What's Behind Hpc Bears Thinking?

[caparn]

Why are the HPC bears so interested in a house price crash (I'm one too)? I think we sometimes need to take an inward look into why we would like to see a house price crash and the reasons for there to be or not to be one. My theory is that we are all property obsessed and would love a price crash so we could afford to buy the house we want? Prices are bloated and gradually the reasons for the high prices are going, but there is still loads of interest in property from HPC bears just waiting for prices to crash so they can buy. There are some underlying reasons why house prices are so high, mentally people have seen how much house can be worth and maybe after a crash they will be a safe investment.

Reason why house prices should stay high:

1. There is a shortage of houses in the UK. The population of the UK is increasing at a rate much faster than the building of new houses so this will get worse.
   
2. The government don't want to see them fall. The economy is built on high house prices, if they were to fall and put millions of people in negative equity, the building societies would be getting the keys to houses posted through their letter boxes, people declaring themselves bankrupt and the banks would be in deep trouble again and in turn the country would be in deeper trouble.
   
3. Mortgages are still affordable, with current interest rates mortgage repayments are still low so people can afford the payments.
   
4. Government intervention, The government will pay peoples mortgage for a certain amount of time if people become unemployed preventing repossession.
   
5. Housing associations will buy peoples property allowing them to repay the mortgage and then rent it to them, this prevents the market forces of a lot of houses coming on the market.
   
6. The devaluation of the GBP means that house prices are falling even if the prices stay the same.
   
7. Planned new government policies to allow people to access their pension fund to pay off the mortgage even of they are no where near the age they should be able to access it.
   

Reasons why house prices should go down:

1. People no longer see investment in property as a one way ticket to make a fortune
   
2. Unemployment will rise? This will mean that people can't afford repayments and their houses will be repossessed (after the government has paid their mortgage for a certain length of time).
   
3. Interest rates will go up? If the credit rating of the UK is reduced the government will be forced to pay more interest on gilts and bonds which will force the Bank of England base interest up, this will mean that people can no longer afford to repay their mortgage and so it will be repossessed.
   
4. The removal of self-certified mortgages. In London in 2007, 52% of mortgages were self-certified (a.k.a. liar loans). The removal of these has got to have a negative effect on the market.
   
5. The requirement of banks to have larger deposits, there are no 125% mortgages or even 100% the most you can get is 95% and even at this level there will be significant indemnity charges, the minimum you need to get a good interest rate is 20%.
   
6. Increased taxes. With the government finally realising that we can't live on borrowed money forever we are all going to have to pay more taxes and so have less money to spend on other things.
   

What I would like to see:

1. The government offer less protection to people who cannot afford their mortgage. If they have to move out it is not like the house will become empty and unused, someone equally deserving will be able to buy it and move in.
   
2. An extra tax on second homes. There is a shortage of housing in the UK and while people have more than one house other people are suffering.
   
3. Interest rates go up, we are in a position that anyone who has done the good thing and saved rather than borrowed it is having their savings eaten away by high inflation while the government is keeping interest rates ridiculously low.
   

With so many factors I find it impossible to predict what will happen to house prices and in the mean time I'm just sitting back and watching and waiting.

Edited May 30, 2010 by caparn

[babesagainstmachines]

It's more fundamental than all that.

An economy doesn't function when rent-seeking is supported by the state over and above productive work. It's the road to oblivion.

[grizzly bear]

[

Reason why house prices should stay high:

1. There is a shortage of houses in the UK. The population of the UK is increasing at a rate much faster than the building of new houses so this will get worse.
   I'm not sure that there is such a shortage - otherwise rents would have gone up as much as house prices.
   
2. The government don't want to see them fall. The economy is built on high house prices, if they were to fall and put millions of people in negative equity, the building societies would be getting the keys to houses posted through their letter boxes, people declaring themselves bankrupt and the banks would be in deep trouble again and in turn the country would be in deeper trouble.
   I'm not so sure where the government has the funds etc to keep them propped up. It costs a lot of intervention to keep them high, so it would need to be a real priority for them
   
3. Mortgages are still affordable, with current interest rates mortgage repayments are still low so people can afford the payments.
   For those who own. But look at rates for those trying to buy now for first time without big deposit.... and eventually rates will go up.
   
4. Government intervention, The government will pay peoples mortgage for a certain amount of time if people become unemployed preventing repossession.
   See point above, not sure there is enough money for this.
   
5. Housing associations will buy peoples property allowing them to repay the mortgage and then rent it to them, this prevents the market forces of a lot of houses coming on the market.
   Yes, this might avoid floods of houses onto market, providing housing associations have funds.
   
6. The devaluation of the GBP means that house prices are falling even if the prices stay the same.
   People earn in GBP, this only affects foreign buyers - in luxury London homes.
   
7. Planned new government policies to allow people to access their pension fund to pay off the mortgage even of they are no where near the age they should be able to access it.
   Can't see that this will have much impact.
   

[abaxas]

Debt enforces labour.

If people cant buy, they rent. Hence they tend to not be as bothered.

[winkie]

When people see no benefit from their hard work they give up trying....any goal has to be seen to be achievable.......

[the flying pig]

...Reasons why house prices should go down:

1. People no longer see investment in property as a one way ticket to make a fortune

2. Unemployment will rise? This will mean that people can't afford repayments and their houses will be repossessed (after the government has paid their mortgage for a certain length of time).

3. Interest rates will go up? If the credit rating of the UK is reduced the government will be forced to pay more interest on gilts and bonds which will force the Bank of England base interest up, this will mean that people can no longer afford to repay their mortgage and so it will be repossessed.

4. The removal of self-certified mortgages. In London in 2007, 52% of mortgages were self-certified (a.k.a. liar loans). The removal of these has got to have a negative effect on the market.

5. The requirement of banks to have larger deposits, there are no 125% mortgages or even 100% the most you can get is 95% and even at this level there will be significant indemnity charges, the minimum you need to get a good interest rate is 20%.

6. Increased taxes. With the government finally realising that we can't live on borrowed money forever we are all going to have to pay more taxes and so have less money to spend on other things.

...

er, you missed the key thing, namely the prices themselves. they're astonishingly high. the rest of the world is laughing at us. LINK

[caparn]

Reason why house prices should stay high:

1. There is a shortage of houses in the UK. The population of the UK is increasing at a rate much faster than the building of new houses so this will get worse.

   I'm not sure that there is such a shortage - otherwise rents would have gone up as much as house prices.

There definitely is a shortage of housing, see:

http://news.sky.com/skynews/Home/Business/UK-Housing-Shortage-Is-At-Crisis-Point-With-An-Extra-One-Million-Homes-Needed-To-Be-Built-Report/Article/201003315577632

http://news.bbc.co.uk/1/hi/business/8501479.stm

http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/7604334/Post-election-cuts-herald-UK-housing-shortage.html

The government don't want to see them fall. The economy is built on high house prices, if they were to fall and put millions of people in negative equity, the building societies would be getting the keys to houses posted through their letter boxes, people declaring themselves bankrupt and the banks would be in deep trouble again and in turn the country would be in deeper trouble.

I'm not so sure where the government has the funds etc to keep them propped up. It costs a lot of intervention to keep them high, so it would need to be a real priority for them

Until there is a change in policy the government has to have enough money to pay for it, even if it means resorting to selling bonds or quantitative easing.

Mortgages are still affordable, with current interest rates mortgage repayments are still low so people can afford the payments.

For those who own. But look at rates for those trying to buy now for first time without big deposit.... and eventually rates will go up.

Hopefully rates will go up but when?

Government intervention, The government will pay people's mortgage for a certain amount of time if people become unemployed preventing repossession.

See point above, not sure there is enough money for this.

See my point above too.

Housing associations will buy peoples property allowing them to repay the mortgage and then rent it to them, this prevents the market forces of a lot of houses coming on the market.

Yes, this might avoid floods of houses onto market, providing housing associations have funds.

The devaluation of the GBP means that house prices are falling even if the prices stay the same.

People earn in GBP, this only affects foreign buyers - in luxury London homes.

Yes but foreign investment still does have an effect on property prices even if it's not the biggest one.

Edited May 30, 2010 by caparn

[plummet expert]

er, you missed the key thing, namely the prices themselves. they're astonishingly high. the rest of the world is laughing at us. LINK

All apart from Australia (and parts of China) where they are in a mega bubble.

The long list of reasons does not disclose or show understanding that we do not gain as a country from having our business cycle so affected by the constant bubble and burst of the housing market. We seem to have got used to using it as an investment vehicle rather than a place to live in. It has distorted the rest of the economy to our detriment. MY THINKING:

You need not worry about factors like a shortage of housing - when it crashes that sort of thing will be seen as irrelevant.

It is causing a kind of paper/ false wealth that is unhealthy. If you find people make more out of their house than by going to work there is something wrong. That is what happens when we have a house price boom here. People start remortgaging these paper gains and spending them on imported cars and holidays. They have not earnt the money, so the balance of payments is put in the red. Even if we manufactured enough here, it would then cause inflationary consequences.

Ultimately it has a bust, which is then very painful. In the meantime, those born in the wrong decade find they cannot even buy a home because the distortion is so long lasting and unfair. In one decade your average Jo can buy a 3 bed terace or semi, in the next one the same type of person cannot. How is this helping our country. It has beome a game which is damaging us all in different ways. Mortgage lending needs proper regulation and then we would not have this problem. ANYONE AGREE?

[caparn]

All apart from Australia (and parts of China) where they are in a mega bubble.

The long list of reasons does not disclose or show understanding that we do not gain as a country from having our business cycle so affected by the constant bubble and burst of the housing market. We seem to have got used to using it as an investment vehicle rather than a place to live in. It has distorted the rest of the economy to our detriment. MY THINKING:

You need not worry about factors like a shortage of housing - when it crashes that sort of thing will be seen as irrelevant.

It is causing a kind of paper/ false wealth that is unhealthy. If you find people make more out of their house than by going to work there is something wrong. That is what happens when we have a house price boom here. People start remortgaging these paper gains and spending them on imported cars and holidays. They have not earnt the money, so the balance of payments is put in the red. Even if we manufactured enough here, it would then cause inflationary consequences.

Ultimately it has a bust, which is then very painful. In the meantime, those born in the wrong decade find they cannot even buy a home because the distortion is so long lasting and unfair. In one decade your average Jo can buy a 3 bed terace or semi, in the next one the same type of person cannot. How is this helping our country. It has beome a game which is damaging us all in different ways. Mortgage lending needs proper regulation and then we would not have this problem. ANYONE AGREE?

I think the government are quite happy for the British public to spend all their money on housing as while it's going on mortgage payments we are not spending it on imports. If house prices were to crash we would all have a lot more money to spend in importing foreign goods (as we don't manufacture much ourselves now) .

[Georgia O'Keeffe]

Why are the HPC bears so interested in a house price crash (I'm one too)? I think we sometimes need to take an inward look into why we would like to see a house price crash and the reasons for there to be or not to be one. My theory is that we are all property obsessed and would love a price crash so we could afford to buy the house we want? Prices are bloated and gradually the reasons for the high prices are going, but there is still loads of interest in property from HPC bears just waiting for prices to crash so they can buy. There are some underlying reasons why house prices are so high, mentally people have seen how much house can be worth and maybe after a crash they will be a safe investment.

Reason why house prices should stay high:

1. There is a shortage of houses in the UK. The population of the UK is increasing at a rate much faster than the building of new houses so this will get worse.

2. The government don't want to see them fall. The economy is built on high house prices, if they were to fall and put millions of people in negative equity, the building societies would be getting the keys to houses posted through their letter boxes, people declaring themselves bankrupt and the banks would be in deep trouble again and in turn the country would be in deeper trouble.

3. Mortgages are still affordable, with current interest rates mortgage repayments are still low so people can afford the payments.

4. Government intervention, The government will pay peoples mortgage for a certain amount of time if people become unemployed preventing repossession.

5. Housing associations will buy peoples property allowing them to repay the mortgage and then rent it to them, this prevents the market forces of a lot of houses coming on the market.

6. The devaluation of the GBP means that house prices are falling even if the prices stay the same.

7. Planned new government policies to allow people to access their pension fund to pay off the mortgage even of they are no where near the age they should be able to access it.

Well most of your reasons are based on what is happening now rather than what might or might not happen in the future so are pretty irrelevant to where house prices are going in my opinion, for that a person has to forward think policy & market condition changes.

Personally it doesnt bother me what happens to Uk houseprices up down or sideways for the next 10 years although my view would be on at least 50% declines by end 2013.

What i was interested in was the point in Bold, its very interesting, they do this in Switzerland, do you have further information on this, its an interesting way of trying to further protect the banks, although is totally reliant on equity and bond markets holding up so in my view are liable to be useless because i think they are in the middle of 80 to 90% declines aswell

Edited May 30, 2010 by Tamara De Lempicka

[geoffk]

THERE IS NO HOUSING SHORTAGE IN THE UK..PERIOD.... here are figures for empty homes that are not for sale and there are 750k for sale on right move making that 1,4 million homes available in the uk..

North East NE 40,685 2,468 23 490 21,986

North West NW 122,632 3,714 418 4,721 64,332

Yorkshire & the Humber YH 90,768 5,716 426 214 42,566

East Midlands EM 62,134 3,332 591 82 29,797

West Midlands WM 69,002 3,460 175 1,587 33,780

East of England E 54,169 2,295 806 82 29,262

London L 75,706 9,277 954 183 28,804

South East SE 84,205 2,821 1,214 702 36,073

South West SW 52,692 1,472 1,128 311 20,401

ENGLAND 651,993 34,555 5,735 8,372 307,001

Notes: http://www.emptyhomes.com/usefulresources/stats/2009breakdown.htm

There is a shortage of affordable housing....

Edited May 30, 2010 by geoffk

[Charlie Don't Surf]

There definitely is a shortage of housing, see:

http://news.sky.com/skynews/Home/Business/UK-Housing-Shortage-Is-At-Crisis-Point-With-An-Extra-One-Million-Homes-Needed-To-Be-Built-Report/Article/201003315577632

http://news.bbc.co.uk/1/hi/business/8501479.stm

http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/7604334/Post-election-cuts-herald-UK-housing-shortage.html

Spare us! Mainstream media just spewing out the same old mantra.

Go onto Rightmove and look for a house for sale. Plenty no? Ergo no shortage - just at a reasonable price. Also, if there is such a huge shortage, where are all these homeless people?