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3 Parts To Hpi

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We all have our own opinions as to why house prices in the UK have reached such a hight, we also have our own thoughts as to what will cause a crash. I have lost count on this forum, of how many - clearly intelligent, well informed people have posted saying that there won't be a crash until "this" happens or "that" happens. but when you really look at it, there are 3 crutial parts to hpi, all 3 need to be in place for house prices to rise - but only one needs to fail for prices to fall (it doesnt really matter if the other 2 are still in place or not).

1, The availability of cheap, abundant credit - this includes low interest rates as well as stuff like the carry trade and the sale of mortgage backed securities.

2, The willingness of banks to lend to the buyer - even if the banks have or can get the money, it doesnt mean that they will lend it out - they have in recent years, but as soon as they see the light its all over. They can (and will) ask their own surveyors to be more cautious, or stop giving 5x, 100% loans to fools ect.

3, sentiment - very much overplayed IMHO but it is without doubt a vital part of hpi, and as soon as it goes into reverse prices will fall.

All three need to be in place for prices to rise, but only one needs to fail for prices to fall. If one fails the other two could fail as a result - but they don't need to.

Which do you think will fail first - or is one or more failing already?

Edited by gfromls

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I go for sentiment.

This will create the problem.

Reaction - banks tightening credit.

Solution - less lending.

Good 'ol Hegelian dialectics :ph34r:

Edited by music man

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