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A long stagnation could kill off Britain’s obsession with house prices

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https://moneyweek.com/502842/a-long-stagnation-could-kill-off-britains-obsession-with-house-prices/

 

 

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House prices are still struggling in the UK.

According to the latest Nationwide report, prices rose by 0.4% in February, compared to the same month last year.

The average UK house price is now around £210,000, reckons the building society.

Not much change then since last time.

The big question is – what’s next?

People only care so much about house prices because they have to

House prices are a bit of an obsession in Britain.

This is not because the British are born with some sort of property-fetish gene. It’s because houses are both economically significant and the cause of a great deal of insecurity.

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It’s similar to the way that parents with school-age kids in this part of the world obsess over catchment areas and exam results. They didn’t care when they were single and childless, and they won’t care once their kids have got into school. But try getting them to talk about anything else when they’re in the midst of the fraught school-hunting process – no chance.

So this obsession with property is simply a result of the fact that houses hang over us. This is made clear by the fact that this “national obsession” is in fact, not really national at all. You only see it in areas where houses are expensive – in the 20-odd years of my life I spent in and around Glasgow, I don’t think I had a single conversation about house prices (lots about the rain, though).

Since maybe the mid-1990s, the UK property market has been gripped by  slow-motion FOMO (“fear of missing out”). You stayed off “the ladder” to your cost.

Say that, as a young person without much money and a desire to maintain geographic flexibility, you didn’t fancy taking a huge leveraged punt on an asset of often-questionable quality. Well, that was a mistake. That property you passed up back then has probably “earned” more money each year than you ever got paid.

The old saying “you can’t go wrong with bricks and mortar” has been hammered home to the last couple of generations with brutal efficiency. If you are in the core wealth-planning target market (around 40-60 odds) then more than anything else, your present level of household wealth almost certainly depends on how much property you owned and when.

It could make all the difference between whether you are now able to think about jacking it all in for a portfolio career with a heavy dollop of golf and city breaks on the side; or whether you are looking down the barrel of another 25 years of back-breaking mortgage payments that could rocket to unaffordable, lose-your-home-at-age-65, levels on the whim of Mark Carney.

Anyway…

What if this is the “new normal” for house prices?

The question for me now is – how long will this obsession persist?

 

 

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House prices to drop in mid-2020s as baby boomers start dying out

Professor Les Mayhew of Cass Business School has predicted that house prices will drop from between 25% to 38% in the mid-2020s as the baby boomer generation dies out.

In his report ‘The Last-Time Buyer: housing and finance for an ageing society’ he outlined a new concept called the Dwelling Index, combining demographics with data on household composition and housing supply to analyse past, present and future housing needs.

https://www.mortgageintroducer.com/house-prices-drop-mid-2020s-baby-boomers-start-dying/#.XHzrPlCnzqA

That will do it.

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7 minutes ago, Peter Hun said:

House prices to drop in mid-2020s as baby boomers start dying out

Professor Les Mayhew of Cass Business School has predicted that house prices will drop from between 25% to 38% in the mid-2020s as the baby boomer generation dies out.

In his report ‘The Last-Time Buyer: housing and finance for an ageing society’ he outlined a new concept called the Dwelling Index, combining demographics with data on household composition and housing supply to analyse past, present and future housing needs.

https://www.mortgageintroducer.com/house-prices-drop-mid-2020s-baby-boomers-start-dying/#.XHzrPlCnzqA

That will do it.

I'm also very sceptical about the "we need to build vast numbers of new homes". I don't say the shortage idea is a myth; but it's less of an issue than painted.

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If “supply and demand innit bruv” drove house prices there would be homeless people on every street in Britain.

 

how much DEBT the banks can persuade the plebs to take on is what drives house prices, nothing more nothing less

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11 minutes ago, crouch said:

I'm also very sceptical about the "we need to build vast numbers of new homes". I don't say the shortage idea is a myth; but it's less of an issue than painted.

The professor also says in that article "It does depend crucially on levels on migration as well."

Basically without migration the UK population would be shrinking, and we probably wouldn't need any new homes at all (we might have other problems, but housing wouldn't be one of them).

Equally if migration continues at the current rate then obviously we will need to build new homes, because there will be more people coming in than dying off.

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1 minute ago, scottbeard said:

Basically without migration the UK population would be shrinking, and we probably wouldn't need any new homes at all (we might have other problems, but housing wouldn't be one of them).

The UK has a significant problem of the houses being in the wrong place. Much of the stock was built to house people working in factories, shipyards and coalmines. Those jobs no longer exist so there is no point in warehousing people there if they don't actually want to live there (fine of course if they want to stay). Maybe it would be better to go back to the pre-industrial arrangement of the population being fairly evenly distributed throughout the countryside. Most of rural Britain has a lower population density now than it did 150 years ago.

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1 hour ago, Dorkins said:

The UK has a significant problem of the houses being in the wrong place. Much of the stock was built to house people working in factories, shipyards and coalmines. Those jobs no longer exist so there is no point in warehousing people there if they don't actually want to live there (fine of course if they want to stay). Maybe it would be better to go back to the pre-industrial arrangement of the population being fairly evenly distributed throughout the countryside. Most of rural Britain has a lower population density now than it did 150 years ago.

Indeed, but as far more work now is service oriented, do we need to travel as much as we do? The population isn't as concentrated because our industry has gone.

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2 things are happening right now. migration is slowing down, its got nothing to do with brexit, infact brexit may actually be having a positive migration effect due to the idea of getting here before the doors closed attitude, which is the complete opposite of what is being stated by the anti brexit mob. 

eastern europe was amalgamated into the eu in a rapid expansion, you had 2 massive population centres kept apart and then one day the borders opened for all. this obviously created a lot of equilibrium and population movements and wealth balancing. the gates were opened and the poor rushed into the rich countries, and who could blame them. 

i believe most people never had much problem with this and companies looking for cheaper labour welcomed it. this influc however has naturally slowed down, the east dont have an unlimited supply of people that want to keep moving to the west. not only that the benifits of moving have been getting less and less. 20 years ago you could come here work a year and buy a nice home back in poland, 10 years ago it was a flat, today you need to save a few years to get anything. not only that at the same time wages have increased in poland, prices of goods as well. prices and wages are all catching up with the west and the benifits of moving here are becoming less and less. add the fact that a massive influx can only really happen once before there is no viable fit, young, smart, go getter type people left to leave. it wont be long before we actually see negative migration and once again its nothing to do with brexit. 

 

the second thing is i dispute the amount of homes built over the years. everywhere i look there are new homes built. and all they old abandoned properties have been renovated, cut in 2 or 4 or 6 and put back for sale. its everywhere.  ho through villages now that had been dying for years that are now full of people again. they are not going to the pub or shop or school but they are full of people once again. hence all the posts saying there is no shortage of homes. i dont think the home shortage is anywhere as big as potrait. the real issue is hoarding, to many people have multiple homes, btl etc. 

nature is soon to take its course. 

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1 hour ago, scottbeard said:

The professor also says in that article "It does depend crucially on levels on migration as well."

Basically without migration the UK population would be shrinking, and we probably wouldn't need any new homes at all (we might have other problems, but housing wouldn't be one of them).

Equally if migration continues at the current rate then obviously we will need to build new homes, because there will be more people coming in than dying off.

That's what gets me so bloody angry about immigration. Without it there wouldn't be the curse of having to have ever more building (well there'd have to be some due to populations still shifting internally). A shrinking population is desperately needed - usually there's no way of achieving it by any vaguely ethical means but we could have it without having to do anything!

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1 hour ago, thewig said:

If “supply and demand innit bruv” drove house prices there would be homeless people on every street in Britain.

Although I'm firmly in the camp that it's loose credit that's been largely responsible for driving up prices there's no argument that some places at least aren't matched in supply and demand, often in places where there's little to no room to build more. The result isn't homelessness, it's buildings being divided into tiny flats with lots of people in each one - overcrowding.

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5 minutes ago, Riedquat said:

That's what gets me so bloody angry about immigration. Without it there wouldn't be the curse of having to have ever more building (well there'd have to be some due to populations still shifting internally). A shrinking population is desperately needed - usually there's no way of achieving it by any vaguely ethical means but we could have it without having to do anything!

One of the more subtle problems of FOM is the actual ebb and flow which, I would assume - yes it is an assumption - is more than with non EU migration. Many of the Poles are now going back so I'd imagine this would have an effect on housing. In ten years, if we were still in the EU it could reverse again.

I can't see that a substantial ebb and flow of people is particularly welcome in some ways; it exacerbates some existing problems (do we need more doctors now; will we need them in ten years?)

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14 minutes ago, Riedquat said:

That's what gets me so bloody angry about immigration. Without it there wouldn't be the curse of having to have ever more building (well there'd have to be some due to populations still shifting internally). A shrinking population is desperately needed - usually there's no way of achieving it by any vaguely ethical means but we could have it without having to do anything!

A shrinking population means a growing tax burden on the workforce to support the growing healthcare requirements of the elderly.

Which is precisely why Blair welcomed the E8 migration from 2010.

2 hours ago, scottbeard said:

Basically without migration the UK population would be shrinking, and we probably wouldn't need any new homes at all (we might have other problems, but housing wouldn't be one of them).

The lack of a tax base is a THE problem. It's critical. Hence why immigration will continue.

Boomers. Too many of them and they didn't have enough kids.

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7 minutes ago, Peter Hun said:

A shrinking population means a growing tax burden on the workforce to support the growing healthcare requirements of the elderly.

Which is precisely why Blair welcomed the E8 migration from 2010.

The immigrants eventually grow old and retire themselves, so then even more people are needed to handle that, ad infinitum. That's not a sustainable model no matter how appealing it looks in the short term, and it has unpleasant impacts (unless you like more demand on housing, more congestion on the roads and / or having to build more obnoxious crap to handle it) long before it becomes unmanageable.

If the population isn't shrinking too rapidly then the extra burden over a stationary population should not be that great, certainly worth paying that price. The problem is that the obsession with ever more growth can't be sated even with a stationary population so the short term wins out.

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Boomers. Too many of them and they didn't have enough kids.

Too many of them, yes - the clue's in the name, but if they'd had more kids that would just perpetuate that. I'd far rather have to tighten my belt until the demographic bulge has passed; at least there would be something to look forward to then.

Edited by Riedquat

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57 minutes ago, Riedquat said:

Although I'm firmly in the camp that it's loose credit that's been largely responsible for driving up prices there's no argument that some places at least aren't matched in supply and demand, often in places where there's little to no room to build more. The result isn't homelessness, it's buildings being divided into tiny flats with lots of people in each one - overcrowding.

Loose credit up to 2007, with a bit more til MMR.

But then followed by insane migration propped up with tax credits and beneits.

The sooner UK brings in earning limits for work permits and remove the rights of all non Brits from nay welfare, the better.

 

As it stands, the UK tax payer is on the hook to large number of EEers running Skleps and hand car washes, all subbed at 1500/m on TC and HB.

Then they pay twice by having the cost housing forced up. Then again in lower public services - full schools, full GPs.

 

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15 minutes ago, Peter Hun said:

A shrinking population means a growing tax burden on the workforce to support the growing healthcare requirements of the elderly.

Which is precisely why Blair welcomed the E8 migration from 2010.

The lack of a tax base is a THE problem. It's critical. Hence why immigration will continue.

Boomers. Too many of them and they didn't have enough kids.

80% of EEerrs migrants dont earn enough to pay tax.

Without a earning limit and access to non-contribution benefits, the EErs migrants are a tax sink not a revenue source.

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8 minutes ago, Riedquat said:

I'd far rather have to tighten my belt until the demographic bulge has passed; at least there would be something to look forward

What, for the 100 year period affected?

And how much belt tighten do you fancy, supporting one person in a care home for fourty years for every two tax paying workers? And entire lifetime?

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2 hours ago, thewig said:

how much DEBT the banks can persuade the plebs to take on is what drives house prices, nothing more nothing less

Politicians and bankers have always known this. Inflation, bubbles, booms and busts are always created by them. Remember Gordon Brown?

https://www.youtube.com/watch?v=aCQREoAmsu0

Stagflation is probably more likely because they won't allow house prices to revert to mean and will sacrifice the currency instead. I hope not, but I just think these immoral and corrupt people just won't give up.

Edited by Captain Kirk

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16 minutes ago, Peter Hun said:

What, for the 100 year period affected?

And how much belt tighten do you fancy, supporting one person in a care home for fourty years for every two tax paying workers? And entire lifetime?

People don't stay in care homes for 40 years.  The average is 1-2 years, and then they die.  And of course many people die without ever needing full time care.

I'm with Ridequat on this one - if you actually look at the UK Population Pyramid the baby boomers really only look like a tiny blip - it's not a 100 year problem, and it shouldn't need mass immigration to "solve" it because then when the immigrants grow old the problem is compounded.

The issue isn't really how many boomers there are, it's how long all generations are now living.  We all need to understand that, if we as a human race are going to live on average to 90 instead of 70, then there will be fewer resources for us all to enjoy at ages 0-70 because we need to divert more to ages 71-90. 

Immigration can delay the day of reckoning, but is not a long term solution for the UK, and in the short term makes the problem worse in Poland and all the other places they've left, which are now short of young people.

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28 minutes ago, crouch said:

I'm also very sceptical about the "we need to build vast numbers of new homes". I don't say the shortage idea is a myth; but it's less of an issue than painted.

Agreed

17 minutes ago, thewig said:

If “supply and demand innit bruv” drove house prices there would be homeless people on every street in Britain.

It does though  

16 minutes ago, scottbeard said:

The professor also says in that article "It does depend crucially on levels on migration as well."

The snowflake generation want to be part of the EU whoch has attracted 3m migrants to the uk.  They want an open door immigration policy because they are so “right on and liberal”.  They want the uk to give refugees a home.  They have no idea of the basic idea of supply and demand.  Then they whine about house prices.

 

16 minutes ago, scottbeard said:

The professor also says in that article "It does depend crucially on levels on migration as well."

Basically without migration the UK population would be shrinking, and we probably wouldn't need any new homes at all (we might have other problems, but housing wouldn't be one of them).

Equally if migration continues at the current rate then obviously we will need to build new homes, because there will be more people coming in than dying off.

Agreed

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35 minutes ago, spyguy said:

80% of EEerrs migrants dont earn enough to pay tax.

Without a earning limit and access to non-contribution benefits, the EErs migrants are a tax sink not a revenue source.

Well, that's crap and you've had that pointed out to you many times before.

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My Eastern European neighbours are buying up property in their old homelands and intending to retire there. Not sure what will happen with pensions but they are hoping to get their UK pensions paid there eventually.

Also thinking about keeping a "home" in the UK if they need expensive medical treatment in the UK. 

It's multi-home owners and tenants used to pay for this if they can. Not sure how that will work out.

 

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31 minutes ago, scottbeard said:

 

31 minutes ago, scottbeard said:

UK Population Pyramid the baby boomers really only look like a tiny blip - it's not a 100 year problem, and it shouldn't need mass immigration to "solve" it because then when the immigrants grow old the problem is compounded.

The issue isn't really how many boomers there are, it's how long all generations are now living. 

Yes its the combination of numbers of boomers x extended lifespan x years in poor health x expensive medical developments x Cost 

All paid for by a falling working age population. 

The solution isn't immigration, we just need a time machine go back in time and FORCE boomers to have 4 children each.

Or compulsory  euthanasia for boomers.

1 hour ago, Riedquat said:

If the population isn't shrinking too rapidly then the extra burden over a stationary population should not be that great, certainly worth paying that price

The boomers healthcare suckling population is too much of a burden and it will be far worse than migration , which apparently isn't worth the price.

 

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3 hours ago, thewig said:

If “supply and demand innit bruv” drove house prices there would be homeless people on every street in Britain.

 

how much DEBT the banks can persuade the plebs to take on is what drives house prices, nothing more nothing less

No competitive bidding = no inflation.

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1 hour ago, Peter Hun said:

What, for the 100 year period affected?

And how much belt tighten do you fancy, supporting one person in a care home for fourty years for every two tax paying workers? And entire lifetime?

If that's what it takes. No-one's painted a picture of any alternative that won't be a bigger mess in the long term. "It's good for me now and I couldn't care less if it makes a complete mess of the place as long as that happens after I die" isn't an argument I can respect.

The only alternative that gets mentioned is eternal population growth, and that's just kicking the can down the road as the issues it causes increase. It isn't a solution. And as scottbeard points out that if people are living longer then it's a simple truth that we need to support ourselves for longer. The only long term sustainable choice is for people to earn enough through their working lives to support their entire life (which includes childhood as well as old age, even if it's offset to the next generation). There's no getting around that without ever increasing productivity and reliance on ever increasing productivity is chancy; better to enjoy it as a luxury when it happens.

Edited by Riedquat

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26 minutes ago, Peter Hun said:

Yes its the combination of numbers of boomers x extended lifespan x years in poor health x expensive medical developments x Cost 

All paid for by a falling working age population. 

The solution isn't immigration, we just need a time machine go back in time and FORCE boomers to have 4 children each.

Or compulsory  euthanasia for boomers.

The boomers healthcare suckling population is too much of a burden and it will be far worse than migration , which apparently isn't worth the price.

We're getting told that it's a short-term problem by now as the boomers age.

If you could go back in time it would make much more sense to force the boomers' parents to have fewer children, not force them to have more. You're giving a scenario where once a mistake has been made you can see no alternative than to keep perpetuating it.

The level of productivity has increased massively within the lifetimes of the boomers. Supporting the whole population without population growth, even with a lot more elderly, really should be within our means. The barrier is simply that it gets in the way of maximising short term growth.

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  • 295 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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