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Yvette Cooper's Bid For Economist Of The Year

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Guest xeouialp

Yvette Cooper, Minister for Housing & Planning, stated on Friday's Any Questions, "The fact is we need more homes in this country (audience boos). Over the last 30 years we have seen a 30% increase in the number of households and a 50% drop in the level of new house building. That is unsustainable. There is a good reason why it is that our house prices in this country - in the long term - have been going up faster than other countries and faster than our European competitors, and that is simply because we have not been building enough homes to meet demand" (my emphasis - no she didn't get up and bang the table with those last words)

Now I don't actually know if the statement she makes at the end is true but it seems to me that if we had enough supply of anything to meet demand, prices would drop to an uneconomic level for anyone ever to make a profit, and capitalism would have to give up and go home forever because the market's need for scarcity would finally have become redundant. I doubt that's what she means, but I'm more interested in why a minister from John Prescott's former department is so interested in promoting a huge programme of mainly private housebuilding, mainly in the south east, and what interests she is representing by saying it. Anyone got any ideas?

My second question is about economics and in particular is these strange concepts of supply and demand. I understand that the price of a commodity is really that finely-tuned point at which supply and demand co-exist. But isn't demand a function of the availability of money, in particular in this case mortgages, and therefore as much a function of interest rates and the availability of debt products as the actual demand for housing? Isn't poor Yvette confusing two very different types of product - money, on the one hand, and houses on the other? I'd love to explore these issues with anyone who is interested, I'd like to know why she thinks it's so important to pretend it's all just about housing policy.

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"The fact is we need more homes in this country (audience boos).

How could anyone boo to that? Talk about being selfish.

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...we have seen a 30% increase in the number of households and a 50% drop in the level of new house building. That is unsustainable....

Why is she comparing an absolute figure to a rate of change? She clearly doesn't have much of a grasp of numbers. Mind you, nor do any government ministers...

Edited by IamSpartacus

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How could anyone boo to that? Talk about being selfish.

Here I choose my words carefully. They have been brainwashed by the ***** at the CPRE.

W@nkers to a man.

Having said that I am sure people associate more housing with more shoeboxes to live in. Horrible, poxy little estates with people crammed in like sardines.

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I'd love to explore these issues with anyone who is interested,

I'm interested and yes you're right its also to do with the supply of money. Prices are set at the margin. I don't know the figures for the supply of housing but I don't really believe that there is a great shortage. As credit dries up there will be a dramatic drop in demand and those houses that have increased the most in value will fall by the most.

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I'm interested and yes you're right its also to do with the supply of money. Prices are set at the margin. I don't know the figures for the supply of housing but I don't really believe that there is a great shortage. As credit dries up there will be a dramatic drop in demand and those houses that have increased the most in value will fall by the most.

I agree. I think there are enough houses for those that want to buy them to have one (just not enough for everybody to buy 2 or 3 etc).

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I'm interested and yes you're right its also to do with the supply of money. Prices are set at the margin. I don't know the figures for the supply of housing but I don't really believe that there is a great shortage. As credit dries up there will be a dramatic drop in demand and those houses that have increased the most in value will fall by the most.

I call it "house pounds". Its a new form of monopoly money that can be only exchanged for housing and bears no relevance to external pricing.

Extreme example: if you gave everyone in the UK a million pounds stirling BUT they could only spend it on buying a house what do you think would happen to the price of all housing?

Lax lending, IO, self cert, high multiples at low low IR's is part way to this extreme. Do you get my drift? :ph34r:

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I call it "house pounds". Its a new form of monopoly money that can be only exchanged for housing and bears no relevance to external pricing.

Extreme example: if you gave everyone in the UK a million pounds stirling BUT they could only spend it on buying a house what do you think would happen to the price of all housing?

Lax lending, IO, self cert, high multiples at low low IR's is part way to this extreme. Do you get my drift? :ph34r:

Hmmm, i thought banks were giving everyone about 200k or 5/6x there salary when offering a morgage... its funny cos thats about the price of an average house ;p

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Remove the restrictions on building,

and the market would solve the problem

Main drivers of increase in households: immigration and divorce, it is not fertility

Women are too busy working and shopping to have large families

I thought the market was responsible for the huge over development of 2 bed executive appartments for sheeple BTL investors which will lead the market down.

It also seems to have failed spectacularly in the building of quality long lasting family homes with a decent infrastructure.

Huge disconnects between supply and demand depending upon area and type of housing. I think I saw a quote from Savills a few years ago where they claimed that professionals regarded London as 26 different markets.

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I thought the market was responsible for the huge over development of 2 bed executive appartments for sheeple BTL investors which will lead the market down.

It also seems to have failed spectacularly in the building of quality long lasting family homes with a decent infrastructure.

Huge disconnects between supply and demand depending upon area and type of housing. I think I saw a quote from Savills a few years ago where they claimed that professionals regarded London as 26 different markets.

although i must say that encouraging the market to build the next generation of social housing, and getting foolish 'property developers' with highly financed porsche boxters to pay for it was quite a masterstroke on the part of the government.

in sheffield they are pulling down most of the circa 1960 blocks of flats and building hip, funky 'executive apartments' even closer to the centre of the city. if these aren't full of drug addicts, prostitutes and beaten wives within five years i'll eat my hat.

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I call it "house pounds". Its a new form of monopoly money that can be only exchanged for housing and bears no relevance to external pricing.

Extreme example: if you gave everyone in the UK a million pounds stirling BUT they could only spend it on buying a house what do you think would happen to the price of all housing?

Lax lending, IO, self cert, high multiples at low low IR's is part way to this extreme. Do you get my drift? :ph34r:

Actually, you have a point here. Not in the lending criteria though. "House pounds" is the equity built up by most homeowners who purchased before the latest bubble and who haven't MEWed it away.

We carried £300K equity forward from 1 house to the next. Monopoly money which we don't even consider is available for normal spending. I fully expect us to be indirectly funding grandchildrens first purchase with this equity after we both die.

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How could anyone boo to that? Talk about being selfish.

The booing bit is the most informative part of the quote.

Never forget that the vast majority of this country do no want too much more housebuilding which is why all these calls for accelerated building programmes will never get supported.

Selfish... or democratic?

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Guest xeouialp

Well I think I've fully thought through the honorable minister's utterances last week.

Of course there is a housing shortage in Britain. There always has been a housing shortage and there always will be one. As I mentioned earlier, only scarcity of supply can guarantee that a house gets any price at all. If there weren't a shortage, there'd be a glut. It's simple logic. Irresponsible governments will point to the ever-present housing shortage to explain house price bubbles before they burst. It's an just easy bit of amateur economics to blurt out when you think your audience is rather stupid as Yvonne Cooper obviously did on Friday. Of course it's in a government's interests not to publicly recognise a housing bubble bursting before it happens, since there's always the chance it might not happen till after then next general election. I think the poor dears are a bit out of sequence in this electoral cycle though.

The reason why the government wants thousands of new houses in the south-east is because a lot of developers are on their back who see a fast buck to be made while the bubble is still growing. They just want to get in before the bubble bursts. The Labour Government probably owes them a few favours anyway. Actually the question in Any Questions was very much about the inability of the south east's infrastructure to support the level of new housing being proposed. I think the audience sensed the fast-buck motivation and the environmental impact and that is what they were booing at, which gave her majesty the minister a chance to berate them about the unfairness of our present housing market, but that's another story.

Actually while we're on the subject I don't find today's Nationwide house price figures, which show yet another increase, as discouraging as some people do on this site. This is, to coin a phrase, the mother of bubbles, and it's just a wonderful spectacle for those of us who know what's going to happen next to sit back and watch it grow, and grow, and grow... I'm quietly minimising my debts and staying away from any property as long as this situation continues; I don't doubt the coming recession will be painful for all of us, I'd just rather not be endebted on top of everything else when the reverse comes.

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The booing bit is the most informative part of the quote.

I heard this programme whilst in the car and was shocked by the boos. There is something important to add - when Ms Cooper expanded on the reasons homes were needed, the difficulties faced by FTB's without parental handouts, and the unfairness involved the audience reaction changed. Seems to show that there is a need to confront people with the debate.

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Guest xeouialp

I love that graph! (hopefully it won't happen though)

I mean the the one by XEOUIALP not the guy crashing down hill, but thats good also

Thanks. Yeah, actually I'm from the future. The graph is the only thing I was allowed to bring with me. Be afraid, be very afraid.

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I'm afraid there is a shortage of houses being built. However it's not the chief source of "the current bubble" but it is the driving force behind the long term trend.

See this:

Building Enough New Homes

And this:

Why the housing shortage won't stop the crash

For further enlightenment.

Thanks for the links but I'm afraid I remain unconvinced. I'm not arguing that you are wrong in saying that there is a shortage of property just that I've not seen any evidence that substantiates this. I've not read the Barker report but the links you provide seem contradictory at best. Disregarding 2002 which was clearly a low point for house building (134,000) all other years seem to hover just below 200,000 which is pretty close to the number of new housing formations. I can concede that maybe supply is lagging by single digit amounts (<10%) and whilst by my own admission 'prices are set at the margin' can that justify 100% increase in prices over the last 5 years ?

...Or maybe thats the point and a similar amount of oversupply (pending) will lead to significant falls.

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There is a huge shortage of 5 bedroom houses with half an acre of gardens in the centre of London - why can't the government build a few million more of them?

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Does housing completions show the whole picture. Surely have to take in account the number of houses being destroyed and renevated. In the 1960's they were knocking down tenements right left and centre and replacing them with High Rise. I reckon less houses get knocked down today, more will get renevated and divided into rabit hutches.

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Yes, prices are determined by supply and demand.

Yes, demand for housing has outstripped supply in recent years, causing a huge rise in market prices.

However, Yvette Cooper (and Kate Barker, who should know better) have suggested the solution is to target supply by building more and more houses.

I believe they are wrong. I believe there is a demand problem, not a supply problem, and it is demand that should be targeted. Much of the high demand in recent years has come about as a result of speculation and cheap borrowing. If this was to dry up (and at some point it will), demand would plummet, creating a massive oversupply of housing and a crash in market prices.

After all, if supply was the problem then why have house prices tripled in most areas since 1995 whilst the size and shape of the UK population has remained relatively unchanged?

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Yes, prices are determined by supply and demand.

Yes, demand for housing has outstripped supply in recent years, causing a huge rise in market prices.

However, Yvette Cooper (and Kate Barker, who should know better) have suggested the solution is to target supply by building more and more houses.

I believe they are wrong. I believe there is a demand problem, not a supply problem, and it is demand that should be targeted. Much of the high demand in recent years has come about as a result of speculation and cheap borrowing. If this was to dry up (and at some point it will), demand would plummet, creating a massive oversupply of housing and a crash in market prices.

After all, if supply was the problem then why have house prices tripled in most areas since 1995 whilst the size and shape of the UK population has remained relatively unchanged?

Why on earth would any government regardless of hue ever want to engineer a house price crash?

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Why on earth would any government regardless of hue ever want to engineer a house price crash?

That's a fair point. No government would ever wish for, let alone engineer a housing crash on their watch.

The problem is that at some stage the economic fundamentals will change (e.g. interest rates will return to their long-term trend or even overshoot on the upside), and if imbalances in the economy have not been actively managed, the resulting downturn will be far worse than it would have been.

Whilst I would not expect any goverment minister to recommend targeting demand, I would expect influential economists such as Kate Barker to put pressure on the goverment to do so.

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If there was a genuine shortage of supply in housing then rents would have risen at the same rate of inflation as house prices.

That's a fair point that I hadn't thought about and I've got to say I agree entirely.

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  • 341 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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