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Trampa501

Could "pent-Up Demand" Help A Soft Landing?

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I'm now hearing this from people who were previously bullish on house prices. "Prices can't fall much, there's too much pent-up demand"...

Where to start....?

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All the 'pent up demand' in the world won't help if credit availability is rightly restricted via mmr for first time buyers and simultaneously chopped away for btl scummers by basel iii, carney finally regulating away IO and Osborne making overleveraged portfolio landlords dodo like.

I suggest not saying that in response to the ostriches, and just nodding. They won't like it if you're proved right.

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That'll be the same pent up demand that wasn't actually able to proceed to buy when asking prices were 25-30% lower than they are now.

People saying prices can't fall much may actually be right though, depending on their definition of "much" :)

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A market has 2 halves. If there is indeed pend up demand, there is matching pent up supply. The desperate to buy may be willing to overstretch. Equally the desperate to sell should be willing to compromise. I think the latter is going to be the most desperate, as no-one is ever that desperate to buy. There are always other options. Rent, stay at parents, wait to inherit, leave the country, etc. Whereas if you are in a house you have to leave, you really will resort to desperate measures when selling becomes more urgent.

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I'm now hearing this from people who were previously bullish on house prices. "Prices can't fall much, there's too much pent-up demand"...

Where to start....?

There would be if the potential buyers had had cheaper rent.

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The average deposit is something like £33k. The average savings is something like £5k.

That is where the help comes in, that is no help at all....jammo is right....when sellers become more keen to sell because they have to, than buyers are willing to buy. ;)

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Why is this demand "pent up"? There are thousands of people who are keen to buy but they don't put in offers on the goods that are offered for sale because...

1. the goods are underpriced, and the potential buyers don't want to short change the sellers

2. The local mafia are threatening to kneecap anyone who puts in an offer

3. .....?

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may we need need 'Help to Generate Pent up Demand' from the govt - HTGPD for short. Perhaps electric shock therapy/persuasion for HPCrs - must buy a house must buy a house....

Edited by Si1

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It's too late for a soft landing now. Carefully unwinding two decades of rises isn't going to happen quickly, and we haven't even started. I can't spend another twenty years of my life waiting on the housing market - by then it will be far, far, too late.

IMO we were actually headed for something like a soft landing during the coalition - but then they decided that 2007 prices were the new baseline, and they needed an election bribe. HTB put paid to the idea forever.

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It's too late for a soft landing now. Carefully unwinding two decades of rises isn't going to happen quickly, and we haven't even started. I can't spend another twenty years of my life waiting on the housing market - by then it will be far, far, too late.

IMO we were actually headed for something like a soft landing during the coalition - but then they decided that 2007 prices were the new baseline, and they needed an election bribe. HTB put paid to the idea forever.

There's a massive load of dbt built up i nthe economy.

QE and ZIRP would have helped ifthey'd shut down bank lending. They did not, debt rose massively.

The UK is not a low interest economy - finances look more like a developing country.

UK risks a big shock with Brexit.

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For big ticket items, there is a huge difference between desire to buy and proceedable demand to buy, ie having the requisite finances in place. Take expensive sports cars - lots of people desire to own one, but have nowhere near the financial capacity at the existing price level. Ditto for FTBs at today's house prices. The desire to buy is massive among the under 40s today, for sure. Last decade, loose lending from the banks made it possible for that desire to become proceedable demand amid rapid price rises. Today, MMR restrictions make it much harder to turn the current desire to buy into proceedable demand without significant price falls taking place.

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Simples.

Actual ability to buy (demand) vs desire to buy.

Then what happens even to 'desire to buy' in an era of collapsing prices.

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I think pent up demand will mean a softer landing for some types of properties, but not others. Houses should hold up better than flats as they're places people want to live and raise a family.

Flats only really appeal to people who live in big cities, don't want the hassle of a garden and aren't likely to have children in the next 10 years.

The notion of the flat as the typical FTB property is relatively new.

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The pent-up demand is there, full stop, doesn't matter one jot if you can't see things from the perspective of those people (the 300 that would camp out in the rain for 29 homes).

Whether the pent-up demand creates a soft landing or not is most definitely up for debate.

If banks stop lending, then it's a full-blown HPC. However, if the government does something like another HTB scheme or a hybrid of HTB and FLS, then the crash might not be nearly as large as we all hope for.

If the cause is another recession, then banks will cut down on lending and fewer people will borrow because of job insecurity, so we have an HPC. The government might even invent some HTB +SMI hybrid in an attempt to control an HPC.

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The average deposit is something like £33k. The average savings is something like £5k.

I think that £5k is a pretty optimistic view. Isn't that number based on statistics by one of the big banks a while back (IIRC)?

Isn't the average CC debt in the region of that?

I recall statistics on debt, ie; about 3/4 of working Brits are in debt (outwith mortgage), and about 1/2 Brits are paycheck to paycheck?

Kind of makes savings a moot point for the great majority of working people, but we all know that shoddy mortgage officers and brokers will over look those figures eh?

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The pent up demand will be there at a certain level, e.g. if prices collapsed 50% then a lot more people could potentially join the market. Do those people have a deposit ready to go though? Probably not.

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The pent-up demand is there, full stop, doesn't matter one jot if you can't see things from the perspective of those people (the 300 that would camp out in the rain for 29 homes).

Whether the pent-up demand creates a soft landing or not is most definitely up for debate.

If banks stop lending, then it's a full-blown HPC. However, if the government does something like another HTB scheme or a hybrid of HTB and FLS, then the crash might not be nearly as large as we all hope for.

If the cause is another recession, then banks will cut down on lending and fewer people will borrow because of job insecurity, so we have an HPC. The government might even invent some HTB +SMI hybrid in an attempt to control an HPC.

Depends if the rest of the economy is vulnerable. The govt won't want to spunk money away unnecessarily on propping up house prices for a minority of rentiers.

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Depends if the rest of the economy is vulnerable. The govt won't want to spunk money away unnecessarily on propping up house prices for a minority of rentiers.

This ^

It if we get a meaningful HPC it will be 1989 style widespread repossessions - no soft landing. If we don't get distressed sales then people will just sit on their property as they won't be able to or want to sell cheaply. Prices won't crash but sales volumes will.

Looking to 2015 figures for sales volumes we are already there. If we get the recession this year and jobs start to go in the thousands then we'll see a real crash but it won't be people selling property cheap by choice.

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