The different origins of the housing crisis by HPCers

[nickb1]

1 hour ago, DrBuyToLeech said:

If we have a housing bubble (and I don't think we do) then all bets are off. Values are out of line with economics, by definition. 

If we have a credit bubble on the other hand (and I'm not sure bubble is the right word here either),  then house prices would rise without rents rising. The income stream is fixed, and rates affect the capitalised value.  That's pretty much exactly what we've seen over the last 2 decades.

Roughly (very roughly) prices should be:

annual rent / annual interest rates

That doesn't tell us anything about causality though.  So if all we have is that relationship, you would be right.  However the relationship between rents and incomes is fixed by the law of rent.  

There are links between house prices and rents though, in that cheap debt also inflates incomes, so it's not as clear cut as all that. 

I think we are actually on the same page, more or less. Though I'm not sure what the distinction is you are drawing between "housing bubble" and "credit bubble". I think if you take a long time series of rents against house prices they will turn out to be co-integrated.

I think it's more accurate to think in terms of speculative inflation of site values in any case, since it's not really bricks and mortar that are becoming inflated as opposed to their location.

[BorrowToLeech]

8 minutes ago, nickb1 said:

I think we are actually on the same page, more or less. Though I'm not sure what the distinction is you are drawing between "housing bubble" and "credit bubble". I think if you take a long time series of rents against house prices they will turn out to be co-integrated.

I think it's more accurate to think in terms of speculative inflation of site values in any case, since it's not really bricks and mortar that are becoming inflated as opposed to their location.

Prices and rents should be cointegrated.  But I think you'd get the same for incomes and rents, GDP and rents, or some other similar proxy. 

The reason I'm cautious about the word bubble is because I think the definition used by economists (to the extent it's defined at all) differs from the common understanding. 

Housing probably is at 'fair value' as an investment, given the level of interest rates.  That doesn't mean the price of houses is fair, economists love to twist language in this way, it just means it's not a bubble.

Interest rates (mortgage spreads anyway) were probably in a bubble pre-2008, but now they're simply pricing in the inevitable bailouts.

The risk is low if the government has your back, so I'm not convinced the markets are definitely mispricing anything.

[Venger]

5 hours ago, Beary McBearface said:

....The case of London since 2012 has shown clearly that restricting lending to owner-occupiers is not enough to cap house price inflation. If you have investors active in the market then they can drive prices. Likewise if you restrict owner-occupiers' access to one form of finance (mortgage borrowing) then if they face a rising market they'll just tap other forms of finance (the so-called Bank of Mum and Dad, for example) more aggressively.

Since about 2013, I've been massively dubious about the idea that it's people borrowing against their incomes driving prices. Whilst owner-occupiers were clearly a big part of the story pre-2008 a lot has changed since then. You can lend like an idiot to idiots if you are going to sell the mortgage on. The securitisation chain is basically dead.

...........Where UK banks are lending to UK households they know that there is a considerable chance that they will be holding those loans on their balance sheet all they way to maturity. That affects their conduct. There has been a total restructuring of UK mortgage lending between the boom years and today and anyone who wants to pretend otherwise is either blind to the facts of the matter or wilfully misrepresenting the situation.

I accept this part, but I think we've had the period of cash rich buying in.

Banks have been restructuring.

Time may come when speculators/ BOMADS/HPIers/ work out they have been taking all the risks, and far less so the banks.

And you tell me banks make money on transactions/churn, and for that they will require lower prices.

 

Quote

 

Frances Coppola on Jun 14th 2014

[..] House prices have risen pretty consistently for over fifty years: yes, in that time there have been three crashes, but the losses in the first two have all been more than recovered, and the losses from the most recent one will soon be recovered too. Property is risky in the short-term, but as a long-term investment it is high-yielding and virtually risk free. And that makes it a better investment for ordinary people than virtually anything else. No wonder people prefer to buy property than save in bank accounts or stocks & shares.

So the fact that property is expensive, and becoming ever more expensive, is actually one of the principal reasons why people want to buy.

http://www.pieria.co.uk/articles/the_british_obsession_with_property

:puke:

Frances Coppola on Jun 10th 2014

Admittedly, London house prices do look inflated: but the London boom is mainly driven by rich people putting their money into cash purchases of prime real estate (and overseas buyers borrowing from overseas banks to buy prime London real estate), not by cash-strapped households over-mortgaging themselves to pay off credit card debts.

[..]We do not have a consumer consumption boom any more. We aren't going to have a consumer consumption driven housing crash, either. This isn't nuts (yet), and if there is going to be a crash, it's a long time off.

http://www.pieria.co.uk/articles/consumption_booms_and_housing_busts

 

Yet we can still have a crash, where speculators/HPIers have to give up mad-gainz,

and banks in position to handle it..... and there are VIs in out there who want banks to do well (shareholders) which means mortgage lending on lower prices.

What the hell use it it for banks to see millions of homes owned outright worth fortunes?  Or owned by foreign speculators.  They have no debt on them / non voting speculators can be squeezed.

Other people who want less money locked up in unproductive housing, but spent in productive economy (I would spend more in economy with lower house prices/not renting---- go to furniture shop..... although my pal nearly got caught out at Dwell -furniture- for his rented place, just before they went under...... - may have come out of adminitration since - had it not been for HPC I wouldn't have had advance warning to tell him to go and ask for a refund and that got processed days before they went under.)

And not everything will be done to protect older people's HPI, imo.   They believe themselves 'core-voters' - but look how the BTLers/118ers were astonished at the move on them.   Absolutely astonished and defenceless.    They thought themselves the power.  They began their letter campaign.   They were/are nothing against power.

[Venger]

41 minutes ago, Venger said:

....Other people who want less money locked up in unproductive housing, but spent in productive economy (I would spend more in economy with lower house prices/not renting---- go to furniture shop..... although my pal nearly got caught out at Dwell -furniture- for his rented place, just before they went under...... - may have come out of administration since - had it not been for HPC I wouldn't have had advance warning to tell him to go and ask for a refund and that got processed days before they went under.)

And not everything will be done to protect older people's HPI, imo.   They believe themselves 'core-voters' - but look how the BTLers/118ers were astonished at the move on them.   Absolutely astonished and defenceless.    They thought themselves the power.  They began their letter campaign.   They were/are nothing against power.

Just to be clear... an apartment in Manchester they rented from a landlord - and where I got a strange sensation of being on a treadmill whenever I went to visit, walking down the corridor. 

Just felt like not getting any further down the corridor, towards their door.  Corridor goes on and on and on... past doors that are all the same.  (They've since moved on to another rental, out of the city.... babies.)

Apartment in Manchester... where a landlord who drives around in top of the range Bentley who owns loads of Manchester properties.  Where some tight-fisted landlord served notice on friends a few doors down because they wouldn't agree to a £25/£50 rent-raise.   Got someone in who would.  (**********)

It wasn't that easy to get the debit-card refund either. 

Had to show receipt about the refund (all processed before happy-dayz full-store went into administration).

It was a table or something, and his wife mentioned them having just bought it.   I had to tell her what I had just read... (read on HPC..... about concerns to their financial position).  They kept me informed.  He found it hard to believe (administration) for everything had looked some hustle and bustle, happy faces.  Days later (after getting a refund processed) store is closed... all locked up/sign up.

 

Edited October 26, 2017 by Venger

[zugzwang]

7 minutes ago, Venger said:

I accept this part, but I think we've had the period of cash rich buying in.

Banks have been restructuring.

Time may come when speculators/ BOMADS/HPIers/ work out they have been taking all the risks, and far less so the banks.

And you tell me banks make money on transactions/churn, and for that they will require lower prices.

 

And yet, in the real world of 2017, house prices continue to rise, mortgage lending remains robust, bankers are richer than ever while the poor learn to do without...

Quote

A rise in re-mortgaging ahead of an expected interest rate rise next month helped boost the value of home loans to £21.4bn last month.

Expectations of a rate hike in November - which have been boosted by better-than-expected economic growth figures - prompted home owners to lock in deals before borrowing costs go up.

That helped fuel the 5% increase in gross mortgage lending in September, compared to the same month last year, reported by trade association UK Finance.

"Competition amongst lenders, as well as near record low mortgage rates, has meant more and more home-owners are re-mortgaging and locking in deals," its monthly report said.

"If talk of the first rate rise in over ten years continues to gain momentum, we would expect to see growth continue in this part of the market."

UK Finance also reported a return to growth in the home-mover market, partly thanks to the Bank of England's Prudential Regulation Authority (PRA) slightly easing rules designed to limit the scale of borrowing at high loan-to-income ratios.

First-time buyers also contributed to the higher level of mortgage lending, continuing a trend seen so far in 2017.

Mohammad Jamei, UK Finance's senior economist, said: "Our data is showing that housing market activity has built up modest momentum since the start of the year, helped by an increase in first-time buyer numbers."

https://uk.news.yahoo.com/home-owners-lock-low-mortgage-133800350.html

Quote

The world’s super-rich hold the greatest concentration of wealth since the US Gilded Age at the turn of the 20th century, when families like the Carnegies, Rockefellers and Vanderbilts controlled vast fortunes. 

Billionaires increased their combined global wealth by almost a fifth last year to a record $6tn (£4.5tn) – more than twice the GDP of the UK. There are now 1,542 dollar billionaires across the world, after 145 multi-millionaires saw their wealth tick over into nine-zero fortunes last year, according to the UBS / PwC Billionaires report.

Josef Stadler, lead author of the report and UBS’s head of global ultra high net worth, said his billionaire clients are concerned that growing inequality between rich and poor could lead to a “strike back”.

“We’re at an inflection point,” Stadler said. “Wealth concentration is as high as in 1905, this is something billionaires are concerned about.

“The problem is the power of interest on interest – that makes big money bigger and, the question is to what extent is that sustainable and at what point will society intervene and strike back?”

Stadler added: “We are now two years into the peak of the second Gilded Age.” 

He said the “$1bn question” is how society will react to the concentration of so much money in the hands of so few.

https://www.theguardian.com/business/2017/oct/26/worlds-witnessing-a-new-gilded-age-as-billionaires-wealth-swells-to-6tn

 

[Bland Unsight]

1 hour ago, Venger said:

And I can't work out your view about lower lending not going to be enough... and 'cash-rich' just going to buy up houses if they begin to fall.

Intervention by the Bank, FCA and Treasury can either support prices or withdraw support. I think that we can also profitably distinguish between measured intervention and dramatic intervention. I'm on the fence about Treasury intervention (Help to Buy equity loans) regarding both its impact on prices and the extent of that impact. In my opinion FCA and Bank intervention has withdrawn support for current prices. Others here have argued otherwise but I don't find their arguments very convincing.

If the relevant authorities used the powers that they now have to impose an LTI limit of 3x one earner & 1x the other earner for two income households and insisted that all new BTL lending was on a repayment basis then you absolutely would crash the housing market IMO. That would be a dramatic intervention. It would be all over the front pages of the newspapers and there would be questions in parliament. I do not believe that there is any democratic mandate for that kind of intervention. No party has included a promise to crash house prices in their manifesto.

On the other hand you can see the kind of intervention we've seen. As LTIs started to climb back to pre-2008 levels the FPC put in the soft cap. As the percentage of purchases which are BTL edged up the Treasury put in Section 24 and the PRA put in SS13/16. These are headwinds to the market but they are not going to sink it. However, when something else turns up the market is more likely to stall than it would have been absent those interventions.

My argument that tightening lending is not going to be enough is more just an observation that it was not enough (or maybe has not been enough yet?). My best guess would be that foreign money and BTL coming into London was enough to keep pushing London higher. With London still going higher owner-occupiers did their usual trick of borrowing as much as they possibly could to avoid missing the boat so they pushed LTIs as high as they could and pushed mortgage terms further out and thus thus also got behind current prices.

The market will turn (at no point in the six years I've been reading and posting has it looked more like London has actually turned). I think that it'll be a bit meaningless to say why it turned once it turned. A wiser poster once answered a question similar to the one in the thread OP by saying that house prices are going up because they are going up. That's why I quoted the NEO72 post. The role of demand is easily overlooked. It doesn't matter why prices start falling, once they do the idea that you have to stretch yourself to buy is replaced with the idea that you might want to hold off buying because prices are falling. Likewise the effects of speculators entering are replaced with by the impact of speculators exiting.

For my money the real problem with UK property is the volatility. We ought to be able to provide a situation where housing is cheaper, better and less likely to either enrich you or impoverish you. I don't think we've made much progress in that direction in the last ten years but to the extent that there has been progress it has been the Bank of England and FCA who have done something constructive by putting and end to the boom era mortgage madness.

 

[Venger]

I know zugzwang - I know....

Quote

 

Foxtons Founder Jon Hunt Appoints Rival Agency To Sell His £50 Million Development
Oct 11, 2017

The founder of London estate agency Foxtons has shown his true feelings for his old agency by appointing rival agent Strutt & Parker to sell his newly listed £50 million development on London’s Albert Embankment.

It’s a veritable slap in the face for Foxtons, as they battle a stagnant London market and a miserable share price which is currently trading at an all-time low.

So why did Hunt reject Foxtons, the company he built from scratch?

The good life: Hunt has a collection of red Ferrari’s, making millions from his supercar collecting hobby. Source: Agent4Stars

Hunt founded the firm in 1981 in a then unfashionable Notting Hill, selling the business to private equity group BC Partners for a cool £375million in 2007, just weeks before the global recession hit.

To attract customers and much need press attention, Foxtons sold properties in its first three months in operation without charging any commission, “in our first year we banked £13,000 and (the business) cost us £46,000 to run, so we were pretty close to bust” Hunt revealed in a rare interview with Business Life in 2012.

Since selling the high street agency, the property mogul has been making extremely successful moves in both commercial and residential property investments in the Capital. He founded his current property investment and development firm Ocubis whilst managing Foxtons in 1995.

Originally a luxury service office business, Ocubis has evolved into a huge business, owning large swathes of London residential property alongside developing residential, commercial and retail real estate.

.......DealMakerz contacted Ocubis to provide a reason for their Foxtons-phobia, but they declined to comment. Has Jon Hunt got a vendetta against Foxtons management? Does he feel like the company has gone off the rails since his departure?

The most obvious reason why Hunt keeps on snubbing his old firm is directly related to recent M&A property activity.

In July this year BNP Paribas Real Estate agreed a deal to buy Strutt & Parker for an undisclosed amount, bringing together 1,500 staff across both residential and commercial. As with most buyouts, the idea is to leverage synergies of two business, which in some cases can provide a discount to end users or clients.

We suspect this is exactly why Hunt keeps ignoring Foxtons.

.........On the face of it, Hunt seems to be rejecting Foxtons simply to save money on multi-million pound development deals. A sadder and more serious conclusion is that one of London’s foremost property mogul’s has lost faith in the company he spent 25 years building – we’ll let you decide.

https://dealmakerz.co.uk/foxtons-founder-jon-hunt-appoints-rival-agency-sell-50-million-development/

 

 

And he's just won planning approval - after many years of trying to get it - for an Icerberg basement for his classic car collection...(according to one news report I recently read).

[spyguy]

A few things not mentioned  together is Brown holy trinity of tax credits, migrants and IO BTL.

Tax credits have gone from a estimate of 200m/y to 22bln/y. Theyve encouraged 50% of famileis with working kids to bascially jack in FT work and let the TC bill, including HB, take the strain.

EE migrants/non EU migrants. My rough +_ready reckoning is that there are about 7m EE migrants in the UK. The majority on low incomes. A large number of tax credits, living in IO BTL houses.

UKGOV has brought in a laughable 18k limit to bring in a non UK spouse.

The salary hurdle for no UK residents needs to rise rapidly - look at Greenfell house. Did anyone working live there? Had everyone with a tenancy illegaly suble it to EE? Answers: No, Yes.

A large part of house prices.budget deficits can be explained  by IO BTL lending to EEers, who claim tax credits.

Theres about 10m people who need to leave the UK. And thats purely on a you can stay if you cover your costs/no recourse to benefits.

 

 

[Venger]

1 hour ago, Beary McBearface said:

Intervention by the Bank, FCA and Treasury can either support prices or withdraw support. I think that we can also profitably distinguish between measured intervention and dramatic intervention. I'm on the fence about Treasury intervention (Help to Buy equity loans) regarding both its impact on prices and the extent of that impact. In my opinion FCA and Bank intervention has withdrawn support for current prices. Others here have argued otherwise but I don't find their arguments very convincing.

If the relevant authorities used the powers that they now have to impose an LTI limit of 3x one earner & 1x the other earner for two income households and insisted that all new BTL lending was on a repayment basis then you absolutely would crash the housing market IMO. That would be a dramatic intervention. It would be all over the front pages of the newspapers and there would be questions in parliament. I do not believe that there is any democratic mandate for that kind of intervention. No party has included a promise to crash house prices in their manifesto.

Yeah but that's exactly what the BTLers say about Section24; "not fair - it wasn't in their manifesto - we're core voters'. x 1000 posts I've read it.  Back from their initial view that they would soon change Conservative minds about S24, to ever growing shock and disbelief - then all the letter writing about how they are core-voter special BTLers.

Quote

Reply to the comment left by "Ros ." at "18/03/2016 - 16:54":

Hi Ros

I don’t think that Section/Clause 24 is government policy. It wasn’t in their manifesto, and I doubt whether any ministers understand its ramifications, including Cameron. Those who show an interest in it are no doubt taken in by Treasury sophistry.

This policy is Osborne’s, the brilliant politician who gave us the omnishambles budget, the tax credits U-turn and now the disability benefits revolt.

This part they got right...

Quote

A manifesto can only be relied upon as a hugely inflated list of things a party will dream up in order to attract voters. Why on earth we haven’t a system in place which renders a manifesto something like a contractual offer where there are penalties if promises are broken is beyond me. 

Life doesn't work that way.  ForeverHPI / BTL++++ wasn't in any manifesto I read.  Imposed on me in the new e-con-o-meh.

Quote

WTF is up with all the math? Have we not all learned by now that math has been proven scientifically false? Math, gravity, physics, etc. have gone the way of alchemy and we have replaced them with new sciences like unicorn fartology, rainbowology, this time is differentology, etc… Come on, you are sounding like my grandpa. “Math”, “percentage”, “economy”, what quaint concepts… Horse, buggy, buggy whip kinda makes me chuckle…

 

1 hour ago, Beary McBearface said:

On the other hand you can see the kind of intervention we've seen. As LTIs started to climb back to pre-2008 levels the FPC put in the soft cap. As the percentage of purchases which are BTL edged up the Treasury put in Section 24 and the PRA put in SS13/16. These are headwinds to the market but they are not going to sink it. However, when something else turns up the market is more likely to stall than it would have been absent those interventions.

My argument that tightening lending is not going to be enough is more just an observation that it was not enough (or maybe has not been enough yet?). My best guess would be that foreign money and BTL coming into London was enough to keep pushing London higher. With London still going higher owner-occupiers did their usual trick of borrowing as much as they possibly could to avoid missing the boat so they pushed LTIs as high as they could and pushed mortgage terms further out and thus thus also got behind current prices.

Sounds reasonable to me.  And I think it's 'not been enough yet'.   There's been perception of banks/govt fully commited to HPI/protecting house prices... and I saw one Bomad in 2015:  "You may get dribs and drabs of better value, but not even that in expensive areas."  Money all stumped up to help upsize.

Headwinds, from these prices levels can result in sharp volatility imo.  You don't need that many sellers, selling for lower prices, to bring values down sharply (imo).

So I disagree with your view that if tighter lending does begin to tilt priced down, as wider market realises banks aren't powering it so much, that 'rich' will step in and more BOMAD.  Not in a market where there is real sense of turn/tighter lending.  There could be cascade falls. 

Quote

I've read and enjoyed a number of the books you mention, but I disagree with your claim. UK house prices are volatile and whilst this volatility shows up over timescales that are significant compared to working lives, the volatility is still there and is still a hazard to be negotiated over an individual's lifetime. The roots of this volatility and the extent to which land (or perhaps the land value of housing wealth) has become so problematic in the UK economy are not some late 90s phenomenon. It was the same damn thing in the late 1980s (and before that too).

You've also made plenty of posts about volatility, including risks from speculators pulling out/selling.

1 hour ago, Beary McBearface said:

The market will turn (at no point in the six years I've been reading and posting has it looked more like London has actually turned). I think that it'll be a bit meaningless to say why it turned once it turned. A wiser poster once answered a question similar to the one in the thread OP by saying that house prices are going up because they are going up. That's why I quoted the NEO72 post. The role of demand is easily overlooked. It doesn't matter why prices start falling, once they do the idea that you have to stretch yourself to buy is replaced with the idea that you might want to hold off buying because prices are falling. Likewise the effects of speculators entering are replaced with by the impact of speculators exiting.

For my money the real problem with UK property is the volatility. We ought to be able to provide a situation where housing is cheaper, better and less likely to either enrich you or impoverish you. I don't think we've made much progress in that direction in the last ten years but to the extent that there has been progress it has been the Bank of England and FCA who have done something constructive by putting and end to the boom era mortgage madness.

Good.

It doesn't matter if we can't immediately see why it has turned. 

If we can't see every single reason (we've got a good grasp of a many triggers that could turn the market - many a combination).

We can leave that to later... after it has turned, Gen Rent isn't being farmed, prices have corrected, money is being spent in productive economy.

We can come back to that.

All that matters is it turns.  

On 24/03/2016 at 10:55 PM, Neverwhere said:

I think buy-to-let (meaning lenders and borrowers both) is coming into the limelight simply because it's one of the most significant remaining problems. BTLers are the largest segment of speculators still acting in the market. Much of the previous speculation by owner occupiers - in the form of liar loans, interest-only lending, and 100%+ LTVs - has already been knocked on the head.

Help to Buy is an issue but the volumes are so low that I don't think it can hold up prices without speculators taking up a significant portion of the market. It's mainly a sentiment driver and speculators are likely the strongest reactors to sentiment drivers, hence without the speculators it has substantially less teeth to drive prices.

MMR has limited loans to income for owner occupiers and Carney has indicated he expects to see an increased spread between base rates and market rates due to lenders meeting the increased costs of higher regulatory and capital requirements, so low base rates should also be less of an issue.

This is especially true if the amount of speculators in the market is reduced, as this would seriously curtail the other consequence of low base rates on the housing market: yield chasing. Supply of actual physical homes is arguably meeting direct demand but falling short of speculative demand, and thus reducing speculative demand would also help with this issue.

Equally there are BTL landlords who have and will get out with massive unearned gains, just as there are other speculators of all stripes who stand to lose it all and more in a BTL-induced correction.

The world is not just. While it's good to try and work out the truth of what's happened what's most important is that the situation gets solved and people who are not to blame at all stop having to suffer the consequences of the actions of those who do share in the blame and are currently living the life of Riley.

And BTLers have lots of problems ahead... right now in fact for some of them.

Mr.Nimrod posting about bankruptcy ahead as 20 years a BTLer, with 60 tenants.

On 30/08/2017 at 12:23 AM, Beary McBearface said:

(Emphasis added)

Spot on V. Spot on.

Questions about responsibility and insight are all well and good, but FFS lets have a massive HPC before we start to reflect on the issues that arise as the result of a massive HPC.

Posting here about how we know best is for the birds. In exactly which way do we know best?

We might have valuable perspectives, interesting questions. We might even just know a great deal more than the people we are arguing with or mocking. However, there is a place for humility. I've taken my lumps when Venger has brought this point to my attention and I am grateful that he chose to do so.

If we stick to data, questions and suppositions then all shall be well. If we start calling winners and losers and assigning responsibility before the race is won then matters may be more problematic.

 

Edited October 26, 2017 by Venger

[BorrowToLeech]

48 minutes ago, Beary McBearface said:

In my opinion FCA and Bank intervention has withdrawn support for current prices. Others here have argued otherwise but I don't find their arguments very convincing.

I think that's a straw man. 

The argument isn't that the BOE have done nothing, it's that they have done less than they should.

They witnessed a horrific car accident, and put £1 into a Red Cross collection tin.  Did you call an ambulance?  No, we didn't do that.

51 minutes ago, Beary McBearface said:

If the relevant authorities used the powers that they now have to impose an LTI limit of 3x one earner & 1x the other earner for two income households and insisted that all new BTL lending was on a repayment basis then you absolutely would crash the housing market IMO. That would be a dramatic intervention. It would be all over the front pages of the newspapers and there would be questions in parliament. I do not believe that there is any democratic mandate for that kind of intervention. No party has included a promise to crash house prices in their manifesto.

Yes now. Not at all in 2008 or 2009.  Rules to prevent the crisis happening again would have been an easy sell then and well within their remit.

I think there's ample evidence that the Bank did everything they could to avoid the reset that should have happened then, not for conspiratorial reasons, but because they think the crisis was a technical hiccup in an otherwise perfectly functioning economy.

 

[Venger]

20 minutes ago, DrBuyToLeech said:

I think that's a straw man. 

The argument isn't that the BOE have done nothing, it's that they have done less than they should.

They witnessed a horrific car accident, and put £1 into a Red Cross collection tin.  Did you call an ambulance?  No, we didn't do that.

Yes now. Not at all in 2008 or 2009.  Rules to prevent the crisis happening again would have been an easy sell then and well within their remit.

I think there's ample evidence that the Bank did everything they could to avoid the reset that should have happened then, not for conspiratorial reasons, but because they think the crisis was a technical hiccup in an otherwise perfectly functioning economy.

My view is that they took the view the economy/banks/society couldn't handle it.

That they've allowed a BTLer/speculator double-down.

....2008---2017

Can't find what I was looking for on Twitter (so difficult to search)...

2016 Merv King 'welcome lower house prices'.

Quote

 

Tuesday 11 October 2016

But Lord King said: "The whole thing has generated reactions which are over the top."

"During the referendum campaign, someone said the real danger of Brexit is you'll end up with higher interest rates, lower house prices and a lower exchange rate, and I thought: dream on.

"Because that's what we've been trying to achieve for the past three years and now we have a chance of getting it."

+VIDEO of him saying that....

http://news.sky.com/story/lower-pound-a-welcome-change-says-former-bank-chief-lord-king-10612690

 

 

And to get there I have to believe they've allowed greed/speculators to double down.  They have the equity to smooth out the losses ahead (HPC) rather than banks.

Although not certain; Carney recently again putting it all on 'lack of supply'.   That's just plain simple 'managing expectations' and such a limited view, imo - and also suggests to me still some way from 'allowing' HPC.

 

 

Often speculators... I've seen a property sell from BTLer to BTLer to BTLer since 2009++ mostly at higher prices, but last one may have taken some loss after costs. 

 

 

 

 

 

 

 

Things change.. and BTLism can change hard...
All those improvements.. vehicles.. but backwardisation in 
housing tenure.  Greed.

 

 

 

 

 

[Kosmin]

5 hours ago, iamnumerate said:

One thing that no one has mentioned that normally when prices rise, supply rises (as happened to houses in Spain etc) sadly that did not happen here.

 

4 hours ago, zugzwang said:

Except there is no 'normal'. The smoothly intersecting supply and demand curves in the economics texbooks are an empirically unsubstantiated fiction.

It is basic economic reasoning and observable in practice that supply rises when prices rise, if there are not restrictions on supply. This does not require smoothly intersecting supply and demand curves.

Denying this is on the same level as denying that money matters for an understanding of macroeconomics.

[Venger]

13 minutes ago, Kosmin said:

It is basic economic reasoning and observable in practice that supply rises when prices rise, if there are not restrictions on supply. This does not require smoothly intersecting supply and demand curves.

Denying this is on the same level as denying that money matters for an understanding of macroeconomics.

Read a great post the other day for why this has not been happening.

drbuytoleech has touched on a few of the reasons as well.

Why housing not anything to do with 'basic economic reasoning'.

[flb]

1 hour ago, spyguy said:

EE migrants/non EU migrants. My rough +_ready reckoning is that there are about 7m EE migrants in the UK. The majority on low incomes. A large number of tax credits, living in IO BTL houses.

UKGOV has brought in a laughable 18k limit to bring in a non UK spouse.

The salary hurdle for no UK residents needs to rise rapidly - look at Greenfell house. Did anyone working live there? Had everyone with a tenancy illegaly suble it to EE? Answers: No, Yes.

A large part of house prices.budget deficits can be explained  by IO BTL lending to EEers, who claim tax credits.

Theres about 10m people who need to leave the UK. And thats purely on a you can stay if you cover your costs/no recourse to benefits.

Nonsense.

First of all, fewer than 300,000 Eastern Europeans migrated to the UK since 2012 according to Migration Watch graphs (if you also consider Poland as "Eastern Europe", that number is obviously higher, but Poland is not in Eastern Europe, it's in Central Europe). In fact, since 2012, there have been fewer than 1M European migrants moving to the UK (I'll explain why 2012 is relevant)

It takes 5 years to get your PR (permanent resident) status here and one more year for citizenship. Therefore, whoever came here before 2012 is likely a citizen now (unless you can think of a strange reason to NOT apply for citizenship/residence) and therefore they're not migrants anymore - they're now British.

Out of the 10M people (where did you get that number, by the way? It's absurd) you'd like to see "gone", about 800k COULD actually be asked to leave at some point (that's not likely, but it would be a possibility). It would accomplish a grand nothing.  Now, if you're talking about eliminating tax credits for EVERYONE, including British people, I'm all for it - you've got my vote, that would definitely help. Otherwise, your "solution" might apply to 800k people (if even that...and that number is decreasing by the day - see the Home Office PR application queue for details) -  as relevant as spitting in a hurricane. 

In what regards your other nonsense - Greenfell + EE migrants - that's so stupid it's almost funny. The Guardian and the Independent ran stories on the victims of the fire (lists here: https://www.theguardian.com/uk-news/2017/jul/13/grenfell-tower-fire-victims-dead-missing-identified-named-so-far and here http://www.independent.co.uk/news/uk/grenfell-tower-fire-victims-list-dead-presumed-killed-71-people-sir-martin-moore-bick-inquiry-a7945866.html ). NO EASTERN EUROPEANS ARE ON THOSE LISTS. NOT ONE. In fact, there's ONE European (Italian) couple listed there. Not a single soul with any connection whatsoever to Eastern Europe. Most of them are BAME - with the odd English guy here and there.

Your anti-EE narrative is getting old and boring. Do try to find another scapegoat.

As for migration to the UK, non-EU migration has been higher than EU migration (I'm talking about the entire EU, not just EE) every single year since 1991 (when the graphs start). Graphs can be generated here: https://www.migrationwatchuk.org/statistics-net-migration-statistics/#create-graph

Edited October 26, 2017 by flb
edited for clarity

[Kosmin]

Just now, Venger said:

Read a great post the other day for why this has not been happening.

drbuytoleech has touched on a few of the reasons as well.

Why housing not anything to do with 'basic economic reasoning'.

Can you quote the great post and explain what this has to do with basic economic reasoning not applying to housing?

 

 

If you could build a house anywhere, builders who are hoarding land would see their values collapse. People would start building and prices would adjust. That's the theory. Comparing Britain with countries which have fewer restrictions we can see supply increased and prices were/are lower.

[Venger]

1 minute ago, Kosmin said:

Can you quote the great post and explain what this has to do with basic economic reasoning not applying to housing?

...If you could build a house anywhere, builders who are hoarding land would see their values collapse. People would start building and prices would adjust. That's the theory. Comparing Britain with countries which have fewer restrictions we can see supply increased and prices were/are lower.

Can only do the HPC post by DrBuyToLeech - very very good.

Article the other day was from a source I can't easily search... very very good in other ways.

Although you're introducing something else there, about building where you want to (even I don't want to see that - seen some right crappy places - we need certain regs)

My point was about how we've had years of very low inventory on market, in blistering to extreme to new extreme areas of the country for HPI.

Very few tempted out to sell..... housing market (supply contained) isn't like other markets.   Mad gainz not tempting out sellers, sometimes because anticipate further HPI.

Quote

 

Estate agents have lowest stock of homes for 40 years
By Brian Milligan
Personal Finance reporter
13 July 2017

 

http://www.bbc.co.uk/news/business-40581912

 

Another BTL for you down South Kensington?

On 21/09/2015 at 1:38 PM, DrBuyToLeech said:

The idea that older people don't see their homes as investments is a ridiculous self-serving platitude.

If that were true, the age demographics of landlords wouldn't be what they are, the daily mail wouldn't print the house price of every serial killer and murder victim, and house prices probably wouldn't be an issue.

Very few people can afford to ignore the value of their home, whatever their age, it's a key factor in everyone's decisions about housing.

I'll repeat my earlier point, in the hope that reading comprehension wasn't just a passing fad from my youth.

We live in a market economy, of sorts. The selling point of a market economy is that selfish decisions should lead to an optimal allocation of resources.

The distribution of housing is not optimal. Why?

The elderly ought to downsize. Not that they should be forced to, like in a command economy, but that it ought to be the outcome of their selfish decisions, and it isn't. That is a fact that needs explaining.

I claim that this can be explained by looking at the lack of incentives to move. Retired people don't downsize because:

1. They don't pay the costs of their decision, other people do.

2. Homes are investments, and the financial incentives beat the real economic incentives.

In other words, we don't have a free market for housing. An alternative position is that we do have a free market, but free markets don't work for some reason.

'Some older people are poor' isn't an alternative argument.

Nor is individual psychology, the relative mentality of demographic groups (as if such a thing even exists) or how anyone feels about anything.

 

[Kosmin]

25 minutes ago, Kosmin said:

 

It is basic economic reasoning and observable in practice that supply rises when prices rise, if there are not restrictions on supply.

 

11 minutes ago, Venger said:

Read a great post the other day for why this has not been happening.

drbuytoleech has touched on a few of the reasons as well.

Just re-reading this I'm not sure what you mean.

There are restrictions on supply, so I'm not sure you can use the observation that supply isn't increasing to undermine the argument that supply will increase in response to price increases unless there are restrictions on supply.

 

[BorrowToLeech]

18 minutes ago, Kosmin said:

Can you quote the great post and explain what this has to do with basic economic reasoning not applying to housing?

 

 

If you could build a house anywhere, builders who are hoarding land would see their values collapse. People would start building and prices would adjust. That's the theory. Comparing Britain with countries which have fewer restrictions we can see supply increased and prices were/are lower.

Basic economic reasoning does apply to housing, it's naive economic reasoning that doesn't work. 

If you could build anywhere, then land would have no value ever. But you can't because of geometry.

I can't build a house next to my office because someone already owns that land. And the land next to it, and so on for miles. 

What makes land special (although it isn't the only commodity that behaves this way) is that its supply is fixed and locations are unique.

If I want access to the London job market I have to buy land within commuting distance of London.

That land can't be manufactured, so the supply won't rise as the price does. Nor is land in Aberdeen a useful substitute.  So land is priced according to demand not supply. 

Edited October 26, 2017 by DrBuyToLeech

[BorrowToLeech]

8 minutes ago, Kosmin said:

 

Just re-reading this I'm not sure what you mean.

There are restrictions on supply, so I'm not sure you can use the observation that supply isn't increasing to undermine the argument that supply will increase in response to price increases unless there are restrictions on supply.

 

That observation holds in other countries as well. 

Planning reduces the total amount of land available, it doesn't make it any less responsive to price signals. 

Edited October 26, 2017 by DrBuyToLeech

[Kosmin]

7 minutes ago, DrBuyToLeech said:

Basic economic reasoning does apply to housing, it's naive economic reasoning that doesn't work. 

If you could build anywhere, then land would have no value ever. But you can't because of geometry.

I can't build a house next to my office because someone already owns that land. And the land next to it, and so on for miles. 

What makes land special (although it isn't the only commodity that behaves this way) is that its supply is fixed and locations are unique.

If I want access to the London job market I have to buy land within commuting distance of London.

That land can't be manufactured, so the supply won't rise as the price does. Nor is land in Aberdeen a useful substitute.  So land is priced according to demand not supply. 

When I said "if you could build a house anywhere" I meant providing you owned the land. I don't think anyone would go to the trouble of building a house on land they didn't own, aside from homesteading new areas, which clearly isn't relevant to Britain.

Even in London and the surrounding areas there is space to build. If restrictions were removed people might build more or people might sell for fear of increased building. Do you think that would probably reduce prices?

[Venger]

21 minutes ago, Venger said:

Can only do the HPC post by DrBuyToLeech - very very good.

Article the other day was from a source I can't easily search... very very good in other ways.

Still searching my History - but I have feeling I won't be able to find it... it was hot with so many good reasons about our housing market that does not work to rational economic theories.

There was also this one... 'reasonably interesting'.

https://medium.com/@ian.mulheirn/2-1-billion-square-metres-to-swing-a-cat-in-b1f13ee7ad6b

 

[Kosmin]

14 minutes ago, DrBuyToLeech said:

That observation holds in other countries as well. 

Planning reduces the total amount of land available, it doesn't make it any less responsive to price signals. 

In some countries it is common for people to buy a plot of land and build a house. These countries have cheaper housing (land) prices. Do you think that's a coincidence?

[BorrowToLeech]

Just now, Kosmin said:

When I said "if you could build a house anywhere" I meant providing you owned the land. I don't think anyone would go to the trouble of building a house on land they didn't own, aside from homesteading new areas, which clearly isn't relevant to Britain.

Even in London and the surrounding areas there is space to build. If restrictions were removed people might build more or people might sell for fear of increased building. Do you think that would probably reduce prices?

On balance I don't think it would reduce prices significantly.  The owners of that land would immediately charge as much as they could for the land, and that price would depend upon the local job market.  

Are you suggesting that land with planning in London would not be worth a fortune?

If you could flood the market with land, that might have a temporary one-off effect on prices.  The London green belt is the obvious candidate for this, although it's not so obvious because greenbelt land lacks amenities and transport links, so it's inherent value is lower than it would otherwise be. 

This still doesn't change the economics though, because its still not land supply responding to price signals.  Valuable land would  still be in fixed supply, it's just that the fixed amount is higher. 

[flb]

Just now, DrBuyToLeech said:

On balance I don't think it would reduce prices significantly.  The owners of that land would immediately charge as much as they could for the land, and that price would depend upon the local job market.  

Are you suggesting that land with planning in London would not be worth a fortune?

I think he's suggesting that there wouldn't be "land with planning permission" in London, because "planning permission" could be eliminated and/or replaced with a few general guidelines (common sense "regulations", mostly - like not building a skyscraper next to your neighbour's 2 bed house, as you'd block the light etc)

Land owners couldn't charge too much, as you'd have the option of buying land ANYWHERE if you didn't require planning permission.

That is, in fact, the reason for which "land with planning in London" is so expensive - the fact you can't just buy & build "anywhere", thus creating and maintaining "scarcity".

Right now, planning permission is the base of the pyramid for the property "mafia", the very foundation on which their house of cards has been built. Get rid of it and the whole thing will come down crashing. Planning permission is also what made plagues like "leasehold", "ground rent" and "service charge" possible - and we're talking about ridiculous amounts. 

I totally understand that there need to be some common sense regulations (not building too close to your neighbours, not building a significantly taller building next to them etc), but what they've done with it (PP) is completely stupid - another prop for the land hoarders/developers and another F.U for the average bloke.

 

[BorrowToLeech]

5 minutes ago, Kosmin said:

In some countries it is common for people to buy a plot of land and build a house. These countries have cheaper housing (land) prices. Do you think that's a coincidence?

Yes, or at least I think it's a small contributing factor.   Self build is as difficult in the centre of Sunderland as it is in Mayfair, but prices are quite different.  So building rules clearly don't explain price variations. 

Internationally almost all western countries, certainly the Anglo-Saxon countries have had price booms, with varying building regimes.  I've yet to find one with a housing shortage.