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Flat Bear

Factors Influencing House Prices In The Uk

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I call myself a bear because I believe house prices in the UK will go down. I also believe it would be a good thing and would like this to happen but I hope this does not cloud my judgement. Unfortunately, I realize my wanting it to happen will and does in the same way it does everyone else. So I try very hard to look at facts as clinically as possible, especially those I don’t agree with.

FACTORS AFFECTING HOUSE PRICES TODAY (DYNAMICS)

#Unemployment

#Overall population decrease increase

#Credit availability

#Cost of credit

#Government support/subsidies for housing/bankrupts

#Amount of ready capital in the populous and opportunity for money

#Sentimentality

#General Inflation

#Tax and statutory obligations associated

#Housing stock increases

MAGNITUDE

Some of the above may have more influence than others but I would suggest the magnitude of each factor is more important and must be considered.

Example

#Overall population decrease increase

Relatively unimportant?

What if the UK population halved overnight? Not very likely but if it would, house prices would fall by around 70% within months

#Cost of credit

Vitally important?

But a change of ¼ of a percent can make very little difference

Then the relationship of all these factors must be taken into account.

e.g. Population increase at the same time as increase in housing stock.

All factors must be considered if we are to avoid denial.

SO WHY A BULL TRAP (ak spring bounce, dead cat bounce, suckers rally)

Especially when set against rising unemployment, and a deteriorating economy.

When I look at the low in Feb (£147746 N/W) and the steady climb to June’s (£156442 N/W) I see a definite and pronounced rise in prices.

WHY?

#Cost of credit

Approx. 2 months before. BOE Interest rates fell to near zero, which must have a massive affect. Cheapest ever? Did anyone think it wouldn’t?

#Credit availability

The government have been pumping enormous amounts of money into the banking system (approx. dec/jan?) which hasn’t been going to business I can tell you, but has been filtering through to the mortgage sector.

#Government support/subsidies for housing/bankrupts

The government have been supporting the system with benefits, and other schemes which has helped people losing their homes by deferment in many cases and by direct financial support. This has been expensive and is increasingly so. This, in anyones reasoning, has had a massive affect.

#Amount of ready capital in the populous and opportunity for money

I leave the one with the biggest current magnitude till last.

“It’s just not worth leaving money in the bank the rates are lousy, I’d be better off putting it under my mattressâ€

“I have to invest in property even if it goes down a bit, don’t think it will drop more than 15% and I’ve built that in. Where else can you put your money safely eh?â€

The excuses go on and on.

Truth is it may make sense short term, and as time went on more and more got dragged into buying.

That is why there has been a “bounceâ€

It really is ironic

The STRs who sold to make a profit in the downturn are the people who are responsible for this increase in prices.

How much more of this volatile money is in the system?

Have I missed any other factors or major influences?

A fool and his money is soon parted

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Govt intervention in development. Primarily the planning system and building control system. Restricts supply of new housing and dictates how the houses should be built. It certainly has an impact on house prices but to what magnitude i dont know. With a large housing stock and relatively small flow of new houses, supply restrictions may not have that much of an impact on prices but who knows how much of a suppressed need there is to build houses. Could be quite a lot.

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Only point I would mention is the obsession with owning a property in the UK. It appears, to me at least, to be the number 1 priority of most people. If you don't own a house it is somehow seen as a failure.

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Govt intervention in development. Primarily the planning system and building control system. Restricts supply of new housing and dictates how the houses should be built. It certainly has an impact on house prices but to what magnitude i dont know. With a large housing stock and relatively small flow of new houses, supply restrictions may not have that much of an impact on prices but who knows how much of a suppressed need there is to build houses. Could be quite a lot.

I agree it is a very important factor.

It is generally the current bull view and a very good one.

"They can't make any more land"

"We are a very crowded island which is only likely to get more crowded"

"There isn't enough green belt or non building land"

All of these things are true

When we actually arrive at the situation where houses and developements have to be pulled down to support the ecology this will have a devastating affect.

Where I live there simply isn't enough room to build but somehow the councils and developers have managed to get permission to build on totally unrealistic sites which has and will have disasterous consequences for not only the environment but the infastructure of the area.

Even in a simply micro sense silly locations such as white land is being used/considered.

As I was told a few days ago

Humans are like a disease spreading across the planet devouring everything in its path, totally oblivious to its impact on its host or to its own long term wellbeing. In fact an uninteligent life form in the macro sense.

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Have I missed any other factors or major influences?

You didn't mention how the media is allowed to be used by those with vested interests to ramp the market up. Stuff like "there aren't enough houses" (1m+ unoccupied!) "now is a great time to buy because interest rates are low" (as if interest rates will never go back up!) undoubtedly leads the sheep to the slaughter.

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You didn't mention how the media is allowed to be used by those with vested interests to ramp the market up. Stuff like "there aren't enough houses" (1m+ unoccupied!) "now is a great time to buy because interest rates are low" (as if interest rates will never go back up!) undoubtedly leads the sheep to the slaughter.

I would put "media hype" under #Sentimentality

I do not think it was a major influence of this bounce. In fact it may have very slightly subdued it. Much of the recent media hype has been quite bearish.

I would put your other point "there aren't enough houses" under #Housing stock increases#Overall population decrease increase

Although it is universily recognised there is an acute shortage of housing which the goverment have been going on and on about but hasn't done anything about except build more in already overcrowded areas (SE England) There's enough room for a million in Scotland FFS. London already has problems with transportation and just about every other infastructural problem.

I do not believe this is an important factor of the bounce partly because it is affecting "social housing" more. (I hate that phrase Social Housing I wouldn't want to live in one would you?)

You are also correct the number of empty homes has been decreasing over the last decade. We are down to around 2.8% which is accepted as very close to the absolute minimum.

Your points are bullish but I dont think they have influenced this bounce. I would suggest they will have an affect sometime in the future.

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Only point I would mention is the obsession with owning a property in the UK. It appears, to me at least, to be the number 1 priority of most people. If you don't own a house it is somehow seen as a failure.

I would say sentiment and culture are the most influential factors at play in the UK housing market. Every developed economy is influenced by the numerous economic and demographic factors you cite, but the obsession with house ownership in the UK and US and the manipulation of that sentiment, leaves those housing markets particularly vulnerable to speculation. Most of our continental neighbours aren't afflicted with this disease.

All that cheap money, bank credit and carry trade cash was just ripe for malinvestment. It had to flow somewhere and this time it wasn't tulips or internet stocks. Instead, British and American homebuyers and property investors were ready to lap it up.

Although credit conditions are pre-cursor to the boom, it's sentiment that ensures where the malinvestment is directed.

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I would put "media hype" under #Sentimentality

I do not think it was a major influence of this bounce. In fact it may have very slightly subdued it. Much of the recent media hype has been quite bearish.

I would put your other point

I only had one point - the housing stock was just an example of media hype used.

I'm amazed that anyone could think that the media hype has not played a part in the earlier temporary bounce.

You are also correct the number of empty homes has been decreasing over the last decade

What? Where did I say that? Are you really a bear?

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I would say sentiment and culture are the most influential factors at play in the UK housing market. Every developed economy is influenced by the numerous economic and demographic factors you cite, but the obsession with house ownership in the UK and US and the manipulation of that sentiment, leaves those housing markets particularly vulnerable to speculation. Most of our continental neighbours aren't afflicted with this disease.

All that cheap money, bank credit and carry trade cash was just ripe for malinvestment. It had to flow somewhere and this time it wasn't tulips or internet stocks. Instead, British and American homebuyers and property investors were ready to lap it up.

Although credit conditions are pre-cursor to the boom, it's sentiment that ensures where the malinvestment is directed.

I would agree with this.

The UK property market was ripe for exploiting

I only had one point - the housing stock was just an example of media hype used.

I'm amazed that anyone could think that the media hype has not played a part in the earlier temporary bounce.

Sorry Redhat read it wrong.

I think media sentiment over the past decade has been an influence in ingraining sentiment and cultural idiology. I don't think it has become more bullish recently though. Saying that, I have noticed one S.Beeny at the end of a show that involved a couple of no hope developers say "the only way they can make money is rent it out/move in and waite for the upturn" where in reality they had lost a fortune. Maybe its currently a bigger factor than I have credited it with.

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"They can't make any more land"

"We are a very crowded island which is only likely to get more crowded"

"There isn't enough green belt or non building land"

All of these things are true

Are you really a bear or an estate agent just pretending?

I still don't like how you twisted what I said into estate agent type speak.

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Only a small percentage of the country is urbanised so there is still plenty of room for development. The alternative is to build upwards but the govt does like that either in a lot of places.

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Are you really a bear or an estate agent just pretending?

I still don't like how you twisted what I said into estate agent type speak.

Read my preamble in OP

I may want prices to drop because I believe it is needed for society generally and I would personally gain but I need to look at every factor on its likely affect and influence on the market so I can make a decision on market direction.

Things don't happen because we want them to and as facts or the situation changes I must re-valuate the likely outcome.

I'm not interested in exchanging insults with you.

A factor is just that.

Some factors in the uk housing market include lack of space, overcrowding, and, has been to date, increasing population.

What is more important are their magnitude

Lets take Japan as an example (as dr Bubb mentioned)

Nearly as densily populated as England but by the time uninhabitable areas are excluded will probably work out more densily populated with "good" land at a premium.

It is important to remember that Japan's boom and bust was not influenced on exactly the same factors.

Japan

Population high but minimal growth. During the bust slight decrease in population with ageing becoming a factor. Very rich country with surplus capital to requirements. Very high earning population with minimal unemployment. Generally a law abiding honest and trusting society where mortgage fraud would be low but still faced with economic optomism that bought about the intergenerational mortgage etc

Very little immigration.

State more integrated within the economy with support to the larger exporters that make a bigger percentage of the Japanese economy. A population made up of savers.

Credit that fuelled the boom was domestic money finding the best safe investment. Which in turn later help fuel the UK boom.

Economy based on high tech manufacturing. A net food importer with need for premium food sources esp. fish.

in comparison

England

Population growing at a record rate, starting to slow down? Very indebted country which is getting worse and worse which relies on Far eastern countries to buy its gilts. Generally an unlawful nation with a very high prison population which should be higher and is set to rise dramatically. Generally an untrusting nation where polititians, public institutions including the police and even the bankers are not trusted by most of the populus. Mortgage fraud would be very high and was encouraged.

State sees its job as telling industry what to do with the only strategy to state investment being "saving jobs"

Very little manufacturing with most larger manufacturers that do survive being foreign owned. A population made up of debtors.

A net food importer with want of premium food.

OK

both countries have restricted land which will obviously push up the price.

England had a growing population that increased pressure on land which had an upward affect.

Japan had a stable population so had no overall affect

Other factors

Both countries had booms in house prices mainly due to easy credit and low interest rates.

But the amount of credit in the boom in England that is poor quality is much higher. This is a major worry and will take many of the banks down when QE ends.

So in Japan debts were very high but were sustainable as they had been overt. It would just take a very long time for these debts to be paid back. In England many are unsustainable and will be written off as soon as rates rise.

At the end of the day Japan would end up still being one of the richest countries in the world per capita whereas England will become a country of porpers with a government squeezing the last few drops of blood from the remaining taxpayers.

We all know it but we don't do anything.

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