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Peter Hedditch

Is ‘lack of supply’ an illusion?

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Greetings HPCers! Thanks for adding me into the forum.

Much has been said about how a fundamental underlying lack of supply will continue to keep housing prices up in London & SE. Don’t get me wrong – I think the nefarious activities of the builder/developer cartel do much (like De Beers with diamonds) to create artificially high prices. i.e. there is a sense in which there IS a genuine lack of supply.

However, how much of this ‘lack of supply’ of stock is just down to vendors either taking their properties off the market or refusing to put them on the market in the first place (despite a desire to move home)?

i.e. is there a solidarity among homesellers, who, refusing to accept that the end of the bubble has arrived, are determined to hold out through the wishful thinking of the market picking up again in the near future? What happens when some critical trigger breaks this stalemate up? I remember the recent nature documentary which followed the annual thawing of some frozen waterfall in North America.

Back in the late ‘80s and early ‘90s it was very high interest rates and job losses that FORCED reluctant vendors to sell for WHATEVER PRICE THEY COULD GET. What will it take this time, and WHEN will it happen, that enough sellers break ranks and realise that it’s better to sell now than to sell in an even weaker market a year or two down the line?

What will all of this do to the illusion of lack of supply in the prevailing theory of housing market 'experts'?

[BTW, thanks go out to the HPC community for introducing me today to Property Bee on Firefox. Anyone still not using this browser plugin for Rightmove, install now!] J

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I think a big part of it is that nobody can afford to move up to something bigger and not many want to downsize.

Perhaps an alternative way of looking at things would be the total value of all properties actually sold by month/year, does anyone have figures for that?

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There's definitely a lack of decent housing in the south east. The problem to solve is that everyone seems to want to live there more than anything else.

That "lack of supply" argument is being used to tear up huge amounts of greenbelt near me though and I live nowhere near the south east. 

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12 hours ago, Habeas Domus said:

I think a big part of it is that nobody can afford to move up to something bigger and not many want to downsize.

Perhaps an alternative way of looking at things would be the total value of all properties actually sold by month/year, does anyone have figures for that?

As people move less, I am not sure that would be meaning full.

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There's about 20,000 empty properties in GL area.  A lot of empty houses are owned by Transport for London apparently.

This 20,000 figure pre-dates Grenfell BTW.

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No, but the problem is lack of social housing & lack of measures to restrict wealth transfers to landowners. All else equal more private housing never lowers prices.

Windfall gains from permissions just pushes land prices up x100+.
Aggomeration/density effects (demand) from development and infrastructure are capitalised into higher land prices.
There's no alternative, so landlowners have no incentive to build any more than they can sell at max £ one can get hands on.
Prices have often risen most when rate of building was highest, until credit availability collapses.
etc

What will it take this time? Same as every other time - a crash when land prices get too high, a credit crunch, or tax changes to favour working over rentseeking.

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I can only comment on my area.

Plenty of dumps

Plenty of flats and ex BTL

Plenty of nice houses over 600,000£ for sale for ages 

A shortage of family homes at 250K 3 bed and under 350K 4 bed.*

* people can actually buy at this level

 

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1 hour ago, PopGun said:

It's a myth. There's plenty of housing. Problem is one person can own many of them.

The one home at a million is no longer fashionable when can have four decent desirable ones that are in high demand at quarter of a million each.....growth and income.;)

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Hmm, not sure about supply.

Its v. Low levrl of transactions.

Is it  problem?

Yep.

There will be a large number of the overleveraged running for the door, finding its tiny.

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4 hours ago, Fromage Frais said:

I can only comment on my area.

Plenty of dumps

Plenty of flats and ex BTL

Plenty of nice houses over 600,000£ for sale for ages 

A shortage of family homes at 250K 3 bed and under 350K 4 bed.*

* people can actually buy at this level

 

This.

There is plenty of 3 bed priced at 350k but not a lot of 3 bed at 250k. Plenty of 4 bed at 450 but but not a lot at 350k. That which is priced well and is a forced sale, ie a probate sells fast. The kite flying greedy deluded vendor thinks its worth 100k more than 2 years ago.

And so is the stalemate.

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1 hour ago, zugzwang said:

Depressing. Even the non-residential numbers are holding up. F***ing HtB.

I guess there could be an element of getting in before its too late.

The withdrawal of MIRAS in the 1980s signalled a market top.

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2 hours ago, GreenDevil said:

This.

There is plenty of 3 bed priced at 350k but not a lot of 3 bed at 250k. Plenty of 4 bed at 450 but but not a lot at 350k. That which is priced well and is a forced sale, ie a probate sells fast. The kite flying greedy deluded vendor thinks its worth 100k more than 2 years ago.

And so is the stalemate.

Cartel pricing imho

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33 minutes ago, maverick73 said:

Demand vs. Supply... prices are driven my demand of assets. When the price is too high then the prices come down to re-energise demand.

They do in a free market.

This isn't a free market.

 

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Re: stats showing slowdown in the market, I was really thinking about London and the South-East, as per my original post. There does seem to lots of evidence about slowdown both statistically and anecdotally in these regions.

 

 

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17 hours ago, kzb said:

There's about 20,000 empty properties in GL area.  A lot of empty houses are owned by Transport for London apparently.

This 20,000 figure pre-dates Grenfell BTW.

How many are fit for habitation?

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The “lack of supply” argument works by forcing people to accept higher and higher prices. Notice how even ‘sensible’ mortgage lending is at four and a half times and prices for a normal family semi are at the quarter of a million pounds. Currently one in ten mortgages are for over thirty five years. As already pointed out the lack is in affordability in the market raise rates to the correct level would solve that and help FTBs save.

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It's not a myth, so much as a lie.  

For most of the 21st century the population of houses grew much faster than the human population.

Year Dwellings Population Ratio

2014 28,073 64596800, 2.30

2008 27,047 61823800, 2.29

2001 25,468 59113000, 2.32

1991 23,552 57438700, 2.44

1981 21,577 56357500, 2.61

1971 19,259 55928000, 2.90

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1 hour ago, DrBuyToLeech said:

It's not a myth, so much as a lie.  

For most of the 21st century the population of houses grew much faster than the human population.

Year Dwellings Population Ratio

2014 28,073 64596800, 2.30

2008 27,047 61823800, 2.29

2001 25,468 59113000, 2.32

1991 23,552 57438700, 2.44

1981 21,577 56357500, 2.61

1971 19,259 55928000, 2.90

I've seen figures for average number of people per dwelling before, and I think it's a good statistic. I do have two concerns though:

(1) It's a ratio of two numbers. I'm happy that ONS (or whoever) can count dwellings accurately. I'm not so convinced they can count the population correctly. If Spyguy is correct and there is another 3M (or 5%) of the population uncounted, that raises the 2014 ratio from 2.30 to 2.42. Not a huge effect, but it puts us back to 1990's ratios, when there was (if memory serves) quite a lot of homelessness / pressure on supply.

(2) Change in population and family structure. If there are a lot more elderly couples or elderly singletons than previously, then that puts pressure on supply for the younger part of the population. Similarly, if people are marrying and having families later, there will be a need for more houses per head of population in order to meet demand. For sure, strangers can (and do) live in HMO's, but if they don't want to, that doesn't alter the fact that there are too few houses, and thus a lack of supply.

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