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The housing crisis is all about supply and demand – of credit

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I like Money Week, particularly their views on property. Bill Bonner's book Empire of Debt is one of the best books ever written, so entertaining too.

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There's a great graph that's posted here periodically showing how population and houses have been stable / in tandem for decades.  Only credit has fuelled this hpi madness. 

I'll see if I can find it. Feel free to beat me to posting it first.

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10 minutes ago, Agentimmo said:

There's a great graph that's posted here periodically showing how population and houses have been stable / in tandem for decades.  Only credit has fuelled this hpi madness. 

I'll see if I can find it. Feel free to beat me to posting it first.

yes credit....AND conditions of scarcity to give rise to competitive bidding.  Without competitive bidding there is no mechanism for inflation.  the two run in parallel.

If its only credit driving HPI why are there such huge variances in HPI between say Hartlepool and Cambridge?  Credit conditions are the same.  I expect it is because supply is not meeting demand in Cambridge and giving rise to competitive bidding.  Not so true in Hartlepool.

 

 

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7 minutes ago, Wayward said:

yes credit....AND conditions of scarcity to give rise to competitive bidding.  Without competitive bidding there is no mechanism for inflation.  the two run in parallel.

If its only credit driving HPI why are there such huge variances in HPI between say Hartlepool and Cambridge?  Credit conditions are the same.  I expect it is because supply is not meeting demand in Cambridge and giving rise to competitive bidding.  Not so true in Hartlepool.

 

 

I would imagine the lender would look at wages in each of those towns and lend on the expectation of getting their money back,  with interest. Jobs attract wage earners. Not disagreeing with you btw, but credit and the easy availability of it is surely the main driver?

I live in an area of France that's prosperous, like Cambridge,  but credit is limited.  A 4 bed semi with a pool costs 300k. 

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35 minutes ago, rollover said:

Bank of England tightens mortgage rules: what it means for you

Yahoo

Quote

The Bank is keen that lenders do not get lulled into a false sense of security by current low interest rates and offer increasingly risky loans. 

Well you worried about too much borrowing you could maybe I dunno ... PUT THE F'KIN INTEREST RATE UP .... or something.

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In the article it says banks have been using these guidelines since 2014, and BTL have lower stress tests.

I thought they were bringing them in-line with each other!

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4 hours ago, Wayward said:

yes credit....AND conditions of scarcity to give rise to competitive bidding.  Without competitive bidding there is no mechanism for inflation.  the two run in parallel.

If its only credit driving HPI why are there such huge variances in HPI between say Hartlepool and Cambridge?  Credit conditions are the same.  I expect it is because supply is not meeting demand in Cambridge and giving rise to competitive bidding.  Not so true in Hartlepool.

2

1001 potential purchasers chasing 1000 houses will provide the scarcity needed to give rise to competitive bidding. There doesn't need to to be a huge shortage of homes.

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45 minutes ago, Just_Do_It said:

But if the potential purchasers can't get the credit then the agreed price is going to be lower than the asking price.

Indeed.

Nobody can borrow £600k? Nobody sells a home for £600k.

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5 hours ago, Wayward said:

yes credit....AND conditions of scarcity to give rise to competitive bidding.  Without competitive bidding there is no mechanism for inflation.  the two run in parallel.

If its only credit driving HPI why are there such huge variances in HPI between say Hartlepool and Cambridge?  Credit conditions are the same.  I expect it is because supply is not meeting demand in Cambridge and giving rise to competitive bidding.  Not so true in Hartlepool.

 

 

There's always scarcity. 

The difference in prices between location is due to the difference in income between locations. 

This has been understood for a couple of centuries. 

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50 minutes ago, ThoughtCriminal said:

The sullen refusal to accept the consequences of unprecedented levels of immigration is comical.

House prices have risen since 2004 in Scotland with no mass immigration. Probably seen a fall in population in this period. 

Australia has about 20million people and no shortage of land to build on. Massive bubble.

Credit bubble. By far.

 

 

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8 hours ago, Noallegiance said:

Indeed.

Nobody can borrow £600k? Nobody sells a home for £600k.

Their is a fallacy in the prices... an asset is only worth what a fool is willing to pay ?

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14 hours ago, Agentimmo said:

There's a great graph that's posted here periodically showing how population and houses have been stable / in tandem for decades.  Only credit has fuelled this hpi madness. 

 

There's a great graph that's posted here periodically showing how population and houses have been stable / in tandem for decades.  Only credit has PREDATORY LIAR LOANS have fuelled this hpi madness.

 

Corrected.

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10 hours ago, ManVsRecession said:

1001 potential purchasers chasing 1000 houses will provide the scarcity needed to give rise to competitive bidding. There doesn't need to to be a huge shortage of homes.

yes I agree.  but the greater the scarcity the more fierce the bidding and the more folks will have to extend to win the bidding.  Plus the larger pool of bidders means the more folks with deeper pockets.

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8 hours ago, Agentimmo said:

House prices have risen since 2004 in Scotland with no mass immigration. Probably seen a fall in population in this period. 

Australia has about 20million people and no shortage of land to build on. Massive bubble.

Credit bubble. By far.

 

 

You couldn't be more wrong.

"The population of Scotland has increased each year since 2001 and is now at its highest ever. For the latest year population growth for Scotland has been higher than that of the EU15 countries. In 2016 the average annual population growth rates since 2007 for Scotland and the EU15 were 0.50 and 0.41 per cent, respectively."

 

- Scottish Government 

 

Every bit of that population increase has come from immigration and Scottish house prices began climbing just as that immigration began.

 

Other than that, though, no link whatsoever......

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9 hours ago, DrBuyToLeech said:

There's always scarcity. 

The difference in prices between location is due to the difference in income between locations. 

This has been understood for a couple of centuries. 

Scarcity of housing supply is by design - it isn't inevitable.

If variances in house prices geographically is due only to average income variances geographically why the huge variances in house prices v average income ratios across the county (with same credit conditions)? 

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19 minutes ago, Wayward said:

Scarcity of housing supply is by design - it isn't inevitable.

If variances in house prices geographically is due only to average income variances geographically why the huge variances in house prices v average income ratios across the county (with same credit conditions)? 

+1

Dual causes. Affordability and immigration. The open door immigration policy is intended to remedy the affordability issue by subdivision of the housing stock, hence Barwell's dog kennels.

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The world economy needs and thrives on inflation, the inflation of money created via debt......gets to a certain point and they do pull in the reigns via tighter controls and/or higher costs.....all this money should, if it works well produce lots more for consumers to desire and purchase......how many steaks a week can a person eat? how many homes can a person service?....big problem being, those that have it don't need or can spend enough of it and can't find good enough places to store/hoard it, those that want it and need it do not have the means or ability to secure it or pay for it......there must come a point where the balance tips itself over. ;)

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I still think lack of regulation and cheap credit is to blame.

I was shocked to find out the excessive amount of credit/debt I am allowed borrow, and it is shocking to see how much someone can borrow without much of a deposit built up. It just isn't right. If it was regulated, such as no foreign investors, government schemes, clamp down on BTL and second homes. Including safe lending multiples with at a 10% deposit.

Additionally, IR being raised to normal levels will naturally bring it down further, but those things mentioned above will have an impact.

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17 hours ago, Agentimmo said:

There's a great graph that's posted here periodically showing how population and houses have been stable / in tandem for decades.  Only credit has fuelled this hpi madness. 

I'll see if I can find it. Feel free to beat me to posting it first.

This one? I'm the persistent offender!

UK-House-Prices-1997-2014.png

Source: http://positivemoney.org/issues/house-prices/

Edited by Eddie_George

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15 minutes ago, Eddie_George said:

This one? I'm the persistent offender!

UK-House-Prices-1997-2014.png

Source: http://positivemoney.org/issues/house-prices/

That's the one, Eddie_George. Many thanks sir ! :)

 

A picture speaks a thousand words as they say.

Sure , in local micro markets immigration - whether from outside the UK or within - will play a role. Overall, the graph shows it's a credit bubble.

Absolutely no reason why a house should be 10 times avarage earnings in my parents home town , when it was 3 times in the 80s. And today industry has gone and the high st is closing down year after year.

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