Muddlehead Posted May 31, 2015 Share Posted May 31, 2015 I've been asked to give a 10 minute presentation at work and I think I might talk about house prices. There's obviously a lot to cram in so I would be grateful if anyone has any comments on what to include or remove. Or to change the structure of the argument. I might like to include some more discussion of likely scenarios, or sensible policies at the end, but not sure there is time. This is what I've come up with so far in outline: In the post-war period house prices have increased by a staggering amount, working out at approximately 10% per annum. This has led to a fairly widespread assumption that house prices naturally rise fairly rapidly. One constant, which was introduced fairly early (even pre-war?), was planning restrictions. This is mistaken. Much of house price growth can be explained by a series of separate factors, rather than an underlying trend. I'll discuss these factors and then consider whether these or other factors can be expected to lead to further increases. I think growth was fairly even until the end of the 1960s - the golden age of capitalism. Throughout the 1970s and 1980s prices increased rapidly. This was quite largely due to high inflation. Other important changes (starting or becoming more important toward the end of the century?): Rise of two income families, and mortgage lenders beginning to consider two incomes. (starting in the 1970s?) Demographic changes: Average age of marriage increasing, divorce increasing, meaning more households Life expectancy increasing, so reduced supply (but are these trends continuing?) The introduction of assured shorthold tenancies in the 1988 Housing Act led to buy to let mortgages, which created massive demand in addition to that of owner occupiers. Mortgage terms and application processes changed dramatically: 100%+ mortgages (i.e. no deposit), salary multiples increased, interest only mortgages became available. Self-certified and liar loans (same thing?) These factors led to massive increases in lending and so house prices were bid up rapidly. Many council houses had been sold under right to buy, which was introduced in the 1980s. This meant many people who would have been council tenants now rented privately. Renting privately is more expensive and so housing benefit was paid to those who could not afford their rents. Significant immigration from EU and internal migration to the south-east. Some already wealthy and higher earners, pushing up prices or rents. The rest put greater strain on the lower end, increasing prices, rents and making BTL more attractive. Then crash: mortgage arrears, negative equity, repossessions Then base rate cut to 0.5%, QE, FLS halted the crash in the south-east. London is different! Wealthy people (largely European) flocked to buy largely as a safe haven, also in some cases for money laundering, tax evasion. The London boom had returned and there was a lot of interest from Asian speculators who apparently do not even let out the properties. Ripple effect: Owners in London cashed in and moved further out, and those who couldn't afford their preferred location moved further out. The London bubble spread to all commutable parts of the south-east. HTB - not widely used, but seemed to have a massive impact on sentiment. Various other measures: changes to stamp duty, measures to deter purchases through companies, foreigners liable for CGT, MMR. (Have any of these or others been particularly important? Enough time to mention?) I think the proposed increase in IHT is worth mentioning. Which of these factors can lead to further growth? Immigration is likely to continue, but how much impact does this have? Not all the world's multi-millionaires have a mansion in London, but do they all want one? Will some sell? Reasons include currency movements, changes in London laws and business environment, moving on to next property hotspot. Most of the other factors appear to have run their course. Some worry that the private rental sector will continue to increase, eventually outstripping owner occupants. But rental yields are already very low. About 5% gross in much of the south-east, falling to about 2% in prime central London. House prices in London and the south-east have increased rapidly, whereas rents have not increased at nearly the same rate. Perhaps some true HPI cheerleaders believe yields can go to 1% in prime central London and 2%. If enough believe this, they may bid up prices amongst themselves, but at some point it will come crashing down. 5% rental yields might just be viable if interest rates stay low. So for buy to let to remain viable, really we need rents to increase in line with house prices at this point. Many people are already paying a very large proportion of their salary in rent, so it is not clear how much higher rents can go without significant increases in income. (Can salaries go much higher? Could housing benefit increase?! It's being cut!) Even if sentiment would support increases, surely rational landlords will want to sell at these prices. Those who are not rational will eventually face cash flow problems. In any case, isn't it fairly likely the base rate will rise eventually? 2020? At 2% or 3% many landlords would be forced to sell and so would many owner occupiers. There would not be sufficient demand, even if everyone believed prevailing prices were reasonable. But given 2-3% base rate, landlords would probably need more like 8% yield, which would require a significant fall, and owner occupiers would prices unaffordable. 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The Spaniard Posted May 31, 2015 Share Posted May 31, 2015 Will you include the fundamental role of money creation by the lending banks? http://www.positivemoney.org/issues/house-prices/ Quote Link to comment Share on other sites More sharing options...
Fully Detached Posted May 31, 2015 Share Posted May 31, 2015 Honest advice? Don't do it. Quote Link to comment Share on other sites More sharing options...
billybong Posted May 31, 2015 Share Posted May 31, 2015 (edited) Liar loans lol But it might not be appropriate. Mortgage backed securities to offload lenders' risk Edited May 31, 2015 by billybong Quote Link to comment Share on other sites More sharing options...
Guest_northshore_* Posted May 31, 2015 Share Posted May 31, 2015 A no win topic for a work presentation. Unless directly related to your job you're better off self censoring opinion and keeping real-muddlehead / work-muddlehead as separate as possible. Homeownership is a religion. If you'd comfortably give a presentation on Jesus or Islam to bosses and colleagues then do it, if not maybe have a think about it. Quote Link to comment Share on other sites More sharing options...
porca misèria Posted May 31, 2015 Share Posted May 31, 2015 A no win topic for a work presentation. Seconded. Unless you can make a stand-up-comedy routine of it and avoid all temptation towards preachiness (ooh, my spillchucker allows that as a word). That could be great! Quote Link to comment Share on other sites More sharing options...
olde guto Posted May 31, 2015 Share Posted May 31, 2015 A no win topic for a work presentation. Unless directly related to your job you're better off self censoring opinion and keeping real-muddlehead / work-muddlehead as separate as possible. Homeownership is a religion. If you'd comfortably give a presentation on Jesus or Islam to bosses and colleagues then do it, if not maybe have a think about it. This potentially beyond a Jesus talk, it's almost like saying "You know those ISIS chaps, maybe they have a point and here's why". If you're going to talk house prices talk about it from the perspective of what it's doing to the young and their dreams of home ownership - that'll get those with children in their teens or twenties on board. Quote Link to comment Share on other sites More sharing options...
long time lurking Posted May 31, 2015 Share Posted May 31, 2015 Rise of two income families, and mortgage lenders beginning to consider two incomes. Might be wrong ( bit of a chicken and the egg scenario) but i think this was a consequence of high house prices rather than the cause Quote Link to comment Share on other sites More sharing options...
renting til I die Posted May 31, 2015 Share Posted May 31, 2015 Honest advice? Don't do it. Yes, no-one will want to heard what you say, unless you tell them them that the price of their house will double in the next 10 years (as it always does)! (P.s. Mother on the phone to me today, telling me what a good deal they think they got on their new house. House next door was bought at auction of 5k less than theirs and now is up for sell at some silly amount! So, of course her house is worth the same! I can't take it any more!) Quote Link to comment Share on other sites More sharing options...
Dorkins Posted May 31, 2015 Share Posted May 31, 2015 The UK population is not ready for a grown-up conversation about house prices, try again in 10 years' time maybe. Quote Link to comment Share on other sites More sharing options...
long time lurking Posted May 31, 2015 Share Posted May 31, 2015 This potentially beyond a Jesus talk, it's almost like saying "You know those ISIS chaps, maybe they have a point and here's why". If you're going to talk house prices talk about it from the perspective of what it's doing to the young and their dreams of home ownership - that'll get those with children in their teens or twenties on board. This if you must ^^ would also include the negative impact it has on the economy due to the ever decreasing amount of disposable income and the banks are the main winners from HPI But personally i would steer well clear,unless you are a teacher talking to you`re pupils Quote Link to comment Share on other sites More sharing options...
long time lurking Posted May 31, 2015 Share Posted May 31, 2015 Yes, no-one will want to heard what you say, unless you tell them them that the price of their house will double in the next 10 years (as it always does)! (P.s. Mother on the phone to me today, telling me what a good deal they think they got on their new house. House next door was bought at auction of 5k less than theirs and now is up for sell at some silly amount! So, of course her house is worth the same! I can't take it any more! ) Sorry to hear it`s got that bad this may come in handy http://en.wikipedia.org/wiki/Dignitas_%28assisted_dying_organisation%29 Quote Link to comment Share on other sites More sharing options...
LabConH8er Posted May 31, 2015 Share Posted May 31, 2015 You could start off by dividing the room into home owners, multiple home owners and renters. Then take things from there. Quote Link to comment Share on other sites More sharing options...
Dorkins Posted May 31, 2015 Share Posted May 31, 2015 By the way, this is the correct personality to adopt when in large groups in the workplace: - loud - simple - smiley h/t Dilbert Quote Link to comment Share on other sites More sharing options...
renting til I die Posted May 31, 2015 Share Posted May 31, 2015 You could start off by dividing the room into home owners, multiple home owners and renters. Then take things from there. FIGHT! Quote Link to comment Share on other sites More sharing options...
renting til I die Posted May 31, 2015 Share Posted May 31, 2015 Sorry to hear it`s got that bad this may come in handy http://en.wikipedia.org/wiki/Dignitas_%28assisted_dying_organisation%29 Haha, If believing in forever HPI is a mental illnesses then Dignitas are going to be pretty busy! Parents will just not shut up with the you have to buy a house sh*t... Quote Link to comment Share on other sites More sharing options...
Roman Roady Posted May 31, 2015 Share Posted May 31, 2015 Don't do it...seriously...they do not want to hear it. Is this designed to raise your profile WRT a promotion? If so give a talk that makes them all feel good about themselves, if you ust talk about HPC then do it in a way that seems to praise it from the perspective of the masses. Throw in a few subtle digs that only a few will pick up upon. See my signature line. Quote Link to comment Share on other sites More sharing options...
Dorkins Posted May 31, 2015 Share Posted May 31, 2015 For the sake of your career you should probably pick something less controversial than house prices like which people in the office you would or why Hitler was just misunderstood. Quote Link to comment Share on other sites More sharing options...
Muddlehead Posted May 31, 2015 Author Share Posted May 31, 2015 Thanks for all the replies! It would be a talk to 10 or 11 people. I'm 30 years old. The others are evenly split between slightly younger, slightly older and middle aged. I know one owns a flat quite near me. I assume the middle-aged own (they have been settled for many years). I know most of the rest rent, at least one in a house-share (he's a recent graduate). I bought a flat in 2013. I'm selling and buying somewhere cheaper and further out. So I've benefitted (at least if the transaction goes ahead) from house price increases. I would benefit from further increases. Maybe some of them would think it was hypocritical to seemingly denounce the thing I've benefitted from, but I don't think that follows. I've discussed some of these things before and don't think I've offended anyone. If you could eavesdrop on the conversations I've had about property I think you would actually be pleasantly surprised! Many are at least sympathetic to arguments that HPC could happen or will happen. Quote Link to comment Share on other sites More sharing options...
LabConH8er Posted May 31, 2015 Share Posted May 31, 2015 For the sake of your career you should probably pick something less controversial than house prices like which people in the office you would or why Hitler was just misunderstood. You're probably correct, but isn't it a sad reflection of our culture that we can't debate something which affects the lives of millions. Quote Link to comment Share on other sites More sharing options...
XswampyX Posted May 31, 2015 Share Posted May 31, 2015 You will have to give a couple of minutes to 'Why does it matter?' So what if house prices have gone up, they have always been expensive. We had to struggle when we first bought. We had to live with my parents for 6 months before we could get the deposit together. etc etc.... If you don't get that point across it will just look like sour grapes. It matters if house prices crash the week after you just paid full whack for it. Isn't it just stealing from the younger generation? I mean it's not like an extra house has been built, or any work done at all! The work will be done by the person who buys the house. Not by the seller. General fairness. This will be a tough sell. Think about two people one is in his thirty's, the other in his sixty's. They both get paid the same for working in a warehouse sweeping the floor. Young guy has to rent, pays 50% over to his landlord, 40% on food and bills. Gets to keep 10% (to buy I-pads). Old guy, Paid off house bought for £12,000 40 years ago. So 40% on food and bills. Gets to keep 60% (to buy worthers originals). So the old guy gets to take home 600% more than the young guy for doing the same work.... How is that fair... in any way, and then the old wonder why the young people don't have babies. Good luck! Quote Link to comment Share on other sites More sharing options...
Guest_northshore_* Posted May 31, 2015 Share Posted May 31, 2015 This potentially beyond a Jesus talk, it's almost like saying "You know those ISIS chaps, maybe they have a point and here's why". If you're going to talk house prices talk about it from the perspective of what it's doing to the young and their dreams of home ownership - that'll get those with children in their teens or twenties on board. If a referendum forced a private choice between eradicating HPI and eradicating ISIS (or jesus or islam) there'd be no 'potentially' about it. OP - good luck then. The money creation angle is interesting if you understand and can explain it. That way you can incorporate banks, lending and house prices without it being your opinion or prediction. Quote Link to comment Share on other sites More sharing options...
Muddlehead Posted May 31, 2015 Author Share Posted May 31, 2015 I just googled "good topics for 10 minute presentation" and stumbled across advice like "talk about what you know best." I think I would probably give a better presentation on this topic because I care about it. I thought it would be better to just be passionate about the subject, rather than a jokey delivery. Does anyone know any good house price jokes?! "E M Forster said 'Property is the religion of the English middle classes.' I gather it is not polite to discuss religion, so if anyone is worried my talk is likely to be offensive, I'll will gladly talk about [think of alternative topic - possibly an impossibly boring one] instead. OK, I'll start with a joke. Two antiquarian booksellers were stranded on a desert island with nothing but the clothes on their backs and their wallets. One day a waterlogged book washed up on shore. When they were finally rescued they were both rich. Now can anyone see the relationship between this joke and George Osbourne's long term economic plan? or Can anyone see where I'm going with this?" Quote Link to comment Share on other sites More sharing options...
DarkHorseWaits-NoMore Posted May 31, 2015 Share Posted May 31, 2015 ...Does anyone know any good house price jokes?!Thousands here: http://www.rightmove.co.uktoo obvious . Quote Link to comment Share on other sites More sharing options...
Muddlehead Posted May 31, 2015 Author Share Posted May 31, 2015 I was thinking of something along those lines: about the misunderstanding of the concept of the free market in general. Basically say the financial crisis occurred in a mixed economy. Was it because derivatives weren't regulated? Was it because of implicit and explicit guarantees from governments and central banks? (arguably too much regulation) Can free markets be defined? Can we agree on a coherent definition? Are free markets possible? Never mind for the moment would they function in a desirable manner - i.e. be effective or fair... Quote Link to comment Share on other sites More sharing options...
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