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fru-gal

Do Volumes Decline As House Prices Go Higher?

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Sorry, this is probably a silly question but I got thinking about the relationship between high prices and volumes.

Presumably as house prices become more expensive then volumes will slow as there will be less and less people at the bottom able to get on the property ladder. I know at the moment there are lots of policies to stop this happening such as HTB, low interest rates, foreign buyers being encouraged to come and buy but surely when property gets to the point where it is unfeasibly expensive in terms of income multiples, volume will drop extremely low as very few non- cash people buying and selling?

Are high house prices one of the reasons why volume is still half of what it was in 2007, because if mortgage lending is tightened up and only given to those that can realistically pay back their loan (without the prop of HTB which may be temporarily distorting volume), then will we see a time when prices are so high that volume drops to almost nothing (or only in the very top band)?

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Sorry, this is probably a silly question but I got thinking about the relationship between high prices and volumes.

Presumably as house prices become more expensive then volumes will slow as there will be less and less people at the bottom able to get on the property ladder. I know at the moment there are lots of policies to stop this happening such as HTB, low interest rates, foreign buyers being encouraged to come and buy but surely when property gets to the point where it is unfeasibly expensive in terms of income multiples, volume will drop extremely low as very few non- cash people buying and selling?

Are high house prices one of the reasons why volume is still half of what it was in 2007, because if mortgage lending is tightened up and only given to those that can realistically pay back their loan (without the prop of HTB which may be temporarily distorting volume), then will we see a time when prices are so high that volume drops to almost nothing (or only in the very top band)?

High prices plus much less available credit to "buy", and sentiment having definitely shifted since the bubble was considered something worth being part of.

Edited by dances with sheeple

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The current situation is unusual as there is a massive latent demand for property and a massive capacity for new borrowing as so few people under 40 currently have property related debt right now.

With current IR mortgages are still affordable at lolprices, what is making them unaffordable is deposit/stamp duty and the suspicion that prices can't go up much further (although IR can) which makes it a high risk decision.

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The current situation is unusual as there is a massive latent demand for property and a massive capacity for new borrowing as so few people under 40 currently have property related debt right now.

With current IR mortgages are still affordable at lolprices, what is making them unaffordable is deposit/stamp duty and the suspicion that prices can't go up much further (although IR can) which makes it a high risk decision.

But if we have HTB and low interest rates, then what is stopping all this "latent demand" as the deposit is sorted (or so the government think) via HTB and low interest rates (for now) sort the repayment part. Outside of London these two features should be producing much more volume. I agree about the stamp duty part but if people were ok to pay SD in 2007 when prices were already high, then how has mentality changed now? Do you think more non owners think that prices have reached a point where they are too high, even with all the help?

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But if we have HTB and low interest rates, then what is stopping all this "latent demand" as the deposit is sorted (or so the government think) via HTB and low interest rates (for now) sort the repayment part. Outside of London these two features should be producing much more volume. I agree about the stamp duty part but if people were ok to pay SD in 2007 when prices were already high, then how has mentality changed now? Do you think more non owners think that prices have reached a point where they are too high, even with all the help?

SD was added on to the loan in`07? Banks are being much more choosy who they lend to, whatever VI`s would like us to believe. A graduate working in Tesco with 30k student debt is not going to get a big house loan unless mum and dad have a lot of skin in the game?

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The current situation is unusual as there is a massive latent demand for property and a massive capacity for new borrowing as so few people under 40 currently have property related debt right now.

With current IR mortgages are still affordable at lolprices, what is making them unaffordable is deposit/stamp duty and the suspicion that prices can't go up much further (although IR can) which makes it a high risk decision.

That point is debatable IMO, I would say there is a massive latent demand to release "equity", but not necessarily to borrow the amounts that people think their house is worth.

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Do you think more non owners think that prices have reached a point where they are too high, even with all the help?

It's too soon to tell, for me I've been expecting a correction for 6 years and all I'm seeing is a government who is going to do everything it can to bring a 'boom' back.

If we are still seeing HPI in 6 months there may be a trigger point at which Gen X/Y capitulate and stampede into debt.

The fact is there are too many variables to make any kind of informed guess at where it's going - election, IR, land tax, universal credit, HTB2, boomer retirement etc.

You can look at history for signals - which is where I've been informing myself, but 'this time is different' - as there appears to be no limit to how much TPTB will throw at the situation.

We could see 100% rise from where we are today before it corrects, and that correction could be via wage inflation so we're proportionately no better off than today.

Or we could see systemic collapse, either way we're not going to get that thing we all probably want - the property value/salary situation of 1997.

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It's too soon to tell, for me I've been expecting a correction for 6 years and all I'm seeing is a government who is going to do everything it can to bring a 'boom' back.

If we are still seeing HPI in 6 months there may be a trigger point at which Gen X/Y capitulate and stampede into debt.

The fact is there are too many variables to make any kind of informed guess at where it's going - election, IR, land tax, universal credit, HTB2, boomer retirement etc.

You can look at history for signals - which is where I've been informing myself, but 'this time is different' - as there appears to be no limit to how much TPTB will throw at the situation.

We could see 100% rise from where we are today before it corrects, and that correction could be via wage inflation so we're proportionately no better off than today.

Or we could see systemic collapse, either way we're not going to get that thing we all probably want - the property value/salary situation of 1997.

I seriously doubt that actually, the perception out there about what is going on has changed dramatically IMO.

Some central Edinburgh flats already slipping back to `97 and beyond http://www.espc.com/properties/details.aspx?pid=329252

Edited by dances with sheeple

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I seriously doubt that actually, the perception out there about what is going on has changed dramatically IMO.

Some central Edinburgh flats already slipping back to `97 and beyond http://www.espc.com/...aspx?pid=329252

I agree. I think that tptb take people for mugs but actually it seems like relatively few want to take on large debts, having already been saddled with a high cost of living and large education debts that get them dummy degrees. Perhaps people are not as stupid as the Government would like to think?

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Rightmove has data going back 13 years to 2000 which provides volume and price data.

The run up to 2004 was accompanied by higher volume.Then the SE/London demerged and significantly higher with some postcodes doubling and trebling albeit on lower volume to 2013.The rest of the country either went slightly higher,dropped or stayed flat on lower volume.

Volume,per se,doesn't necessarily lead the price action.

For instance,B9-Birmingham-has seen lower prices over the last 9 years on lower volume.

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The types of buyers changed. Volumes generally held up between 2000-2007, but FTBs halved and BTLers doubled.

Trouble for the market is that at these values, demand is largely speculative, and if credit ever gets less available, speculative demand vanishes just as quickly as it materialized.

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Do you think more non owners think that prices have reached a point where they are too high, even with all the help?

Yes.

Prices can rise 10% on very little transaction volume in an area, as sellers/buyers agree higher prices. They can fall just as quickly, with few transactions, bringing all home-owners values down, on low transaction volume, as some sellers/buyers agreed to transact at lower prices. As proven in 2008 before Gov/BoE stepped in with house market value protection measures in 2009.

Toppy as hell now in many areas, not just central London, and some property-VIs claiming 10% rises in a month need to be knocked right off their perches. Including the old layabout owners who've known pretty much nothing but decades of HPI, and those in over-paid jobs offering nothing but irrationality, peddling HTB2, wanting hard-working people to enter massive debt.

That will happen with any event buyers dry up, including perhaps with refusal to take up HTB2. And it doesn't need that many sellers to agree to sell at lower prices to bring all home-owners values right back down. As seen in the indexes of 2008. Hopefully followed by panicking owners bringing loads of inventory to market, as sentiment shifts, to cash out before prices fall further.

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Low volumes hurt estate agent's profits!

Wasn't there's a stamp duty holiday a few years ago now?

That seemed to keep volumes up for a while I remember a mini-rush before the holiday ended

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I agree. I think that tptb take people for mugs but actually it seems like relatively few want to take on large debts, having already been saddled with a high cost of living and large education debts that get them dummy degrees. Perhaps people are not as stupid as the Government would like to think?

Now that the consequences of debt and high house prices are all over the media people maybe are realising how much of an unsustainable illusion it all was? Really can`t see the young being able or willing to pony up the silly amounts most sellers think they are due in anything like the numbers needed?

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