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It's The Gaps, Stupid

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I would say the biggest contributor to inequality is the fact that assets are leveraged to the money supply (aka 'credit').

So credit devalues savings and incomes but also increases assets by a multiple.

In addition, the richer also borrow far more as they are able to secure that debt. And those debts are typically devalued over time.

That is how the rich get richer.

Also the rich have greater ability to reduce tax through debt management.

Yes - it feels like government outsourced to Roger Rabbit's 'toon-town.

But why is a Savills guy pointing this out?

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"You dont need regression analysis & dummy variables to explain UK house prices: just a credit boom & increasing inequality":


Is this guy telling the truth?

Its an insightful analysis IMO. The key point that he makes that I hadn't considered before is that the rising prices are now driven by the combination of lower transaction volumes and people with higher incomes being the buyers as those on lower ones are priced out thus the price per transaction is held high.

So it would seem that the key to sustaining the rises is keeping transaction volumes low and so long as they stay so low then it doesn't matter in the short/medium term if FTB are completely priced out. However any relatively modest increase in supply would cause a slump maybe as little as 5 or 10% as might occur for example when a significant proportion of the current IO loans start become due for repayment. So we can expect a real HPC kicking off in about a 3-5 year time frame I would say.


Just found this little gem ...

"650,000 interest-only mortgages were granted between 2005 and 2007"

So assuming the majority of those are 20-25 terms then means a total decimation of prices starting at around 2025 so things arnt looking too good for anyone using BTL as a pension investment.

Edited by goldbug9999

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  • 244 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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