Has Anyone Seen A Strong Arguement For Future Hpi?

[othello]

There are a few bulls registered on this forum and I imagine many more lurkers, but I have never seen anybody put forward a sound, well thought-out case for arguing that the market will continue to rise or indeed remain static.

Is this because bulls are generally uninterested in market economics and go on their gut instinct (not that stupidity is a bad thing if they have jumped onto the bandwagon and made a killing) or because there is no case that would stand up to scrutiny?

I would like to see the case for the bulls and see it discussed sensibly and not shot down in a hail of sarcasm and hostility.

If necessary, to start the ball rolling, just one question. Could one of the bulls explain where the money is coming from to increase prices or indeed maintain current prices (in real terms) in future?

[Time to raise the rents.]

There are a few bulls registered on this forum and I imagine many more lurkers, but I have never seen

If necessary, to start the ball rolling, just one question. Could one of the bulls explain where the money is coming from to increase prices or indeed maintain current prices (in real terms) in future?

Higher rents.

[AteMoose]

In the long term, Higher wage inflation and higher interest rates, if people earn alot more in the future the debt will be eroded away and houses will be more.

or

In the short term, Lower interest rates people will be able to borrow more...

Edited April 19, 2006 by moosetea

[right_freds_dead]

....and not shot down in a hail of sarcasm and hostility

how about shot down in a hail of honesty and warmness then ?

"you are bust sir.

i insist. after you,

no after you sir....."

[BillyShears]

Higher rents.

I think the OP wanted strong arguments for continued HPI, not knee-jerk reactions. Can you explain how rents will rise in the future to support HPI, since current prices make BTL uneconomic even now?

Billy Shears

[othello]

Higher rents.

Not much of an argument then! Perhaps to take your thinking a little further...

How are higher rents afforded? What about the majority of properties not rented out?

In the long term, Higher wage inflation and higher interest rates, if people earn alot more in the future the debt will be eroded away and houses will be more.

or

In the short term, Lower interest rates people will be able to borrow more...

Higher wage inflation - think about what you said INFLATION! If house prices keep up with inflation they are not rising in real terms. Debt will be eroded away by infalation but again INFLATION. There is no substance in this argument.

In the short term... I can't see interest rates dropping. Even if they do, how much more can people borrow, particularly to climb the 'ladder' if prices are already 6-7 times average incomes! Again not much of an argument.

how about shot down in a hail of honesty and warmness then ?

"you are bust sir.

i insist. after you,

no after you sir....."

Sarcasm is as they say the lowest form of wit. How about a straightforward, intelligent debate. That's what's missing from all this 'piffle' as somebody said yesterday.

[Rachman]

I am not a bull, but am certainly a bear on the non-London and prime commuter belt areas.

In the central London market, it's been dead since 2001/2, as has a lot of prime Surrey - which is why I piled in there in 2004 and I have seen selling prices go up a lot for proper houses (i.e. not these awful mews houses, not 2 bed shoebox flats and other such detritus) - the usual, no supply and as more people want houses with their own space, demand will be maintained and the money comes from the City.

Take most of Britain's city centres and those people who bought boggo mundane flats in 'edgy areas' could lose everything. Illiquidity (because when all's said and done they won't be new flats any more and they won't be a rarity) and increasing service charges will kill their investments as the BTL lemmings get burned by increasing IRs.

[zag2me]

In my area of the world(south east) there is no spare land, and not enough houses/flats.

Its a simple supply and demand curve that makes me think the rises are not done with yet.

Sorry I cant propose any better argument than that

[MarkG]

In my area of the world(south east) there is no spare land,

That's odd. The house where I live just outside London has an acre or so of land to itself, and there's plenty of green stuff whenever I drive around the south-east. Looking at this area on Google Earth it's mostly green with the odd patch of grey and brown where someone's built a town or village.

In fact, I live about a mile and a half from work, and could walk most of that way through grassy fields if I wanted to.

and not enough houses/flats.

Again, that's odd, because the road where I used to live a few miles from here had over a dozen unsold or unlet 'executive apartments' and thirty or more being built. So many, in fact, that the council said they'd probably met their building targets up to 2012 already.

Edited April 19, 2006 by MarkG

[BillyShears]

In my area of the world(south east) there is no spare land, and not enough houses/flats.

Its a simple supply and demand curve that makes me think the rises are not done with yet.

Sorry I cant propose any better argument than that

No spare land? Do you mean that the entire South East is one big metropolitan area?

Billy Shears

[Bingley Bloke]

In the long term, Higher wage inflation and higher interest rates, if people earn alot more in the future the debt will be eroded away and houses will be more.

I think wage inflation is highly unlikely given that most of what was our manufacturing industry and a significant part of our services sector now riside in countries with much lower wages than the ones we're on now. In the future we'll have to be more competitive, not more expensive. I'd like to see a mathematical explanation as to how anyone will be able to live in the UK in the long term future, amidst lower wages to make us competitive with the East, but soaring energy costs meaning we can't afford heating or lighting on these low wages.

[MarkG]

I'd like to see a mathematical explanation as to how anyone will be able to live in the UK in the long term future, amidst lower wages to make us competitive with the East, but soaring energy costs meaning we can't afford heating or lighting on these low wages.

It's OK, because by then houses will only cost 50p for a two-bed terrace or a fiver for a twenty-bed mansion with ten acres of land.

[Mags]

That's odd. The house where I live just outside London has an acre or so of land to itself, and there's plenty of green stuff whenever I drive around the south-east. Looking at this area on Google Earth it's mostly green with the odd patch of grey and brown where someone's built a town or village.

In fact, I live about a mile and a half from work, and could walk most of that way through grassy fields if I wanted to.

And if you take the train to London from Brighton you pass mile after mile of open countryside. I remember doing the London to Brighton bike ride years ago and being struck at how much of that stretch of the country is undeveloped.

[Father Fred]

(1) People are stubborn and will not accept lower prices than they believe are fair (ie peak prices) unless they have to. There are still few forced sellers. I appreciate that this may happen if unemployment or interest rates rise (even a small amount) but there is no guarantee either will rise much.

(2) Houses are being considered more seriously by institutional landlords... we could well be entering a period whereby they start buying residential in large numbers. This along with BTLers using houses as pensions means house prices should be judged in comparison with other assets such as shares and gilts. 5-6% (off the top of my head) could be considered a fair long term yield if inflation stays low.

(3) Linked with (2) house prices will become more linked to rents and rents have been rising below trend for a while so may be due a rise - especially if FTBs priced out means more renters.

(4) House prices have never crashed in the UK in a period of low inflation and interest rates (3 previous crashes in early and late 70s and early 90s were all characterised by high inflation and interest rates, low nominal falls but high real falls. (Linked to the psychology in (1) people are more likely to sell if there have been real falls compared to nominal ones - they can't see real falls but they can nominal).

(5) BTL is more popular now than ever and they are the least likely to sell in a downturn (they are generally in it for pension not short term cashflow). Professional landlords might sell before or during a downturn, as might families for personal reasons, but BTLers are in it for the long term and less likely to be affected by short term movements. (Some may not even be able to afford to sell in a downturn if they are relying on the income or are highly geared and prices fall whilst income is maintained.)

(6) Immigration which will put upward pressure on capital values and rents.

As for buyers, I know 4 people (off the top of my head) who are buying / looking -

1 - getting married, one fairly good income, one good income. 250k budget

2 - family with adult kids fed up in flat - buying house. 3 incomes and family business as builders makes this pretty easy 250k budget

3 - ftb given large sums by father who wishes to avoid inheritance tax by starting to give his money away now. 250k budget

4 - couple with young child looking to buy a house (they have let their 1 bed flat and are currently living in a 2 bed rental place). one fairly good income, one good income. 350k budget

they all seem to be able to afford something reasonable in a reasonable area (they are not necessarily representative but they can afford to buy). There are buyers out there. (This is aside from a mate who is considering his second BTL - I think he resents me for having played devils advocate in a bearish way and put him off buying a third property before)

Amongst many of my friends I am known as an Uber-bear, but on this site I am a bull compared to the consensus around here!!!!

[Time to raise the rents.]

Look bears, the fights over, you lost, prices ARE rising. The shows over....

[BillyShears]

It's OK, because by then houses will only cost 50p for a two-bed terrace or a fiver for a twenty-bed mansion with ten acres of land.

Don't say that. It's bad enough having my son bugging me to buy him toys and food when I take him out. If prices fall that far he'll be bugging me to buy him some BTLs at the same time.

Billy Shears

Look bears, the fights over, you lost, prices ARE rising. The shows over....

TTRTR - you can do much better than such yah boo sucks responses. How about some reasoned argument?

Edit: as far as I can see, TTRTR's argument can be summed up as "No crash today means no crash ever."

Billy Shears

Edited April 19, 2006 by BillyShears

[Goat]

No spare land? Do you mean that the entire South East is one big metropolitan area?

Billy Shears

More to the point, how did we suddenly run out of land in 2001 when there was plenty before then?

[zag2me]

That's odd. The house where I live just outside London has an acre or so of land to itself, and there's plenty of green stuff whenever I drive around the south-east. Looking at this area on Google Earth it's mostly green with the odd patch of grey and brown where someone's built a town or village.

You cant build on greenbelt land unfortunaltey

[BillyShears]

You cant build on greenbelt land unfortunaltey

True, but that means that the problem is one of a lack of planning permission, not a lack of land. They don't make new land. Much easier to change planning permission policies.

Billy Shears

[Time to raise the rents.]

TTRTR - you can do much better than such yah boo sucks responses. How about some reasoned argument?

Edit: as far as I can see, TTRTR's argument can be summed up as "No crash today means no crash ever."

I'm feeling lazy today, so I'll take one of those thanks....

[Magpie]

True, but that means that the problem is one of a lack of planning permission, not a lack of land. They don't make new land. Much easier to change planning permission policies.

Billy Shears

I meant to post a link to this the other day - it's not all good, but parts of it are interesting - he's basically arguing that we need to revise planning policy to free up farmers to redevelop land and also to encourage development of urban areas and woodland on a certain proportion of agricultural land. It's an example of the sort of thinking that will become more popular if there really is a shortage of housing over the next couple of decades (and not just the illusion of a shortage)

http://www.adamsmith.org/index.php/publica.../select/Economy

[BillyShears]

I meant to post a link to this the other day - it's not all good, but parts of it are interesting - he's basically arguing that we need to revise planning policy to free up farmers to redevelop land and also to encourage development of urban areas and woodland on a certain proportion of agricultural land. It's an example of the sort of thinking that will become more popular if there really is a shortage of housing over the next couple of decades (and not just the illusion of a shortage)

http://www.adamsmith.org/index.php/publica.../select/Economy

This was posted the other day. As I said in another thread, I think it's a very clever plan in general. Keeps more or less everyone happy. Those that can possibly be kept happy by anything that is.

Billy Shears

[othello]

In my area of the world(south east) there is no spare land, and not enough houses/flats.

Its a simple supply and demand curve that makes me think the rises are not done with yet.

Sorry I cant propose any better argument than that

Doesn't the land argument fall down on the basis that the same restrictions were in place during the last HPC in the 80s? Indeed isn't the Government freeing up a large new part of green belt land for development as part of its future housing strategy?

[Magpie]

This was posted the other day. As I said in another thread, I think it's a very clever plan in general. Keeps more or less everyone happy. Those that can possibly be kept happy by anything that is.

Billy Shears

Must have missed it, thanks. I do like the idea of using woodland in that way. I can't help feeling it's a bit utopian in parts, but at least it's trying to come to terms with the problem. At the minute the only plan seems to be to cram more and more high-density housing into every nook and cranny of the cities, playing fields, wherever. I don't think building on parts of the green-belt should be out of the question so long as it is done well.

[MarkG]

You cant build on greenbelt land unfortunaltey

Why? Do the buildings fall down or something?

Didn't someone post here recently about a few hundred travellers who built a new village without planning permission, and the council decided it was too much hassle to deal with: why not get together with a few hundred friends and do the same?