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Scooter
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It is cheap credit that has pushed up property (land) prices in London and everywhere else.

Without it London prices will fall along with everywhere else.

No, you misunderstand the very nature of the market.

It is driven by supply, and demand. Demand outstrips supply, therefore prices rise.

If you cite the cause as cheap lending, you might as well blame low interest rates, high inflation, wage increases, or any other of a myriad of economic factors.

These all play their part in the scale and rapidity of appreciation, but they cannot create a market by themselves. Without demand, there is no market. Everything else is incidental.

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No, you misunderstand the very nature of the market.

It is driven by supply, and demand. Demand outstrips supply, therefore prices rise.

If you cite the cause as cheap lending, you might as well blame low interest rates, high inflation, wage increases, or any other of a myriad of economic factors.

These all play their part in the scale and rapidity of appreciation, but they cannot create a market by themselves. Without demand, there is no market. Everything else is incidental.

Ummm....you're going to get in so much trouble for that :lol:

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No, you misunderstand the very nature of the market.

It is driven by supply, and demand. Demand outstrips supply, therefore prices rise.

If you cite the cause as cheap lending, you might as well blame low interest rates, high inflation, wage increases, or any other of a myriad of economic factors.

These all play their part in the scale and rapidity of appreciation, but they cannot create a market by themselves. Without demand, there is no market. Everything else is incidental.

The group that decides the interest rate deliberately fuelled a consumer boom to boost house prices and personal debt so that "UK Plc" could avoid recession.

Former governor Edward George said the Monetary Policy Committee "did not have much of a choice" in the matter.

The MPC members were battling to use interest rates to prevent the UK being dragged into a worldwide economic slump, he explained.

Massive, WAKE UP !!!

Edited by debtfree
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No, you misunderstand the very nature of the market.

It is driven by supply, and demand. Demand outstrips supply, therefore prices rise.

If you cite the cause as cheap lending, you might as well blame low interest rates, high inflation, wage increases, or any other of a myriad of economic factors.

These all play their part in the scale and rapidity of appreciation, but they cannot create a market by themselves. Without demand, there is no market. Everything else is incidental.

HPI_vs_Rent.jpg

Which one follows supply and demand? Hmmm....

Edited for mistake with me crayons...... :lol:

post-6049-1174576488_thumb.jpg

Edited by Burned Out
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I think the value added to the East End market from the Olympics regeneration, Cross-Rail, East End Line extensions, Euro-star (Stratford) are currently priced into the market. Further value (or should that be ramping?) will be made as these come online, but the potential gains I believe are small for any new investment.

Agreed - it's never a reliable investment strategy to simply dive into a supposed hotspot and hope for the best. Bullish as I am about London overall, this in no way detracts from the need for due diligence. Every single property, wherever located, must be judged on its individual merits.

I also concur on the ephemeral nature of financial business, but who can say? The best we can do is judge the market on the evidence before us, and look to what is planned for the future.

When so many forces push in the same direction, I think it's justified to forecast a rosy outlook for the next 5 years or so. Allowing for natural fluctuation and stabilisation, I'd like to say the same for a decade hence, and two decades, but again, who can say?

The signs are positive, so we shouldn't deny the facts. If these forces persist, then the market will inevitably follow. If things change, then we can re-assess when they do so. But let's not preach doom in the face of the facts, just because our personal demons tell us someone else has something that we desire.

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No, you misunderstand the very nature of the market.

It is driven by supply, and demand. Demand outstrips supply, therefore prices rise.

If you cite the cause as cheap lending, you might as well blame low interest rates, high inflation, wage increases, or any other of a myriad of economic factors.

These all play their part in the scale and rapidity of appreciation, but they cannot create a market by themselves. Without demand, there is no market. Everything else is incidental.

So you don't think that the amount of money people have to spend has any impact on demand at all?

Let me ask you a question - if you gave every person in the UK £1 million pounds in cash, do you think house prices would rise or fall?

Another question - If mortgages and loans were outlawed tomorrow and people were only able to buy things with the money they earn or save, do you think house prices would rise or fall?

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I also concur on the ephemeral nature of financial business, but who can say? The best we can do is judge the market on the evidence before us, and look to what is planned for the future.

When so many forces push in the same direction, I think it's justified to forecast a rosy outlook for the next 5 years or so. Allowing for natural fluctuation and stabilisation, I'd like to say the same for a decade hence, and two decades, but again, who can say?

The signs are positive, so we shouldn't deny the facts. If these forces persist, then the market will inevitably follow. If things change, then we can re-assess when they do so. But let's not preach doom in the face of the facts, just because our personal demons tell us someone else has something that we desire.

The signs are not positive! Your supply and demand argument is bunk. It is you who is denying the facts. The facts clearly show trouble around the bend (Miles report, Steady Eddie, repos, blah blah blah). Honestly, I can hardly be bothered.

Edited by Burned Out
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No, you misunderstand the very nature of the market.

It is driven by supply, and demand. Demand outstrips supply, therefore prices rise.

If you cite the cause as cheap lending, you might as well blame low interest rates, high inflation, wage increases, or any other of a myriad of economic factors.

These all play their part in the scale and rapidity of appreciation, but they cannot create a market by themselves. Without demand, there is no market. Everything else is incidental.

:lol::lol::lol:

I had to laugh out loud when I read that - really!

You have just demonstrated beyond any doubt that you don't know what you are talking about. Please don't ask me to elaborate, the previous few posts to this one tell you all you need to know.

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Debtfree, the London market (for all the reasons I have stated) needs no boosting.

Doubtless, without such tactics, prices may not have risen so far so fast, but are you seriously saying that there is no supply deficit of accommodation in the capital?

Are you implying that this market is not driven by demand? That without manipulation of interest rates there would be no market?

Burned Out - your coloured lines are very pretty. Pretty, but patently meaningless. Are you relating them in some way to the London property market?

Underpressuretobuy, as I said, affordability plays its part in the scale and rapidity of appreciation, but it does not drive the fundamental market.

Your scenarios are pure fantasy, but I'll indulge you. Of course large scale economic changes affect prices, and I have quoted many economic factors that do so.

Johnny Cash, I tire of reiterating the same facts when your empty contradictions carry no evidence to counter my argument. You carry on laughing, and we'll just have to see who makes it to the bank.

Liquid - indeed, by positive, I mean upwardly mobile. Whether this is indeed a good thing all round is debatable, and I for one would welcome a general cooling of the economy and less hyperbole in the property market, whether in the capital or the country as a whole.

Edited by Massive
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Debtfree, the London market (for all the reasons I have stated) needs no boosting.

Doubtless, without such tactics, prices may not have risen so far so fast, but are you seriously saying that there is no supply deficit of accommodation in the capital?

Are you implying that this market is not driven by demand? That without manipulation of interest rates there would be no market?

Drrayjo - your coloured lines are very pretty. Pretty, but patently meaningless. Are you relating them in some way to the London property market?

Underpressuretobuy, as I said, affordability plays its part in the scale and rapidity of appreciation, but it does not drive the fundamental market.

Your scenarios are pure fantasy, but I'll indulge you. Of course large scale economic changes affect prices, and I have quoted many economic factors that do so.

Burned Out and Johnny Cash, I tire of reiterating the same facts when your empty contradictions carry no evidence to counter my argument. You carry on laughing, and we'll just have to see who makes it to the bank.

Liquid - indeed, by positive, I mean upwardly mobile. Whether this is indeed a good thing all round is debatable, and I for one would welcome a general cooling of the economy and less hyperbole in the property market, whether in the capital or the country as a whole.

Yeah . . . What he said :lol:

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Debtfree, the London market (for all the reasons I have stated) needs no boosting.

Doubtless, without such tactics, prices may not have risen so far so fast, but are you seriously saying that there is no supply deficit of accommodation in the capital?

Are you implying that this market is not driven by demand? That without manipulation of interest rates there would be no market?

Underpressuretobuy, as I said, affordability plays its part in the scale and rapidity of appreciation, but it does not drive the fundamental market.

Your scenarios are pure fantasy, but I'll indulge you. Of course large scale economic changes affect prices, and I have quoted many economic factors that do so.

If HPI has been driven by a supply deficit of accomodation in the capital why has the property market boomed throughout the UK, even in areas of the North of England where the population is declining?

Please can you give me your definition of demand, what do you mean when you use this word?

I only ask because some people seem to have different ideas about what it means.

My scenarios were intended to be fantasy but you missed a serious point that a large scale economic change has already happened.

It occurred after 9/11 and it was the relaxation of credit.

It certainly did affect prices and it has had a much bigger effect on this property boom than some future promise of regeneration in Stratford.

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....less hyperbole in the property market, whether in the capital or the country as a whole.

I would think that because there is such hyperbole it would mean that it cannot be lessened, at least not in a ‘soft’ way. The momentum of exuberance is too big. There are many apt analogies to draw from this, but the switch in sentiment I believe will be seismic in the opposite direction. This isn’t to say that it will be rapid, but that the sentiment will gradually reverse. Some bulls portend that this effect will restore the market, in that the bears/STRs will provide resistance to any downturn. This, in my view is a false dichotomy because the bears are in a small minority compared to the buying bulls.

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Burned Out - your coloured lines are very pretty. Pretty, but patently meaningless. Are you relating them in some way to the London property market?

Thanks. I chose them just for you.

"patently meaningless" I see, so.... Nationwide House Price Inflation and CPI Rental Inflation are meaningless....

I regards to the London market....

The graph is a reflection of the whole of the UK.

London is located in the UK.

London house prices have risen roughly in line with national house prices.

I can't be bothered to graph London house prices as they are obviously meaningless to you.

Explain me this, if you can..... Why haven't London rents inflated in line with London house prices? If there is excess demand would this not have spilled into the rental market ( which it can be argued, is much more liquid)? Why have BTL yields dropped in recent years?

Reducing it to theoretical "supply and demand" shows very little understanding of finance or economics. Come on, you can do better.

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What you say makes sense, but as you rightly point out the positives reflect gains for the short-term. I think the value added to the East End market from the Olympics regeneration, Cross-Rail, East End Line extensions, Euro-star (Stratford) are currently priced into the market. Further value (or should that be ramping?) will be made as these come online, but the potential gains I believe are small for any new investment. Against these positives I believe you will still have one of the largest unemployment rates in the UK, a large ethnic demographic that is mostly reliant on benefits and low income which exacerbate the wealth divide, an increasing supply of new build flats, and no foreseeable industry (service or otherwise) to take the slack if/when the City takes a downturn. London is currently seen as the financial capital of the world but what can one read into the hue and cry from the New York exchange and its supporters? Does it aim to fight back? It will certainly have more reason if in the midst of a recession and a poor dollar. Frankfurt too is interesting for the reasons that have been said: the low cost of living for employees, the low cost of commercial property, and an optimal time-zone that supports the potential boom markets of Asia. Do these factors appeal to the banks who might just be thinking beyond the current boom times in the UK?

Frankfurt has been touted as a serious rival to London/Wall Street since my A' Level economics days. Still waiting...........

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Guest Cletus VanDamme
Explain me this, if you can..... Why haven't London rents inflated in line with London house prices? If there is excess demand would this not have spilled into the rental market ( which it can be argued, is much more liquid)? Why have BTL yields dropped in recent years?

My naive understanding is that there is an excess supply of flats available rent in London, hence rents have fallen in real terms. The excess demand, and under-supply, is in the market for buying, not renting. People aspire to own, but there aren't enough places for sale that people want to buy, so prices have risen.

This is why, e.g., 1 bed flats in the Barbican cost 500K.

Can you explain why this is wrong 'cos it seems pretty clear to me?

Edited by Cletus VanDamme
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With regards to London, and UK HPI in general, is it feasible to suggest that we have seen a structural change in the market over the last 6-8 years? Have the general public now squared it in their minds that they have to commit more of their labour (i.e. working lives, monthly income) to acquiring a house?

If days of 2.5x earnings are no longer in the minds of most people in the UK (bears, STRers excepted), is there any going back?

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My naive understanding is that there is an excess supply of flats available rent in London, hence rents have fallen in real terms. The excess demand, and under-supply, is in the market for buying, not renting. People aspire to own, but there aren't enough places for sale that people want to buy, so prices have risen.

This is why, e.g., 1 bed flats in the Barbican cost 500K.

Can you explain why this is wrong 'cos it seems pretty clear to me?

You said it, "People aspire to own" = buying sentiment.

Regarding my other post in which I invite you to have a think in reply to your observation that a flat in London costs £300k (or whatever you wrote) and one in Frankfurt or Berlin £70k.

I guess your inference when you invited us to 'go figure' was that the German flats were cheap. Has it occured to you that the London one might be over priced? When you consider that only 5 or 6 years ago it cost less than half what it costs today I would have thought that could easily be the case especially in the climate of our unhealthy pre occupation with property coupled with the lax credit environment of the period.

Massive,

Johnny Cash, I tire of reiterating the same facts when your empty contradictions carry no evidence to counter my argument. You carry on laughing, and we'll just have to see who makes it to the bank.

Fair enough. I feel the same way.

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With the average couple earning little more than 60k between them, there is now way they could afford to get onto the housing ladder.

A correction will take place, and very soon.

They could get on the flat ladder? :P

Joking aside, it is possible with a joint income of 60, assume you have saved for a deposit over a few years, to self cert and buy, whether someone should or not, or having their own place is that important, is up to them, but they should look carefully at finances, and any eventualities

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Guest Cletus VanDamme
I guess your inference when you invited us to 'go figure' was that the German flats were cheap. Has it occured to you that the London one might be over priced?

Of course the London flats are over-priced. But what is a fair price in a market where people are happy to pay these prices?

Of course it comes down to lax credit. Seems to me that if you have lax credit, you get bullish sentiment. Add that bullish sentiment to an item of desire - a property to own (not rent), and you get demand. So the most highly prized properties inflate in price.

So what's the difference between what you're saying and what I'm saying? Seems to me we're in agreement.

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So what's the difference between what you're saying and what I'm saying? Seems to me we're in agreement.

So why does it say 'bull' next to your name then?

No I dont think we agree all that much. You seem to be arguing that the increase in UK house prices is somehow a real increase in their intrinsic value (how do we calculate that? maybe comparing the amount of return you can get on the investment compared to having the cash in the bank or elsewhere would be a good start) and Im saying that the increase is purely down to lax lending and people aspiring to own property largely in anticipation of capital gains based on past performance.

Let me ask you a question. Are you a bull because you think prices will rise but hope they dont or do you think they will and also want them to.

I am a bear who thinks prices will drop but in a strange way, I hope they dont drop too far, not in nominal terms at least, as I work in a very recession sensitive occupation. Rambling here, it makes me laugh how many people write on here that they work in a recession proof business. I wonder how many of them really do.

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Guest Cletus VanDamme
Let me ask you a question. Are you a bull because you think prices will rise but hope they dont or do you think they will and also want them to.

I'm a bull because I think in areas in high demand, e.g. London, unless there is a big change in economic conditions, high prices will be maintained. I'm not happy about it and I don't want it to happen.

If job creation continues to be centred in the South East, then demand will continue to outstrip supply in the decent areas where people want to live.

Why else have the bears been wrong all these years? What's going to change to affect sentiment in London?

Edited by Cletus VanDamme
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