Strong Rise In U K House Prices

[Ologhai Jones]

BBC website: UK house prices see strong rise, says Nationwide.

Nothing has changed. Give people credit, and they will spend it.

Despite the debt-fuelled financial disaster of 2007/8 that's still with us, we've learned nothing it would seem.

[TheCountOfNowhere]

Soon to be followed by a strong decline.

[Eddie_George]

The UK Land Registry index is the number to watch, but it really doesn't say much on a nation-wide level. The fact that both the government and the BoE have at last woken up to the fact prices are out of wack with incomes means its serious. Perhaps even they are been driven out of town by investors.

Where's that thread that described the ways the indices were calculated? It deserves to be pinned. It opened my eyes to how believable these averages actually are.

[scrappycocco]

To me it seems like every bit of stimulus ups the average, two steps forward and one step back. The only way we're going to see falls is a massive increase in house building and policies against hpi.

[TwoWolves]

Its only about the credit.

Dual income, 4-6 times income, low rates - prices go up irrespective of supply. Look at the American and Irish bubbles, endless space and supply but still bubbled on credit.

[choox]

Its only about the credit.

Dual income, 4-6 times income, low rates - prices go up irrespective of supply. Look at the American and Irish bubbles, endless space and supply but still bubbled on credit.

It certainly is all about the supply of credit. As we see, most people seem to want to borrow as much as they can, without thinking about how to pay it off - live for today, forget about tomorrow.

I'm all in favour of increasing supply of housing as well - but in the context of breaking up the cartel of massive housebuilders churning out crappy cardboard boxes, prompting Nimbys to take to the streets. We need lots and lots of small, well designed developments sympathetic to the local townscape and landscape. We also need much much more self build, and a more rational planning system.

However, a more rational planning system might reduce the price of building land, but without a reduction in the availability of credit, that would just increase the profits of builders.

There are several interlocking viscous cycles here - massive availability of credit = high house prices = more power for big builders = a rotten planning system which suits them and shuts out small builders and self builders = high land prices = no profit in small high quality developments = nimbys = a rotten planning system = high land prices = high house prices = massive availability of credit so that ordinary people can afford them.

There's a reason housing in Germany for instance works in a different way, and its because their banks behave differently fundamentally, which creates a different economic environment for builders, and hence a more rational planning system. Pull away the massive dependency of our banks on houses and everything else can find a more sensible level - we might even see banks investing in industry...

Availability of credit is central to the whole mess.

[R K]

BBC website: UK house prices see strong rise, says Nationwide.

Nothing has changed. Give people credit, and they will spend it.

Despite the debt-fuelled financial disaster of 2007/8 that's still with us, we've learned nothing it would seem.

The proximate cause in '08 was the well documented failure of the securitisation markets and the knock on impact to credit supply/spreads and interbank lending.

One wonders if the 'bubble' itself would have collapsed if credit funding was continuous.

The resurgent housing market suggests perhaps not.

[winkie]

The UK Land Registry index is the number to watch, but it really doesn't say much on a nation-wide level. The fact that both the government and the BoE have at last woken up to the fact prices are out of wack with incomes means its serious. Perhaps even they are been driven out of town by investors.

....but I thought unemployment was down? or is that underemployment up?

Or is that real wages down? and self-employment up?

[renting til I die]

....but I thought unemployment was down? or is that underemployment up?

Or is that real wages down? and self-employment up?

I know, nothing makes any sense any more, if it ever did!

Slowly getting to the point that while I'm in the UK I'm just going to rent. Keep saving and at some point quit work and move aboard, if anywhere is still by that time!

[Venger]

The proximate cause in '08 was the well documented failure of the securitisation markets and the knock on impact to credit supply/spreads and interbank lending.

One wonders if the 'bubble' itself would have collapsed if credit funding was continuous.

The resurgent housing market suggests perhaps not.

Probably not if it truly was continuous. People might happily borrow x20 income, on expectation prices always go up. However funding is isn't continuous to ever greater levels. We hit a point where that illusion crumbled with securitisation, that powered HPI, and investors money backing a load of rubbish AAA-rated overvalued CDOs.

There's a push to find ways to bring back easy lending, but now there is a more of a reality limit to how much people are prepared to borrow, especially with inflation in essentials and concerns about their incomes going forwards. Two sides to the lending equation.

Spent £3 acquiring the details rather than wait for sale price to come onto public records, to discover a terraced house I was tracking has just been bought by a mid-30s NHS doctor for just under £500,000 with a mortgage from HSBC, no doubt at a very tempting rate.

Their own decision to go to the bank and seek a mortgage to buy at that price. Bank didn't drag them in. Perhaps amongst the last of the idiots. I can hear the sound of a barrel bottom being scraped. There's going to come a time when there are too few willing and proceedable buyers. Banks are lowering mortgage rates simply to try and find willing borrowers to take on big mortgages.

Unless Gov/Banks really begin accepting any old trashy idiot borrowers to keep borrowing to meet high prices under HTB2. I guess they already have form for it, allowing other idiots to borrow big, ever more money (with securitisation behind the liquidity to lend) since 2000.

In the classic assets mania, markets outrun any rational valuation based on yield or cash return. Properties come to sell at absurd prices on the expectation they will appreciate to still more absurd prices. And they do. They defy gravity, moving from one lofty high to another, month after month, year after year, luring people into mortgaging their gains to reinvest in the inflated assets on margin.

Before the market can top, everyone who could conceivably be drawn in must have already become a buyer. And debt levels supporting the asset prices must be many times higher than any that could conceivably be serviced out of the cash flow yielded by the property itself. Then comes the bust. Just as everyone has come to count on the idea that lofty asset prices are permanent, there is a crash.

Edited December 2, 2013 by Venger

[Venger]

BBC website: UK house prices see strong rise, says Nationwide.

Nothing has changed. Give people credit, and they will spend it.

Despite the debt-fuelled financial disaster of 2007/8 that's still with us, we've learned nothing it would seem.

RBS has suggested it can't get businesses in who are willing to borrow (who can put down some security). "Demand for business lending remains a challenge.... want to help it materialise."

Hope it's going to be the same affect in the housing market next with too few people left to borrow to meet the asking prices desired by sellers. Then some sellers blink, agree lower prices, affecting values for other home-owners... and bringing out more supply.

Does this make sense BTW? I wasn't aware BoE had made commitment of more QE.

Robert Gardner, of the Nationwide, said the change to FLS was likely to have a "fairly modest impact". "After all, FLS is only one of the reasons why mortgage rates are at historic lows," he told the BBC.

He cited the Bank of England's policy of quantitative easing as being instrumental in that, a process which will continue.

Under FLS, banks and building societies have been able to borrow money cheaply, if they lend it out to individuals and businesses.