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lewissheridan

Your 10 Reasons For Hpi With Proposed Solution

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Ok I'll go first, in descending order of significance to causing the massive HPI we are experiencing.

Top 10 6 reasons for HPI

1. Right-to-Buy - The sale of social housing/council housing to tennants at knock-down subsidised prices. This has moved more housing stock into the private sector and the grubby hands of the wannabe btl landlords. Every man and his dog wants a piece of the cake, buying up ftb properties, and then letting them back to them on handsome yields whilst capital appreciation pulls the ladder up and beyond the reach of normal first-time-buyers.

2. Low Interest Rates & BTL Mortgages & No confidence in pensions

With 'historically' low interest rates, Gordon Brown's miracle economy, people feel safe to borrow, and with huge equity gains in their homes, they borrow easily and cheaply. Now is the tide about to turn with IR increasing ?

3. Cheap credit lendingCredit is cheap, let's borrow more and more, and have a have it now society and undermine those savers. In turn puts pressure on inflation, rising living costs, and in turn fuelling HPI through higher mortgage borrowing, and jumping on the ladder before you miss out mentality.

4. MEWing

This is the reason I think most people are in denial about house prices correcting or normalising. They prefer to call you doom mongers, expecting a crash. We're expecting some return of affordability so ftb can buy - but on the flip side, if that does happen, more btl'ers will enter the market again - being parasites to the housing market and living of ftb'ers inability to buy.

5. VI propoganda

The media has support HPI, and has not said any cautionary words about the HPI bubble that appears in the graph. This is not a balanced two-sided debated, it's been one-sided, house prices always rise mantra, invest in houses it's good etc.

6. Irresponsible mortgage lending, self-certification, fraud/lying

Again proping up house prices by making them 'obtainable' to those who ordinarily would not be able to afford them.

...

i'm sure there's plenty more, I ran out of ideas. I think that's the full picture as i see it, please give me your top 10.

My Solution:

A stop to BTL mortgages and multiple home ownership. Homes should be exactly that, homes for people to live in. Not investment vehicles with profit yeilds, and an asset class. That will solve the problem of where we're are. A more responsible credit lending practice as well is needed.

Your turn now...

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Ok I'll go first, in descending order of significance to causing the massive HPI we are experiencing.

Top 10 6 reasons for HPI

1. Right-to-Buy - The sale of social housing/council housing to tennants at knock-down subsidised prices. This has moved more housing stock into the private sector and the grubby hands of the wannabe btl landlords. Every man and his dog wants a piece of the cake, buying up ftb properties, and then letting them back to them on handsome yields whilst capital appreciation pulls the ladder up and beyond the reach of normal first-time-buyers.

2. Low Interest Rates & BTL Mortgages & No confidence in pensions

With 'historically' low interest rates, Gordon Brown's miracle economy, people feel safe to borrow, and with huge equity gains in their homes, they borrow easily and cheaply. Now is the tide about to turn with IR increasing ?

3. Cheap credit lendingCredit is cheap, let's borrow more and more, and have a have it now society and undermine those savers. In turn puts pressure on inflation, rising living costs, and in turn fuelling HPI through higher mortgage borrowing, and jumping on the ladder before you miss out mentality.

4. MEWing

This is the reason I think most people are in denial about house prices correcting or normalising. They prefer to call you doom mongers, expecting a crash. We're expecting some return of affordability so ftb can buy - but on the flip side, if that does happen, more btl'ers will enter the market again - being parasites to the housing market and living of ftb'ers inability to buy.

5. VI propoganda

The media has support HPI, and has not said any cautionary words about the HPI bubble that appears in the graph. This is not a balanced two-sided debated, it's been one-sided, house prices always rise mantra, invest in houses it's good etc.

6. Irresponsible mortgage lending, self-certification, fraud/lying

Again proping up house prices by making them 'obtainable' to those who ordinarily would not be able to afford them.

...

i'm sure there's plenty more, I ran out of ideas. I think that's the full picture as i see it, please give me your top 10.

My Solution:

A stop to BTL mortgages and multiple home ownership. Homes should be exactly that, homes for people to live in. Not investment vehicles with profit yeilds, and an asset class. That will solve the problem of where we're are. A more responsible credit lending practice as well is needed.

Your turn now...

I'd not disagree with that, except for point 5. I think there's plenty of stuff in the media about the dangers of over-stretching and the possibility of a dip/crash, call it what you will. A lot of negative stuff appears on here culled from the media by V/I bears. It's just that we tend to pick and choose what we listen to and absorb. We tend to pick up on things that consolidate our point of view and our desires, whichever side of the argument we're on.

You've not mentioned EAs and the arbitrary way they guess at prices. If they say that this house is worth £10K more than it was last month, everyone just seems to go along with that without question.

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Pretty much spot on IMO, I can't think of many more, mortgage fraud plays a part IMO

I can think of a couple more;

7. Land supply constraints

I'm not going into all the why's and wherefore's of this, not least because as an Australian (who has visited the UK 3 times in the past 5 years including this year) I'm not qualified to comment. But it is nonetheless true that the land supply acts as a big constraint on building, and supply/demand takes over from there.

8. Taxation Policies

Despite what you may think, property taxes/rates are very low in the UK (and even more so in Australia :D ) compared to many parts of the US. In Texas, for example, the norm is about 3% per year, which has got to act as somewhat of a deterrent to overpaying.

There are also specific pro-ownership government policies in Oz, and I suspect the same is true in the UK, which were initially aimed at helping FTB's but have finished up hurting them by being capitalised into prices, and which would be political suicide to take away.

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Sorry I mistook your post for one of those annoying, frustrating and only slightly relevant google ads that is inconveniently plastered on every new thread that is started. I see that it is a genuine question. And in answer to it.

Does it have to be 10?

No.

And why would there be a solution to HPI? It's fine as it is.

HPI needs a solution to bring ftb'ers back to the market, so that people can move up their chains and the healthy momentum and equillibrium of the market can be restored. Currently it has a blood clot of BTLers, a bit like a parasite or a disease - but fortunately not terminal - a nice healthy dose of IR injections and we'll soon rid of that blockage. BTLers will sell up, flood the market, house prices will spiral down ... etc.

TTRTR are you greedy and scared ?

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Halve your reasons (VIs, MEW etc...) are far off the mark.

The reason wages haven't risen, alongside houses is that there are many millions more people fighting for the same supply of resources. Truly massive levels of immigration has been used as a specific force to keep wages down, (deflate wages) while they flood the economy with credit. Thats why a wage-price spiral has not occured.

Obvoiusly this creates two upwards forces on houseprices, it lowers per capita supply, and raises it's price.

While this plan was occuring (by stealth), laws were being introduced, removal of MIRAS, tax break schemes etc... which effectively locked out ordinary workers, lowering financing costs and giving tax breaks/favourable treatment to the property investor. Thats why you see few FTBer's on the property auction BBC show 'under the hammer' etc...it's all investors looking for angles.

Everything else can be slotted into this framework.

Edited by brainclamp

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Halve your reasons (VIs, MEW etc...) are far off the mark.

The reason wages haven't risen, alongside houses is that there are many millions more people fighting for the same supply of resources. Truly massive levels of immigration has been used as a specific force to keep wages down, (deflate wages) while they flood the economy with credit. Thats why a wage-price spiral has not occured.

Obvoiusly this creates two upwards forces on houseprices, it lowers per capita supply, and raises it's price.

While this plan was occuring (by stealth), laws were being introduced, removal of MIRAS, tax break schemes etc... which effectively locked out ordinary workers, lowering financing costs and giving tax breaks/favourable treatment to the property investor. Thats why you see few FTBer's on the property auction BBC show 'under the hammer' etc...it's all investors looking for angles.

Everything else can be slotted into this framework.

You're probably right, a lot of what i mentioned is house price crash trivia to some respects, and although contributionary to where house prices are, the 'real' cause as it were may be closer to your take on things. It'll be interesting to see other peoples views on this as well, i value what you've put since it delves a little deeper into the 'why' hpi is the way it is. Although immigration and downward pressure on wages i don't think is the whole story in respects to affordability. Then i imagine if what you mentioned didn't take place then we'd be earning on average £60k a year, and suddenly a £180k house becomes affordable ?

Either way there is probably more than meets the eye, but what framework should we all be making our analysis on - it appears VI, MEWing, BTL are the likely culprits. Who should i blame for the inability for me to be able to afford a house, i mean home.

I've had my dig at TTRTR today.. ;)

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significance to causing the massive HPI we are experiencing.

What about jet-planes piloted by beardy-weirdies slamming into the World Trade Center ?

Would we have had 3.5% interest rates had this not happened ?

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You're probably right, a lot of what i mentioned is house price crash trivia to some respects, and although contributionary to where house prices are, the 'real' cause as it were may be closer to your take on things. It'll be interesting to see other peoples views on this as well, i value what you've put since it delves a little deeper into the 'why' hpi is the way it is. Although immigration and downward pressure on wages i don't think is the whole story in respects to affordability. Then i imagine if what you mentioned didn't take place then we'd be earning on average £60k a year, and suddenly a £180k house becomes affordable ?

Either way there is probably more than meets the eye, but what framework should we all be making our analysis on - it appears VI, MEWing, BTL are the likely culprits. Who should i blame for the inability for me to be able to afford a house, i mean home.

I've had my dig at TTRTR today.. ;)

If there had been no millions and millions in immigration, when the credit flood was turned on - yes - many people would be earning 60k while house prices are 180k. This is pretty much what happened during the 1970s.

Houseprices went from 2k in 1973 to 9k short few years later. However, peoples wages also rose - in line with the prices of goods and services. Those upperty workers demanded wages that rose in relation to the real cost of all this money with strong unions!

Now we have a bizarre inflation measure that is deigned not to pick up real inflation. Per capita economic growth is negative as shown by houseprices and other resource prices rising forever in realtion to wages, while this is called economic growth (nominal GDP rises but wages don't) - mass immigration brings diminishing returns to scale.

So, its pretty much like the 1970s, except your wages cannot rise to keep pace with real world inflation (ex- MP3 players).

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Sounds pretty accurate to me. I've been criticising right-to-buy for years, even when I was on the ladder: Bought first houe around '97 with future ex-wife for £37k (up north). Sold in 2000 (after having a bridging loan for a year) for £35k :huh: Bought down south end of '99 for 80k'ish (I think) Sold on divorce in 2001 for a little more. Rented for a bit. Bought another house just before meeting my partner in 2002. Sold after 8 months and redundancy to move in with her. Still renting. We've got an 8 and a 2 year old. Waiting for the moment! I earn around 50% over the average I believe, it costs me £300/month in travel to work, trying to save £300/month (will go up when I start getting shift allowance next month).

Oh, and my favourite food is pizza ;-)

BTW, Nothing against people exercising their right to buy. Just against the eejits for offering. Having said that, nothing like a change of power to shake things up.

I have a worry though among all the expectation:

If IR's going up cause prices to drop we'll be paying more on the mortgage for a cheaper house (apparently 1% in IR=20% in mortgage/month) and we who can't afford to pay a mortgage will still be screwed? :unsure:

Here's hoping for an exciting Tripple Witching. I think :unsure: Again

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What's a tripple witching - sounds exciting - too lazy to google it... cheers, lewis

It was on here the other day. It's a quarterly day when stock options, something else and something else all mature on the same day (excuse my crappness, I learned everything I know about stocks from the movie Trading Places ;) )

It was further explained as like all your quarterly bills arriving on the same day and you going down the races with your cash to pay them. Sounds fun huh? :D

Roll on the crash! (Well when I've got a deposit saved)

Edited by RussellF

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I think the flood of easy money gets to the core of the issue, I take the point about immigration.

What I would do is

1. Limit the amount of a Mortgage to 4 x income at the max

2, end all BTL mortgage

3. Give real incentives to FTB's (like council tax breaks etc)

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My Solution:

A stop to BTL mortgages and multiple home ownership. Homes should be exactly that, homes for people to live in. Not investment vehicles with profit yeilds, and an asset class. That will solve the problem of where we're are. A more responsible credit lending practice as well is needed.

Your turn now...

I can agree with your point about responsible lending - but i think it's a little silly to start controling who can own property or not, it's a free market - if people want to throw everything they can and can't afford into housing that's their choice. You can do the same too to get onto the housing ladder, it's more a question of whether it's wise to.

I don't think it's healthy to hope for a 'get of jail free card' - yes it's unfair that we have to pay double what people did 4 years ago for the same property, but did you ever believe life was fair? if you want a house right now that badly you'll just have to accept what's the going rate.

I'm looking for my first house as well, i think prices are insane but you either want a house badly enough to pay for it or you don't - in the end we all have that choice.

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The cause of HPI was cheap credit from Asia. The solution is expensive credit from Asia.

When Asia begins tightening HPI will go away. If they don't it will implode anyway as the market is effectively gridlocked: FTBs are priced out and middle OOs cannot move up. Kill the bottom feeders and the big fish at the top die. The food chain must have constant imput from the entry point or the top of the chain starves to death.

HPI is, after all, a form of "inflation" which is a form of economic disease. It is regarded as something to stamp out through higher IR. It rarely benefits those who participate as everything rises together making profits notional. The only winners are those who buy low and sell high, the banks and the EAs.

Edited by Realistbear

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The cause of HPI was cheap credit from Asia. The solution is expensive credit from Asia.

Yes expensive credit (1-2% interest rate rise) should hit the house prices - but it isn't quite the 'get out of jail free card' forum members hope it will be.

If they can't afford houses (i.e. monthly repayments) now at current interest rates what makes them think they can after the rate hikes - a crash is only really going to benefit the cash rich buyers who can jump in with minimal/no finance required.

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A massive Asteroid similar to the one that wiped out the Dinosaurs as there’s no hope anyway.

You can get medical treatment for them these days!

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My solution would be capital gains tax on property. It would then be closer to other asset classes and would help to eliminate the ladder mentality. Modest inflationary house price gains in the region of 1 to 2 would remain below the CGT threshold but in times of crazy growth all home owners who moved house would have to forfit some of there unintended windfall and would probably not over inflate their house. It's great to make 60 grand on a house but it would hurt if you had to give 25 of it back to Gordon especially when you have to increase your morgage for the new bigger house you want to buy.

Edited by wudking

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Cheap credit from Asia - well to a point, and then again - no...

The main factor has been the non-unionisation and 'flexible' no jobs for life culture etc... within the workforce which has enabled lower interest rates. The polcies of Thatcherism, and a sound money supply had created a highly productive economy, with low unemployment, and large per capita increases in material living standards - real economic growth.

The hard lean years, large scale unemployment and suffering the UK workforce endued to create this greater capacity, rise in real living standards is now being reversed by a corporate controlled political elite class who are implementing the very policies and in spades that unions were formed to stop. Deflating wages by importing lower paid workers etc...!

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  • 301 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% +
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      • Even
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      • up 5%



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