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Why There Will Be No Crash

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Like the rest of you I hope real house prices will drop over the next 3-4 years. The current levels are unfair and represent an excessive transfer of wealth from owners to buyers moving up the chain. We all know house price increases are the result of increasing demand, limited supply, and peoples’ ability to pay cheap loans:

1. Demand is increasing because of increasing personal wealth, higher divorce rates, immigration, and ageing demographics. These factors suggest to me that we won’t see a reduction in demand in the next ten years and that the only tools for controlling prices are increasing supply and tighter credit.

2. Supply is controlled by people who either control the permit process, or who build and renovate houses – they all want high prices and have no intention of creating even mild over-supply. I would take a hefty bet that every house-owning, socialist, working in your local council would reject plans to increase supply in an attempt to reduce house prices to more tenable levels. What kind of socialist does that make them?

3. The availability of cheap loans is a natural outcome of economic policy objectives that were dreamed of in the 1970’s and 1980s. It’s ironic that having achieved the goal of low inflation that the western economies needed very low interest rates to stimulate growth. For example, US base rates were <2% a couple of years ago which was around the rate of inflation. Keynes must be laughing in his grave, since weaker minds with vested interests have chosen to focus on personal wealth at the expense of the western worlds’ youth. Of course, they will say that low inflation is good for stability, and that low interest rates are good for borrowers; the problem is the largest purchase any of us will make is our home – their policies are great if you bought when house price–earnings ratios were 3, but dreadful when it’s 7-10. Add the change in demographics and the growing pensions scandal and the result is grotesque intergenerational inequity.

Before betting on a fall in house prices, remind yourselves about the power of self interest and greed – it leads to delusion so powerful that it has very clearly corrupted the Labour Party. So much for their promise to uphold a social contract that shares wealth fairly.

One final anecdote – when I mentioned my views to a 55 year old house owner his response was that its tough shit for the younger generation, he deserves everything he worked for and wouldn’t ever vote for a party that truly wanted fairness. His advice? If you can’t afford a nice home buy a smaller house or rent and if that dont work do what his parents did and share a bed !

His views are no different to your parents so beware and get politically active!

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I have been saying something similar for a while now...no property crash likely, especially in the absence of a major economic trigger. Sad fact for several people I know, but true nonetheless

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There are people on this site who aren't betting at all. We have become observers of human folly.

Having realised that we are simply priced out, we have no choice. Its not a bet. Its a concrete reality.

In the old world we would have stayed with the programme, and contributed to housing liquidity. In the brave new world, we have been forced to re-evaluate the meaning in our lives and decide that having a house is not a life and death situation. Having reached the fork in the road we are now looking to something more creative...

but however aspirations change, this has got to be the genuinely best board around if you want to talk ideas rather than replacing East Enders with cyber-gossip.

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Guest boredwaiting

This is also what I am coming around too. I know the logic for why there should be a crash, but the bottom line is that it is not happening. Last year was the year it was supposed to happen. It didn't and it's doesn't seem to be happening now. I can see first hand the houses in my area selling. There are many houses with sold signs on. More than for sale at the moment.

Although i have seen a independant mortgage broker company close down, the EA's seem to have customers quite often... A couple of months ago they were dead.

It's annoying but this is the way I see it now.

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Guest Winners and Losers

This is also what I am coming around too. I know the logic for why there should be a crash, but the bottom line is that it is not happening. Last year was the year it was supposed to happen. It didn't and it's doesn't seem to be happening now. I can see first hand the houses in my area selling. There are many houses with sold signs on. More than for sale at the moment.

Although i have seen a independant mortgage broker company close down, the EA's seem to have customers quite often... A couple of months ago they were dead.

It's annoying but this is the way I see it now.

Maybe you should buy then? Get yourself on the ladder before it's late. If you want to buy, then buy. Who said it was "supposed" to happen last year? Was that you again Dr Bubb??? Troublemaker that Dr Bubb. ;)

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This is also what I am coming around too. I know the logic for why there should be a crash, but the bottom line is that it is not happening. Last year was the year it was supposed to happen. It didn't and it's doesn't seem to be happening now. I can see first hand the houses in my area selling. There are many houses with sold signs on. More than for sale at the moment.

Although i have seen a independant mortgage broker company close down, the EA's seem to have customers quite often... A couple of months ago they were dead.

It's annoying but this is the way I see it now.

It seems that all the time the bank's are lending the money, consumer's will spend it...

It's got to run out soon...

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[...]

1. Demand is increasing because of [... ] higher divorce rates

[...]

This is nonsense, you are just repeating something you heard someone say in the 80s. Get your facts right.

divorces.jpg

Divorce rates went through a major change IN THE 1970s but have been stable since the mid-80s.

frugalista

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This is also what I am coming around too. I know the logic for why there should be a crash, but the bottom line is that it is not happening. Last year was the year it was supposed to happen. It didn't and it's doesn't seem to be happening now. I can see first hand the houses in my area selling. There are many houses with sold signs on. More than for sale at the moment.

I think you're far too impatient. Last year HPI came to a near standstill after big gains for quite a few previous years. This year is still too new to really work out what is going to happen. Can't see real reason for people to be so pessimistic yet.

Billy Shears

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This is nonsense, you are just repeating something you heard someone say in the 80s. Get your facts right.

divorces.jpg

Divorce rates went through a major change IN THE 1970s but have been stable since the mid-80s.

frugalista

He may have been incorrect on the 'divorce' issue, but there is certainly more than a grain of truth in his other arguments....

...in particular, I do believe that rising immigration is an important factor in increasing occupancy (rent>buyer) demand

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Guest Winners and Losers

He may have been incorrect on the 'divorce' issue, but there is certainly more than a grain of truth in his other arguments....

...in particular, I do believe that rising immigration is an important factor in increasing occupancy (rent>buyer) demand

They tried that argument in Oz for a while. Still did not stop prices from falling.

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I have been saying something similar for a while now...no property crash likely, especially in the absence of a major economic trigger. Sad fact for several people I know, but true nonetheless

I think a general realisation that prices are massively overpriced, are unlikely to go up, and everyone who wants to cash in on their gains needs to sell now would be enough to tip the scales. I don't necessarily think that we're at that point yet.

Billy Shears

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We all know house price increases are the result of increasing demand, limited supply, and peoples’ ability to pay cheap loans:

No, We all don't know your weak supply/demand argument.........We all don't subscribe to that oft trotted out weak piece of rubbish by the VI's.... you obviously do ....Are you a Btl'r??

The UK is awash with properties to buy today and there is still plenty of potential demand, only the demand has taken a holiday because the prices demanded are still too far in excess of what is really afordable. Afordable = a loan which is significantly cheaper than renting the same property and can be paid off without curtailing your life for ever.

There is no supply problem and by the obvious falls in prices we are seeing all around the UK, demand is not there either at the moment.

Looks like a classic oversupply/lack of demand situation AS WE ALL KNOW is happening right now......

"AS WE ALL KNOW"

:lol::lol:

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His views are no different to your parents so beware and get politically active!

My parents don't share that view. The price of their house is irrelevant to them, they are more worried about their children doing well. As any "good" parent would be?

The people with the most interest in the UK economy are the banks. They will create a recession so that they can claim back all that property they bought with imaginary money. Theirs is the only sentiment that counts - and its dark.

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They might not crash, but they arent going to boom either :) there are much better places to invest, i refuse to put money into anything this over inflated...

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He may have been incorrect on the 'divorce' issue, but there is certainly more than a grain of truth in his other arguments....

...in particular, I do believe that rising immigration is an important factor in increasing occupancy (rent>buyer) demand

Ah, the old chestnut of "does immigration cause HPI". I just cannot be bothered to do it to death for the ten zillionth time. If you're prepared to wheel out the tired old "divorces" argument, anything goes really. Personally I think the house price boom has occurred because British ceramic bricks have an unusual quantum property which means they are actually shrinking by imperceptible amounts every day, this is causing a literal "squeeze" on the housing supply, and pushing up prices of those houses that have not actually shrunk into their own space-time wormholes yet. I read it in the paper, so it must be true.

frugalista

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Guest Winners and Losers

No, We all don't know your weak supply/demand argument.........We all don't subscribe to that oft trotted out weak piece of rubbish by the VI's.... you obviously do ....Are you a Btl'r??

The UK is awash with properties to buy today and there is still plenty of potential demand, only the demand has taken a holiday because the prices demanded are still too far in excess of what is really afordable. Afordable = a loan which is significantly cheaper than renting the same property and can be paid off without curtailing your life for ever.

There is no supply problem and by the obvious falls in prices we are seeing all around the UK, demand is not there either at the moment.

Looks like a classic oversupply/lack of demand situation AS WE ALL KNOW is happening right now......

"AS WE ALL KNOW"

:lol::lol:

:lol::lol:

Yeah, feck off and buy a property then if you are bored waiting! JOKE, before you become hysterical! Honestly though, you need to learn the art of patience, bored waiting. All good things come to those who wait, fools rush in etc. etc. Unless you do have a VI?

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I've got to agree with woof (how could you disagree with anybody who's fluffy and got a warm damp nose!) :lol: you can't predict when the bubble will burst you just know it will eventually. With the level of debt in this Country it ain't going to take much to "push people over the top" When it comes it certainly won't be a soft landing!

Edited by cupidstunt

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Like the rest of you I hope real house prices will drop over the next 3-4 years. The current levels are unfair and represent an excessive transfer of wealth from owners to buyers moving up the chain. We all know house price increases are the result of increasing demand, limited supply, and peoples’ ability to pay cheap loans:

1. Demand is increasing because of increasing personal wealth, higher divorce rates, immigration, and ageing demographics. These factors suggest to me that we won’t see a reduction in demand in the next ten years and that the only tools for controlling prices are increasing supply and tighter credit.

2. Supply is controlled by people who either control the permit process, or who build and renovate houses – they all want high prices and have no intention of creating even mild over-supply. I would take a hefty bet that every house-owning, socialist, working in your local council would reject plans to increase supply in an attempt to reduce house prices to more tenable levels. What kind of socialist does that make them?

3. The availability of cheap loans is a natural outcome of economic policy objectives that were dreamed of in the 1970’s and 1980s. It’s ironic that having achieved the goal of low inflation that the western economies needed very low interest rates to stimulate growth. For example, US base rates were <2% a couple of years ago which was around the rate of inflation. Keynes must be laughing in his grave, since weaker minds with vested interests have chosen to focus on personal wealth at the expense of the western worlds’ youth. Of course, they will say that low inflation is good for stability, and that low interest rates are good for borrowers; the problem is the largest purchase any of us will make is our home – their policies are great if you bought when house price–earnings ratios were 3, but dreadful when it’s 7-10. Add the change in demographics and the growing pensions scandal and the result is grotesque intergenerational inequity.

Before betting on a fall in house prices, remind yourselves about the power of self interest and greed – it leads to delusion so powerful that it has very clearly corrupted the Labour Party. So much for their promise to uphold a social contract that shares wealth fairly.

One final anecdote – when I mentioned my views to a 55 year old house owner his response was that its tough shit for the younger generation, he deserves everything he worked for and wouldn’t ever vote for a party that truly wanted fairness. His advice? If you can’t afford a nice home buy a smaller house or rent and if that dont work do what his parents did and share a bed !

His views are no different to your parents so beware and get politically active!

Sadly, I agree with you, I want, or need a crash to buy a house, but my gut instinct tells me this tremendous crash that's going to make the 80s seem like a blip is not going to happen. I've been on this board for a few years, and am convinced by the evidence, the statistics, the trends that all scream out something is going to give, but this summed it up perfectly for me

"...the power of self interest and greed"

The unwinding and the ultimate undoing of the market will be along drawn out affair.. i'm sure a correction is due.... but it could be another 5-10 years we get there, and we've all moved on... we buy super-inflated houses, why ? because we have a family, we want a home...

And in respect to getting political, i think this board should turn this intelligent debate into a constructive manifesto where we can lobby our local MPs for change... i doubt we are minority here... we are the next generation needing a home... the power of self interest and greed sickens me deeply.

There are people on this site who aren't betting at all. We have become observers of human folly.

Having realised that we are simply priced out, we have no choice. Its not a bet. Its a concrete reality.

In the old world we would have stayed with the programme, and contributed to housing liquidity. In the brave new world, we have been forced to re-evaluate the meaning in our lives and decide that having a house is not a life and death situation. Having reached the fork in the road we are now looking to something more creative...

but however aspirations change, this has got to be the genuinely best board around if you want to talk ideas rather than replacing East Enders with cyber-gossip.

here here

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Guest Winners and Losers

The "perceived" power of greed and self interest will prove to be their biggest downfall.

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And in respect to getting political, i think this board should turn this intelligent debate into a constructive manifesto where we can lobby our local MPs for change... i doubt we are minority here... we are the next generation needing a home... the power of self interest and greed sickens me deeply.

here here

FRUGALISTA PARTY SUSTAINABLE HOUSING POLICY MANIFESTO

I have distilled my various thoughts into 3 top housing priorities, in descending order of urgency.

1. First and foremost, above everything else regulate mortgage lending. It costs the government almost nothing to do this; it will bring prices down to sensible levels and reduce the risk of reposession misery.

2. Next improve tenants' rights. Especially, prohibit exorbitant rent increases and increase the length of assured leases. Again, almost no revenue required to fund this. BTLs will become less attractive and so BTL investors will compete less with FTBs for housing; also some people will be happier with renting and there will be less pressure to get on the ladder; prices will fall.

3. Finally, and less importantly, liberalise planning law. There is plenty of land which could be used for sustainable new communities. Permission should be granted for this kind of land use if it passes sustainability tests. Again, almost no revenue required to fund this. Increased supply will bring down prices.

Importantly, in none of the above cases could the government be accused of raising taxes or spending profusely. So, theoretically could be adopted by any of the main parties.

frugalista

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Yep. Just take the recent trend and extrapolate it for a million years hence. Fool proof. Just disregard the increase in everything but wages well above inflation (do the math Gordon) and the fact that prices are set by the buyer.

If prices will continue to rise through infinity, why only 5% this year? Why not 10% or 20%? If there are factors at play causing a reduced HPI, why is a reversal so hard to comprehend?

1. Demand is increasing because its fashionable. Everyone wants to throw dinner parties in their s*****y pads or establish a 'get rich quick'/pension property empire. A declining birth rate and retiring baby boomers will not be offset by Polish cleaners and mushroom pickers.

2. Supply is controlled by those selling property, one look at right move should dispell any misunderstanding of supply.

3. Cheap loans will not last forever. Growth based on debt is not growth.

As for those who say 'the crash is not happening', I'd suggest taking a second look and adding the words 'fast enough'. What are you expecting, every seller dropping 50% off the asking price tomorrow afternoon. Its not in their interests obviously, they have to accept less, and convincing them will require a pretty big push, redundancy or IR rise, or vacant BTL. It is happening painfully slowly.

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Like the rest of you I hope real house prices will drop over the next 3-4 years. The current levels are unfair and represent an excessive transfer of wealth from owners to buyers moving up the chain. We all know house price increases are the result of increasing demand, limited supply, and peoples’ ability to pay cheap loans:

1. Demand is increasing because of increasing personal wealth, higher divorce rates, immigration, and ageing demographics. These factors suggest to me that we won’t see a reduction in demand in the next ten years and that the only tools for controlling prices are increasing supply and tighter credit.

2. Supply is controlled by people who either control the permit process, or who build and renovate houses – they all want high prices and have no intention of creating even mild over-supply. I would take a hefty bet that every house-owning, socialist, working in your local council would reject plans to increase supply in an attempt to reduce house prices to more tenable levels. What kind of socialist does that make them?

3. The availability of cheap loans is a natural outcome of economic policy objectives that were dreamed of in the 1970’s and 1980s. It’s ironic that having achieved the goal of low inflation that the western economies needed very low interest rates to stimulate growth. For example, US base rates were <2% a couple of years ago which was around the rate of inflation. Keynes must be laughing in his grave, since weaker minds with vested interests have chosen to focus on personal wealth at the expense of the western worlds’ youth. Of course, they will say that low inflation is good for stability, and that low interest rates are good for borrowers; the problem is the largest purchase any of us will make is our home – their policies are great if you bought when house price–earnings ratios were 3, but dreadful when it’s 7-10. Add the change in demographics and the growing pensions scandal and the result is grotesque intergenerational inequity.

Before betting on a fall in house prices, remind yourselves about the power of self interest and greed – it leads to delusion so powerful that it has very clearly corrupted the Labour Party. So much for their promise to uphold a social contract that shares wealth fairly.

One final anecdote – when I mentioned my views to a 55 year old house owner his response was that its tough shit for the younger generation, he deserves everything he worked for and wouldn’t ever vote for a party that truly wanted fairness. His advice? If you can’t afford a nice home buy a smaller house or rent and if that dont work do what his parents did and share a bed !

His views are no different to your parents so beware and get politically active!

Hi,

Therein lies the problem, the problem with our (human) nature, unlimited wants and inflation. Most economic policy is at it's heart aimed to constrain people's avarous wants, inflation is the outward expression of that in our measures of the goods and services we can consume. Problem being that left unchecked, it gets to the point of self destruction. You mention Keynes. You could also mention Milton Friedman or any of the current exponents of inflation targeting monetary policy. That will also shortly be consigned to the dust bin of economic experiments by governments. As soon as you plug one leak, another develops and we all know that the inflation figure the ONS manipulates has little to do with real world inflationary pressures. It's failed policy, hyper inflation in the housing market is quietly dismissed but it's all inflation, in the long run. And the more wealth many individuals get, the more they often get a taste for more, it's difficult for many to moderate their behaviour, maybe just stick it in the bank and forget about it, all due to our wonderful human nature. As soon as the FTB's, trade uppers, divorcies, or whoever are inreasingly priced out of the game, the smaller minority will increasingly turn on themselves, try to screw eachother over. People will seldom sit back and say 'ah, that's fine now, I'll just sit back now'. As soon as many people do that, they are not far away from the grave. How many real life stories of some people retiring do you hear where they pop their cloggs just a few years into it, lacking that inner motivation or drive anymore? Once you've had a strong enough taste for it, if you are that way inclined, you lose that ability to make that stance anymore, it is very difficult to not feel that you are moving forward in a similar way anymore. Peer groups, self esteem, self achievement, all the inert influences playing on peoples wants and aspirations.

Look at the history of our societies, look at why so many governments are so scared of the destructive repercussions of inflation. There is plenty of pay back inflation stored up in the current situation, it's just not tenable by any measure, even more so in today's globalised world where people can want and demand ever more and take ever increasing risks as long as the easy credit roles. It never does though. If you are sure you can pay your costs and swallow a fall in your house pruchase, then it doesn't matter too much for you individually. If you can't, it will rectify itself sooner rather than later, always has, always will.

Edited by boom_and_bust

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There are people on this site who aren't betting at all. We have become observers of human folly.

Having realised that we are simply priced out, we have no choice. Its not a bet. Its a concrete reality.

In the old world we would have stayed with the programme, and contributed to housing liquidity. In the brave new world, we have been forced to re-evaluate the meaning in our lives and decide that having a house is not a life and death situation. Having reached the fork in the road we are now looking to something more creative...

but however aspirations change, this has got to be the genuinely best board around if you want to talk ideas rather than replacing East Enders with cyber-gossip.

I used to think like that. Then I moved out of London. Did wonders for my outlook.

Billy Shears

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frugalista - you should read my words more carefully. I said higher divorce rates, not increasing. Divorces today are creating new demand. As for your chart it's meaningless, you should infact be looking at correlated, leading indicator like the share values of major chocolate makers. The stochastics for chocolate show a steady increase and decrease - if you draw some lines betweent the peaks and the troughs you will see there is a distinctive trend up and down and up again....... combine this with the stress of having to share your bed with your kids and you'll see there is clear indication of major uncertainty in prices. All this proves my point.

By the way I dont BTL and dont own a home. I live in the USA and plan to show you all how to have a better life.

;)

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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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