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"there Is Nowhere Else For The Housing Market To Go Now But Down"

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I know there's another thread on the Civitas think tank report, but it seems to overlook how bearish the author is and how plain-speaking he is about how screwed-up the market is.

There are some choice quotes to keep HPCers going, listed here:

- The market has been stretched as tight as it can possibly bear. There is nowhere else for it to go now but down. (p117)

- [This boom is] the bubble that never burst (p20)

- In this fourth boom, unlike the previous three, home owners have accumulated wealth at the expense of the younger generation of prospective buyers – their children and grandchildren. (p30)

- Dramatically-low interest rates have encouraged new buyers to take on increasingly huge loans to purchase housing assets that are by historical standards still over-valued by between 20 and 30 per cent. (p35)

- To make matters worse, real earnings have hardly changed for the last 15 years either, so borrowers cannot look to future wage growth to help them clear their debts. These huge housing loans thus seem likely to remain a continuing burden for many years into the future. (p36)

- many [young people] have no choice but to remain in the private rented sector, where escalating rents make saving for a huge deposit a soul-sapping experience akin to walking up a down-escalator. (p38)

- Inadequate supply is not the key cause of our high house prices (p63)

- When a prospective landlord is in competition with a prospective owner-occupier to purchase a house, the former enjoys a number of significant advantages. Even if the investor has to apply for a mortgage, her/his credit-worthiness is assessed on the rent the property is likely to generate, whereas the credit-worthiness of home buyers is assessed on their income. In areas of high housing demand (and hence high rents), this difference will often allow the landlord to borrow more than the prospective owner-occupier.19 Indeed, landlords with several properties can leverage their loans to buy more, easily squeezing out buyers on low or average incomes looking to purchase their first house. (p71)

- To add salt to the wound, while prospective owner- occupiers are trying to save for a deposit, they are more often than not living in rented accommodation, paying rents to the very landlords who have helped drive them out of the market in the first place, and thereby paying their landlord’s mortgage costs! (p72)

- Both the Bank of England and the Treasury are desperate to avoid a repeat of the early 1990s house price slump (even though a big reduction of house prices is arguably precisely what’s needed to bring prices back into alignment with earnings). (p74)

-The Chancellor wants to stop landlords from pushing house prices beyond what owner-occupiers can afford; but he’s scared of bringing prices down to a level where owner-occupiers might once again be able to buy. (p75)

- younger buyers fortunate enough to have parents or grandparents who bought their homes have been getting into the market, either by using loans and gifts from their parents, or with the help of legacies inherited from parents or grandparents. In either case – gifts from living relatives or legacies from dead ones – most of this money comes from capital gains generated by an earlier and more fortunate generation of home owners. In this sense, the housing market is now feeding off itself. (p78)

- Like BTL landlords, immigrants tend to compete for housing at the lower end of the market, where first-time buyers are also clustered. Indeed, most recently-arrived immigrants rent their homes from private landlords. Their increased numbers have therefore stoked up demand for cheaper housing, both directly (through their own purchases) and indirectly (through landlords purchasing houses to rent to them). (p79)

- Nobody knows what happens next; everyone is holding their breath. The market is stretched tighter than ever before, and for the first time in our modern history, home ownership rates are falling. Many young people have been shut out of the market because they cannot afford to buy, and even if they can, they can no longer scrape together the huge deposit they need to qualify for a loan. It is obvious that any significant increase in interest rates (to bring the cost of borrowing somewhere closer to its historical normal level) will trigger a tidal wave of negative equity, defaults and foreclosures that will make the misery of the market adjustment following the 1988 house price boom look mild in comparison. In the Treasury and the Bank of England, nobody dare countenance even a quarter point rise in base rate. (p83)

- So in this dangerously precarious situation, what has the government been doing to salvage the future of home ownership? It has been stoking the inflationary fire with a range of initiatives designed to enable even more young people to borrow even more money to pay even higher prices for even more over-valued properties. Finding itself at the bottom of a very deep hole, the government is still furiously digging. (p83)

- The collapse of owner-occupation among the young represents a generational process of social exclusion that is deeply worrying and extremely unfair. Fifteen years ago, 60 per cent of 25-34 year olds were buying their own homes; today, it is 40 per cent. (p99)

- If the aim is to dampen down demand in the housing market, immigration is therefore an obvious (and politically popular) target. Whether such a dramatic restriction would make sense for the wider economy is, however, a different question. (p102)

- nowadays the biggest demographic among private tenants is families with children. These are people with local jobs, whose children are enrolled in neighbourhood schools, yet their landlord could at any time give them two months notice to leave, and at the end of every six or 12-month lease, their rent can be hiked to whatever the market will bear. According to Shelter, 27 per cent of private renters with children have moved at least three times in the last five years. (p107)

- Nobody in government or anywhere else currently has a clue how to get interest rates back up to normal levels without the whole economy seizing up, so there is not much point suggesting it. (p115)

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The joke is that this situation is clearly unsustainable both economically and socially but the only government efforts being directed at it are attempts to keep it going- thus we see bizzare spectacles like the Chancellor of the exchequer pouring petrol on an out of control fire with his 'help to buy' intitiative- the last in a long line of schemes designed to make that which cannot be sustained somehow continue.

It would be funny if it were not so tragic.

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Thanks PL-FTB. Good read.

Agreed JiltedJen. If and when they do let things go - and I think they have to for all this 'feeding off itself' market - with the haves and have-even-moars vs badly priced-out young, is deeply unhealthy and impedes new growth.

You need a correction to allow entry at times and to allow New Blood (new BBC crime series with lot of anti-HPI messages for 2 detectives) and new ways of doing things - they're going to have to find something to blame it upon (and that's going to be interesting - what will it be), as they stand to the side 'helpless' to protect the £Trillions in equity on owner side.

Edited by Venger

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- Nobody in government or anywhere else currently has a clue how to get interest rates back up to normal levels without the whole economy seizing up, so there is not much point suggesting it. (p115)

Forget about 'normal levels' for interest rates. But put them up one notch - a shot across the bows. Warn folk that that's where they're heading.

I doubt they will have the guts to do this though. They seem a spineless lot.

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it will be blamed on external factors. something along the lines of 'its china's fault', and landlords are evil.

They will somehow spin it as temporary and saying they will do everything they can (they will do little of any note against a hard falling market), and also spin it as great for FTB.

Just in time for the election we will hear 'green shoots in the housing market'

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We don't need that much to get the hpc on, from these levels, from these extremes (house values, inc with all the BTLers) .

Section 24, 3% stamp duty hike on BTLers and second homeowners, MMR/EMCD. It's begun imo. Could cascade, but even over a few years, it's ok with me. Things are in play.

Some attacking moves have begun, and the banks are in a position, after years of recapitlisation measures, to take a bludgeoning and survive - when it's ready - , and lending to younger generations vs much lower house prices. For the total profit of it to the financial system, and so young still have money to spend in a resurgent economy (after the HPC)

Nonlinear world; A mighty flame followeth a tiny spark. - Dante.

Contrary to common expecatations, cause and effect do not often move in a simple straight line, but interact in cycles, 'with the effect feeding back on the cause and perhaps amplifying it.'

Perhaps the most famous example of nonlinearity is the "straw that broke the camel's back." Under most circumstances it would be a trying task to kill a camel with a straw. [..]but clearly there is some weight that the animal's overburdened spine cannot support. Locating that point may be difficult, but that does not make it any less the real. Load one straw too many and the camel's back breaks.

There are for more nonlinear events than most people realise. Time and again people have marginalised their affairs, rendering themselves increasingly crisis prone. They have gone into debt, extending claims on resources to an extreme that could only be supported if current conditions were sustained uninterrupted into the future. Time and again these hopes have been disappointed.

Well, it was a Culture move, but at least it was an attacking Culture move; followed through, it would wreck his whole cautious strategy so far, but it was all he could do if he was to have even the glimmer of a chance of resisting.

He gradually remodelled his whole game-plan to reflect the ethos of the Culture militant, trashing and abandoning whole areas of the board where the switch would not work, pulling back and regrouping and restructuring where it would; sacrificing where necessary, razing and scorching the ground where he had to. He didn't try to mimic Nicosar's crude but devastating attack-escape, return-invade strategy, but made his positions and his pieces in the image of a power that could eventually cope with such bludgeoning, if not now, then later, when it was ready.

-Player of Games

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Is this report written by a HPC'er :-)

Seems to backup many of the points in this forum..

Biggest point for me:

'In a sense, the market is feeding itself..'

How fantastically healthy!

Yep, I also made a note of that line!

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I know there's another thread on the Civitas think tank report, but it seems to overlook how bearish the author is and how plain-speaking he is about how screwed-up the market is.

There are some choice quotes to keep HPCers going, listed here:

- The market has been stretched as tight as it can possibly bear. There is nowhere else for it to go now but down. (p117)

- [This boom is] the bubble that never burst (p20)

- In this fourth boom, unlike the previous three, home owners have accumulated wealth at the expense of the younger generation of prospective buyers – their children and grandchildren. (p30)

- Dramatically-low interest rates have encouraged new buyers to take on increasingly huge loans to purchase housing assets that are by historical standards still over-valued by between 20 and 30 per cent. (p35)

- To make matters worse, real earnings have hardly changed for the last 15 years either, so borrowers cannot look to future wage growth to help them clear their debts. These huge housing loans thus seem likely to remain a continuing burden for many years into the future. (p36)

...//...

...nants is families with children. These are people with local jobs, whose children are enrolled in neighbourhood schools, yet their landlord could at any time give them two months notice to leave, and at the end of every six or 12-month lease, their rent can be hiked to whatever the market will bear. According to Shelter, 27 per cent of private renters with children have moved at least three times in the last five years. (p107)

- Nobody in government or anywhere else currently has a clue how to get interest rates back up to normal levels without the whole economy seizing up, so there is not much point suggesting it. (p115)

Oh well..... They've now finally worked out what we knew 15+ years ago......... 2/10.

And...... Have they seen the Elephant Mammoth in the Room?? i.e. The WHOLE SCAM was fuelled with PREDATORY LIAR LOANS --- THESE are what put ROCKET FUEL into the whole VAST FRAUD/PONZI-PYRAMID SCAM that the "property market" is.........

And - of course --- the Government "help" in the form of "help to buy" loans are just a CONTINUATION/ANOTHER FORM OF PREDATORY LIAR LOANS....

:rolleyes: :rolleyes: :rolleyes:

Edited by eric pebble

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Good post OP and thanks for the summary.

Oh well..... They've now finally worked out what we knew 15+ years ago......... 2/10.

Agreed. While it is nice to hear that a think-tank now has the same view that we do, it is way to little, way to late, and where the Tuck were they when the problem was developing into this monster that is destroying peoples lives? They are paid to think but it seems they need the situation spelled out for them first. What is the point in these people when they are so, so slow to come to a conclusion? I would not be surprised to find they were stoking the fire up until a few years ago and making a nice profit for themselves in the meantime. I tried to find some of there old housing reports but was unsuccessful.

Edited by doahh

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Very good quotes. He sees it clearly. FTBers have been utterly sacrificed to keep the bubble afloat. Especially in London and the South. It is now pretty much impossible to buy without a very good salary or BOMAD.

I read somewhere else (can't recall where) that under-35 home ownership will soon be at 25% if the current trend continues.

Some other quotes:

"By 2015, BTL accounted for … 80 per cent of all new mortgage lending."
"Seven out of 10 newly-built properties in the prime areas of London ... are bought by overseas investors."

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Oh well..... They've now finally worked out what we knew 15+ years ago......... 2/10.

And...... Have they seen the Elephant Mammoth in the Room?? i.e. The WHOLE SCAM was fuelled with PREDATORY LIAR LOANS --- THESE are what put ROCKET FUEL into the whole VAST FRAUD/PONZI-PYRAMID SCAM that the "property market" is.........

And - of course --- the Government "help" in the form of "help to buy" loans are just a CONTINUATION/ANOTHER FORM OF PREDATORY LIAR LOANS....

:rolleyes: :rolleyes: :rolleyes:

It's not a mere woolly mammoth.

It's a giant galaxy devouring space turtle.

You are in the matrix.

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I read somewhere else (can't recall where) that under-35 home ownership will soon be at 25% if the current trend continues.

The housing benefit bill will be as insane as the current house price boom in 20 years time when these people are retired or can't work due to getting old, the lack of joined up thinking of the high house price policy is astounding ... it was OK for people to rent until their 60s prior to the 1950s, for the basic fact people died within a couple of years of retiring.

Times have changed but the government still has old world policies for the wealth divide.

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The housing benefit bill will be as insane as the current house price boom in 20 years time when these people are retired or can't work due to getting old, the lack of joined up thinking of the high house price policy is astounding ... it was OK for people to rent until their 60s prior to the 1950s, for the basic fact people died within a couple of years of retiring.

Times have changed but the government still has old world policies for the wealth divide.

Interesting point about the over 60's renting in days gone by... the writing really is on the wall in the UK for the long term - we face some unprecedented challenges. Unfortunately this means there is even more incentive to get out of the rental trap, stretch to purchase etc as if you manage to make it to the end of your mortgage you might be able to avoid the 'pensioners living like students' type arrangement that is a real possibility.

There's really no easy way to navigate around the current situation. In trying to sum up the options I see as:

1. You either join the masses and stretch to buy, living a life praying interest rates don't rise (high risk)

2. Don't stretch and buy something you really don't want to live in, but play it safe

3. Hold out and pray for IR to rise or something else to cause a HPC. In a big one you're going to need cash to buy as credit will dry up (depends how many years you have on your side)

4. Look at emigration (not as easy as many would like to believe)

5. Take a gamble at starting a business in a hope of making a lot of money/doing something you enjoy and not worrying about the money/house

6. Try to invest your spare cash wisely for FIRE - providing you have any after paying rent that is

If anyone can think of any more, please add - For our family, the only real options are 1 or 4, and both are on the cards in the next 12 months

Edited by streamingfreedom

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- Nobody in government or anywhere else currently has a clue how to get interest rates back up to normal levels without the whole economy seizing up, so there is not much point suggesting it. (p115)

BULL****.....THEY know how to get them up....Collapse house prices.

As they pointed out,...they refuse to collapse prices...

Prices MUST collapse.

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Interesting point about the over 60's renting in days gone by... the writing really is on the wall in the UK for the long term - we face some unprecedented challenges. Unfortunately this means there is even more incentive to get out of the rental trap, stretch to purchase etc as if you manage to make it to the end of your mortgage you might be able to avoid the 'pensioners living like students' type arrangement that is a real possibility.

:lol::lol::lol::lol::lol::lol:

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Really lovely quotes, have forwarded to a couple of people - thanks for taking the time Patient London FTB.

Count, hope this cheers you up!

I just hope prices dont collapse...I want to leave now :-P

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Considering how completely f****d our economy looks like right now I can't even imagine what a seized up economy would look like.

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:lol::lol::lol::lol::lol::lol:

Glad you got a laugh out of that. The reality I'm sure we agree on is that the future is bleak for the UK and there aren't really any easy ways out for us. As you've said, you're planning on emigrating, that's one of the ways out and one that I'm also seriously considering.

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Considering how completely f****d our economy looks like right now I can't even imagine what a seized up economy would look like.

The only way to fix the economy is to address the thing that broke it.

The hosuing bubble, aka insane house prices.

The rich must love the bubble as they have profited massively but it's slowly eating the country.

Im now swaying on the side of the BrExit vote might be so huge in the Leave favour they can't fiddle it now.

It is going to get very tasty in the UK after that as I dont believe for 1 minute the bankers will allow it.

We'll still get the immigration (somehow) and we'll still get no end of banker oppression

The seeds have been sown and grown for 30 years now.

There is only 1 sane choice....Not just Vote Leave but actually Leave

Edited by TheCountOfNowhere

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Im now swaying on the side of the BrExit vote might be so huge in the Leave favour they can't fiddle it now.

Same here. Around 80% of people I know are going with a Leave vote, and that's in the SE. I will be surprised if turns out to be a big remain vote in the end.

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