Why There Will Never Be A Hpc - Ever

[dgl1001]

I think its time to hear a counter argument to all of this HPC talk. This web site has been established for years now and still you are no closer to realising your goal - a HPC. Just perhaps, this housing market may be a little more complex than you all think and maybe, just maybe, your assumptions about a crash are miss-guided.

So why won't the housing market crash?

In simple terms, the market will not crash because there is an insufficient supply of housing to meet housing need. The demand for housing will fluctuate up and down and will impact on price. If the demand for housing is reduced, by say interest rate rises, then house prices may fall (as i'm sure they do in the future). Housing supply and housing need are very very complex areas which use computer modeling to try to estimate.

If anyone tells you their is no housing supply problem because 1) they looked on Rightmove and theres load of houses 2) there are loads of flats which are vacant in my area - therefore loads of housing 3) looked outside a saw loads of housing; then frankly they know nothing. If on the other hand some tells you they are a professor of demographic studies with the backing of a University behind them and undertake modeling work on a regular basis to inform housing supply debates at Examinations in Public, then they will know plenty about the complexity of housing need and supply. I am not one of these people, but i do employ them to try a convince the Government to increase the supply of housing.

The failure of the planning system - for the last 30 years

The amount of housing which is built is determined by the planning system, which is Plan led. Although a complex process in itself i can simplify it by saying that the level of housing need is debated and the Panel of inspectors will give their final report which is then adopted. The key points you need to know are:

a) determining housing need is a complex area with a number of factors from immigration, birth rates, average household size etc etc

Local authorities are against providing housing because it is not popular with local voters - who can keep them in power

c) the models used have always tended to under-estimated demand

d) the projections are made over 15 to 20 year timescales which cannot foresee future changes in government policy - eg UK opening up the boarders to other EU states; so no housing is provided for them

e) this failure of the system has been going on for about 30 years

When the government makes statements about an under-supply of housing it is this very complex area they are referring too; NOT the amount of properties for sale on 'rightmove'.

So why won't a House Price Crash happen?

Expecting a 20% fall of prices next year so you can buy a house? Sorry, its unlikely to happen. Because their has been such an under supply of housing their are countless people wanting to do the same thing. In fact so many people want a house price crash to happen so they can buy a house that they they go to housepricecrash.co.uk to try a convince themselve that it will. Another example of the under supply are the thousands of families waiting to be housed in Council housing in each local authority area; families in bedsits, the homeless, FTB's in rented accomodation, children still living at home - the list goes on and on and on - and its the reason that there will not be a house price crash. Its simple supply and demand!

What about the evidence for this under supply?

Government policy is changing with Gorden B proposing to develop more housing. This change in policy was in part brought on by a Treasury backed report by Kate Barker which examined the problem. you can find it at

http://www.hm-treasury.gov.uk/consultation...arker_index.cfm

In simple terms it identifies the problem of housing under supply and the only way to resolve it by building more houses

Before this there was a white paper from 1996 called something like "where shall we live - the problem of housing need in 2016. This predicted that we shall need a further 3 millions homes by 2016.

But what about all this extra housing which GB has told you about?

Too little, too late really. The figure which he is providing will are only a fraction what we need to produce as an absolute minium. There are also serious concerns about delivery particully as as a new planning system has been put in place to speed up the entire planning system which happening the opposite effect.

what about the other factors of HPI such as the ease of credit

Yeah, your right, its not only the under supply of housing which has fueled HPI but also other factors such as the ease of credit, low interest rates etc etc. you've all debated them for years and they have all contributed BUT its all been underpinned by the lack of supply.

But prices seem to be easing off, interest rates are going higher the US housing market is in a right state and house price are not affordable

Its likely that these factors may lower house prices but its unlikely it will cause a crash. As soon as prices become affordable all the people who have struggled to get on the market will do so, increasing demand and therefore prices. On this affordabily issue remember their is plenty of money in the economy and securing a mortgage is still easy. I know someone who has brought a £150k house and she's only on £17k. is it affordable for her - yes because she's brought it with someone else. Loads of people are purchasing together and thereby sustaining demand - its happening all over the place.

In a nut shell

1) massive under supply of housing over the last 30 years

2) This has underpinned recent HPI

3) Unable to build the houses needed to balance out the demand for housing

4) a 'crash' is unlikely to occur because any lowering of prices will make house purchasing more affordable which will increase demand and prices.

Just a few notes

A 'crash' in the market is not house prices weakening in a few parts of the country but more about huge loses of say 20 to 30% in a short period of time of say 6 months to a year

You may be impressed by some members and how they partry their argument across but if they've been a member for any amount of time, it means they have also predicting a crash for ages, which hasn't happened.

Im not saying the market won't go down slight - im sure it will. What im saying is that there won't be a crash

Know body can predict the future

[downshifter98]

dgl1001.......brace yourself.......

[LargelyIgnorant]

There's a lack of supply? Gosh, that argument hasn't ever been discussed on here. Do you think we've missed the boat, or is there still a chance of buying now before we're priced out forever?

[bdon]

demographics and dynamics change - a deep recession will mean people living together (rather than separately). some generations ago there was mum dad kids and granny living in a relatively modest accomodation. newgen imigrants to uk have no qualms about sharing many to a domicile

mathematical models are all very well (I belive the met office has a rather sophisticated one running on one of the finest supercomputers). it still pisses down.

[Issy]

As soon as prices become affordable all the people who have struggled to get on the market will do so, increasing demand and therefore prices.

You think? Why on earth would people buy in if prices start to slide and when the interest on the mortgage is more than renting? Don't you think sentiment has anything to do with it?

[Boughtin95]

Just a few notes

A 'crash' in the market is not house prices weakening in a few parts of the country but more about huge loses of say 20 to 30% in a short period of time of say 6 months to a year

You may be impressed by some members and how they partry their argument across but if they've been a member for any amount of time, it means they have also predicting a crash for ages, which hasn't happened.

Im not saying the market won't go down slight - im sure it will. What im saying is that there won't be a crash

Know body can predict the future

Where did you cut and paste the main body of your post from?

I don't think it's your own work as, in the main, the spelling and grammar are quite good, whereas the "Just a few notes" part is not.

[dgl1001]

Where did you cut and paste the main body of your post from?

I don't think it's your own work as, in the main, the spelling and grammar are quite good, whereas the "Just a few notes" part is not.

Its all my own work. Spelling diminished towards the end

[Dopamine]

[Know body can predict the future

I'm sorry, but you've obviously gone to a lot of effort to write and post your opinions, and then you end with that?

[tackle2004]

There will be loads of supply and no demand, if nobody can afford to pay the mortgage.

Edited July 19, 2007 by tackle2004

[ccc]

In simple terms, the market will not crash

What im saying is that there won't be a crash

Know body can predict the future

Whether there will be a crash or won't be is besides the point. You clearly don't have a clue what you are talking about...

[Guest Charlie The Tramp]

In a nut shell

1) massive under supply of housing over the last 30 years

1977?

1990?

[Guest nosugarbaby]

Thats a great poster that you have written to convince yourself but your deluded. Just in case you havent understood let me repeat. You are deluded. I do admit though that you havenot understood me. Do however continually bump your post so that it stays in a prominent position, because your post is every reason why it will crash.

Someone I know was offered an interest only mortgage recentyl from a leading mortgage advisor (referred by Fxtns). It was for 265k. His deposit was 20k. The advisor siad that this was the vbest mortgage for him because it would allow him to stretch his 'affordability'. My friend eans 48k. Because my firnd is thick he thinks ghis monthly payments will pay his mortgage competely (the capital and the interest). As you will know he is wrong. Whats worse your friend the mortgage broker scum then adds salt to the wound by saying he can give a better rate of interest if he adds the 'fees' to the loan, that way my friend will have extra cash to tart up his 2 bed ****** flat in N8. My friend of course is compeletly oblvisous to the fact that he having a hot poker up his arrsrss!" You might think that the broker has advised him to take out a sacvings plan to ensure the capital is paid off. Your deluded. Instead h e said property prices will rise?!?!?!??!?!??

Sheesh, you know - I'm pssed off. So ****** the ****** ofvcffv"!"!

(5 mins later).

Calmer now.

Perhaps you can elucidate how those in the same psoition as my friend (FTBs) will actually benefit from the type of offers made by your friends in the business. Saying that, youre maths are proabbly that good so I won't expect anything from you. Once last try: perhaps I'm mad: prove it to me.

[Goldfinger]

OK, situation now:

average house price (ahp): £ 200,000

average income (ai): £25,000

average house price / average income = ahp/ai = 8

I think there are two options for the future:

(1) ahp/ai = 10, 12, 14, ... -- government supports HPI, they hand out free £1,000,000 lump sums every few months

to everyone who wants to buy a house.

(2) ahp/ai stays at 8 --> government bails out everyone who goes into foreclosure because of higher IRs

(3) ahp/ai falls, since no one can afford it at present levels with IRs climbing.

I somehow can't see (1) and (2) happening. But then, who knows.

[dgl1001]

Thats a great poster that you have written to convince yourself but your deluded. Just in case you havent understood let me repeat. You are deluded. I do admit though that you havenot understood me. Do however continually bump your post so that it stays in a prominent position, because your post is every reason why it will crash.

Someone I know was offered an interest only mortgage recentyl from a leading mortgage advisor (referred by Fxtns). It was for 265k. His deposit was 20k. The advisor siad that this was the vbest mortgage for him because it would allow him to stretch his 'affordability'. My friend eans 48k. Because my firnd is thick he thinks ghis monthly payments will pay his mortgage competely (the capital and the interest). As you will know he is wrong. Whats worse your friend the mortgage broker scum then adds salt to the wound by saying he can give a better rate of interest if he adds the 'fees' to the loan, that way my friend will have extra cash to tart up his 2 bed ****** flat in N8. My friend of course is compeletly oblvisous to the fact that he having a hot poker up his arrsrss!" You might think that the broker has advised him to take out a sacvings plan to ensure the capital is paid off. Your deluded. Instead h e said property prices will rise?!?!?!??!?!??

Sheesh, you know - I'm pssed off. So ****** the ****** ofvcffv"!"!

(5 mins later).

Calmer now.

Perhaps you can elucidate how those in the same psoition as my friend (FTBs) will actually benefit from the type of offers made by your friends in the business. Saying that, youre maths are proabbly that good so I won't expect anything from you. Once last try: perhaps I'm mad: prove it to me.

Your friend cannot benefit from taking out so much debt - why is he doing it?

[Red Baron]

Oh yes, all the same arguments which were trotted out before the last crash (which dgl1001 is probably too young to remember).

Just to remind him, nominal prices dropped in my area by 30%, real prices nearer 50% and I remember people being in negative equity for a decade. In my Father's case the house he bought in 1988 took until 2001 before its real value was restored allowing for inflation.

Shortage of property? A complete fiction - our mental house prices are explained by two factors alone, easy credit and the bubble sentiment.

Edited July 19, 2007 by Red Baron

[nowthenagain]

If the wider economy falls from its ten year prosperous perch then this under-supply myth will be exposed.

There is only what you call under-supply because we have got so rich over the past few years and therefore 1. Will not live in the poor quality empty property that already exists and 2. Expect to live with less persons per property.

When the economic boom ends we'll see a return to a more traditional society, blowing your rather simplistic argument out of the water.

[Dubai]

dgl1001..... I think that you're very brave to put up that post on a board like this. You must be expecting flak, and lots of it!

I can see your point, but you've missed a very important factor.... affordability.

I'm no economist, nor into demographics or any other discipline which could qualify me as an expert. But I do know that if people can't afford to buy something, then it won't sell. And if somebody wants or needs to sell something, they have to reduce the price to an affordable level.

The reason people can afford these lunatic prices is because they can borrow huge amounts of money at low interest, make their repayments and still have enough to buy food. But if interest rates go up, then something has to give.

Anyway, glad to see there are still people with big enough cajones to post such a counterpoint

[dgl1001]

Oh yes, all the same arguments which were trotted out before the last crash (which the poster is probably too young to remember judging by his spelling).

Just to remind him, nominal prices dropped in my area by 30%, real prices nearer 50% and I remember people being in negative equity for a decade. In my Father's case the house he bought in 1988 took until 2001 before its real value was restored allowing for inflation.

Shortage of property? A complete fiction - our mental house prices are explained by two factors alone, easy credit and the bubble sentiment.

i suggest you read the Barker Report on the link provided in my main post

Just out of interest, how long have you been predicting a crash - your membership to this forum has been for quite a long time

[The Matador]

Where did you cut and paste the main body of your post from?

I don't think it's your own work as, in the main, the spelling and grammar are quite good, whereas the "Just a few notes" part is not.

An obvious cut and paste job and one with some pretty weak arguments at that.

How can this bozo expect to be taken seriously

Im not saying the market won't go down slight - im sure it will. What im saying is that there won't be a crash

Ole!

[itsme]

Money is lent to purchase property based on the amount of collateral, therefore, your dream of forever rising prices and hence perpetual prosperity will one day fail. Nothing can be perpetual, and physics, let alone economics will tell you this. once the money lenders feel there is an insufficient amount of collateral to utilise upon a loan default, then loaning money for this sort of transaction stops, and hence the purchasing (or mass purchasing for investment purposes) then you will have a crash, and it will happen in the blink of an eye. You will be as surprised as if your wife or girlfriend had suddenly decided to leave what you thought was your happy marriage......cry, one day you will; keep the tissues ready...........

[Yandros]

I love it!! The irony is quite delightful. Anyone who takes the time to craft an essay like that is clearly DESPERATE to convince everyone that there isn't going to be a crash. I'm afraid that every bull post on here simply adds weight to the bear argument. If the HPC crowd really was a load of deluded idiots, nobody would give them a second thought.

You can smell the stench of fear and political spin a mile away

[DabHand]

So why won't the housing market crash?

In simple terms, the market will not crash because there is an insufficient supply of housing to meet housing need. The demand for housing will fluctuate up and down and will impact on price. If the demand for housing is reduced, by say interest rate rises, then house prices may fall (as i'm sure they do in the future). Housing supply and housing need are very very complex areas which use computer modeling to try to estimate.

Well l dont know of anyone who is homeless because there physically isnt anywhere for them to buy or rent. Admittedly there is s shortage of "dream houses" and plenty make do in.."make do" housing. With regard to pricing, l think you will find its entirely due to the availabilty of credit. If you let everyone and their dog have easy borrowing access to a million pounds that they can only spend on a house, then pretty soon the cheapest house will be a million pounds.

Not sure l wish to address the middle part which seems to revolve around "it like really hard innit, computers n' stuff" Ever heard of GIGO? Generally models are simply slick ways of representing underlying assumptions and statistics, which are of course predisposed towards the desired outcome for the funding source.

Im not saying the market won't go down slight - im sure it will. What im saying is that there won't be a crash

Know body can predict the future

You wanna read that again?

[BrownField]

Knee jerk reactions... why can't you guys get to grips with the fact we have been underbuilding but that won't stop a crash, it will make it worse?! Are you all CPRE members trying to talk down house prices to avoid ruining the character of your villages (i.e. not letting any riff raff who work for a living in)?

Seriously this dogged determination to cling to the "no lack of supply" dogma undermines the valid arguments postulated here. Any numpty can see we've been underbuilding and that too much emphasis has been placed on individual categories of properties (i.e. flats).

dgl1001 - We agree on one thing, there is a shortage of housing (particularly family housing which has been squeezed out by insane brownfield building policies and builders targetting BTL mania).

However did you bother to read further than the executive summary of the Barker Report? If you did but missed it (it's tucked away in there) Barker actually admits that the UK's housing shortage doesn't stop volatility in the UK property cycle but actually increases it.

We've had NIMBY's and planning gridlock for decades, but in the 90's that didn't stop prices plumeting did it.

Neither did it stop the Japanese decade of house price deflation and lack of supply and pressure on land is even higher there than here.

Kinda undermines your argument a bit doesn't it, but well done for at least having a go at a rational bull argument.

Edited July 19, 2007 by BrownField

[Dubai]

I'm just wondering if DG is a moderator posting a spoof to liven up debate

[Yandros]

I'm just wondering if DG is a moderator posting a spoof to liven up debate

Nah, just some bull who's £500K in debt and possibly getting nervous