Housing Uk; The New De Beers?

[Prescience]

Many members of HPC seem hellbent on believing a price crash is just around the corner...

Some proponents of such believe the UK residential property market has been restricted by excessive planning policies and preservation of the much vaunted Green Belt. They suggest that if the suppply of housing approached demand, then prices would fall, basing this argument on the core economics law of Supply & Demand.

There is a core flaw to such hypothesis, sadly.

Consider the ONS annual analysis of Britain's capital wealth, just published.

http://www.ons.gov.uk/ons/rel/cap-stock/the-national-balance-sheet/2015-estimates/stb-nbs-2015.html

I have tracked these reports since the early 2000s: and the proportionate value of UK residential housing hasn't altered much since then.

Dwellings remained the most valuable non-financial asset in the UK at £5.1 trillion, accounting for 63% of the UK’s total net worth at the end of 2014. Dwellings increased in value by £408 billion (9%) over the period 2013 to 2014.

Residential property remains a basic balance sheet asset of banks and mortgage lenders.

A significant property price crash would mean all UK banks were insolvent; inter alia, the UK's financial and monetary system also would implode.

As with De Beers and the CSO (Central Selling Organisation), if the price of diamonds crashed, then so would many banks as what are called Investment Stones (top quality diamonds of multi-carat weight, complete with geological certificates, X Ray Crystallography reports etc), live permanently in bank's vaults as bastions of reserve and investment value.

However, De Beers and others have millions of carats of fine recovered diamonds sitting in their vaults too: since if they dumped this stock onto the global market, then the price and value of diamonds would crash. In other words, an utterly contrived and synthetically contrived and controlled market.

(I had some considerable experience of this way back in the late 1970s: and became rather frightened for my own safety!)

The stark conclusions are, sadly inescapable:

If government and the Bank of England really saw a massive growth in potential new build development, then they would rapidly realise the very monetary and financial system and government itself would be effectively extinct.

Clearly, whilst the basic Economics law of Supply and Demand does actually function in true open markets (There is no such animal as a Free Market: since most major markets comprise a series of cabals and effective monopolies. e.g. oil and gas; gemstones; coffee; etc), where and when any commodity becomes a keystone of a financial and monetary system, then it will be ruthlessly controlled, contrived and restricted.

Happy New Year!

Edited January 1, 2016 by Prescience

[Si1]

Wtf

[Venger]

..There is a core flaw to such hypothesis, sadly.

..Residential property remains a basic balance sheet asset of banks and mortgage lenders.

A significant property price crash would mean all UK banks were insolvent; inter alia, the UK's financial and monetary system also would implode.

Right-oh. Is that just your belief or do you want to bring some facts and figures into it.

Have you even read the technical posts?

Amusing how there is a surge in hpcers coming back, pushing back against possible market weakness ahead.

Noticing the ones who swaggered about how we'd 'lost' and 'rent-seekers have won', - 'can't see a crash, at least not even in expensive areas and even then only dribs and drabs' seemingly a bit more concerned about the path ahead.

Another guy today, elsewhere, who was clearly all about ££££ than a home, with his roulette/horse comparisons, and sister who made loads £, putting it into an upsize - putting the forum down now squealing BTLers are trying to bring a JR, expecting us to be wrong and Gov to back down.

I'm out for a while, very content hpc is on, to have some fun elsewhere, boost my renter-saver pot (and btlers carrying balance sheet risk) and add to my buying fund.

[Prescience]

Right-oh. Is that just your belief or do you want to bring some facts and figures into it.

Have you even read the technical posts?

Amusing how there is a surge in hpcers coming back, pushing back against possible market weakness ahead.

Noticing the ones who swaggered about how we'd 'lost' and 'rent-seekers have won', - 'can't see a crash, at least not even in expensive areas and even then only dribs and drabs' seemingly a bit more concerned about the path ahead.

Another guy today, elsewhere, who was clearly all about ££££ than a home, with his roulette/horse comparisons, and sister who made loads £, putting it into an upsize - putting the forum down now squealing BTLers are trying to bring a JR, expecting us to be wrong and Gov to back down.

I'm out for a while, very content hpc is on, to have some fun elsewhere, boost my renter-saver pot (and btlers carrying balance sheet risk) and add to my buying fund.

Care to dignify your unconnected gibberish with some empirical evidence?

Facts and figures?

Doesn't the sheer reality of UK's residential housing stock representing 63% of TOTAL capital value, enjoy any significance to you?

[Prescience]

Wtf

OK I'll guess.

World Trade Forum?

Westminster Tossers Folkclub?

wtf, language code for the Watiwa language, a Trans–New Guinean language

world taekwondo federation

?????????

Some substantative debate would be rather more welcome, perhaps.

[bobbo]

Where I am I'd hazard prices are at least 30% overvalued.

http://www.bbc.co.uk/news/business-27202546

[HenryWeston]

Good post Prescience, After following this site since 2005 and realising that its basically a rigged market I purchased a 3 bed detached house in Worcestershire in 2014, the mortgage payment is barely any more than the rent we were paying on a 2 bed semi so it made sense to buy.

[Roman Roady]

OP if your theory is correct, why did we have a crash in the early 90's?

This would also be true of the Irish etc.

You suppose that the controls of the UK economy are in the hands of the UK VIs....admittedly this has been true of late but it not guaranteed to stay that way...ask John Major and Norman Lamont.

[frederico]

I don't think you can reasonably compare the housing market to that for diamonds.

63% of wealth is by no means all used as security against bank loans and is a hypothetical number.

If a crash did occur, not all houses would be repossessed. In fact a very small number would be.

This risk is much greater from the BTL market which has not been subject to MMR.

[winkie]

Good post Prescience, After following this site since 2005 and realising that its basically a rigged market I purchased a 3 bed detached house in Worcestershire in 2014, the mortgage payment is barely any more than the rent we were paying on a 2 bed semi so it made sense to buy.

Therein lies one way to direct a real fall in prices or giving so many more a good reason not to buy, reduce the rents or cap rents like they do in certain European countries....

On the diamond question, I recall reading on here some interesting articles on how the diamond trade works.....only hard lumps of crystal afterall.

[Si1]

Good post Prescience, After following this site since 2005 and realising that its basically a rigged market I purchased a 3 bed detached house in Worcestershire in 2014, the mortgage payment is barely any more than the rent we were paying on a 2 bed semi so it made sense to buy.

No it didn't. Arithmetic not your strong point then Mr sock puppet

[frederico]

Good post Prescience, After following this site since 2005 and realising that its basically a rigged market I purchased a 3 bed detached house in Worcestershire in 2014, the mortgage payment is barely any more than the rent we were paying on a 2 bed semi so it made sense to buy.

OK I hope you went into this with your eyes open, house prices can crash, interest rates can go up a lot, you can be made redundant and struggle to get a job.

As long as you have considered all these eventualities and still buy I would say fair enough.

But you'll be on your own if tshtf

[Si1]

OK I'll guess.

World Trade Forum?

Westminster Tossers Folkclub?

wtf, language code for the Watiwa language, a TransNew Guinean language

world taekwondo federation

?????????

Some substantative debate would be rather more welcome, perhaps.

Pot

Kettle

[wherebee]

Yes, there are many comparisions between the diamond 'market' and the Uk housing 'market'. Your mistake is to not appreciate that the cycles must end eventually. Diamonds, for example, will be near worthless in the future. May take 10 years, may take 1000, but the artificial diamond industry and the ever increasing stocks vs flat demand means it is an inevitability - but only jokers claim to know the timing.

Likewise with housing. Yes, the gvt of the day will do everything they can to stop a collapse - but it will come in time. Look at the crash in US stocks in the 20's and the millions spent to try to prop it up. Fundamentals still won in the end...

[zugzwang]

OP if your theory is correct, why did we have a crash in the early 90's?

This would also be true of the Irish etc.

You suppose that the controls of the UK economy are in the hands of the UK VIs....admittedly this has been true of late but it not guaranteed to stay that way...ask John Major and Norman Lamont.

Or even Gordon Brown, who had not one but two housing bubbles reversed by economic gravity. Indeed, prices would have remained on that downward trend post-2010 but for a succession of outrageous subsidies and Carney's endless dallying over interest rates.

[Kiwi Toast]

I don't think there is a determinate solution to optimal supply from the oligopolistic building industry.

[long time lurking]

Remove all credit then you would see the true cost of a house ,the supply of easy credit (self cert /IO )caused the inflation > 2008 the removal of easy credit caused the crash 2008> now the supply of cheap credit has taken over where the easy credit left this has somewhat reinflated parts of the market ,,,you don't need to be an expert to figure out what might cause the next crash but you do need to be psychic to know when especially when we all now know what lengths TPTB will go to

It`s got nothing to do with the supply and demand of houses it's credit issues

[Silverfinger]

...

If government and the Bank of England really saw a massive growth in potential new build development, then they would rapidly realise the very monetary and financial system and government itself would be effectively extinct.

Clearly, whilst the basic Economics law of Supply and Demand does actually function in true open markets (There is no such animal as a Free Market: since most major markets comprise a series of cabals and effective monopolies. e.g. oil and gas; gemstones; coffee; etc), where and when any commodity becomes a keystone of a financial and monetary system, then it will be ruthlessly controlled, contrived and restricted.

I think Prescience has an interesting argument here. A prime example of such a commodity (last sentence) is - quite obviously and foremost - gold. But in some ways, houses have become the new gold of banks globally, not just in the U.K.

Maybe it is time to go back to a less intrusive asset to back up balance sheets of banks, namely gold. At least no one would care about expensive gold, while expensive houses are a social tragedy.

EDIT: And I should add, locally (and not in the U.K.), I have heard that banks do take influence in terms of planning permits to avoid oversupply which might threaten the value of the securities behind their mortgages, i.e., yes, banks want houses to stay expensive. The question is, if they are always able to maintain that.

Edited January 1, 2016 by Silverfinger

[HenryWeston]

In reply to Frederico

I have considered all of what you mention.

Edited January 1, 2016 by HenryWeston

[frederico]

In reply to Frederico

I have considered all of what you mention.

Fair enough mate, I know the current state of things has put people in between a rock and a hard place.

I am also certain that house prices will end up higher than they are now.

[frederico]

The market is fixed until it isn't.

Some of us have experienced a time when a credit bubble was brought to a juddering halt in the late 1980's into the early 1990's.

Whilst that was the last time any 'medicine' was imbibed, it is by no means certain that such medicine won't ever be administered again by the irresistible forces of the market coupled with decisions about who the winners and losers should be this time around.

If a party feels their electoral lives depended on higher home ownership, anything can happen.

Well the bottom line is housing costs are already out of reach for many and are still rising. So we end up with most people not able to afford a roof over their heads. I don't think this is in anyway a palatable outcome.

But yes, I bought and sold during the times you refer to.

[Bland Unsight]

Clearly, whilst the basic Economics law of Supply and Demand does actually function in true open markets (There is no such animal as a Free Market: since most major markets comprise a series of cabals and effective monopolies. e.g. oil and gas; gemstones; coffee; etc), where and when any commodity becomes a keystone of a financial and monetary system, then it will be ruthlessly controlled, contrived and restricted.

When the HPI+++ brigade come off as the wacky extremists, the market really must be edging towards fragile.

Arguably, or pretty much inarguably really, UK residential property lacks a key property which it would need to have to be understood as a commodity; residential property is not fungible. A nice Georgian town house in Aberdeen is not the same as a nice Georgian town house in Chelsea. Apart from that the relentless and incontrovertible logic brooks no argument. I'll buy a house tomorrow. Thanks for posting.

[Exiled Canadian]

A significant property price crash would mean all UK banks were insolvent; inter alia, the UK's financial and monetary system also would implode.

Complete rubbish I'm afraid. The banks assets are loans made to individuals or firms, these are often secured on property. It is important to note that the underlying property does not appear on the banks balance sheet.

If the borrower is still able to pay interest and principal to terms then the value of the underlying security is of no relevance as it will never be tested.

Banks to not have to write down the value of performing loans even if the underlying security is impaired.

Look at the 1990's crash - many people continued to pay their mortgages despite being in negative equity - there were no significant bank failures.

Edited January 2, 2016 by Exiled Canadian

[spyguy]

Into the realms of the Illuminati/man by the fruit machine in the pub here ...

DeBeers controls ~90%+ of the Diamond market. The rest is probably controlled by organistions in cahoots with DeBeers.

Diamonds, bat industrial ones, have no reall economic value bar spoof valuations.

Diamonds are not particularly rare.

Banks do not control housing. They control the supply of credit to the housing market.

Well over 50% of UK banks by size nearly ended up various degrees of insolvency. Nothing to do with house pries falling. All do with mismatch with funding and liabilities.

To exert any control on housing, banks would need to own nearly all housing. Mortgaged homes account fro ~50% of the housing stock.

The housing market - remember that?? housings being bought and sold? Not much life outside of London - is driven by Debt, Divorce and Death.

[dances with sheeple]

Many members of HPC seem hellbent on believing a price crash is just around the corner...

Some proponents of such believe the UK residential property market has been restricted by excessive planning policies and preservation of the much vaunted Green Belt. They suggest that if the suppply of housing approached demand, then prices would fall, basing this argument on the core economics law of Supply & Demand.

There is a core flaw to such hypothesis, sadly.

Consider the ONS annual analysis of Britain's capital wealth, just published.

http://www.ons.gov.uk/ons/rel/cap-stock/the-national-balance-sheet/2015-estimates/stb-nbs-2015.html

I have tracked these reports since the early 2000s: and the proportionate value of UK residential housing hasn't altered much since then.

Residential property remains a basic balance sheet asset of banks and mortgage lenders.

A significant property price crash would mean all UK banks were insolvent; inter alia, the UK's financial and monetary system also would implode.

As with De Beers and the CSO (Central Selling Organisation), if the price of diamonds crashed, then so would many banks as what are called Investment Stones (top quality diamonds of multi-carat weight, complete with geological certificates, X Ray Crystallography reports etc), live permanently in bank's vaults as bastions of reserve and investment value.

However, De Beers and others have millions of carats of fine recovered diamonds sitting in their vaults too: since if they dumped this stock onto the global market, then the price and value of diamonds would crash. In other words, an utterly contrived and synthetically contrived and controlled market.

(I had some considerable experience of this way back in the late 1970s: and became rather frightened for my own safety!)

The stark conclusions are, sadly inescapable:

If government and the Bank of England really saw a massive growth in potential new build development, then they would rapidly realise the very monetary and financial system and government itself would be effectively extinct.

Clearly, whilst the basic Economics law of Supply and Demand does actually function in true open markets (There is no such animal as a Free Market: since most major markets comprise a series of cabals and effective monopolies. e.g. oil and gas; gemstones; coffee; etc), where and when any commodity becomes a keystone of a financial and monetary system, then it will be ruthlessly controlled, contrived and restricted.

Happy New Year!

They already are insolvent (the banks and the over-borrowed that is) it is obvious that the PTB will do whatever to protect the banks, not so the over-borrowed any more it seems? The banks can probably take a crash by now IMO, but the PTB obviously don`t want to bring this on any faster than necessary because it will upset a lot of people (the over-borrowed in particular)