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

[BorrowToLeech]

29 minutes ago, allornothing said:

One counter to this I sometimes hear, is that if credit was the main factor then all areas would have inflated in line with falling lower interest rates. But this isn't the case, some areas have stagnated or fallen despite increased credit. If credit is the main factor, how to explain this effect, which suggust other factors may be at least if not more important?

Plus are not most houses paid for with mostly cash, either the buyers or the parent's, further decreasing the importance of credit, and increasing hte importace of supply?

To your second point: No, and it wouldn't matter anyway.  

Your first point is more interesting, but it's somewhat out of scope.

We're discussing national shortages and national average prices, so it's no surprise that all the explanations ignore local effects. 

We haven't really discussed why houses are more expensive in, say, West London than they are in east London.  That can't be about relative differences in availability, not is it about interest rates, neither idea is detailed enough.

There are a number of reasons that local prices fluctuate around the mean, and it won't be the same in all areas.   The main one is changes in local wages, including implicit wages from improved local services, reduced crime, and gentrification.  If those are happening, and rents are doing the same, then there's nothing to explain.  

Another factor is that we are discussing equilibrium, but markets aren't really in equilibrium. A few years of outperformance isn't a surprise, it has to be sustained. 

In some cases, there may be local physical shortages, but that's not the same thing as a national shortage.

So the data is perfectly compatible with the theory, it just isn't explained by it.

Thats true of the national shortage theory too: why have some areas underperformed if there's a national shortage?

[BorrowToLeech]

50 minutes ago, frederico said:

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.

Because that takes years and costs money, and meanwhile there's a housing crisis being caused by a state induced mortgage bubble. 

And at the end of it, in ten or twenty years from now, it may not have helped anyway, if the bubble is still there.

I'm not against building, we absolutely should do it. Preferably, the government should relax planning requirements (especially in the London green belt) for self-builders and 2-3 house developments. That circumvents nimbys and big developers, creates jobs, and probably leads to better houses. All good. 

But, it isn't enough. If that's your plan, then you haven't really done anything to deal with the problem.

When you're waiting on a bed in casualty, for hours, with your pancreas oozing out of your sphincter, it's not very comforting to know that the government are planning to train more doctors, particularly if the government is paying the existing doctors not to come to work. 

Edited February 5, 2017 by BuyToLeech

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

Re

"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 would increase because landlords would be buying ever more expensive housing stock, and would need to cover the mortgage repayments? 

[VeryMeanReversion]

On 04/02/2017 at 6:01 PM, 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

I prefer to think of it like a game of monopoly.  

- Your labour is you going round and round in circles to pick up the £200.  (note : no pay rises)
- All properties were bought up and developed before you even started. There is no permission to create any more. More development means higher prices.
- Your spend your life paying rent
- The winners are the bank (who creates all the money) and those that started first.

 

The only difference between £ and monopoly money is that you have to pay your taxes with £.

 

So how do you win?

 

1. Buy property from desperate sellers when things are relatively cheap (I've done this twice but it involves a lot patience)

2. Bend the rules in the planning game. Find the loopholes and be prepared to build without permission.

3. Position yourself to pay as little tax as possible (salary sacrifice SIPP then use the many tax-free income possibilities e.g. ISA, rent-a-room, 5K divis, 1K savings etc.)

 

 

 

[Errol]

There is no supply issue. Official figures show more than 1.5 million properties are currently empty around the UK.

So absolutely no supply issue at all. The problem is in the artificial market - created by Government distortions through credit and policy.

[onlyme2]

47 minutes ago, allornothing said:

Amazing! I don't think the OPs mates are going to be persuaded by any of these arguments. 

It is obvious to 99% of people that supply is at least as important, if not more important, than IRs. 

Look at any area in the UK where supply is high relative to demand. Same interest rates. Lower prices. 

I'm fully invested/betting on a HPC, but sometimes reading this site makes me cry with disbeleif how detached from reality some wishers are.

It is somewhat amusing.

The only official population information is from the census. Millions of houses did not appear in the census data as the census was ignored, the majority in the areas with the highest population densities and migrant flow. Join the dots.....

 

[iamnumerate]

We could increase the supply overnight* by making pro single parents share homes.  It would save tax payer money and make housing cheaper.

*Actually it would take a few months for Argos etc to provide the necessary bunk beds but still quicker than building new homes.

[billybong]

1 hour ago, allornothing said:

Amazing! I don't think the OPs mates are going to be persuaded by any of these arguments. 

It is obvious to 99% of people that supply is at least as important, if not more important, than IRs. 

Look at any area in the UK where supply is high relative to demand. Same interest rates. Lower prices. 

I'm fully invested/betting on a HPC, but sometimes reading this site makes me cry with disbeleif how detached from reality some wishers are.

My highlight.

Just to say that the areas with lower average prices also tend to have lower average wages so that's a factor as well.  Lower wages tend to attract less credit from the banks and also less willingness to borrow by the borrowers.  Liar loans can disrupt that of course and sometimes massively but likely the effect of liar loans is proportional to the specific area involved.

Edited February 6, 2017 by billybong

[billybong]

2 hours ago, gruffydd said:

Re

"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 would increase because landlords would be buying ever more expensive housing stock, and would need to cover the mortgage repayments? 

There's a limit to how far they can go though.  A few might manage to do that in line with crazy house prices but not all.

In the current system on average rents increase at roughly the same rate as wages, which tend to follow inflation, which tends to follow gdp, which tends to follow total debt which is related to population growth?   Not necessarily always in that sequence of course.  There will be local effects such as typically London has a higher gdp per capita than elsewhere in Britain?  

Edited February 6, 2017 by billybong

[iamnumerate]

12 minutes ago, billybong said:

My highlight.

Just to say that the areas with lower average prices also tend to have lower average wages so that's a factor as well.  Lower wages tend to attract less credit from the banks and also less willingness to borrow by the borrowers.  Liar loans can disrupt that of course and sometimes massively but likely the effect of liar loans is proportional to the specific area involved.

I am not sure that is always correct, places like Tower Hamlets are quite "poor" but have high house prices

[onlyme2]

7 minutes ago, billybong said:

My highlight.

Just to say that the areas with lower average prices also tend to have lower average wages so that's a factor as well.  Lower wages tend to attract less credit and also less willingness to borrow.  Liar loans can disrupt that of course and sometimes massively but likely the effect of liar loans is proportional to the specific area involved.

Basically all the financial manipulation, interest rate suppression, debt promotion, outright fraud affect the price multiplier and the degree by which overvaluation, financialization and rent gouging occurs. Underneath it will there still has to be a mismatch in the medium/long term between supply and demand that keeps the ship afloat, whether that demand is real and/or perceived.  "The BOE will keep rates low", "the population will keep on growing", "government will never allow enough houses to be built and build on green belt", just the sort of mindset that you will encounter if you talk to landlords for example themselves. Since the mass promotion of BTL we have had historically unprecedented population growth, the two are linked and absolutely reliant on each other.

[billybong]

25 minutes ago, iamnumerate said:

I am not sure that is always correct, places like Tower Hamlets are quite "poor" but have high house prices

It's considered a poor area but how out of line are the average wages there compared to the rest of London with some people living there maybe working in wealthier areas of London - with credit being used to provide accommodation close to work.

Not to mention the effect of overseas buyers and cash and the government props calculated based on average London prices/average London wages etc.

Edited February 6, 2017 by billybong

[billybong]

14 minutes ago, allornothing said:

Wages are massively over weighted on here too. A factor sure. But look at st Ives or tower hamlets. Demand / supply issues,are primary drivers here, with interest rates and wages important but secondary.  

St Ives (and to some extent maybe Tower Hamlets) can possibly be partly explained by cash buyers from outside. 

Edited February 6, 2017 by billybong

[iamnumerate]

1 minute ago, billybong said:

St Ives (and to some extent maybe Tower Hamlets) can possibly be partly explained by cash buyers from outside. 

Tower Hamlets is probably explain by the simple shopper (the Government) spending too much on housing benefit and not suggesting that people move rather than gets ££££ from the taxpayer.

[GreenDevil]

3 hours ago, Errol said:

There is no supply issue. Official figures show more than 1.5 million properties are currently empty around the UK.

So absolutely no supply issue at all. The problem is in the artificial market - created by Government distortions through credit and policy.

^ this, credit and banking policy creates modern day financial slavery, simple, its not an accident. 

[iamnumerate]

3 hours ago, Errol said:

There is no supply issue. Official figures show more than 1.5 million properties are currently empty around the UK.

So absolutely no supply issue at all. The problem is in the artificial market - created by Government distortions through credit and policy.

I love the around the UK - how many of them are places where people want to live?  I believe there are quite few empty homes - need a bit of work and no wi-fi - on St Kilda and many others on other Scottish Islands.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

3 hours ago, allornothing said:

Amazing! I don't think the OPs mates are going to be persuaded by any of these arguments. 

It is obvious to 99% of people that supply is at least as important, if not more important, than IRs. 

Look at any area in the UK where supply is high relative to demand. Same interest rates. Lower prices. 

I'm fully invested/betting on a HPC, but sometimes reading this site makes me cry with disbeleif how detached from reality some wishers are.

"Obvious to 99% of people" ??? Is it. See what happens when they cap mortgages in Dublin (where supply is a massive issue) - ie rapidly increasing prices suddenly flattened within weeks. See what happened when there was over supply of houses (yet also rapidly increasing credit) in Australia... prices kept going up. 

It really isn't rocket science. Take away the mortgage lending and there is no demand. Take a look at the work carried out by Prof Steve Keen - how mortgage lending is the key driver. 

 

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

1 hour ago, allornothing said:

Wages are massively over weighted on here too. A factor sure. But look at st Ives or tower hamlets. Demand / supply issues,are primary drivers here, with interest rates and wages important but secondary.  

Cap the demand (ie mortgage lending) and hey presto... the big driver is no longer there - see recent experience in Dublin. 

[iamnumerate]

1 minute ago, gruffydd said:

Cap the demand (ie mortgage lending) and hey presto... the big driver is no longer there - see recent experience in Dublin. 

 

2 minutes ago, gruffydd said:

"Obvious to 99% of people" ??? Is it. See what happens when they cap mortgages in Dublin (where supply is a massive issue) - ie rapidly increasing prices suddenly flattened within weeks. See what happened when there was over supply of houses (yet also rapidly increasing credit) in Australia... prices kept going up. 

It really isn't rocket science. Take away the mortgage lending and there is no demand. Take a look at the work carried out by Prof Steve Keen - how mortgage lending is the key driver. 

 

Spain has lots of credit at the moment and very cheap housing - if you have enough supply you can still have cheap housing even with NINJA mortgages (which I don't think the UK has ever had).

[billybong]

22 minutes ago, iamnumerate said:

 

Spain has lots of credit at the moment and very cheap housing - if you have enough supply you can still have cheap housing even with NINJA mortgages (which I don't think the UK has ever had).

It goes back to what is demand.  

When politicians talk about supply and demand for public consumption they just tilt the debate to mean demand is the number of people or at least that's what they always put the emphasis on - that is population growth etc.  

However the main component of people's demand is credit but if nobody wants credit because they've been bankrupted or otherwise bitten through a house price crash and prices are languishing and there's no confidence in the market then there's going to be little or no demand for credit even though it's readily available.  People are the mechanism for transmission of credit.  

Some say politicians are scared of a HPC for voting reasons and that's why they prop up the market but lenders (their pals who give them sinecure jobs during and after being MPs etc) are also scared because of the possible lengthy transition period before credit volumes might pick up again.

Edited February 6, 2017 by billybong

[iamnumerate]

1 minute ago, billybong said:

It goes back to what is demand.  

When politicians talk about supply and demand for public consumption they just tilt the debate to mean demand is the number of people or at least that's what they always put the emphasis on - that is population growth etc.  

However the main component of people's demand is credit but if nobody wants credit because they've been bankrupted or otherwise bitten through a house price crash and prices are languishing and there's no confidence in the market then there's going to be little or no demand for credit even though it's readily available.  People are the mechanism for transmission of credit.  

Some say politicians are scared of a HPC for voting reasons and that's why they prop up the market but lenders (their pals who give them sinecure jobs during and after being MPs etc) are also scared because of the possible lengthy transition period before credit volumes might pick up again.

True, to be honest I can't see any harm in reducing credit and increasing supply - a bit like losing weight through diet and exercise.

(That was an example please don't start talking about diets etc).

[billybong]

In the 90s it seemed that nobody wanted to live in London.  For quite a few years the papers were chock full of pages advertising repossessed properties for sale.  Prices dropped.   

Properties that they couldn't shift.  People were out of work and mortgages weren't so easy to get.

Then BtL started in earnest combined with lax lending.

Edited February 6, 2017 by billybong

[sPinwheel]

We have plenty of supply.....Of credit.

Limit credit....Limit house prices inflation

[BorrowToLeech]

7 hours ago, iamnumerate said:

I am not sure that is always correct, places like Tower Hamlets are quite "poor" but have high house prices

 

Median incomes in Tower hamlets are well above the U.K. average.  

Also, there's no shortage of flats and they are building even more, so no supply constraint I can see. 

In any case income is a simplification, the issue is what you can earn from living in an area.  That includes a number of things in addition to wages, it's just wages are a pretty good proxy.  When this process was first understood (about 200 years ago), it was in phrased in terms of crop yields and the relative productivity of farm land.

If you want to live in tower hamlets you have to pay what a banker can pay, or what a housing benefit recipient can pay, if you can't then forget it. Their incomes drive the price, not yours. 

In some areas rents are way out of line with earnings, because retired people couldn't afford to move to the areas they live in. Still, if you want to live there what sets your rent will be local earning potential. 

Edited February 6, 2017 by BuyToLeech

[BorrowToLeech]

29 minutes ago, allornothing said:

What about areas where transactions are mostly cash buyers? Are they exempt from this law?

Cash buyers are irrelevant.  When they spend cash they lose the interest they would otherwise collect, so the economics is the same as for borrowers.  

 

Edited February 6, 2017 by BuyToLeech