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Anyone up for this? If so, we could write a emotion free counter argument against the bull reports we keep seeing in the press. Outlining why the bubble can't continue, why FTBers aren't buying, why BTL isn't profitable anymore and why buying at high prices and low interest rates is potentially devastating.

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Here is a start:

One of the classic bullish arguments is that low interest rates are the principal explanation for the rapid growth in house prices since 2001. Although at first glance the argument is tempting, once it is subjected to scruitiny it becomes obvious that it can not explain a doubling in house prices over the past five years.

When mortgage lenders and other parties with vested interests in supporting house prices quote "low interest rates" they are of course refering to the nominal (non inflation adjusted) rate. Although they are correct that today's nominal rates are low, they conveniently ignore the fact that the nominal rate has little or no influence on underlying value of housing.

As any competent economist would tell you, it is the real (inflation adjusted) rate that matters. If you graph the real interest rate over the last thirty years the story you get is somewhat different. The first point to note is that by historical standards the real interest rate is not all that low. The second is that the big falls in the real rate occured in the early 1990's, long before the recent growth. Both of these points strongly suggest that this is not an adequate explanation for the recent spectacular growth.

The final nail in the interest rate coffin comes when we try to attach some figures to the model. Econometric studies suggest that every 1% fall in the real interest rate leads to a 2-3% rise in house prices. If we take a extreme scenario and assume a 12.5% fall in the real interest rate coupled with a 4% elasticity we still only get a 50% increase in house price. Even in the extreme example we get nowhere near explaining the recent inflation, in the real world we can explain perhaps 10% of the rises.

We can therefore see that, despite the emphasis placed upon interest rates by housing bulls, the real explanation for the rapid growth over the last five years must lie elsewhere.

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I think that an umbrella organisation for homebuyers needs to be established. HPC.co.uk is a broad church, ranging from STRs, to FTBs to people wanting to move to a larger home for family reasons.

The STR angle is unworkable, as they are basically speculating for personal gain. Nothing wrong with that, but it doesn't garner any sympathy in the outside world.

A "Householders Association" on the other hand would be perfectly placed to gather, analyse and compile information on the state of the market and its social and economic impacts on a large chunk of the population. Such an organisation could represent the interests of FTBs and families who are struggling to buy a property suitable for their needs.

This is a workable angle, as it addresses the very real social and economic injustice that his resulted from the boom, and is more likely to be received in a positive light by the media.

The organisation could draw together these disparate threads, and present it to the media in a coherent, easily digestible manner. Let's face it, they need to be spoonfed information. At the moment it is only VIs who are doing this. The other side of the story needs to be put across.

A press release could give real world examples of people who have their lives on hold due to lack of affordable accommodation, families who are living in cramped accommodation, people who have been financially ruined by huge mortgage debts.

The focus needs to be very much on the negative impacts of high housing costs on society and the economy.

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Post the article via somewhere like prweb.com which for a small fee will distibute a press release.

Above all make sure to have a catchy headline and that you get the main point across in the first sentence or two. The use the other paragraphs to give more detail - don't expect editors/hacks to read anything more than the first paragraph.

For example:

Spinning people into a web of debt...

Mortgage Lenders and Estate Agents through their hyping of the property market have consigned an entire generation to a life of debt just to get their foot on the property ladder. Instead of spending their hard earned cash in shops and services and helping keep our economy going they're bypassing the middle-man and giving the money straight to the bank.

...

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Spinning people into a web of debt...

Mortgage Lenders and Estate Agents through their hyping of the property market have consigned an entire generation to a life of debt just to get their foot on the property ladder. Instead of spending their hard earned cash in shops and services and helping keep our economy going they're bypassing the middle-man and giving the money straight to the bank.

...

Mustrum, that is pure genius! Simple and to the point - get it published!!! NOW I SAY NOW!!!

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This site has issued press releases in the past..... its been a while since the last one..

Has anyone got the previous press releases? I would like to read them!

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Well, we will have to do a little better than this, I think. A quick critique of what we have so far. :)

Par#1. Firstly, this bull argument seems rather oddly fenced in – why only since 2001, surely it works fine from 1995 and earlier? What scrutiny has it been subjected to? Simply saying that "it’s obvious that …" is not good enough. In fact, proper scrutiny shows that it explains prices very well up to about 2002—2003 when it is overtaken by the bubble dynamic.

Par#2. Again, a rather transparent attempt to re-write what others (the evil VIs) have said and to draw out the distinction between nominal and real rates. Then make the completely false claim that nominal rates have little or no influence on the housing market.

Par#3. We have an unconvincing attempt to paint anyone using the words “nominal rate” as an incompetent. Reinforce the point with pseudo-academic waffle. It's not clear whether this trying to present the bull argument or ridicule it.

Par#4. Which figures, which economic studies? Unfortunately, the specific points about the sensitivity of prices to rate changes are mostly nonsense. There are some dubious calculations, and the conclusion that because the answers are wrong the theory (i.e. the supposed bull argument?) must also be wrong. [presumably the intended structure of the debate was to mis-represent the enemy argument, then miss-apply it to produce nonsense, then riducule it for being "wrong"]

Par#5. Now wrap up in a way that is completely unconnected to the previous four paragraphs with a statement the effect “the bulls are wrong”.

Apologies for a harsh critique, but best to see it here rather than later when it's published. B)

Edited by spline

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My opinion (17 years marketing including a contract at a broadsheet) is that we would need to target a VI on the other side of the fence. Something like a debt charity who has enough gravitas to get the mainstream meeja interested.

The story needs to be sensible and easy to follow without too many stats. Personally I don't think we're close enough yet.

A lot of posters on this site thinks journos are dummies - they are not. I'm not the biggest fan of the meeja but to think they are deliberately talking the market up is ludicrous. That is why they won't listen to people from this site. Just think for a minute that you are a journo at the beeb - your talking to the gov't, to the finance industry and oh here comes another e-mail from "OrcSlayer" with what appears to be their maths statistics dissertation. There is also a MASSIVE difference in journalistic terms between opinions and hard facts.

That doesn't mean that we couldn't prove something interesting (and there are some fantastic analysts on the site) BUT it needs to be done in such a way that a tabloids readership can understand it.

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Well, we will have to do a little better than this, I think. A quick critique of what we have so far. :)

Par#1. Firstly, this bull argument seems rather oddly fenced in – why only since 2001, surely it works fine from 1995 and earlier? What scrutiny has it been subjected to? Simply saying that "it’s obvious that …" is not good enough. In fact, proper scrutiny shows that it explains prices very well up to about 2002—2003 when it is overtaken by the bubble dynamic.

Par#2. Again, a rather transparent attempt to re-write what others (the evil VIs) have said and to draw out the distinction between nominal and real rates. Then make the completely false claim that nominal rates have little or no influence on the housing market.

Par#3. We have an unconvincing attempt to paint anyone using the words “nominal rate” as an incompetent. Reinforce the point with pseudo-academic waffle. It's not clear whether this trying to present the bull argument or ridicule it.

Par#4. Which figures, which economic studies? Unfortunately, the specific points about the sensitivity of prices to rate changes are mostly nonsense. There are some dubious calculations, and the conclusion that as the answers are wrong the theory (i.e. the supposed bull argument?) must also be wrong. [presumably the intended structure of the debate was to mis-represent the enemy argument, then miss-apply it to produce nonsense, then riducule it for being "wrong"]

Par#5. Now wrap up in a way that is completely unconnected to the previous four paragraphs with a statement the effect “the bulls are wrong”.

Apologies for a harsh critique, but best to see it here rather than later when it's published. B)

Spline makes two basic criticisms of my post, dubious calculation of interest rate elasticities and that it is false to suggest that nominal rates don't affect the uk housing market.

Re interest rate elasticity see Meen, 1998, “Modelling Regional House Prices: A Review of the

Literature” No.84, Office of the Deputy Prime Minister.

Re the importance of real interest rates see Farlow: "Strikingly, given the current emphasis being placed on it by UK mortgage banks, in no econometric study has the nominal interest rate ever been found to play any role in the long-run determination of house prices. At the end of the day, it is the real costs of housing that matter." Similar quotes can be attributed to other sources.

Of course a study by the IMF did find that nominal rates have an effect in the short run however given the subject matter this is neither here nor there, except to note that this is another way of saying that housing bubbles occur (which is the whole point of the post anyway!)

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Spline makes two basic criticisms of my post, dubious calculation of interest rate elasticities and that it is false to suggest that nominal rates don't affect the uk housing market.

Re interest rate elasticity see Meen, 1998, “Modelling Regional House Prices: A Review of the

Literature” No.84, Office of the Deputy Prime Minister.

Re the importance of real interest rates see Farlow: "Strikingly, given the current emphasis being placed on it by UK mortgage banks, in no econometric study has the nominal interest rate ever been found to play any role in the long-run determination of house prices. At the end of the day, it is the real costs of housing that matter." Similar quotes can be attributed to other sources.

Of course a study by the IMF did find that nominal rates have an effect in the short run however given the subject matter this is neither here nor there, except to note that this is another way of saying that housing bubbles occur (which is the whole point of the post anyway!)

This may be true, but the key wording here is “long-run”, i.e. ignoring those shorter variations with peaks in 1974, 1980, 1989, and 2005. In other words the evidence to support the point actually excludes the context of the current argument.

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My opinion (17 years marketing including a contract at a broadsheet) is that we would need to target a VI on the other side of the fence. Something like a debt charity who has enough gravitas to get the mainstream meeja interested.

The story needs to be sensible and easy to follow without too many stats. Personally I don't think we're close enough yet.

A lot of posters on this site thinks journos are dummies - they are not. I'm not the biggest fan of the meeja but to think they are deliberately talking the market up is ludicrous. That is why they won't listen to people from this site. Just think for a minute that you are a journo at the beeb - your talking to the gov't, to the finance industry and oh here comes another e-mail from "OrcSlayer" with what appears to be their maths statistics dissertation. There is also a MASSIVE difference in journalistic terms between opinions and hard facts.

That doesn't mean that we couldn't prove something interesting (and there are some fantastic analysts on the site) BUT it needs to be done in such a way that a tabloids readership can understand it.

Agree with pretty much everything your saying. Journo's may or may not be thick but they are lazy - look at how many press releases are reproduced word for word with a reporters name tagged on the end, no investigation no nothing. One definate reason why the news seems (and is) biased is that there are a lot of press releases coming out from the VIs and practically none from anywhere else.

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my press release

First time buyers opt out

A growing number of young people appear to be opting out of the housing ladder in favor of renting or staying at home with parents until house prices come down. they have apparently already been heeding the advice of the Finnancal services authority and the Bank of England who in recent weeks have warned of spiraling consumer debt.

Depreciating asset ?

In 2005 house prices apreciated by a mere 2.5% this compares unfavorably with nearly all other assets classes such as equities, bonds and cash. which all outperformed property last year. tie this in with a backdrop of increasing supply due to repossesions and personal insolvency and many savy students feel that housing is going to decline in price further over the next few years.

Most young people leave university with substantial student debts these days so they know just how expensive money can be in the long term and are unwilling to shakle themselves to a mortgage, often many times their salary.

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Companies often spend more money on PR than direct advertising, even though some articles you see are overt advertising it gets past most editors. That's why we see so many shocking articles.

If you want lots of press attention be sure it includes celebrities, the misuse of drugs and barely plausible sexual conduct. Failing that it's often best to personalise the article through the use of a case story "James, aged 25 has been saving up for a deposit house but faces the unreality of the UK housing market on a scale never seen before...", that is your hook, then drive into the figures.

Edited by BuyingBear

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Lovely Kirstie, presenter of the ever-popular C4’s reality TV series “Celebrity Relocation – what a load of dosh”, yesterday piled into Big Brother’s newest celebrity Charl@ne after she unwittingly revealed in the diary room that “houses prices were far too high” and would “crash and burn” within five years. BBC hackette Amanda Panda later went on record suggesting that the story had been fabricated, as she thought the remarks revealed an insight uncharacteristic of the new girl on the block, but was unwilling to say anything further fuelling widespread speculation that prices could plummet by up to 26% YoY in the South East … <and so on into the stats> … :D

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This may be true, but the key wording here is “long-run”, i.e. ignoring those shorter variations with peaks in 1974, 1980, 1989, and 2005. In other words the evidence to support the point actually excludes the context of the current argument.

I think what you are saying here is that it is the short-run prices that matter and that we can ignore the long run trends. Given that housing and mortgages are a 25 year financial committment I really can not agree with you on this point.

The whole point of the post and the site as a whole is to explain that we are in a short term asset price bubble that will reverse over five years or so, in doing this we need to look at long run prices of which nominal interest rates are not a determinant. It is you who is ignoring the context of the argument.

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Lovely Kirstie, presenter of the ever-popular C4’s reality TV series “Celebrity Relocation – what a load of dosh”, yesterday piled into Big Brother’s newest celebrity Charl@ne after she unwittingly revealed in the diary room that “houses prices were far too high” and would “crash and burn” within five years. BBC hackette Amanda Panda later went on record suggesting that the story had been fabricated, as she thought the remarks revealed an insight uncharacteristic of the new girl on the block, but was unwilling to say anything further fuelling widespread speculation that prices could plummet by up to 26% YoY in the South East … <and so on into the stats> … :D

brilliant -

why don't we club together and put in the highest bid on e-bay for Jordan's boobs.

then get a newspaper article " Evey Bubble must burst"

edit: - sorry a bit tasteless and off topic

Edited by Sisyphus

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I think what you are saying here is that it is the short-run prices that matter and that we can ignore the long run trends. Given that housing and mortgages are a 25 year financial committment I really can not agree with you on this point.

The whole point of the post and the site as a whole is to explain that we are in a short term asset price bubble that will reverse over five years or so, in doing this we need to look at long run prices of which nominal interest rates are not a determinant. It is you who is ignoring the context of the argument.

Oh dear, this is getting horribly tangled so perhaps I should start by attempting to clear up a few things.

Firstly, I posted a critique of the proposed article – this was *not* meant to be demolition or refutation of the argument, but rather to highlight the flaws it contained so that you could correct them before sending it off. In its current form it has the potential to do more damage to the bears’ cause than be effective against the bulls. ;)

Secondly, on the particular point of “nominal” rates above: we are at end of a short-term boom, and you present a bull argument that attempts to explain this by appeal to nominal interest rates; you then cite evidence that *over the long-term* nominal rates are not a determinate of prices, and hence conclude that the bulls cannot be correct (evidence appears to contradicts the bull claim). The problem with this approach is that the evidence cited is ineffective at discrediting the *short-term* bull explanation because it properly applies to the *long-term*. [in fact, I could post direct numerical evidence suggesting that the bulls are *absolutely correct* up until 2002-2003.] I am saying that you need to construct the argument on more sound footings, and avoid this sort of logical sleight of hand if it is to effective and be taken seriously. These are intended to beconstructive criticisms and to give examples of how the article might be attacked – the point is to help you fix it. :)

Sisyphus - :D

Edited by spline

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  • 302 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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