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gruffydd

We need more SUPPLY of housing, apparently - IGNORING DEMAND, which comes from banks' mortgage lending, and money laundering

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Are people and the media really this thick? They talk about supply as though it's a solution. ONLY SUPPLY MATTERS

Ignoring the DEMAND created by mortgage lending to householders and landlords, and international "investors" laundering money. 

Academics have identified mortgage lending as the main driver of house prices, and therefore the housing crisis, yet the media, politicians, charities (Shelter), housing think thanks (JRF), etc. all focus on supply. 

Is this simply because nobody wants to confront of control the banks? 

In Ireland they simply capped mortgage lending and prices flattened within weeks: https://www.centralbank.ie/press-area/press-releases/Pages/CentralBankannouncesnewregulationsonresidentialmortgagelending.aspx

And then the banks and the usual neoliberal suspects - the IMF, for example, reacted as they would - in defence of the banks: http://www.independent.ie/business/personal-finance/property-mortgages/mortgage-crisis-imf-demands-mortgage-cap-overhaul-to-ease-rules-34854080.html 

So there we have it - the main driver of the housing affordability crisis is bank lending, so the usual suspects - the media, housing charities, banks, estate agents, builders, keep us focused on supply and divert attention from the DEMAND created by mortgage lending. 

Has the world gone totally mad? This is pre-university economics. It just shows us all how corrupt "the system" actually is. 

Shouldn't we get lobbying for mortgage lending caps here in the UK? 

 

Edited by gruffydd

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The main reason is simply they dont really want prices too fall. It is too dreadful for the property owning masses and the media who want them to consume their product. Its not that that they dont sympathise with problems faced by those who cant afford a roof over their head, but only as long as the the solution is hypothetical building, nowhere near them , that somehow wont effect the value of their property. Once you put credit to the fore as the main reason, then the solution, if you really want one, is no longer hypothetical, we could do it tomorrow. Raise rates to a normal level. That means a significant loss of income each month and a plunge in value of their main asset. In short like most public discussions involving haves and have nots, nobody is really interested in true causes and solutions.

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supply not demand, innit?

 

People aren't thick, we're just not educated-aka-indoctrinated/programmed to think in these terms. The constant barrage of the "SUPPLY/DEMAND" narrative WHENEVER the "housing crisis" is mentioned on any form of mainstream media ensures the masses can only think of the crisis as one of supply and demand. 99% of people think whatever we are told to think by our television programming. IMO.

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Too many VIs such as builders and their lobbyists making too much profits to let truth get in the way.

Speaking of pro building trolling, what's Tired of Waiting up to these days...?

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Whatever the merits of the various arguments there remains one simple truth - there is no downside for prospective buyers in having more supply.

Edited by goldbug9999

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56 minutes ago, gruffydd said:

Its true that there is an "investment" effect i.e. that to some degree people will perceive something as good value if the price is rising. Yes that can drive a bubble but yet again the market needs to be operating under scarcity mechanics to make it sustain for any length of time - you simply cannot have sustained investment driven price increases in something that has a supply side surplus or an elastic supply. The tulip bubble demonstrates the how this plays out when you try to do that.

Edited by goldbug9999

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11 minutes ago, goldbug9999 said:

Its true that there is an "investment" effect i.e. that to some degree people will perceive something as good value if the price is rising. Yes that can drive a bubble but yet again the market needs to be operating under scarcity mechanics to make it sustain for any length of time - you simply cannot have sustained investment driven price increases in something that has a supply side surplus or an elastic supply. The tulip bubble demonstrates the how this plays out when you try to do that.

And of course you could have sustained increases in mortgage lending / investment via money laundering/super rich investors over quite a period... it may all end, eventually, yet the market is created via demand created by the financiers. The banks dictate prices and demand. This is not a natural "market" in any way. 

Edited by gruffydd

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12 minutes ago, goldbug9999 said:

Whatever the merits of the various arguments there remains one simple truth - there is no downside for prospective buyers in having more supply.

More fuel for the fire...

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17 minutes ago, goldbug9999 said:

Whatever the merits of the various arguments there remains one simple truth - there is no downside for prospective buyers in having more supply.

if there isn't impact on prices, then "building more homes" to solve the crisis is a charade... a nasty one in that it tricks people into thinking that the government is doing all it can, etc. http://www.debtdeflation.com/blogs/2010/05/11/is-it-all-“supply-demand”/

Edited by gruffydd

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10 minutes ago, goldbug9999 said:

Its true that there is an "investment" effect i.e. that to some degree people will perceive something as good value if the price is rising. Yes that can drive a bubble but yet again the market needs to be operating under scarcity mechanics to make it sustain for any length of time - you simply cannot have sustained investment driven price increases in something that has a supply side surplus or an elastic supply. The tulip bubble demonstrates the how this plays out when you try to do that.

Hang on a minute - was the tulip bubble blown up due to lack of supply of tulips? What am I missing here I thought that was a pure speculative mania

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I'm starting to think all money is dodgy money, how much value does labourmoney ie wages have against magically created from nothing DEBTmoney used to value the wealth of the nation? Feck all surely

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43 minutes ago, thewig said:

I'm starting to think all money is dodgy money, how much value does labourmoney ie wages have against magically created from nothing DEBTmoney used to value the wealth of the nation? Feck all surely

This would imply it's up to 97% on the side of debt money created by banks from thin air. http://positivemoney.org/how-money-works/how-banks-create-money/

As someone who works and wants to work, I really have no issues with people who don't want to work and are on benefits, who altogether are a drop in the ocean.

Edited by Arpeggio

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1 hour ago, goldbug9999 said:

Whatever the merits of the various arguments there remains one simple truth - there is no downside for prospective buyers in having more supply.

Quite right. Whenever there is s good of limited supply, an increase in supply will have a downward pressure on house price growth. 

I take the traditional view (and heretical one on HPC) that HPI has partly been driven by population. Rents have risen faster than earnings and the rising population is likely to have driven this. 

I also hold the conventional HPC view that price rises are a function of low interest rates and money supply growth. This is the principle reason for the rise in house prices and is evidenced by the fact that house prices have risen faster than rents.

Both things can be true at the same time - it does not have to be one or the other.  

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45 minutes ago, Ah-so said:

Quite right. Whenever there is s good of limited supply, an increase in supply will have a downward pressure on house price growth. 

I take the traditional view (and heretical one on HPC) that HPI has partly been driven by population. Rents have risen faster than earnings and the rising population is likely to have driven this. 

I also hold the conventional HPC view that price rises are a function of low interest rates and money supply growth. This is the principle reason for the rise in house prices and is evidenced by the fact that house prices have risen faster than rents.

Both things can be true at the same time - it does not have to be one or the other.  

Yet see what happened in Ireland - they capped mortgage lending and oh... the rapid price rise stopped... within a few weeks. It's an easy market to control, if you control mortgages. https://www.centralbank.ie/press-area/press-releases/Pages/CentralBankannouncesnewregulationsonresidentialmortgagelending.aspx

Evidence suggests price rises are everything to do with lending into the market - lending into the market drives prices... Australia (prices rose along with surplus of supply), Ireland (prices flattened overnight once mortgage cap introduced...

You mention money supply growth. Easy enough to be more specific and focus on mortgage lending growth. 

Edited by gruffydd

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4 hours ago, gruffydd said:



So there we have it - the main driver of the housing affordability crisis is  bank lending PREDATORY LIAR LOANS, so the usual suspects - the media, housing charities, banks, estate agents, builders, keep us focused on supply and divert attention from the DEMAND created by mortgage lending LIAR LOANS...

 

Corrected.
 

 

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2 hours ago, Ah-so said:

Quite right. Whenever there is s good of limited supply, an increase in supply will have a downward pressure on house price growth. 

I take the traditional view (and heretical one on HPC) that HPI has partly been driven by population. Rents have risen faster than earnings and the rising population is likely to have driven this. 

I also hold the conventional HPC view that price rises are a function of low interest rates and money supply growth. This is the principle reason for the rise in house prices and is evidenced by the fact that house prices have risen faster than rents.

Both things can be true at the same time - it does not have to be one or the other.  

Both could be true, it just so happens that they aren't.  That's what the data says.

The reason it is 'heretical' is that the supply shortage argument is used as an excuse for government inaction or, even worse, action that is actually damaging.  

It's also a great moral soother for landlords.  Not us, it's a housing shortage innit.  

Building more is hard.  It takes time.  A housing shortage is a difficult problem that requires raw materials and real human effort.  It really would take years to solve.

Whereas our housing crisis is a virtual, paper, crisis that could be ended any time, at the stoke of a pen.

Edited by BuyToLeech

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49 minutes ago, BuyToLeech said:

Both could be true, it just so happens that they aren't.  That's what the data says.

The reason it is 'heretical' is that the supply shortage argument is used as an excuse for government inaction or, even worse, action that is actually damaging.  

It's also a great moral soother for landlords.  Not us, it's a housing shortage innit.  

Building more is hard.  It takes time.  A housing shortage is a difficult problem that requires raw materials and real human effort.  It really would take years to solve.

Whereas our housing crisis is a virtual, paper, crisis that could be ended any time, at the stoke of a pen.

Clearly if rental properties cost more, the landlords will need to cover higher monthly payments too, which drives prices. Not exactly rocket science is it. 

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7 hours ago, gruffydd said:

Are people and the media really this thick? They talk about supply as though it's a solution. ONLY SUPPLY MATTERS

Ignoring the DEMAND created by mortgage lending to householders and landlords, and international "investors" laundering money. 

Academics have identified mortgage lending as the main driver of house prices, and therefore the housing crisis, yet the media, politicians, charities (Shelter), housing think thanks (JRF), etc. all focus on supply. 

Is this simply because nobody wants to confront of control the banks? 

In Ireland they simply capped mortgage lending and prices flattened within weeks: https://www.centralbank.ie/press-area/press-releases/Pages/CentralBankannouncesnewregulationsonresidentialmortgagelending.aspx

And then the banks and the usual neoliberal suspects - the IMF, for example, reacted as they would - in defence of the banks: http://www.independent.ie/business/personal-finance/property-mortgages/mortgage-crisis-imf-demands-mortgage-cap-overhaul-to-ease-rules-34854080.html 

So there we have it - the main driver of the housing affordability crisis is bank lending, so the usual suspects - the media, housing charities, banks, estate agents, builders, keep us focused on supply and divert attention from the DEMAND created by mortgage lending. 

Has the world gone totally mad? This is pre-university economics. It just shows us all how corrupt "the system" actually is. 

Shouldn't we get lobbying for mortgage lending caps here in the UK? 

 

Today jobs and real economy are continously leaving the western world. Tens of thousands of bank backoffice, manufacturing etc. positions have already been transferred to eastern europe since they've joined the EU and more and more positions are transferred every day. Free trade and free movement is good for companies and the poorer countries, but very bad for the people in the richer countries as their jobs will be transferred to poorer countries or someone else comes from a poorer country and undercuts them (and on top of this we also give some extra money to them...)

 

They try to tell us that as a developed country our role is not in the real economy anymore as we are on the next, "higher" step and we are supposed to live from the growing service sector.

 

The truth is that the only reason why we have this big - especially financial - services sector is that the government basically guarantees that they will do whatever needed for the financial sector and big business. This is what they call the "special regulatory framework". This is basically corruption and guarantees for business built into the system. You can move your jobs to poorer countries, you can pay 0.1% tax, you can exploit our people on their basic needs with interest only mortgages etc.

 

The other factor is very closely related to this. The reason why investors are piling into UK assets is that the government is committed in a similar way to keep up asset prices. In 2008 GBP/EUR dropped from 1.45 to almost 1.00 as investments have been unrolled. Since 2014 - together with HPI and other changes which help investment environment - it went from 1.15 to 1.45 as investors piled into UK assets again with renewed government guarantees, HPI support, QE, FLS, Help to Buy, you name it we had it.

 

Now if the gov suddenly changes its stance and creates an environment where this guarantee is void, the GBP will worth less than the euro within minutes.

 

Playing with financial sector and "investors" is like playing with fire, they pile into your economy, your assets, pump up your numbers, you get addicted to these numbers and you think they will stay here forever, so you start not to care about REAL economy and by the time you realise it's not good for your people and problems start to come, its too late. They can move investments with a click of the mouse and can reset your big numbers overnight. This is the situation we are in at the moment, that's why gov doesn't do anything.

 

The truth is that it was a VERY bad idea to have free trade and free movement with poorer countries and let the real economy leaving the country. Free movement and free trade is not giving anything to the average people in the richer countries. Also we are not on the "next step" with the financial sector - we are rather heading a dead end. Financial sector is a nice modern world for exploitation and as the world is slowly going towards REAL equality (not this crap currently promoted) there is going to be less and less place for financial services.

 

The best thing that could happen with Britain is a hard brexit whatever it means, losing passporting and then finding a new way of existing based on technology, research, and REAL economy and REAL equality, not this cancer of the financial services taking 16 trillion $ taxpayer money since 2008.

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11 hours ago, BuyToLeech said:

Both could be true, it just so happens that they aren't.  That's what the data says.

The reason it is 'heretical' is that the supply shortage argument is used as an excuse for government inaction or, even worse, action that is actually damaging.  

It's also a great moral soother for landlords.  Not us, it's a housing shortage innit.  

Building more is hard.  It takes time.  A housing shortage is a difficult problem that requires raw materials and real human effort.  It really would take years to solve.

Whereas our housing crisis is a virtual, paper, crisis that could be ended any time, at the stoke of a pen.

I do not agree that this is what the data say.

Firstly, I accept that the primary contributor to HPI is money supply and the ease of access to mortgage credit.

However, this would not prima facie affect rental costs, but these too have risen sharp, albeit not to the same extent as house prices. 

Rental costs are a better representation of the fundamental demand for property and provide good evidence for a shortage of property. 

The counter argument to this is the ratio of property to the population, which some have noted remains largely consistent. What this does not take into account is that the newer properties are smaller and have fewer bedrooms that the property stock that they add to. 

Had the pre-1990 stock been made out of crappy 1 and 2-bed flats, then things would have been the same. But it wasn't. The newer population is being squeezed into smaller properties, so the ratio argument is not valid. 

We can model this. The rise in rents is explained by supply, but the excess rise in HPI above this, is explained by mortgage credit. 

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42 minutes ago, Ah-so said:

I do not agree that this is what the data say.

Firstly, I accept that the primary contributor to HPI is money supply and the ease of access to mortgage credit.

However, this would not prima facie affect rental costs, but these too have risen sharp, albeit not to the same extent as house prices. 

Rental costs are a better representation of the fundamental demand for property and provide good evidence for a shortage of property. 

The counter argument to this is the ratio of property to the population, which some have noted remains largely consistent. What this does not take into account is that the newer properties are smaller and have fewer bedrooms that the property stock that they add to. 

Had the pre-1990 stock been made out of crappy 1 and 2-bed flats, then things would have been the same. But it wasn't. The newer population is being squeezed into smaller properties, so the ratio argument is not valid. 

We can model this. The rise in rents is explained by supply, but the excess rise in HPI above this, is explained by mortgage credit. 

Except rents have, more or less, increased in line with wage inflation. 

You have to be careful, because there are plenty of headline statistics on rents that ignore mix adjustment and only look at new tenancies. Also, I'll concede that London may be different. 

In the past I have attempted to find out whether the number of bedrooms has really changed and I couldn't see an effect, but I couldn't find anything rigorous either. 

Also, the number of houses relative to population isn't flat, it increased significantly until about 2010 (from memory, I don't remember the exact date of the peak). 

Its not that I think you are dead wrong, it's a disagreement over the magnitude of two effects. I think the magnitude of 'shortage related effects' is essentially insignificant at a national level, and barely worth discussing.

At best it is a second order effect, and the key point remains: the housing crisis is a virtual crisis created by politicians, and could be solved easily and quickly if mortgages were properly regulated and landlords were put back in their box. 

Also, for the record, if I was a politician I would have policies to encourage building, for a whole bunch of reasons. Only my policies would actually work. 

Edited by BuyToLeech

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11 hours ago, gruffydd said:

Clearly if rental properties cost more, the landlords will need to cover higher monthly payments too, which drives prices. Not exactly rocket science is it. 

Clearly not. There's no reason that landlord costs should influence rents, which are set mostly by local wages.  Why would this be the case?  

Did rents fall dramatically in 2008 when interest rates were slashed?

 

Edited by BuyToLeech

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10 minutes ago, BuyToLeech said:

Except rents have, more or less, increased in line with wage inflation. 

You have to be careful, because there are plenty of headline statistics on rents that ignore mix adjustment and only look at new tenancies. Also, I'll concede that London may be different. 

In the past I have attempted to find out whether the number of bedrooms has really changed and I couldn't see an effect, but I couldn't find anything rigorous either. 

Also, the number of houses relative to population isn't flat, it increased significantly until about 2010 (from memory, I don't remember the exact date of the peak). 

Its not that I think you are dead wrong, it's a disagreement over the magnitude of two effects. I think the magnitude of 'shortage related effects' is very small and not worth discussing.  

At best it is a second order effect, and the key point remains: the housing crisis is a virtual crisis created by politicians, and could be solved easily and quickly if mortgages were properly regulated and landlords were put back in their box. 

We are broadly in the same place and both agree that mortgage credit is the main factor at play, and as you note, the London effectcan also disrupt things when looking at national averages.

On data for new property I may have been looking here previously : 

https://www.gov.uk/government/statistical-data-sets/live-tables-on-house-building

Not sure if this was everything because am on the phone, so have not looked at the contents.

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Here's a wild idea, build a lot more houses that cost less, yes lending is the problem, but banks have to lend more and more money to exist. So with more cheaper houses the banks get to lend more money, the speculators bugger off.

Several birds with one stone.

Personally I think it is happening already, but there is a massive lag in the system, builders want to keep prices up, so do all the other VIs and speculators. The last to realise are going to lose big time.

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