Housing Market Reaches Plateau Say Surveyors

[“Nasty Piece of work”]

Life does not go on hold because of HPI! That is EA/Mumsnet/MSE Whore's shyte.

[crashmonitor]

This caught my eye today on the news stands.....acadametrics I believe.......

http://www.express.co.uk/ourpaper/view/2014-09-12

[Sancho Panza]

It was very sad. He was actually a great economist and went to great trouble to try and work out how he went wrong. He came up with the first analysis of debt deflations in the English speaking world. And in that way, the fact he was so wrong and now remembered for it, spurred him on to greater heights.

"Debt Deflation Theory of Great Depressions"

http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf

It's ironic that they listened to him when they shouldn't have and then ignored him when he was speaking a great deal of sense.

[Sancho Panza]

I think it's worth a few minutes of your time just to read the first few pages if nothing else.

He covers the point you stress - but links it to a caustic relation - that of debt.

Don't forget, Fisher's other great work is "100% Money" where he envisioned a full reserve checking system to avoid problems of boom and bust and forms the basis of "Positive Money's" proposals. I would dig out a link for the pdf but I suspect you don't have time.

http://fisher-100money.blogspot.fr/

'The 100% proposal is the opposite of radical. What it asks, in principle, is a return from the present extraordinary and ruinous system of lending the same money 8 or 10 times over, to the conservative safety-deposit system of the old gold-mints, before they began lending out improperly that was entrusted to them for safekeeping. It vas this abuse of trust which, after being accepted is standard practice, evolved into modern deposit banking. From the standpoint of public policy it is still an abuse, no longer an abuse of trust but an abuse of the loan and deposit functions.'

[Venger]

I think it's worth a few minutes of your time just to read the first few pages if nothing else.

He covers the point you stress - but links it to a caustic relation - that of debt.

Don't forget, Fisher's other great work is "100% Money" where he envisioned a full reserve checking system to avoid problems of boom and bust and forms the basis of "Positive Money's" proposals. I would dig out a link for the pdf but I suspect you don't have time.

Just read a chunk of it. My only hesistation before was due to having recently read one of his other papers - not as indepth as your linked paper though..

His 'Disturbances to equilibrium'. That should be expected; only fools would expect no problems/changes ahead in life/economy. Too much belief in authorities able to pamper the economy with forever growth. For this reason the history of mankind is one of astonishment. 'When we look at anything closely enough, we find it connected to everything else in the universe.' And 'There is hidden order in chaos.'

[..]It is as absurb to assume that, for any long period of time, the variables in the economic organization, or any part of them, will "stay put," in perfect equillibrium, as to assume that the Atlantic Ocean can never be without a wave.

[..]in the great booms and depressions, each of the above-names factors has played a subnordiate role as compared with two dominant factors, namely over-indebtedness to start, and deflation following soom after. He's also right with this.. in deflation the more debtors pay, the more they still owe, with value of money rising. Having to liquidate possessions at lower prices. However no one forced these victims to borrow/outbid others in the first place.

I like the way he describes debt as a disease, but he does the same for deflation, which is a cure. Provided the boom/debt did not go to extremes, deflation, painful for some (large debtors especially, but older boom rewarded VI who don't want to see value of their homes fall - this time slow deflation seeing them scorning even good offers at super high levels, and reflated out with QE), for deflation sets the eventual scene for recovery.

Edited September 12, 2014 by Venger

[katchytitle]

Money changes value like any commodity and London property works on a global level. If the pound falls a lot thanks to scottish independence, you will see prices in £££ rise because they fall in $$$ or Yen terms.

Our exchange rates are really seem to be based on the amount of capital flows we are sustaining into our closed box national system. UK exchange rate is high because London acts as a vast tax shelter for companies and wealthy non-doms. For instance, Malta sustains an equally stronger currency (what does it produce to sustain this????) - it has tremendous amounts of money as a former trade route stop off since the 18th century. Lots of old school wealthy families who run trusts, and minimal laws to enable money laundering into the EU, just like Iceland and Cyprus.

As someone within the UK looking at prices must make them think everyone is crazy, but yet if you wander over to Zimbabwe and you are able to buy a mansion for £5000 you don't think that the same rules apply to you. £5000 is a lot to a local but not a lot to someone in England. Equally a flat in Brixton for £500K is a lot to a local but not a lot to someone who needs to keep capital and have certainty over its location and property rights. These people would happily lose 10-20% as they would have had to give that to the Tax man anyway.

Always view the world as a globally connected system, money in the form of debt is moving from one part of the world to another, it helps to explain results which do not seem logical. Its like cannon balls on a ship. Some times too much cash concentrates into one area or location and the ship start to topple, then there is a slow period of re-distribution until another concentration point is found. Fundamentally, that is how humans create the business cycles every 10 years or so.

[Sancho Panza]

The anti-Krugman in many respects. And Minsky's greatest inspiration alongside Keynes. Unlike the majority of economists, Fisher, Keynes and Minsky had immense first-hand experience of the the stock market and banking. I believe it was this practical understanding of the centrality of money and debt in an economy that led to the insights for which each is acclaimed. It's simply unfortunate that Keynes' name is now so closely associated with those who came after him and grossly misrepresent his ideas. Keynesianism haunts Keynes in the same way that Fisher's reputation is haunted by that quote.

Too true.

According to this paper-admittedly accessed via Steve keen's website-http://mpra.ub.uni-muenchen.de/15892/1/MPRA_paper_15892.pdf- 11 Economists actually predicted a financial crisis.

I remember having a chat with an acclaimed economic historian of the Great Depression in 2005 and I remember him clearly telling me how he'd recently convinced his son to buy a house and his reasoning why,this time it was different.I laid down some counter arguments but he was having none of it.The one striking ability of most academic economists is that they can walk into a room and not see the big fat elephant sat there.

Shaun Richards blog currently plays hosts to some sceptics who ask questions about GDP per capita,GDP itself,inflation measures etc etc.It's reassuring that someone is, because the next leg down isn't far away now and currently,our understnading seems to be that if we copy Japan ,we'll be ok.

Rant over.

[Venger]

As someone within the UK looking at prices must make them think everyone is crazy, but yet if you wander over to Zimbabwe and you are able to buy a mansion for £5000 you don't think that the same rules apply to you. £5000 is a lot to a local but not a lot to someone in England. Equally a flat in Brixton for £500K is a lot to a local but not a lot to someone who needs to keep capital and have certainty over its location and property rights. These people would happily lose 10-20% as they would have had to give that to the Tax man anyway.

Always view the world as a globally connected system, money in the form of debt is moving from one part of the world to another, it helps to explain results which do not seem logical. Its like cannon balls on a ship. Some times too much cash concentrates into one area or location and the ship start to topple, then there is a slow period of re-distribution until another concentration point is found. Fundamentally, that is how humans create the business cycles every 10 years or so.

Maybe, and they only have to buy a small percentage at silly high prices, to push up values for all the other owners, which then feeds back on itself with ordinary buyers wanting larger mortgages, and overseas wealth again setting new peak prices in London. However at this stage it's ridiculous - and extreme pain for younger senior professional.... nevermind vistors working here on temporary assignment.. some of the USA's biggest hitters in law working in senior positions.

a senior in-house lawyer at multinational company *

[..]goes on to explain that what he’s paying for his new gaff is “ten times what you’ll pay for great space in Chicago and something like three times what you’ll pay for nice space in New York.”

“Senior partners at major London law firms can’t afford to live! Well, not quite: But senior partners at many major London law firms can’t afford to live in London itself…

“From an American’s perspective, everything in London is nauseatingly expensive (or ‘quite dear,’ as the locals so quaintly put it). But the cost of housing goes far beyond ‘nauseatingly expensive’; it’s eye-poppingly, grab-your-chest-and-drop-to-the-ground, out of sight. It leaves partner pay in the dust”

in full http://abovethelaw.com/2012/10/inside-straight-london-partners-cant-afford-homes/

In retrospect, probably politically wise for Carney to rent, rather to have come along to London and paid £12 million (or more?) for a standardish home.

We'll see how things pan out if the oil glut weakens prices, iron ore prices keep dropping, China sees major cities experience some hpc, stock markets soften, QE taper/rate rises, more IT pros lose positions in crazy HPI LA/SoCal.... LBO activity plummets and remains down...

The general conclusion is that wealth and power have never been long permanent in any place....and that they travel over the face of the earth, something like a caravan of merchants. On their arrival everything is found green and fresh; while they remain all is bustle and abundance, and, when they are gone, all is left trampled down, barren and bare.

-William Playfair,

An Enquiry into the Permanent Causes of the Decline and Fall of

Powerful and Wealthy Nations, 1805

[mmt]

Money changes value like any commodity and London property works on a global level. If the pound falls a lot thanks to scottish independence, you will see prices in £££ rise because they fall in $$$ or Yen terms.

Our exchange rates are really seem to be based on the amount of capital flows we are sustaining into our closed box national system. UK exchange rate is high because London acts as a vast tax shelter for companies and wealthy non-doms. For instance, Malta sustains an equally stronger currency (what does it produce to sustain this????) - it has tremendous amounts of money as a former trade route stop off since the 18th century. Lots of old school wealthy families who run trusts, and minimal laws to enable money laundering into the EU, just like Iceland and Cyprus.

As someone within the UK looking at prices must make them think everyone is crazy, but yet if you wander over to Zimbabwe and you are able to buy a mansion for £5000 you don't think that the same rules apply to you. £5000 is a lot to a local but not a lot to someone in England. Equally a flat in Brixton for £500K is a lot to a local but not a lot to someone who needs to keep capital and have certainty over its location and property rights. These people would happily lose 10-20% as they would have had to give that to the Tax man anyway.

Always view the world as a globally connected system, money in the form of debt is moving from one part of the world to another, it helps to explain results which do not seem logical. Its like cannon balls on a ship. Some times too much cash concentrates into one area or location and the ship start to topple, then there is a slow period of re-distribution until another concentration point is found. Fundamentally, that is how humans create the business cycles every 10 years or so.

We can't tell where the money comes from, but I suspect there is a large element of foreigners leveraging to speculate on price increases rather than looking for a safe haven.

[katchytitle]

We can't tell where the money comes from, but I suspect there is a large element of foreigners leveraging to speculate on price increases rather than looking for a safe haven.

That could well be true. My post is just highlighting that global views are different to local ones and if you find you can't understand the pricing of commodities its generally down to someone else globally needing it more than locals. The Chinese senior diplomats for instance have squirrelled away billions of dollars and via Hong Kong have bought UK property. The Libyans did the same. I remember a leak from a swiss bank on Wiki leaks in 2007 which identified thousands of properties owned in the UK by Libyan officials moving their bribe/oil money out of the country. For them moving the cash away is the aim - not what they pay for a flat in London.

[Guest]

That could well be true. My post is just highlighting that global views are different to local ones and if you find you can't understand the pricing of commodities its generally down to someone else globally needing it more than locals. The Chinese senior diplomats for instance have squirrelled away billions of dollars and via Hong Kong have bought UK property. The Libyans did the same. I remember a leak from a swiss bank on Wiki leaks in 2007 which identified thousands of properties owned in the UK by Libyan officials moving their bribe/oil money out of the country. For them moving the cash away is the aim - not what they pay for a flat in London.

We shouldn't have allowed homes to become commodities in the first place. This is not like other investment assets such as gold, or artwork, or classic cars. Ordinary people actually need those houses near their jobs in order to live their poor insignificant little lives.

I would care rather less about what the global rich get up to if they had left me the same crumbs they left my parents. But they've ensured that where I can find work, I can't afford to house myself, and where I can house myself, I can't find work. My parents were unemployed for about a decade and they still managed to buy a house!

The system that sustains these parasites is broken. Money has become a fiction that somehow still enslaves us. It needs to be changed.

[The Masked Tulip]

We shouldn't have allowed homes to become commodities in the first place. This is not like other investment assets such as gold, or artwork, or classic cars. Ordinary people actually need those houses near their jobs in order to live their poor insignificant little lives.

I would care rather less about what the global rich get up to if they had left me the same crumbs they left my parents. But they've ensured that where I can find work, I can't afford to house myself, and where I can house myself, I can't find work. My parents were unemployed for about a decade and they still managed to buy a house!

The system that sustains these parasites is broken. Money has become a fiction that somehow still enslaves us. It needs to be changed.

+1. Well said.

[Venger]

The system that sustains these parasites is broken. Money has become a fiction that somehow still enslaves us. It needs to be changed.

It just needs a crash. No one has forced anyone to pay ever higher prices in order to be homeowners. They made their own decisions.

The super-rich don't own alll of Greater London/SE or around my way.

If any number of homeowners, felt the way you did about values/house prices, they'd be rushing to cash in, and readily accept lower prices - to bank fortunes from 2 long waves of house price inflation.

It's ultra high house prices which are the reality for too many owners. Money and debt has become THE irrelevance for many people. Including those still pushing and falling overthemsleves in competition to pay HALF A MILLION POUNDS for a 2 bed in Brixton in a converted house with Japanese Knotweed in the little yard... telling themselves that it's no biggie, as in the future always someone will pay more. Combined with complacency and entitlement about forever hpi. This broken paradigm can be solved by a house price crash.

Daily Mail

Average UK house price to hit £780,000 by 2040, says leading think tank

Kilo Charlie, My World, 9 hours ago

We purchased a property in 1983 for £72,000.........today it's worth £650,000 plus. It's certainly possible and quite likely.

Sam, Bucks, 3 hours ago

Bought house in ,74 for 16k added extention about £8k now valued at £480k you do the maths?

[mobfant]

It just needs a crash. No one has forced anyone to pay ever higher prices in order to be homeowners. They made their own decisions.

The super-rich don't own alll of Greater London/SE or around my way.

If any number of homeowners, felt the way you did about values/house prices, they'd be rushing to cash in, and readily accept lower prices - to bank fortunes from 2 long waves of house price inflation.

It's ultra high house prices which are the reality for too many owners. Money and debt has become THE irrelevance for many people. Including those still pushing and falling overthemsleves in competition to pay HALF A MILLION POUNDS for a 2 bed in Brixton in a converted house with Japanese Knotweed in the little yard... telling themselves that it's no biggie, as in the future always someone will pay more. Combined with complacency and entitlement about forever hpi. This broken paradigm can be solved by a house price crash.

Of course people always have and do pay more, so on the one hand you've got those taking the risk and paying the crazy prices but being financially better off because of it, as they're not paying rent and house prices continue to rise, while there are those who might be able to buy but instead sit it out and just moan about how unfair life is that it's so expensive, get priced out, and then continue to moan instead of buying somewhere. And in ten years they'll still be moaning about it; meanwhile those who bought instead will be quids in and moving into yet a bigger house.

[Venger]

Of course people always have and do pay more, so on the one hand you've got those taking the risk and paying the crazy prices but being financially better off because of it, as they're not paying rent and house prices continue to rise, while there are those who might be able to buy but instead sit it out and just moan about how unfair life is that it's so expensive, get priced out, and then continue to moan instead of buying somewhere. And in ten years they'll still be moaning about it; meanwhile those who bought instead will be quids in and moving into yet a bigger house.

Tuco.. "You've got one part of that wrong..." in my Walter White/Heisenberg retalitory tone of voice.

All correct.. sit and moan... as others, with their own market views, outbid us to extremes.... but also having to suffer claims that such buyers paying and setting ever higher asking prices 'Only wanted a home' and 'They didn't know what they were doing' and 'It's property-porn TV to blame for them treating half-mill on crummy flat as fair value'.

Sick positions claiming the very market participants outbidding us, to extremes (sometimes x2 and more other peoples' valuations for same property), are victims.

And on the other side of things, having to endure claims, often from those at the higher end of the market who've got decades of HPI locked in, that a hpc would see economic collapse.

You could be correct... take your hpi from the future on the £500,000 London flat bought tomorrow, and pay even more as you upsize to a more expensive house.

That's the way of things.. so smart. And it's true... I've been around years, moaning as these outcomes have taken place, for house prices doubling and and reflating again. However I think it has topped out now. We make our own decisions.

[Exiled Canadian]

Mobfant - if you look at what happened in the early 90's you'll see an alternative view of the next 10 years where those who bought at crazy prices end up deep in negative equity for years and get to rue their purchase decision for years.

It is uncertain which way things will go, and I for one was surprised by the amount of money which the govt has pumped in to prop up the market. I doubt however that "it's different this time". The bigger the boom the bigger the crash and all that.

[Venger]

Of course people always have and do pay more, so on the one hand you've got those taking the risk and paying the crazy prices but being financially better off because of it, as they're not paying rent and house prices continue to rise, while there are those who might be able to buy but instead sit it out and just moan about how unfair life is that it's so expensive, get priced out, and then continue to moan instead of buying somewhere. And in ten years they'll still be moaning about it; meanwhile those who bought instead will be quids in and moving into yet a bigger house.

Well I hope it turns out well for you mobfant. I hope the survey fee on the half-mill flat which fell through, proves to be good fortune, as you appear 'mobfrantic' to pay very high prices... and as I've previously stated.... you choice, we make our own decisions, and I respect your decision to pay high prices/outbid others. You may be correct about future HPI (even if I expect hard HPC).

Bloo.... see this? Counting their future hpi profits, on £500,000 apartments. Expecting it to put them into position in future to buy even more expensive houses, after that apartment worth lot more (future hpi). So please don't give me your victim excuses, if this market turns, ok? Had enough of them in 2008-09. We make our own decisions, and no other buyer's decision deserves bailouts/sympathy than those who chose not to pay very high prices.

[Neverwhere]

Mobfant - if you look at what happened in the early 90's you'll see an alternative view of the next 10 years where those who bought at crazy prices end up deep in negative equity for years and get to rue their purchase decision for years.

It is uncertain which way things will go, and I for one was surprised by the amount of money which the govt has pumped in to prop up the market. I doubt however that "it's different this time". The bigger the boom the bigger the crash and all that.

+1

Didn't realise we'd redefined "always" to mean "since 2009"

[Neverwhere]

Well I hope it turns out well for you mobfant. I hope the survey fee on the half-mill flat which fell through, proves to be good fortune, as you appear 'mobfrantic' to pay very high prices...

mob noun

a large crowd of people, especially one that is disorderly and intent on causing trouble;

a group of persons stimulating one another to excitement and losing ordinary rational control over their activity

-fant suffix

speaking (from the Latin verb fari)