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fru-gal

What Is Actually Pushing Up House Prices Now?

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Is it sentiment (self perpetuating belief that HPI is guaranteed), credit, foreign investors, BTLers etc? I still wonder who are all these people buying £1 million + terraces in London suburbs (many of them run down)? I'm starting to think that perhaps HPI can go on forever.

Seriously, how is this defying gravity?

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Prices of anything rise under one of two conditions: people are willing/able to spend more for the same amount of something, or spend the same for less of it. Because of the latter option it isnt necessary for people to have more buying power so long as you can continually reduce transaction volumes.

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kitkats...houses are like kitkats

they always go up in price given enough time..someone always wants a kitkat...and they'll shrink the product and sell you less for the same price.

you missed the big kitkat boom of 1973. They were really cheap back then, and much bigger too.

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Easing money is pushing prices up........few have access to it so few are able to join the party.....never mind, wait until the music stops and they will find there is no chair left to sit on. ;)

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I'm guessing....

* Foreign investment, UK deemed safe haven for ill-gotten gains

* Immigration causing housing shortage

* Cheap money, base rates at record low

* No other good yield investments

* Hope and expectation of HPI

* Property porn

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Ach, I'm not sure winkie's right - as mentioned previously I may look like a newbie but i first started following this site in 2003. Yup, failed to buy then and told everybody that THERE'S A CRASH A'COMIN!!

And everyone told me i was mad

I'm kicking myself still. I'm still yelling THERE'S A CRASH A'COMIN!! and everyone's still telling me i'm mad

i'm beginning to agree

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I'm not really seeing prices going up in my area but at the same time nothing much is selling, but there is a chronic lack of properties being brought to market, the numbers of new instructions has nosedived these last couple of months.

I was getting far more Rightmove property alerts in the depths of winter.. Dec, Jan, Feb than I'm getting now.

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I'm not really seeing prices going up in my area but at the same time nothing much is selling, but there is a chronic lack of properties being brought to market, the numbers of new instructions has nosedived these last couple of months.

I was getting far more Rightmove property alerts in the depths of winter.. Dec, Jan, Feb than I'm getting now.

...also lots of people looking, very few in a position to buy......those who have bought are sticking because they have to, or want to.......there is no ladder, partly because the lower priced first freehold style home is better holding on to than stretching the budget for an extra bedroom for the cost a whole house once was....that takes many more years of extra debt service. ;)

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Cheap mortgage rates, pension pot reforms and various HTB schemes. Pumping the occupier, 2nd home and BTL markets.

Lack of property going onto the market, those going onto the market that aren't chain free are overpriced because people need more money to "get up the ladder".

Without HTB 95% mortgages the market would have crashed or at least stalled (wages aren't going up, IR on savings aren't great).

It's like it was in the 2005-7 period, just waiting for the shock that'll send the market over the edge and into crash.

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Prices here are below peak, and about 2004/5 levels, which whilst not exactly cheap my salary has increased and interest rates reduced over the last 10 years.

The bottom end is pushed up by landlords, the top end in Londonium is driven up by the untaxed rich competing with each other. The rest of the market outside areas of chronic deliberate understandingly (oxford, reading) is broadly flat.

Of course low interest rates are making high prices affordable for the masses and house attractive investment at these low interest rates due to restricted supply and rental subsidies. If supply was not restricted the youn would say feck this and go and buy a cheap house on the outskirts of town.

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Surely the question is whats stopping them deflating?

Amazing, 6 years of IR @ 0.5 and the economy is - errr- still stuck.

My home area - the North - has seen sod all transaction. House after house is piling up.

Rightmove is listing 10+ years of stock at the current transaction level.

Basically, the UK housing market is like an overcrowded basedment nightclub and someone (FED) is going to light a flare.

And there's only a small door.

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there are very few houses coming on to the market in my area

those that do are vastly overpriced (why does anyone think a bungalow on a bungalow estate is worth up to £400K escapes me)

if the bottom feeders cannot afford the prices/ get a mortgage or are being priced out by BTLers there is no-one to buy the 2nd level properties (and so ad infinitum.)

the thing is some of these overpriced properties have been on 6 months or more with nary a price reduction in sight - so are they really selling or just floating their boat to see how the wind blows.

prices are not really increasing BUT they are not coming down very fast either. ;)

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Locally house sold for 495k two years ago and recently sold for 640k (OK that was asking so maybe 625k). So a clear 100k profit in two years .... next buyer will be hoping for the same. Average house in the last years 'earned' 27k, average wage was 27k, go figure.

Never ending hpi .... with lots of help from Dave.

Labelling it as profit is extremely misleading as whether or not it can be construed as profit in any real sense depends on why they sold it!

If they sold because they needed a bigger house in the same market then they didn't make any profit at all, as all the supposed 'profit' was handed over to the person they bought the larger house from. In many cases, and certainly a number of cases I am aware of, these 'winners' with their 'profits' have been paying mortgages for twenty years and are now choosing to sign up for another 20 or 30 years of mortgage just to get a scrap of back garden or a spare bedroom so that they can put up their parents when they come to visit the grandkids.

It's really beneath us here to regurgitate these idiotic memes about what houses earned. It's all about the amount of debt that people were willing to take on to secure control of the asset.

There are two basic ways to benefit from what your house has supposedly 'earned'. Sell it and live in a bin, or 'realise' those gains through mortgage equity withdrawal, done the old fashioned way, by just re-mortgaging, or with one of these brilliant equity release products for the asset-rich, income-poor grey rinse brigade. Either mechanism makes it blatantly clear how you capture the 'profits' your house has been magically 'earning' for you; you just sign up for more debt.

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Where i am - a town near cambridge - asking prices at least are seemingly going up with every sale. They have now reached frightening levels here - so much so i nearly crapped myself when looking at the property pages in the local paper last week. In two years is gone from 'won't buy' - prices which i thought were around 40-50% overpriced in relation to wages to can't buy (i will never have a mortgage) for even something basic like a 2 detached terrace. A full 50-60% increase. In two years I've gone from being a potential mortgage free owner to needing a 3x salary mortgage for the same thing. And it still would be a crap place.

And the even more frightening thing is the same sort of thing in Cambridge is another 2.5 to three times the price here.

I keep on thinking i must be secretly be criminally underpaid compared to everyone else, but from chatting to people i reckon I'm still earning 10k more pet annum them them (if i flipped back to working full time, which i wont).

Something will give, but i dont really care. The things i like doing are very cheap indeed!

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thought the land registry was down about 1 percent last month, so a better question is why are prices startling to collapse?

Edited by TheCountOfNowhere

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I'm guessing....

* Foreign investment, UK deemed safe haven for ill-gotten gains

* Immigration causing housing shortage

* Cheap money, base rates at record low

* No other good yield investments

* Hope and expectation of HPI

* Property porn

I'll go with 4 out 6. Low yield on other assets and cheap money certainly link together.

The UK is a safe haven because of our laws. In part I think the Tory recovery plan is to make us service agents to the uber rich.

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Their response would be that OK maybe not profit but I have gained 100k while you have paid 25k in rent (OK buyer would also need a mortgage or lose a small amount of interest on capital) and the next house may also cost 625k but I am 100k closer to buying it than Mr Renter who will still need to pay 625k. Maximum falls in London in 2009 were around 20% .... so the 625k could fall back to .... 500k.

So however you look at it unless prices fall the buyer has made gains and I really can't see Dave and his chums allowing prices to fall when the taxpayer has deep pockets.

So what will make prices fall given Dave and George's record over the last two years?

You're preaching the Gospel of HPI. Asset prices accelerating away from earnings is not evidence of the good sense of piling into UK property, it's evidence of the fact that collectively we haven't the wit to avoid having our economic lives captured by the half-wits at the Council of Mortgage Lenders.

I don't think they've made gains. I think they've taken on debt because they see one set of risks, and I've elected not to take on debt because I see another set of risks.

As to who is closer to buying the "next house"; the whole notion is fatuous - plucking dumb 'conventional wisdom' straight out of the universe of property porn TV and assuming that a 20% leg down in London constitutes the best, or worst, depending on your side of the trade, that the multi-generational UK property bubble will have to offer us in the way of catastrophic readjustment. If their risks blow up in their faces then they'll have burned all their equity and be renting with a whacking great debt to the bank, and someone who didn't take the same risks will have savings in the bank and the ability to pony up a deposit if they want to. Who will be "closer to buying" then? The losers with massive debts and a ruined credit record or Mr Renter? There is more than one way to tell a story.

Edited by bland unsight

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Dave was reported on the radio today to have been talking to "Cabinet" and saying that he and his government are on the side of all workers and especially blue collar workers.

That'll be another reason why house prices are pushing up beyond crazy and well out of sight. He's on your side.

Edited by billybong

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All I know is that rental rates are in 2015 what they were in 2010 (in Northampton, at least). If I earn and save more every year, (which I can invest in various things), I'm happy. Buying a house? Don't be Norman Normal. Liquidity has its own value, with freedom as an added bonus.

Edited by canbuywontbuy

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You're preaching the Gospel of HPI. Asset prices accelerating away from earnings is not evidence of the good sense of piling into UK property, it's evidence of the fact that collectively we haven't the wit to avoid having our economic lives captured by the half-wits at the Council of Mortgage Lenders.

I don't think they've made gains. I think they've taken on debt because they see one set of risks, and I've elected not to take on debt because I see another set of risks.

We get HPCers saying how their Parents-in-Law are £100K 'up' since they purchased their BTL 18 months ago.

And discussing it as 'profit' in other ways. Facts are with such value jumps, it hurts my position as a non-owning renter-saver.

Now at stage of Kensington mews houses bought 20 months ago for £3m, back on market asking £4m. Sheesh there's houses I've seen sell 3 times for ever higher prices since 2008, in this victim fest. (and others more times over going back to my younger days as renter-saver before on forum). And in those instances it is profit for the seller (they may downsize, or may try it again buying a more expensive home in expectation these mad HPI continuation years don't ever stop... their choices)

Not directed to you especially Bland Unsight, but those who think it's just Council of Mortgage Lenders alone are in total denial. No one is dragging anyone into banks for mortgages to pay ever higher prices. No one is forcing parents-in-law with several hundred thousands pounds of dead money earning 'little interest' to go into BTL at high prices, then count their £100K profit from rise in value, as someone else's parents joins the property party setting ever higher price for property next-door, or even just regular HPI forever smiley house buyers outbidding others for a house.

Those saying they will happily Rent Forever until society has a realisation...that's the sweetest music to a VI property side that is real. If they can they'll have 20+ years of extreme high asset values despite low yields, as others pity them, and rent from them.

The simple answer to the original question, what is actually pushing up house prices, is buyers and sellers transacting at higher prices at the margin.

Asset prices rise not because of "buying" per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else - including those who own some of that asset and those who do not - need do is nothing.

Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer's, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

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Those saying they will happily Rent Forever until society has a realisation...that's the sweetest music to a VI property side that is real. If they can they'll have 20+ years of extreme high asset values despite low yields, as others pity them, and rent from them.

I'm certainly one of those that says they'll "rent forever" (in the UK) and I just see it as a symbiotic relationship between my landlord(s) and myself - I pay them money, they give me liquidity (to make money from money, not bricks) and freedom.

Edited by canbuywontbuy

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I'm certainly one of those that says they'll "rent forever" (in the UK) and I just see it as a symbiotic relationship between my landlord(s) and myself - I pay them money, they give me liquidity (to make money from money, not bricks) and freedom.

What are you investing in, with savings rates paying 1%, that's giving you these £25K / £50K / £100K - £1M gains/profits so many of those on the house owning side have been enjoying, in low-mid-high prime areas, for year on year on year?

I'm not the only one who takes a view those on the owner side... longer term owners.. those who bought more recently... those still buying, see all the HPI as profit. And, in my view, hold the view that it's all locked in HPI profit with no risk of falling back. They're buyers pushing and falling over each other right now for the HPI ahead. We shall see. It's a market.

Why is it happening? Older people looking to downsize appear reluctant to do so, perhaps because the returns they can get on the savings they unlock are so abysmal, and cannot compare with the strongly rising price of the property they own. Instead of being a source of properties for sale, they have become the so-called “bed blockers” of the housing market.

http://www.economicsuk.com/blog/002028.html

The dynamics of value expansion and contraction explain why a bear market can bankrupt millions of people. At the peak of a credit expansion or a bull market, assets have been valued upward, and all participants are wealthy - both the people who sold the assets and the people who hold the assets. The latter group is far larger than the former, because the total supply of money has been relatively stable while the total value of financial assets has ballooned. When the market turns down, the dynamic goes into reverse.

Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else. In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations.

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