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

[BorrowToLeech]

4 hours ago, allornothing said:

Yes. Most people understand that price is a function of demand and supply. not all though clearly! 

Jesus. 

Double the houses. And demand for each house halfs. 

The demand may come from credit or whatever,   but demand for each house is still half.  You can't talk about one without the other .  It's a relationship.  

 

You can't double the supply of land, and if the land was available people would just build their own houses (I know several people who have done this, but they owned the land already).  So what you're talking about has no relevance to the real world.

In any case houses didn't become more scarce after 1996, the opposite happened, so that can't explain how we got to where we are even if it was the solution (which it isn't). 

Edited February 6, 2017 by BuyToLeech

[sPinwheel]

31 minutes ago, allornothing said:

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

Yes, because they make up 5% of buyers. A puny ripple in the ocean.

The other 95% need to borrow to buy a house.

[BorrowToLeech]

8 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.

Indeed. Not only that but more people than ever own two or three houses.  How many do you know who have a spare?  

Some own hundreds.

That's a funny kind of shortage. 

[BorrowToLeech]

35 minutes ago, allornothing said:

I was under the impression it was more like 40%  where did you get 5% from?

Re 2nd home shortage. if the queen owns 99% of regent street and won't sell anything,  that is still low supply.  

 

My current neighbour uses the house maybe one week a year. It's a pure asset for him. I am almost certain he owns outright. As does my landlord. Interest rates going to 20% wouldn't have a big hit on my street. I think there is one house for sale on Rightmove. out of 80. Not saying this is usual just that credit isn't everything. It's not a tourist spot or anything either I can imagine it's worse in those places. 

If you're a cash buyer who can earn 5% in the bank or 2% rental yield, how do you invest your money? In any case you are overstating the number of cash buyers.

And let's say you do build more, and then sell for low prices, so that the potential rental yield is high, 10%.

At that point it becomes worthwhile borrowing money to buy as an investment.  It only stops being worthwhile when the yield (roughly) equals the mortgage rate.   Below that level, landlords will outbid each other to get the house, and the price will rise.  

Prices are set by rental yields and mortgage rates.

 

[BorrowToLeech]

18 minutes ago, allornothing said:

5% in the bank? Which bank? I'll sign up tomorrow

how much am I overstating? I've only spent a couple of mins googling so may well be wrong but it seems like 35 to 40% seems common. Certainly not 5%.  What's your figure and where is it from?

The rental yield on my house is under 3%. It's only the reason I rent  yields vary massively between 3% and 10% depending on type of house and risk profile of tenant  

if rent is set by yield how come rent inflation and price inflation have diverged so much? Shouldn't they converge under your theory?

It depends how you define cash buyers.   No mortgage is about 30% ish, but that includes house swappers.

As to the rest, I'm really not sure what you are saying.  Rental yields are low (prices are high) because you can't get good rates in the bank.  

My (made up) numbers explain why this is.  If you could get higher tates, then yields would need to rise (prices fall) and that's as true for cash buyers as it is for borrowers.  The actual numbers are different, so what?

Yields vary, and rates vary, obviously. I'm simplifying a lot, because I'm trying to explain the basic ideas. Even so, the simplified argument is qualitatively correct, and it isn't quantitatively bad either.  

You think it'd be more persuasive if I included risk adjustments and random time horizons?  With people who cant even get their heads around 19th century economics?  People who lived through the credit crunch and still think there's not a credit issue.  

Edit:  oh and rents diverged from prices because rates fell.   That's sort of my point.

 

 

 

Edited February 6, 2017 by BuyToLeech

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

8 hours ago, allornothing said:

Yes. Most people understand that price is a function of demand and supply. not all though clearly! 

Jesus. 

Double the houses. And demand for each house halfs. 

The demand may come from credit or whatever,   but demand for each house is still half.  You can't talk about one without the other .  It's a relationship.  

 

Yes but one is the driver and that is credit. Read up on it then come back to me - you don't seem to understand the mechanics. 

I will refer you back to Australia, with ever increasing supply yet increasing prices... 

Edited February 6, 2017 by gruffydd

[billybong]

17 minutes ago, allornothing said:

Okay mate. 

Googling 'sydney housing shortage' brings up exactly the same kinds of headlines as 'london housing shortage'.  

Doesn't look too different to me. 

 

 

 

 

 

 

 

They all know the relevant sound bites and headlines etc to use all around the world now.  

Be it global warming through to house prices/housing etc etc including stuff like the homeless and so on.  Murdoch is only one common thread of many in that - the web being another.

Edited February 6, 2017 by billybong

[hp72]

On 04/02/2017 at 9:14 PM, 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.

Agreed on both counts. (Not TCON). 

It's like haemmoregic disease hollowing out the economy. 

[iamnumerate]

On 04/02/2017 at 9:14 PM, 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.

Changing the benefit system would at the stroke of a pen increase the supply by a million homes.

[Riedquat]

20 hours ago, allornothing said:

Why does it have to be one or the other? 

Cant me there be a demand problem AND a supply problem? Unless you solve both there is not likely to be a massive change.

There can be, the question is is there? If the rate of housebuilding falls but the rate of population growth doesn't then you'll have a supply issue, but even then it can still be dominated by other factors.

Anyway decrease demand is the only solution I find acceptable, more building just turns my stomach and gets me angry, so population growth must be tackled, as must ludicrously lax lending. And yes, probably have to build more in some places too unfortunately, but that's tolerable if it's a one-off, and not an exercise that'll need repeating ten years down the line, then another ten, then another ten. A century or more of that has been more than unpleasant enough.

[goldbug9999]

19 minutes ago, Riedquat said:

There can be, the question is is there? If the rate of housebuilding falls but the rate of population growth doesn't then you'll have a supply issue, but even then it can still be dominated by other factors.

Anyway decrease demand is the only solution I find acceptable, more building just turns my stomach and gets me angry, so population growth must be tackled, as must ludicrously lax lending. And yes, probably have to build more in some places too unfortunately, but that's tolerable if it's a one-off, and not an exercise that'll need repeating ten years down the line, then another ten, then another ten. A century or more of that has been more than unpleasant enough.

Ideally we would need:

Stabilisation of the population.

A one-off planning liberalisation building binge.

Restriction of credit primarily to BTL, personally Id favour something quite extreme like not allowing charges on deeds other than for owner occupiers so lenders would be force to risk price them as unsecured loans.

[Riedquat]

24 minutes ago, goldbug9999 said:

Ideally we would need:

Stabilisation of the population.

A one-off planning liberalisation building binge.

Restriction of credit primarily to BTL, personally Id favour something quite extreme like not allowing charges on deeds other than for owner occupiers so lenders would be force to risk price them as unsecured loans.

I completely agree with that. I would much rather we didn't need the one-off planning liberalisation building binge but very, very sadly years of neglected responsibility have got us into the situation where it's a necessary evil. Definitely restrictions on credit, I'd have to ponder on what details I think would be sensible but certainly restricting BTL sounds good (that's preaching to the choir here though).

No alternative that doesn't involve stabilising the population is acceptable to me, and to those who do find it acceptable, well, I suppose you're just counting on it not being enough to annoy you until long after you're dead.

[Assume The Opposite]

Someone at work said their bank was happy for them to use a loan as a deposit... 

[winkie]

On 06/02/2017 at 2:05 PM, billybong said:

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.

Yes....BTL INTEREST ONLY.....interest only per month on a £400,000 debt cost approx £1000 per month....people are paying double that a month to buy a place worth a fraction of that......special terms for special people, people who have the bigger deposit available to put down, never mind where it came from or where borrowed from.

[Sour Mash]

On 04/02/2017 at 4:47 PM, nothernsoul said:

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.

 

Yes, that struck me today as I was listening to yet another media piece pushing the idea that high house prices are solely down to a perceived 'lack of supply'.

The notion that a large part of the reason for the eye watering cost is deliberate interference in the market to support asset  prices (ZIRP/ financial repression/ feckwitted schemes to bolster prices) was not once raised.

Most of the 'solutions' mooted seemed to revolve around subsidising high prices though HTB type schemes, making builders sell some units 'below market value' to people who met specific criteria and various other things like tax rebates.   Not one pundit suggested that lower prices through setting reasonable interest rates and borrowing criteria, plus taxing BTL appropriately might be a good idea.

 

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

Dublin - shortage of supply, huge demand... until they turned the mortgage tap off... prices flattened within weeks. They could've capped further and cut prices. A very easy tool to use. 

"Compared to September 2014, the average asking price in Dublin 6 is actually 2% lower nine months later. In the country's four other most expensive markets, South County Dublin (+2.8%), Dublin 4 (+2.5%), Dublin 6W (+0.8%) and Dublin 14 (-0.3%), prices are effectively unchanged from their level nine months ago. "

It's so easy - in fact, so easy it's not worth even touting other solutions - they take too long and governments aren't capable of implementing them. This is the only easy solution to HPI. 

The other thing about mortgage lending is once the market is rising it triggers yet more lending into the market, and so on... It needs heavy control. 

PS. The IMF is trying to get the mortgage cap lessened... can't restrict the banks can we lol! http://www.independent.ie/business/personal-finance/property-mortgages/mortgage-crisis-imf-demands-mortgage-cap-overhaul-to-ease-rules-34854080.html 

Edited February 7, 2017 by gruffydd