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Is House Price Growth Sustainable?

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It would appear that on this site you either have to be a full on bull or bear. However, most will agree that the forecast for house prices is probably somewhere in the middle of the arguments.

So.. The question to all is… can house price growth continue from this point onwards? And do try and be as honest as possible, even the EA’s. It would actually be good to have a post that might actually help people make the right decision about buying.

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It would appear that on this site you either have to be a full on bull or bear. However, most will agree that the forecast for house prices is probably somewhere in the middle of the arguments.

So.. The question to all is… can house price growth continue from this point onwards? And do try and be as honest as possible, even the EA’s. It would actually be good to have a post that might actually help people make the right decision about buying.

Please specify real or nominal ;)

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However, most will agree that the forecast for house prices is probably somewhere in the middle of the arguments.

Is that so?!!

Why do folk who ask these questions suddenly decide GBP is fixed in value, yet otherwise would say that was daft?

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Banks are over leveraged, having leant far too much foolishly already. The government has asked the banks to increase reserves (wisely), choking off additional credit.

Wages are decreasing, so there is little chance of this multiplying up to lead to higher prices.

Rising unemployment (or chances of) reduces demand for people wanting to move up the housing ladder as they reduce their risk exposure.

MBS (mortgage backed securities) markets have all but dried up, leaving banks to rely on savings and government bail outs. The latter can't continue, as the government has massive borrowing levels already. The former is dwindling too, with today's ONS report saying savings have fallen from 4% to 3%. Where is the money going to come from to boost lending?

In my mind, the only way prices will go up is if the BoE keeps printing (QE), but then the price of everything other than housing will go up too. It is quite likely that if this happened, houses would still have fallen in real terms as other items (including essentials, like food, heating etc) would have risen more during the same period.

The landscape is ever changing (a bond market collapse could have savage results for Sterling, for example), but unless you are sitting on a pot of cash (STRs), while ever prices are falling in real terms, you gain by waiting (especially FTBs).

EDIT: added point about bond market collapse.

Edited by Traktion

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Yes because everyone deserves to live in a £1.38bn property which is where prices will be in 100 years if we continue to have YoY growth at 10%.

I've not seen one bull explain exponential growth and house prices which ultimately you are asking with this question.

Can the economy sustain £1.38bn family homes in the future?

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The one I will pay when I buy. :rolleyes:

It depends: are you interested in the number of zeros, or the number of hours of labour?

In nominal terms there's no limit to HPI, see Weimar or Zimbabwe.

Real prices however cannot rise indefinitely because eventually you reach the point where the entire value of the economy is based on housing and housing debt, and there's nowhere left to go. In reality the system collapses before you reach that limit, as we're seeing right now.

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HPI was never sustainable, is not presently sustainable and will not be sustainable, without having a sound economic foundation. It is possibly sustainable, if people who buy houses, buy them to live in them, not to invest in them.

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It would appear that on this site you either have to be a full on bull or bear. However, most will agree that the forecast for house prices is probably somewhere in the middle of the arguments.

So.. The question to all is… can house price growth continue from this point onwards? And do try and be as honest as possible, even the EA’s. It would actually be good to have a post that might actually help people make the right decision about buying.

A slightly left field point might well be if you ignore the current hoopla about booms and busts and bubbles and crashes then the housing market has proved itself capable of sustained growth... the trend appears pretty steady at something like 2 to 3 % growth and has never flattened ( at least since the current records set began) or threatened to go negative..... so yes house price growth can and will continue ( its just that in the short term theres going to be a lull/crash whatever).. but grow it will continue to do on a trend basis.

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A slightly left field point might well be if you ignore the current hoopla about booms and busts and bubbles and crashes then the housing market has proved itself capable of sustained growth... the trend appears pretty steady at something like 2 to 3 % growth and has never flattened ( at least since the current records set began) or threatened to go negative..... so yes house price growth can and will continue ( its just that in the short term theres going to be a lull/crash whatever).. but grow it will continue to do on a trend basis.

Even at 2% to 3% growth at some point you will hit the exponential growth problem, your just delaying the inevitable.

At 5% growth YoY you'll hit £1.38 for a £100K house in about 148 years.

At 2% growth YoY you'll hit £1.38 for a £100K house in about 365 years.

At 3% growth YoY you'll hit £1.38 for a £100K house in about 345 years.

Sustainable?

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It would appear that on this site you either have to be a full on bull or bear. However, most will agree that the forecast for house prices is probably somewhere in the middle of the arguments.

So.. The question to all is… can house price growth continue from this point onwards? And do try and be as honest as possible, even the EA’s. It would actually be good to have a post that might actually help people make the right decision about buying.

What you gonna have for your tea tonight, anything nice?

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So you want to take finance costs in to account?

Look. This is what the sheeple, as some of you call them on here, understand.

X House costs £150,000

I have a £25,000 Deposit

I need to get a mortgage for £125,000

Now these sheeple who have been buying believe that X house is now going up in value. So next month it will be worth £151,000 and so on.

Now is X house going to go up or down in value over the coming months.

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Look. This is what the sheeple, as some of you call them on here, understand.

X House costs £150,000

I have a £25,000 Deposit

I need to get a mortgage for £125,000

Now these sheeple who have been buying believe that X house is now going up in value. So next month it will be worth £151,000 and so on.

Now is X house going to go up or down in value over the coming months.

Wow I didn't think the average "sheeple" bothered with a deposit. :P

Houses only do go up it's down to a limited supply and pent up demand. It's simple you can only make money with property.

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Look. This is what the sheeple, as some of you call them on here, understand.

X House costs £150,000

I have a £25,000 Deposit

I need to get a mortgage for £125,000

Now these sheeple who have been buying believe that X house is now going up in value. So next month it will be worth £151,000 and so on.

Now is X house going to go up or down in value over the coming months.

I had a nice matsaman vegetable curry. Made it last night, conveniently still had a plate of it in the fridge with some jasmine brown rice. Fortunately that was already cooked too, so it only took five minutes in the microwave.

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Look. This is what the sheeple, as some of you call them on here, understand.

X House costs £150,000

I have a £25,000 Deposit

I need to get a mortgage for £125,000

Now these sheeple who have been buying believe that X house is now going up in value. So next month it will be worth £151,000 and so on.

Now is X house going to go up or down in value over the coming months.

in the coming months - down

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I had a nice matsaman vegetable curry. Made it last night, conveniently still had a plate of it in the fridge with some jasmine brown rice. Fortunately that was already cooked too, so it only took five minutes in the microwave.

You seem to like my posts. You have done something similar to a few before.

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So.. The question to all is… can house price growth continue from this point onwards?

If measured in sterling sure they can. Government can tell the bank to fund all its debt through QE too.

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You seem to like my posts. You have done something similar to a few before.

I just wondered what you were having for tea tonight was all.

Thought I'd make a suggestion. I've got this new curry paste that works wonders so long as you liquefy it properly first.

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Look. This is what the sheeple, as some of you call them on here, understand.

X House costs £150,000

I have a £25,000 Deposit

I need to get a mortgage for £125,000

Now these sheeple who have been buying believe that X house is now going up in value. So next month it will be worth £151,000 and so on.

Now is X house going to go up or down in value over the coming months.

The value is worth the same as paper...it is all relevant, if you sell at a certain price you still have to buy again at a certain price. If you borrow against the increased value you not only take yourself further into debt you will have a larger loan and will pay more interest for longer.

It is not about how much the value goes up, it is about how much and how quickly you can pay down...

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I just wondered what you were having for tea tonight was all.

Thought I'd make a suggestion. I've got this new curry paste that works wonders so long as you liquefy it properly first.

What's it called? What's the problem if you fail to liquefy first? Too strong for the old taste buds?

Who's the dandy in the picture?

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What's it called? What's the problem if you fail to liquefy first? Too strong for the old taste buds?

Who's the dandy in the picture?

Nah, it goes 'orrible and lumpy. Use a little butter, boiling water and simmer and stir like crazy and it's not too bad.

Dandy in picture . . . avatar? Sheriff Gaylord Justice!

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Nah, it goes 'orrible and lumpy. Use a little butter, boiling water and simmer and stir like crazy and it's not too bad.

Dandy in picture . . . avatar? Sheriff Gaylord Justice!

There was me hoping it was going to be you. :P

Won't have that problem having salad for tea, suppose I'd better get started before wifey turns up and starts questioning why I'm on the internet.

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A slightly left field point might well be if you ignore the current hoopla about booms and busts and bubbles and crashes then the housing market has proved itself capable of sustained growth... the trend appears pretty steady at something like 2 to 3 % growth and has never flattened ( at least since the current records set began) or threatened to go negative..... so yes house price growth can and will continue ( its just that in the short term theres going to be a lull/crash whatever).. but grow it will continue to do on a trend basis.

Sorry but I disagree strongly with that. This is not normal circumstances. It is all very well to have government backed borrowing-we have had that before (at levels in excess of what we have now in relation to GDP). However, the important point is that the government generally does not buy housing, people do. In that respect we have the highest level of personal indebtedness per capita that we have ever had in the UK. Therefore, by whatever standard you measure it , be this income (accepted as falling per capita) or ratio of disposable income (after credit card debt etc.) house prices will not maintain a 3% YOY increase for the foreseeable future. If we look at a chart (well not we exactly) in a 100 years who knows? We may well have a few booms along the way after the norm returns (say 3X income). That can only come with wage inflation and I just cannot, for the life of me, see where this is coming from.

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