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Fairyland

What Will It Take To Halt The U.k. Housing Market?

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Bloomberg: British House-Buyers Dance with Devil

British builder Persimmon became the latest to challenge the "Brexit is bearish for building" thesis on Tuesday when it said home reservation rates are 17 percent higher since July 1 compared to the same period a year ago.
Persimmon CEO Jeff Fairburn told Bloomberg Television that "people are still very keen to buy and the lenders are keen to lend".
Brits aren't mad, they're just trapped: prisoners of a system that conspires to keep prices high and houses in short supply. They know their government will do almost anything to prevent house prices collapsing. Buyers can already obtain loans from the government to help get on the housing ladder, a policy that will further inflate prices for those lucky enough to own property already. There are reports that Theresa May's government is preparing a fresh multi-billion pound housing stimulus -- albeit one that should support more development.
After the vote to leave the EU, Persimmon shares sank 39 per cent, in line with other house-builders. But it now trades at just a 12 percent discount to the price on the eve of the referendum.
Meanwhile, the U.K.'s laborious planning laws mean supply won't overtake demand any time soon.
Edited by Fairyland

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Persimmon results are from busuness 2+ years ago.

Whatll stop/crash UK?

Lots.

5% budget deficit, 90% Gdp national debt, 7% current account deficit, massive demographic swing to oaps pulling down hnfunded pensions.

These are the important numbers, not some poofed up figures from a house builderthats been sucking up subbed money for the last 5 years.

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This : They know their government will do almost anything to prevent house prices collapsing."

House transaction used to be an easyway to bump up the economy. Does nit work now cos of BTL.

Cranking up debt gives a short term boost, followed by a medium term bust.

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House transaction used to be an easyway to bump up the economy. Does nit work now cos of BTL.

Cranking up debt gives a short term boost, followed by a medium term bust.

....a lifetime of being tied to debt repayment......and no scope for interest rates to fall further....at the limit, the tipping point.

What other tricks have they up there sleeves I wonder? ;)

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House transaction used to be an easyway to bump up the economy. Does nit work now cos of BTL.

Cranking up debt gives a short term boost, followed by a medium term bust.

The repricing of Interest Only BTL loans will be the trigger. Prices are currently being set at the margin and that margin is currently BTL IO rates divided by monthly market rent.... Remember people are in for the long term so the only thing that matters is can I cover my monthly repayment with the rent they don't need a monthly profit...

So the two possible routes of correction are:-

rents falling

Rates on BTL IO loans increasing either due to Basel 3 or due to people finally noticing the section 29 tax changes and discovering the impact of them.

There will then be a lot of BTL IO mortgage holders unable to escape the chain those rental properties have become..

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Inflation followed by higher interest rates around the world.Everyone and his dog has bought the deflation trade.If they are wrong (as i think they are) and the $ falls inflation will be released.Looks to me like this is already happening,just very few know it yet.Maybe late 2017 il be buying the ishares 20years+ treasury bond ETF (ticker TLT) below 100 again as the deflation myth collapses.

Its not different this time,just a bigger extreme.Just my opinion.

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This : They know their government will do almost anything to prevent house prices collapsing."

I'd imagine though as the none Owners figures continue to grow , the gov will move to gain their votes and work against HPI

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....a lifetime of being tied to debt repayment......and no scope for interest rates to fall further....at the limit, the tipping point.

What other tricks have they up there sleeves I wonder? ;)

Government backed shared ownership/equity. Starts out as a FTB focused scheme with the idea that the government gets paid when house is sold. Will then be expanded to allow it to be rolled over to next "rung on the ladder". Will finally be expanded to all PPR purchases.

That allows HPI to be maintained to please home owners whilst making it possible for FTBs to buy. Whatever we may think on HPC the HTB schemes did buy votes for the Tories.

Edited by olde guto

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Government backed shared ownership/equity. Starts out as a FTB focused scheme with the idea that the government gets paid when house is sold. Will then be expanded to allow it to be rolled over to next "rung on the ladder". Will finally be expanded to all PPR purchases.

That allows HPI to be maintained to please home owners whilst making it possible for FTBs to buy. Whatever we may think on HPC the HTB schemes did buy votes for the Tories.

Dont think it got any. HTB is mainly northern,where theres no Con votes.

HTB was o bail out banks and builders. Stupid scheme.

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Dont think it got any. HTB is mainly northern,where theres no Con votes.

HTB was o bail out banks and builders. Stupid scheme.

I remember seeing something on TV around the time of the GE talking to voters in a key marginal/swing seat (somewhere like Swindon) and there were at least two millennials(ish) saying they were voting Tory because HTB was helping or had helped them buy a house.

Too many people don't see the reality of what HTB is, esp someone in their 20/30s who perceive it to be perhaps the first time the government has actually helped them. Even though in reality it hasn't and they've been saddled with more debt than they'd have had if there had been an HPC.

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Indeed in the approach to the general election Cameron often used to refer to the HtB scheme as benefiting young people. Typically "We've helped young people to own their own homes through schemes like HtB etc etc".

Another common pitch often used by them in support of HtB was that it would help to increase the number of new homes being built every year.

HtB has been around since 2013 and in terms of increasing the number of new homes being built it has been an abject failure. For that reason alone it should be discontinued.

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"HtB an abject failure"... no it has been a great success at achieving its true goal of increasing prices. The lies are so blatant it is staggering and is having a poisonous impact on civil society

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Another poster listed the possible crises that would precipitate a crash. However, as we have seen 2008,brexit, any crises is used as an excuse for extraordinary financial measures to keep the debt/asset price boat afloat. Unfortunately I think unemployment, particularly middle class unemployment, will be what causes house prices to eventually crash.

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General, 'overt' economic failure.

We missed the boat after 2008 to rethink housing economics and beyond that it has been buried under ridiculous policies and (ahem) recent 'diversion's from the problem.

Still think it's worth discussing, post-crash, what a sustainable functioning housing market (and wider economy) should be.

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"HtB an abject failure"... no it has been a great success at achieving its true goal of increasing prices. The lies are so blatant it is staggering and is having a poisonous impact on civil society

Indeed - but I was referring to one of the main stated objectives used to justify HtB by the politicians - increasing the number of new homes being built. A political justification they used to counter the criticism that HtB leads to a bubble and crazy house prices.

By the measure of increased new home building HtB has been a complete failure and they can't now politically justify it using that defence.

Edited by billybong

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All data coming out at present makes that rate reduction a puzzler. I guess Carney had to be seen to do something after he predicted a cataclysm post a Brexit out vote. Osbo and Cameron, similarly, were doing their best to talk the economy down, the disingenuous c$$ts, also looking to save face on their pre-referendum predictions.

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Re. the question from the OP.

I reckon some event from China or US financial markets. No idea what. Possibly along the lines of the last crash in 2008. ie. massive fraud and cover up.

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