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Guardian Article

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http://www.guardian.co.uk/business/story/0...1555054,00.html

"Signs of hope amid gloom

1 Interest rates

There is little prospect of the Bank rapidly increasing the cost of borrowing, which will stop mortgage costs from spiralling in coming years

2 Labour market

The labour market looks stable, with employment buoyant. Britain has one of the lowest jobless rates in Europe, and people are confident of staying in work

3 Mortgages

Recent data shows that levels of mortgage approvals have stabilised. Although they are still lower than last year, they are close to long-term average rates

4 New buyers

The number of inquiries from new buyers is on the increase again, which shows that confidence is returning to the housing market

5 Supply and demand

Supply will remain tight as the number of new homes being built in places where people want to live is outstripped by demand"

Anyone with a slightly more measured approach to the market (rather than my socialist tendancies) want to address this one?

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I'm not going to send an e-mail to the Guardian but you are welcome to make use of any arguments I put forward! Be warned they may be rubbish ;)

1 Interest rates

There is little prospect of the Bank rapidly increasing the cost of borrowing, which will stop mortgage costs from spiralling in coming years

Right, three points:

First, the fallacy that high interest rates are needed to cause a house price crash was thoroughly disproven in Japan in the early 90's and is currently being disproven in Oz;

Second, an interest rate as low as 4.75% saw arrears and repossessions rocket in the first half of the year. During the housing bull market, if people get into trouble they just sell their house, when prices stop going up and the market tightens there is no exit strategy until the bank repossesses.

Third, inflationary pressures are increasing beyond expectations. Do not expect cuts.

2 Labour market

The labour market looks stable, with employment buoyant. Britain has one of the lowest jobless rates in Europe, and people are confident of staying in work

Another fallacy that job losses cause the crash - it is the other way around. The falling housing market makes people feel less wealthy and reduces consumer confidence, resulting in job losses, especially in the retail sector, but ultimately creeping across all industry. In addition, of course, the unemployment levels are much worse than the skewed statistic the government like to use. Again, in a bull market, those who lose their jobs have an easy exit strategy if needed, in a stagnant or bear market the only exit strategy may be repossession.

3 Mortgages

Recent data shows that levels of mortgage approvals have stabilised. Although they are still lower than last year, they are close to long-term average rates

Just because a mortgage is approved doesn't mean it gets taken up. FTBers are at record lows and lending to BTLers is down 20% from peak. Completions are now falling through left, right and centre as FTBers pull out, realising if they wait they will get more for their money.

4 New buyers

The number of inquiries from new buyers is on the increase again, which shows that confidence is returning to the housing market

FTBers are at a record low of 8%!!! What "new buyers"? The long term average for this is 45%!!!

5 Supply and demand

Supply will remain tight as the number of new homes being built in places where people want to live is outstripped by demand"

Another age old bull fallacy, supply and demand is primarily driven by peoples desire to upgrade to a bigger house and live singly. Demand collapsed about a year ago when people started to switch to downsizing and sharing. New homes and population increase can - and has - easily be overwhelmed by sentiment.

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It seems strange that after reporting record profits they are predicting a recovery in the market. Their profits would indicate there is nothing to recover from.

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FTBers are at a record low of 8%!!!  What "new buyers"?  The long term average for this is 45%!!!

BTL has taken the place of FTB and are the 'new buyers' - an excellent post on Fool.co.uk yesterday showed that if you added BTL and FTB together the total has stayed the same through the years.

On the bull side it would also appear that the number of FTBs waiting in the wings has grown significantly and will act as a buffer to any falls, especially at the bottom end of the market.

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It seems strange that after reporting record profits they are predicting a recovery in the market. Their profits would indicate there is nothing to recover from.

Ah, but one question no one is asking... why are they getting record profits? is it because they are grossly overpricing their housing stock.... which would explain the faltering transactions ( less STUPID people out there buying at stupid prices ).

Could it be that at this stage in the cycle, profits from housebuilders would be expected to be at their peak as they squeeze every last penny out of the top of the market? makes sense to me. Anyone have any data on the last crash... did the housebuilders profits peak some time after sentiment turned?

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The reporters e-mail address will be Charlotte.Moore@guardian.co.uk if you want to fire away, you could ask her why she hasn't read what Ashley Seager and Larry Elliot have been writing recently.

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The reason they have made record proofits is that they have been banking up land for the last 5 years. they say they have 5 years worth of building land.

If this is correct they are charging todays prices on land they bought 5 years ago.

This company will end up in trouble when they are selling houses at tomorrows prices on land they bought today.

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In fact Larry Elliot is Charlotte's boss, so you could e-mail him and ask why there news items our so out of line with their comment pieces ("welcome excellent analysis and comment in the Guardian business section, but why are your new pieces churning out EA's press releases with very poor underlying economic analysis?")

Larry.Elliot@guardian.co.uk

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  • 301 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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