Jump to content
House Price Crash Forum
DTMark

Why Will Prices Rise?

Recommended Posts

With today's data the subject of further and/or sustained rises and a recovery is a major topic...

Clearly there has to be some reason why HPI has slowed down and in some areas gone into reverse, certainly not expected last year.

Now, why is that?

Certainly not high unemployment/mass redundancies (though we know those are growing now). Interest rates are phenomenally low and there are some good fixed rate deals about (those "fundamentals" VIs are so keen to point to) regardless of where they might be in a year. No, can't be those.

Does it have anything to do with a natural peak of affordability?

So far as I can see you can only advance an argument for further HPI if you believe we are not at the limit of affordability or you believe that affordability will change in some way - what way?, and my impression of it is that this "limit" was finally reached around the middle of last year.

So what was the "trigger"? Why did it start slowing down? Why can't prices carry on rising at 20% every year? Is it affordability?

If affordability was/is a key trigger, it does not mean that prices would fall much - maybe a little. It just means they wouldn't go up in real terms any more, so still there's no hurry to buy. It doesn't mean there is then no more money to be made in property - there will always be "deals" for professionals who know what they're doing.

It would lead to chains taking many months or years to complete if at all because the pool of first time buyers able to enter the market was cut to almost nothing and the gaps between the "rungs" had grown so large that people either don't want or can't afford to move up in the same numbers as before. Less demand. Longer chains. Broken chains. Hmm, where we are now (does anyone disagree with that?)

Against the rest of the economic climate, is that sustainable, let alone a platform for growth? ("if you wanted to get there, you wouldn't have started from here")

Over the last few years IO and self cert mortgages certainly fuelled HPI by raising that affordability limit to "purchase". Removing the 3.5x ceiling was another factor. We fuelled the affordability like never before. 50 year mortgage anyone?

BTL was fuelled largely by low IRs but now the maths just don't stack up for BTL *now* so there's another section of purchasers vanishing. It just doesn't work any more in the same quantities (again, there are always deals a professional will pick up, but the average man in the street will not).

The media and TV talked it up, best get in now while you can, and so forth. It seems like everything has been done to keep it going, and now it has stopped. Why? Inflation is low. Apparently. What has changed? Is it purely sentiment in the minds of the "average buyer" or was some plateau reached? If it was... what can next be invented to try and keep HPI going?

I'm guessing it was SIPPS on which there has been a lot of debate. Does property HPI over the next couple of years depend almost entirely on SIPPS "working" and falling IRs (not by a quarter point here and there, but by a couple of full percentage points), or is there something else which will cause prices to rise?

Share this post


Link to post
Share on other sites

I'm guessing it was SIPPS on which there has been a lot of debate. Does property HPI over the next couple of years depend almost entirely on SIPPS "working" and falling IRs (not by a quarter point here and there, but by a couple of full percentage points), or is there something else which will cause prices to rise?

It depends if negative amortisation mortgages hit the UK. If they do, then the sky is the limit -- imagine if people were actually paying around 1.5% to 2.5% of the outstanding loan amount each year.

Share this post


Link to post
Share on other sites

SIPPS will not be able to sustain a housing boom that has been of 'epoc' proportion. notice how blair didnt say that about the housing boom. he loves to use that word.

the boom was fuelled to highly and has burned evything including the high st.

a few tax efficient pensioners wont be able to sustain that.

but once buying groups and financial 'advisors' start advertising it with a comedy cartoon house in simple english on daytime tv to the masses (a purple SIPP)- we might just have total inter generational anarchy by 2012

and a sweet revenge 2020 when people refuse to look after the old anymore.

Share this post


Link to post
Share on other sites

It depends if negative amortisation mortgages hit the UK. If they do, then the sky is the limit -- imagine if people were actually paying around 1.5% to 2.5% of the outstanding loan amount each year.

Is that likely?

(Genuine question)

Share this post


Link to post
Share on other sites

Hi,

For my part, I base my thoughts on the availabilty of reports, compare and contrast them, try to see which makes most sense. Often these are weak on the Bullish side because they are very scant in detail and almost entirely put together by people who want you to buy houses at ever increasing prices and will put into play very obvious salesman tactics. Added to which, you can follow press releases and media commentary from the past two crashes where, for want of a better word, they lied about houses price falls.

Also, the economy is faltering, bankrupcities at record levels, repocessions on the rise, high levels of unsold houses, highest ever levels of unaffordability, etc., Things that have caused crashes in the past and are clearly not sustainable to the economy in the long run. And none of the other debt ridden HPI economies around the world who have tried to avoid some form of HPC have managed it. As things stand.

ON the other hand, there have been some very good bearish reports backed by international and historical comparisons, studies and stats. Particularly from independent sources, not obviously connected to selling houses in the UK for a living i.e., IMF, OECD, stock market investments firms, universities and economics commentators.

It is not healthy to become biased toward one view though. I would desperatley like to find some analysis from someone other than VI's, EA's mortgage providers, NewLab (and their pensions fiasco) to get a bablanced view. Surely someone convinced of a new bull run in the market can give some pointers. Things like SIPPS are conjecture at the moment. Particularly since, the golden question, where is the money going to come from in an economy in debt to 1.2 trillion.? We need something more substantial for the sake of balance.

IMHO, if the downturn - which anecdotally is very obvious to anyone who has lived in the same area and seen local area property prices around them for several years - is to be avoided, given the current trade and budget defecits, combined with a weakening sterling, what is reuired is a major export upturn combined with foreign investment inflows and so inject the new money needed into the economy and at the same time mitigate the already rising inflation in the economy and rebablance our EU commitments to balanced defecits, transitioning the spending engine away from the consumer (who is exhausted). I can't see that at the moment at all. A house price correction, like the other HPI economies around the world, if properly managed, would be the most likely method to return competitiveness and consumer spending in the long term, while encouraging inward foreign investment and our export markets.

Boomer

Edited by boom_and_bust

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.