BorrowToLeech Posted February 3, 2017 Share Posted February 3, 2017 36 minutes ago, zugzwang said: BTL was insignificant prior to 2008 (fewer than 10% of all mortgages). The real damage was caused by interest only. In 1988 alone, more than one million homebuyers took out interest only loans. By 1992, three out of four mortgages were interest only. Endowment policies fell out of favour after the dotcom bust when they were replaced by i.o. loans with no repayment vehicle attached. Buy-to-let was extremely significant, you can't measure the significance by market volume, for reasons I pointed out on another thread. Quote Link to comment Share on other sites More sharing options...
LittleBro Posted February 4, 2017 Share Posted February 4, 2017 600,000 houses for sale on Rightmove....doesn't seem like a shortage to me. A shortage of sensibly priced houses, maybe. Availability of funds (high), lack of urgency to sell (good investment with low risk and high returns, currently) mean EAs can push the availability line to justify increasingly ridiculous asking prices. While banks keep funding, the party goes on. Out of morbid curiosity, I'd love to see what happens if houses DO ever start to falter, will it be a massive house of cards? In a falling market, I wonder if people will be so keen to lump on or they'll sit tight. Quote Link to comment Share on other sites More sharing options...
OnionTerror Posted February 4, 2017 Share Posted February 4, 2017 The amount of empty housing has almost doubled to 1.4m since 1996... http://www.telegraph.co.uk/news/2017/02/03/number-empty-homes-hits-highest-rate-20-years-calling-question/ Quote Link to comment Share on other sites More sharing options...
Granit Posted February 4, 2017 Share Posted February 4, 2017 The first part of this series has some good data: https://medium.com/@ian.mulheirn/part-1-is-there-really-a-housing-shortage-89fdc6bac4d2#.cxuzx7d2l The alarm around lack of supply was based on DCLG forecasts on household size and formation which didn't materialise: Quote Link to comment Share on other sites More sharing options...
mathschoc Posted February 4, 2017 Share Posted February 4, 2017 Low volume precedes HPC Quote Link to comment Share on other sites More sharing options...
PopGun Posted February 4, 2017 Share Posted February 4, 2017 Massive credit expansion and influx of capitol. Trump, Gove and Angela Eagle aren't the creators of alt facts. The housing/building VIs have been deploying alternate facts for over 10 years. Quote Link to comment Share on other sites More sharing options...
goldbug9999 Posted February 4, 2017 Share Posted February 4, 2017 1 hour ago, LittleBro said: 600,000 houses for sale on Rightmove....doesn't seem like a shortage to me. A shortage of sensibly priced houses, maybe. Liquidity and scarcity are not mutual exclusive, example: the vibrant market in concert ticket reselling, another example: want to buy a penny black one of the worlds rarest stamps - if your prepared to pay many thousands of times the face value there are plenty for sale http://www.ebay.co.uk/sch/Great-Britain-Victoria-Penny-Black-Stamps/113012/bn_16568671/i.html Quote Link to comment Share on other sites More sharing options...
BorrowToLeech Posted February 4, 2017 Share Posted February 4, 2017 1 hour ago, Granit said: The first part of this series has some good data: https://medium.com/@ian.mulheirn/part-1-is-there-really-a-housing-shortage-89fdc6bac4d2#.cxuzx7d2l The alarm around lack of supply was based on DCLG forecasts on household size and formation which didn't materialise: How do you define a household? Can you be a household without a house? Quote Link to comment Share on other sites More sharing options...
Pieman Pieface Posted February 4, 2017 Author Share Posted February 4, 2017 9 minutes ago, BuyToLeech said: How do you define a household? Can you be a household without a house? Its a good point. If hundreds of thousands of people come in from abroad on their own are they all households Quote Link to comment Share on other sites More sharing options...
BorrowToLeech Posted February 4, 2017 Share Posted February 4, 2017 (edited) 8 minutes ago, Pieman Pieface said: Its a good point. If hundreds of thousands of people come in from abroad on their own are they all households I have seen at least one government report that defined a household as the people living in one house. By that measure, decreasing average household size simply means more houses per person, evidence that there isn't really a shortage. I don't know if better definitions exist. Edited February 4, 2017 by BuyToLeech Quote Link to comment Share on other sites More sharing options...
billybong Posted February 4, 2017 Share Posted February 4, 2017 Ultimately it's due to levels of credit and without constraint it's in the lenders' power to decide prices even if there's fewer buyers than sellers. Lenders could decide to lend less and keep prices down in a certain district just because - or they could decide to lend more in their own district just because they liked the increase in their own asset values. Of course they wouldn't put it quite like that in their official reports. Also mortgage amounts are usually decided by the valuation of houses by surveyors linked to lenders so they can play a role in the above scenarios. Quote Link to comment Share on other sites More sharing options...
Wayward Posted February 4, 2017 Share Posted February 4, 2017 2 hours ago, billybong said: Ultimately it's due to levels of credit and without constraint it's in the lenders' power to decide prices even if there's fewer buyers than sellers. Lenders could decide to lend less and keep prices down in a certain district just because - or they could decide to lend more in their own district just because they liked the increase in their own asset values. Of course they wouldn't put it quite like that in their official reports. Also mortgage amounts are usually decided by the valuation of houses by surveyors linked to lenders so they can play a role in the above scenarios. That doesn't make any sense to me? "in the lenders power to decide prices even if there's fewer buyers than sellers"??? If there are fewer buyers than sellers then the pressure is deflationary not inflationary regardless of the credit available. Why would five people bid against each other when ten houses available? Quote Link to comment Share on other sites More sharing options...
Venger Posted February 4, 2017 Share Posted February 4, 2017 Would-be buyers are adults, in a market. They have to look at how much they earn, their savings, their expectations for the future. Been plenty of bomad assistance along the way, from older people who believe in these values as solid/cheap etc. I can't do anything about someone paying £750,000 for a house I think worth £400,000 for example. It's a market. Not a buyer excuse-fest to extremes. Quote Link to comment Share on other sites More sharing options...
billybong Posted February 4, 2017 Share Posted February 4, 2017 (edited) 41 minutes ago, Wayward said: That doesn't make any sense to me? "in the lenders power to decide prices even if there's fewer buyers than sellers"??? If there are fewer buyers than sellers then the pressure is deflationary not inflationary regardless of the credit available. Why would five people bid against each other when ten houses available? Because if the lender is free to lend (without constraint) any amount the lender decides then it doesn't matter if there are fewer buyers. It will just depend for example on what area the lender wants to be high priced and what area the lender wants to be low priced and the credit will be allocated accordingly. A tame surveyor who will justify the value accordingly also helps. If there's one buyer and ten sellers and the buyer needs a mortgage and the lender decides (these days usually via a tame surveyor report) for whatever (maybe selfish) reason that the house is worth so much (say an outlandish amount) and the lender is prepared to lend accordingly and the purchaser is prepared to borrow that amount then that sets the price. Vice versa for a low price. Under those circumstances it doesn't need competition - competition can help a little bit to set a higher price but it isn't strictly necessary if the lender is set on higher prices and purchasers aren't price sensitive. Edited February 4, 2017 by billybong Quote Link to comment Share on other sites More sharing options...
goldbug9999 Posted February 4, 2017 Share Posted February 4, 2017 9 minutes ago, billybong said: If there's one buyer and ten sellers and the buyer needs a mortgage and the lender decides (these days usually via a tame surveyor report) for whatever (maybe selfish) reason that the house is worth so much (say an outlandish amount) and the lender is prepared to lend accordingly and the purchaser is prepared to borrow that amount then that sets the price. Vice versa for a low price. Under those circumstances it doesn't need competition - competition can help a little bit to set a higher price but it isn't strictly necessary if the lender is set on higher prices. I'm with other guy - this makes no sense. Where sellers outnumber buyers they are competing with each other without any knowledge of the buyers funds and the price gets set accordingly. Quote Link to comment Share on other sites More sharing options...
billybong Posted February 4, 2017 Share Posted February 4, 2017 (edited) 12 minutes ago, goldbug9999 said: I'm with other guy - this makes no sense. Where sellers outnumber buyers they are competing with each other without any knowledge of the buyers funds and the price gets set accordingly. Fair enough I don't think that that makes sense but everyone can have different opinions. I don't agree that competition is the main factor when lenders want higher prices and buyers aren't price sensitive (maybe expecting an inevitable profit from ever rising prices) therefore not offering price competition. An actual auction is different of course although even there prices can be dependent on whether lenders are free and easy with lending to auction purchasers and prices get bid up to the limit. Edited February 4, 2017 by billybong Quote Link to comment Share on other sites More sharing options...
BorrowToLeech Posted February 4, 2017 Share Posted February 4, 2017 1 hour ago, Wayward said: That doesn't make any sense to me? "in the lenders power to decide prices even if there's fewer buyers than sellers"??? If there are fewer buyers than sellers then the pressure is deflationary not inflationary regardless of the credit available. Why would five people bid against each other when ten houses available? Banks more or less do set house prices, by setting the price of debt. What happens, effectively, is that credit conditions and rates effectively determine how many buyers and sellers there are. In the 90s, for example, they decided to create a whole new set of buyers out of people who already had a home, but really wanted to own someone else's home as well. Quote Link to comment Share on other sites More sharing options...
Pieman Pieface Posted February 4, 2017 Author Share Posted February 4, 2017 26 minutes ago, billybong said: Fair enough I don't think that that makes sense but everyone can have different opinions. I don't agree that competition is the main factor when lenders want higher prices and buyers aren't price sensitive (maybe expecting an inevitable profit from ever rising prices) therefore not offering price competition. An actual auction is different of course although even there prices can be dependent on whether lenders are free and easy with lending to auction purchasers and prices get bid up to the limit. I think there is something in what you are saying though. In a world without effective places to store your wealth, housing is seen as the last best way to make income from your existing capital. Its possible that a variety of factors are making buyers far less price sensitive. I think we all know from history that its the percieved value of an asset that helps to push up its price. Quote Link to comment Share on other sites More sharing options...
Venger Posted February 4, 2017 Share Posted February 4, 2017 19 minutes ago, Pieman Pieface said: I think there is something in what you are saying though. In a world without effective places to store your wealth, housing is seen as the last best way to make income from your existing capital. Its possible that a variety of factors are making buyers far less price sensitive. I think we all know from history that its the percieved value of an asset that helps to push up its price. And that is their own market choice. In a market. No conspiracy. Quote Link to comment Share on other sites More sharing options...
Darby Ram Posted February 4, 2017 Share Posted February 4, 2017 6 hours ago, Granit said: The first part of this series has some good data: https://medium.com/@ian.mulheirn/part-1-is-there-really-a-housing-shortage-89fdc6bac4d2#.cxuzx7d2l The alarm around lack of supply was based on DCLG forecasts on household size and formation which didn't materialise: That blog post has got the causation the wrong way round. As I posted upthread, household formation has been suppressed by housing affordability. It's not that there are enough houses because we have fewer households than expected; instead, there are fewer households because houses are too expensive for couples to cohabit and so they just stay at home or live in shared accommodation. The expectation is that if affordability improves, household formation will bounce back (see this research [PDF]). Loose credit is the root of the problem, but we will still have a supply shortage if household formation returns to normal levels - more so if there is a bounce from suppressed older households forming alongside a younger cohort. Quote Link to comment Share on other sites More sharing options...
slawek Posted February 4, 2017 Share Posted February 4, 2017 14 minutes ago, Darby Ram said: Loose credit is the root of the problem, but we will still have a supply shortage if household formation returns to normal levels - more so if there is a bounce from suppressed older households forming alongside a younger cohort. I would say the root cause is the fact that houses become an investment product. It causes a shortage properties for FTB as they have to compete with investors for available stock of properties on the market. Additionally the stock of properties is reduced by property hoarders, people who keep their old properties or don't downsize because they believe this is a good investment. Quote Link to comment Share on other sites More sharing options...
Zzzzzzzzzzzzzzzzzzzzzzzzzz Posted February 4, 2017 Share Posted February 4, 2017 (edited) the main issue is mortgage lending and not a lack of new houses, because mortgage lending drives prices. Not that anyone wants you to think that - our politicians are bought by the banks, for example - nobody wants the heat turned up on the banks. Read this - rising supply, rising prices http://www.debtdeflation.com/blogs/2010/05/11/is-it-all-“supply-demand”/ Edited February 4, 2017 by gruffydd Quote Link to comment Share on other sites More sharing options...
Pieman Pieface Posted February 4, 2017 Author Share Posted February 4, 2017 1 hour ago, Venger said: And that is their own market choice. In a market. No conspiracy. Certainly wasn't suggesting conspiracy. But that doesn't mean that numerous cultural and economic factors don't come together all at once to make people view Housing as the essential place to put your money. In that environment you can see that peoples sense of value goes out the window. Tulips. Quote Link to comment Share on other sites More sharing options...
PopGun Posted February 4, 2017 Share Posted February 4, 2017 It's strange that when the credit crunch happened builders stopped building, yet prices dropped 20% in just six months. The key reason: an instant and massive tightening of lending. And then the state props came to play, zirp and QE. Interest rates sunk from 5 to 0.5%, with the state underwriting risk, the banks begin loosening lending again.. then what do you know... house prices began increasing again. it really isn't that difficult to work out. Supply is and always was a myth. if 10 people want one of those five houses, but none can afford the price due to restricted wages and mortgages, the price would have to come down accordingly. Quote Link to comment Share on other sites More sharing options...
PopGun Posted February 4, 2017 Share Posted February 4, 2017 3 hours ago, Venger said: Would-be buyers are adults, in a market. They have to look at how much they earn, their savings, their expectations for the future. Been plenty of bomad assistance along the way, from older people who believe in these values as solid/cheap etc. I can't do anything about someone paying £750,000 for a house I think worth £400,000 for example. It's a market. Not a buyer excuse-fest to extremes. They've decided to partake, you didn't. from a purely market perspective, what's the problem? i suppose those selling at artificially high prices facilitating the loose credit demand are completely blameless... the winning move was to not take part, granted. They've subjected themselves to 25 +years of debt bondage out bidding you as the market (sic) demanded it for participation. Quote Link to comment Share on other sites More sharing options...
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