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Is There Any Way Of Finding Out...

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In this thread Auntie posted this link to an interesting FT article with economist Douglas McWilliams.

Q: Do you think that by lowering interest rates, and enticing more first time buyers into an overpriced market, the bubble in house prices will be further inflated, raising the possibility of a hard landing in the future?

Peter J Dunbar

Douglas McWilliams: No. Until the supply of housing is increased to cope with demand, I’m afraid that the high price of housing in the UK is largely not a bubble but the reflection of a supply demand imbalance.

Monetary mismanagement, dramatic events in the world economy (such as wars or terrorism), or a sudden lack of demand for sterling creating a currency collapse are more likely causes of any hard landing that might emerge.

(I'm interested in the comment in BOLD).

Is there any way we can find out the reasons why people bought the houses during the boom? I'm sorry but this idea that the current prices purely reflects demand and supply simply doesn't sit comfortably with me.

We know that -

1. There were Sarah Beeny speculators who did up houses to sell on. Most of these were business-plan averse as they frequently got shown-up in the TV shows. They overran budgets but made profits only because of the boom. In normal (non-boom) times, I can fit a kitchen and splash a lick of paint myself and save £25,000 on their prices easily.

2. There were amateur BTLers who wanted to get a tenant in to pay the mortgage with a view to reselling the property at a vastly inflated price say 2 years later. In "normal" times this doesn't work cos the prices aint going up.

3. There were outright property flippers. In "normal" times this doesn't work.

Of course, there were genuine FTBS, genuine professional landlords, genuine downsizers etc, but then we've always had these people, the above three we haven't.

Please add to my list of "unusual" demand if you will. Since end '04 there has been no upward price movement in the north west. The above three groups went to the wall overnight.

How can Douglas McWilliams say (with a straight face) that prices now reflect demand and supply, when a load of the demand was the above speculatory shenanigans?

My postulate is that prices are currently unsupported. I've said it before - prices in my local area over the past seven months that I've been seriously watching - are doing a pretty poor attempt at PROVING that they are REAL SENSIBLE SUSTAINABLE market values because of very poor sales volume, and current oversupply.

Comments welcomed!

:)

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How can Douglas McWilliams say (with a straight face) that prices now reflect demand and supply, when a load of the demand was the above speculatory shenanigans?

I think the Estate Agents have all these answers, since they were at the frontline of dealing with all these speculative buyers when the boom was on.

Whilst the Land Registry records house prices, unfortunately it doesn't say what type of buyer bought the house and for what purpose ! Knowing that sort of data would be incredibly useful.

There are very few EAs here and I would like to see a few more posting to answer these questions - what I want to know from them is to what extent the speculators were driving prices upwards, and how many of them there were in proportion to regular FTBs.

Right now we know that BTL is now dropping away and megaflop you are right - there is surely nothing to support these prices now that only priced out FTBs are left to try and prop up the bottom of the market.

With speculation dying, it is going to be a buyer's market for a long time until prices come back to what FTBs can realistically afford.

Personally, I think it is a good time now to for all FTBs to collectively withdraw from the housing market in protest - to have EAs and sellers on their knees begging for FTBs to return to the market.

Forums like this are a good way to get to as many as possible.

Edited by Warwickshire Lad

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The "housing shortage" line trotted out to justify bubble house price increases has been debunked many times on this forum.

If there was such a housing shortage, there would also be high demand for rental property and rents would be rising. Otherwise, people would be sleeping rough or on couches.

The new build sector (much loved by the BLTers and flippers) is facing a great struggle to shift its wares these days.

Edited by PhilT

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1. There were Sarah Beeny speculators who did up houses to sell on. Most of these were business-plan averse as they frequently got shown-up in the TV shows. They overran budgets but made profits only because of the boom. In normal (non-boom) times, I can fit a kitchen and splash a lick of paint myself and save £25,000 on their prices easily.

Indeed, the Beeny Bunch were nothing but flippers without them even knowing it, in fact in many cases the work done was so over budget it resulted in no added value, the inflation indeed bailed them out in almost every case.

If they kept their paint brushes firmly in their holsters they could have just sat on their bums for 6 months and returned as much, but I suppose that doesn't make good TV, they have to been seen to be doing something so it makes them feel like they've "earnt it" through their 'hard work'. The only upside is that their work might of shifted the house quicker when it went back on the market, but so much of it was so specialised and OTT it wouldn't have been to everyones take, remember Beeny telling them just to fit £50 white kitchen units and be done with it... at least she was under no illusions what it was all about. As the boom progressed the plans and fittings grew more ostentatious to suit.

I see Sarah now has moved now by doings shows about building new fences and binding communities, then the EA goes around at the end and tells everyone their house is worth £40k more (or just £40k?) and everyone feels happy and slaps everyone on the back.

Anyone remember the Property Ladder from around 2002 where two guys did up a barn conversion, quite literally starting from scratch by clearing up after the cows, they did a great job and spent about £25k in the kitchen alone, they were well chuffed when it was valued at £170k and amazed when it sold for £200k, the shell cost about £60k and they sold some more land of seperately later on.

£170k for a brand new big mofo barn conversion in the home counties... ppl thought that was a HUGE figure, and £200k even more ludicrous!

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"In London alone, there are 104,000 homes standing empty"

Dr Bubb - Where did you get this comment from? That's a WHOLE LOT of property!

Assuming each is £200K, that gives £20,800,000,000 'worth'.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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