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I know there's another thread on the Civitas think tank report, but it seems to overlook how bearish the author is and how plain-speaking he is about how screwed-up the market is. There are some choice quotes to keep HPCers going, listed here: - The market has been stretched as tight as it can possibly bear. There is nowhere else for it to go now but down. (p117) - [This boom is] the bubble that never burst (p20) - In this fourth boom, unlike the previous three, home owners have accumulated wealth at the expense of the younger generation of prospective buyers – their children and grandchildren. (p30) - Dramatically-low interest rates have encouraged new buyers to take on increasingly huge loans to purchase housing assets that are by historical standards still over-valued by between 20 and 30 per cent. (p35) - To make matters worse, real earnings have hardly changed for the last 15 years either, so borrowers cannot look to future wage growth to help them clear their debts. These huge housing loans thus seem likely to remain a continuing burden for many years into the future. (p36) - many [young people] have no choice but to remain in the private rented sector, where escalating rents make saving for a huge deposit a soul-sapping experience akin to walking up a down-escalator. (p38) - Inadequate supply is not the key cause of our high house prices (p63) - When a prospective landlord is in competition with a prospective owner-occupier to purchase a house, the former enjoys a number of significant advantages. Even if the investor has to apply for a mortgage, her/his credit-worthiness is assessed on the rent the property is likely to generate, whereas the credit-worthiness of home buyers is assessed on their income. In areas of high housing demand (and hence high rents), this difference will often allow the landlord to borrow more than the prospective owner-occupier.19 Indeed, landlords with several properties can leverage their loans to buy more, easily squeezing out buyers on low or average incomes looking to purchase their first house. (p71) - To add salt to the wound, while prospective owner- occupiers are trying to save for a deposit, they are more often than not living in rented accommodation, paying rents to the very landlords who have helped drive them out of the market in the first place, and thereby paying their landlord’s mortgage costs! (p72) - Both the Bank of England and the Treasury are desperate to avoid a repeat of the early 1990s house price slump (even though a big reduction of house prices is arguably precisely what’s needed to bring prices back into alignment with earnings). (p74) -The Chancellor wants to stop landlords from pushing house prices beyond what owner-occupiers can afford; but he’s scared of bringing prices down to a level where owner-occupiers might once again be able to buy. (p75) - younger buyers fortunate enough to have parents or grandparents who bought their homes have been getting into the market, either by using loans and gifts from their parents, or with the help of legacies inherited from parents or grandparents. In either case – gifts from living relatives or legacies from dead ones – most of this money comes from capital gains generated by an earlier and more fortunate generation of home owners. In this sense, the housing market is now feeding off itself. (p78) - Like BTL landlords, immigrants tend to compete for housing at the lower end of the market, where first-time buyers are also clustered. Indeed, most recently-arrived immigrants rent their homes from private landlords. Their increased numbers have therefore stoked up demand for cheaper housing, both directly (through their own purchases) and indirectly (through landlords purchasing houses to rent to them). (p79) - Nobody knows what happens next; everyone is holding their breath. The market is stretched tighter than ever before, and for the first time in our modern history, home ownership rates are falling. Many young people have been shut out of the market because they cannot afford to buy, and even if they can, they can no longer scrape together the huge deposit they need to qualify for a loan. It is obvious that any significant increase in interest rates (to bring the cost of borrowing somewhere closer to its historical normal level) will trigger a tidal wave of negative equity, defaults and foreclosures that will make the misery of the market adjustment following the 1988 house price boom look mild in comparison. In the Treasury and the Bank of England, nobody dare countenance even a quarter point rise in base rate. (p83) - So in this dangerously precarious situation, what has the government been doing to salvage the future of home ownership? It has been stoking the inflationary fire with a range of initiatives designed to enable even more young people to borrow even more money to pay even higher prices for even more over-valued properties. Finding itself at the bottom of a very deep hole, the government is still furiously digging. (p83) - The collapse of owner-occupation among the young represents a generational process of social exclusion that is deeply worrying and extremely unfair. Fifteen years ago, 60 per cent of 25-34 year olds were buying their own homes; today, it is 40 per cent. (p99) - If the aim is to dampen down demand in the housing market, immigration is therefore an obvious (and politically popular) target. Whether such a dramatic restriction would make sense for the wider economy is, however, a different question. (p102) - nowadays the biggest demographic among private tenants is families with children. These are people with local jobs, whose children are enrolled in neighbourhood schools, yet their landlord could at any time give them two months notice to leave, and at the end of every six or 12-month lease, their rent can be hiked to whatever the market will bear. According to Shelter, 27 per cent of private renters with children have moved at least three times in the last five years. (p107) - Nobody in government or anywhere else currently has a clue how to get interest rates back up to normal levels without the whole economy seizing up, so there is not much point suggesting it. (p115)