Jump to content
House Price Crash Forum
Sign in to follow this  
How soon is now

There's No Need To Fear A House Price Bubble

Recommended Posts

Link

Gavyn Davies can't do maths more like. Full of dodgy/selective stats. One of the worst I've ever read.

That pile of tripe definitely needs a response. And it's in The Guardian for God's sake! I realise that stopped being a left-wing paper years ago but to give space to that is shocking mis-judgement. :angry: :angry:

Share this post


Link to post
Share on other sites

If IR rise from 3% to 6.5% surely someone would be spending 33%+ of their monlthy income servicing the mortgage? But Gavyn is saying prices would still rise by 2% :lol:

VI article

Share this post


Link to post
Share on other sites

Quote:

"Why has the market defied the pessimists? Quite probably because there never was a bubble in prices in the first place. John Muellbauer and his colleagues at Oxford argue that standard equations for house prices are extremely misleading because they omit several key factors, including the availability of consumer credit, regional linkages (eg between the south-east and elsewhere), stock market effects, and demographics. If you include these variables, the level of house prices in 2004 was fully justified by fundamentals. For example, the increased availability of consumer credit, on its own, has increased the justified level of house prices by 28% since 1980."

So once you factor in all the ways in which the market has risen to its present level, then the present level is OK. And while we're at it we'll reclassify "massive debt levels" as "availability of consumer credit", thereby in our Orwellian world making the bad sound good. Or maybe even doubleplusgood. Repeat after me - credit good, there is no such thing as debt, it is the takeup of your credit. And you only get credit when you do well, right? So gold stars all round then.

When I heard about this research by Muelbauer et all I thought there might be something in it, depressing though it would be, but if this is their "argument" then it's utter b*ll*cks.

Share this post


Link to post
Share on other sites

If IR rise from 3% to 6.5% surely someone would be spending 33%+ of their monlthy income servicing the mortgage? But Gavyn is saying prices would still rise by 2% :lol:

Put them up to 6.5% today and have done with it then, we have been told there will be no problem.

Share this post


Link to post
Share on other sites

Put them up to 6.5% today and have done with it then, we have been told there will be no problem.

Somebody needs to pen a reply immediately (not me busy as work).

Share this post


Link to post
Share on other sites

You know there's a bubble when an ordinary person on an ordinary wage can't afford an ordinary house. Of course, The Guardian's writers and readership, being 'comfortably off' socialists, wouldn't want to admit that such a situation exists as it might make them feel guilty and ruin their enjoyment :rolleyes:

Share this post


Link to post
Share on other sites

For me, this reeked of VI the second I saw those quotations around "unaffordable".

They had a sneering quality, as if finding the current prices unaffordable made you a nobody.

Share this post


Link to post
Share on other sites

For god's sake. He's arguing that higher availabilty of credit justifies higher house prices? Is your house suddenly 28% better because banks relax their lending criteria? Thought not.

Loose credit causing prices to increase without a change in the fundamentals is the effing DEFINITION of a bubble.

Moron.

Oh, and I bet your man's not factoring psychology into those fancy simulations.

Edited by CaptainClamp

Share this post


Link to post
Share on other sites

Quote:

"Why has the market defied the pessimists? Quite probably because there never was a bubble in prices in the first place. John Muellbauer and his colleagues at Oxford argue that standard equations for house prices are extremely misleading because they omit several key factors, including the availability of consumer credit, regional linkages (eg between the south-east and elsewhere), stock market effects, and demographics. If you include these variables, the level of house prices in 2004 was fully justified by fundamentals. For example, the increased availability of consumer credit, on its own, has increased the justified level of house prices by 28% since 1980."

So once you factor in all the ways in which the market has risen to its present level, then the present level is OK. And while we're at it we'll reclassify "massive debt levels" as "availability of consumer credit", thereby in our Orwellian world making the bad sound good. Or maybe even doubleplusgood. Repeat after me - credit good, there is no such thing as debt, it is the takeup of your credit. And you only get credit when you do well, right? So gold stars all round then.

When I heard about this research by Muelbauer et all I thought there might be something in it, depressing though it would be, but if this is their "argument" then it's utter b*ll*cks.

So there wasn't some form of "availability of consumer credit" in other bubbles - people didn't borrow more than they could manage in the depression for example? Maybe it's different now because people have credit cards? Somehow it's "different debt to last time"? (sorry if i'm wrong on this - i'm a bit out of my depth in these proper discussion threads - i normally stick to the other stuff!)

Share this post


Link to post
Share on other sites
Guest Winners and Losers

i'm a bit out of my depth in these proper discussion threads - i normally stick to the other stuff!)

:lol::lol:

Yes, it is brave to venture into one of these!! I tend to stick to the rubbish as well. Variety is the spice of life! ;)

Share this post


Link to post
Share on other sites

The view of the British economy from Korea.

Pop! Britain's Bubble Economy Confounds Experts

One significant interest rate rise spells disaster for millions

Take inflation. Officially, during the last decade, inflation has generally hovered between 1 percent and 3.5 percent. In 1997 it peaked at 3.7 percent, in January 2004 it was 1.4 percent, and currently it stands at 2.0 percent. But in most key areas of the economy, inflation has been off the scale. A March 2005 report published by Oxford Economic Forecasting and Cluttons Real Estate noted that house prices had risen nationally by an average of 11.4 percent per year every year for the past ten years. While property prices are controversially not included in the official U.K. inflation figure, similar if not larger rises have been recorded in transportation -- a one-day travel pass in London now costs £6.30 -- utilities, with 2006 seeing a one-year hike of 20 percent for many gas customers, and oil, the price of which skyrocketed following recent instability in the Middle East.

This is where credit steps in to distort reality. The UK population now owes £1 trillion in household debt, with 14 percent indebted to the tune of £10,000 or higher. This debt is more than the total annual GDP of the U.K. And this figure does not even take into account the gargantuan pile of mortgage-related debt -- £967 billion -- that casts a shadow over the U.K. economy. Including mortgage payments, the average British household has £83,722 of debt.

What conclusions can one draw? Firstly, the official inflation figures simply cannot be correct. Two percent inflation in an economy with rapidly increasing living costs and more credit than real money in circulation does not even begin to make sense. Secondly, the reason that interest rates have not been pushed up to act as a fiscal cooling mechanism on growth is simple: with the current levels of household indebtedness and mortgage-related arrears, any move towards a realistic interest rate level will result in economic meltdown. No politician with any electoral ambitions will want to initiate such a move, perhaps least of all Gordon Brown, whose desire to take over the post of Prime Minister from Tony Blair is one of the less well-kept secrets in global politics.

However, the most sobering conclusion of all is that many of the country's economic fundamentals -- and the foundations for future growth -- are rather shaky. In fact, we could be heading for the biggest bust since that of Lolo Ferrari. And economic historians may in the future liken the "Brown Boom" to the fate of the late French actress. Under the malign influence of her husband, Ferrari, a chronic depressive and body dysmorphic disorder sufferer, underwent 25 cosmetic surgery operations to alter her face and enlarge her breasts with silicone in the belief that it would catapult her to stardom. Like Ms Ferrari, we have flooded our system with plastic in the quest for growth. The result is likely to be similarly artificial

.

Link

Share this post


Link to post
Share on other sites
Muellbauer runs a simulation in which inflation rises to 3% this year, mortgage interest rates jump to 6.5%, and both the economy and the stockmarket stagnate. On these pessimistic assumptions, house prices would rise by 2% in the north and the midlands, by zero in the south, and would actually fall by about 2% for two successive years in Greater London.

I cannot believe this. Can someone post a link to the report so I don't have to look for it. Does the simulation factor in eating, driving, buying consumer goods and having dental or health problems?

If you bought a house with 90% mortgage on average salary at 4 times income and interest rates jump to 6.5% I cannot imagine how a simulation could result in a 2% house price increase per year. What on earth is going on here.

Why would anybody want to predict this in any event - do they just want the young to be slaves to the banks for the rest of their lives?

It just p!sses me off when academics seek to justify incredibly high house prices.....

Were there academic debates in the universities of Holland about the price of tulips...."our economic simulation predicts that in the year 2006 the average tulip bulb will cost £24,000,045.67...blah, blah, blah...if you factor in economic fundamentals....blah, blah.....if people remain incredibly stupid...blah, blah......"

Share this post


Link to post
Share on other sites
mortgage interest payments absorbed 15% of household income, while today's low interest rates have kept that ratio down to only 9%

Where does this figure come from? 9%!!!!

Nationwide says that 40% of FTB income now goes on mortgages - that means there are a hell of a lot of FTBS paying 50%+ of their income on mortgages.

It's what happens at the edges of the housing market that dictates where prices go.

If IRs went to 6.5% would these guys be able to afford their mortgages - don't think so. And yet the article claims if they did prices would still be going up 2% !!????***????!??!

Share this post


Link to post
Share on other sites

just get your money out of the uk economy and into euros or gold.

this ones busted. idiots like this pulling the levers. they are going to trash it.

well not with my savings they wont.

Share this post


Link to post
Share on other sites

Where does this figure come from? 9%!!!!

Nationwide says that 40% of FTB income now goes on mortgages - that means there are a hell of a lot of FTBS paying 50%+ of their income on mortgages.

It's what happens at the edges of the housing market that dictates where prices go.

If IRs went to 6.5% would these guys be able to afford their mortgages - don't think so. And yet the article claims if they did prices would still be going up 2% !!????***????!??!

What is the basis for the apparent consensus on this forum that UK interest rates are heading higher?

I am paid in Euros so try and keep an eye on exchange rates, and copy below today’s Forex report issued by Moneycorp.

Forex commentary

Figures for UK industrial and manufacturing production and for the services sector all came in below expectation yesterday. To compound the felony, the figures were all worse than the previous month, in contrast to the improvements that had been forecast. The data were not horrid but they were not good. More than anything, they provided another reminder that the UK economy may not be performing strongly enough to support interest rates at 4.5pc indefinitely. As if to reinforce the UK's lethargy, purchasing managers' indices for the Euro zone and the United States both showed improvement. So Dollar and Euro interest rates are going up, Sterling rates look ever more likely to come down. The Pound weakened yesterday against almost everything apart from the Yen. The Euro managed to screw a few more ticks out of the Dollar and touched its highest level against the Yen since 1998 (in its previous incarnation as the ECU). Despite the recent decision in Japan to allow interest rates to rise above zero, they have not done so and are unlikely to do so in the near future. The Yen remains an ultra-low yield currency and investors are staying away. Today we will learn the interest rate decisions of the Bank of England's Monetary Policy Committee and the European Central Bank. Neither is forecast to make any change but the ECB press conference is expected to point towards a rise next month. Interest rate futures prices suggest that Euro interest rates will be up to 3.5pc by the end of the year. The Euro zone retail purchasing managers' index and the US weekly jobless claims will both be of interest, the latter particularly because tomorrow brings the important monthly payrolls figure. Also on today's agenda should have been German Factory Orders for February but the announcement has been postponed for a fortnight because of a strike in a government office. And the protests against the Contrat Premiere Embauche continue in France. The foreign exchange market normally remains aloof from industrial disputes in continental Europe; they are so common that they go almost unnoticed. But it would not be a complete surprise to see the French situation being used as the pretext for some profit-taking against the Euro. And today's motto: Cave cycnum.

Share this post


Link to post
Share on other sites

The Guardian is getting very bullish of late. There have been two articles in the last month that have been by baby boomers, saying "we never had it so good." Made my blood boil.

Share this post


Link to post
Share on other sites
Guest Fiddlesticks

with all this bullish news there's nowt to stop a hike in interest rates, is there?

Haliwide always downplay the scale of likely future HPI to try to head this off, it seems at the moment like they are always embarrassed by the figures they are producing.

Share this post


Link to post
Share on other sites

What is the basis for the apparent consensus on this forum that UK interest rates are heading higher?

I was quoting the article which stated that research done by Muellbauer showed that if IRs did go upto 6.5% house prices would still go up 2%

I agree that there is too much focus by most members of this forum on IRs. They would have an effect but so will increasing unemployment which is actually happening and against the weakening economy and weakening labour market looks set to continue. This is the most likely trigger for a crash in the short term.

Share this post


Link to post
Share on other sites
Guest

It almost crashed before August last year.

At least the BBC are honest about producing the "nose-diving" HPI chart for that period.

For me, this shows where sentiment really is: BORDERLINE.

Share this post


Link to post
Share on other sites

Regarding giving any respect to any newspapers content, (and yes I do see the irony in believing anything in Private Eye), a lot of stuff is not worth the paper it is written on.

The Evening Standard was offered a series similar to BBC's "Whistleblower" also on Foxtons almost 2 years ago - and was set to run it until Foxtons said they'd remove all their advertising from the ES.

No prizes for guessing why the stories never ran. Were they true? Who can say. Can't trust no one but your own eyes.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 339 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.