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'vanished' Housing Bubble

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'Vanished' housing bubble may be a dangerous illusion

BILL JAMIESON

IF THERE is one certainty in economics, it is that the biggest problems can be made to disappear depending on the statistics used.

Another concern is the reliance on misleading statistical averages. No one lives in an "average" home. And the average figures happily quoted by the likes of the Halifax and the Nationwide obscure the reality of house price stagnation and falling prices in many regions of the UK.

http://business.scotsman.com/economy.cfm?id=143692006

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Nothing new I know, but I found this bit particularly interesting:

There is a respectable argument... there has been in the housing market ... a "one-off paradigm shift", brought about by the widespread and prolonged falls in inflation and in interest rates.

Lower nominal interest rates make possible a rise in debt-to-income ratios and thus increase the amount of money buyers can afford to pay. As a result, house price-to-income ratios have hit historic highs. The argument, eloquently advanced in a paper this weekend by UBS analyst Larry Hatheway, is that there has not been a house price "bubble" in the commonly understood sense of a flight from rational pricing, but a structural change leading to a change in lending practices. More people can borrow. And people can borrow more.

Which probably explains why prices are stickng.

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Edited by Baz63

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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