about.
Let´s think back to before 1975 before credit controls were abandoned. Did real house prices follow a kind of exponential curve that you see fitted to the graph on HPC homepage? You don´t often see this for some reason, but I saw a researcher from Shelter present it once, if I remember correctly with data from the 50s onwards. It didn´t, it was mostly a flat line, wavering around at random. I´ll hazard a guess that household size was increasing at the same time.

Tuesday, April 18, 2017 04:55PM Report Comment

6. icarus said...

hi nick - neither population size nor no. of households has much bearing on house prices. As Michael Hudson frequently points out, it's a worldwide thing and it's down to credit and debt, the availability of cheap money and the financialisation of economies. Real estate assets and mortgage debt are at the centre of the bubble economy, but in addition corporate managers, money managers and funds corrupt the generation of real wealth by borrowing to produce capital gains (not real wealth) mainly to gain financial returns for themselves, their owners, and their creditors. The bubble economys pseudo-prosperity is fuelled by credit flows to inflate asset prices and to transfer ownership rights to whomever is willing and able to take on the largest debt, i.e those who already own inflated assets (debt pyramiding).

His examples of pseudo-prosperity: Households do not receive incomes from the houses they live in. The value of the services their homes provide does not increase simply because house prices rise, as the national accounts fiction has it. And the financial sector does not produce goods or real wealth. Banks do not produce goods, services, and wealth, but claims on goods, services, and wealth - virtual wealth. Bank credit bids up the price of such claims and privileges because these assets are worth however much banks are willing to lend against them. And to the extent that the sector produces services, much of this simply redirects revenues to rentiers and does not generate real wealth in the form of wages and profits. Trade in financial and real estate assets is a zero-sum (or even negative-sum) activity, comprised largely of speculation and extracting revenue, not producing real output. The long-term impact is to increase debt-to-GDP ratios, and to stifle GDP growth as the financial bubble gives way to debt deflation, austerity, unemployment, defaults, and forfeitures.

Wednesday, April 19, 2017 10:36AM Report Comment

7. pete green said...

Icarus - your analysis is spot on as usual

This series of 5 interviews was very useful

Friday, April 21, 2017 08:17PM Report Comment

8. nickb said...

hi Icarus,
I basically agree with all that. Thought you were hinting at something different ...

Monday, April 24, 2017 12:58PM Report Comment

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