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Why There Will Never Be A Hpc - Ever


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Like any traded commodities house prices can go up and down. There are small corrections, large corrections and major crashes. The latter tend to occur where investors forget the realities of the market. When one sees a statement like "There Will Never Be A Hpc - Ever" it is probably time to run for the hills.

Good point - i understand where you are coming from but homes are not the same tradable commodities such as stocks and shares. My next door neighbours have lived in their property for the last 11 years - its not a traderable asset for everyone

Edited by dgl1001
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answers

1) i can't comment on individual cases but is shortage of money the issue here?

YES! far more than supply and demand, and it isn't so much a 'shortage of money' more like a collapse of lending, heard of 'sub-prime'?

2) is this a financial bubble - i view it as a housing shortage

er for whom B T Letters!

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YES! far more than supply and demand, and it isn't so much a 'shortage of money' more like a collapse of lending, heard of 'sub-prime'?

er for whom B T Letters!

Well it maybe a money issue for you but it isn't me for me. or my parents, or several friends i know

so your saying that if the market falls 20% - all of the btl'ers will sell up?

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Well it maybe a money issue for you but it isn't me for me. or my parents, or several friends i know

rich friends or stupid with money?

so your saying that if the market falls 20% - all of the btl'ers will sell up?

well do you think they will stay in it for the yields!

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rich friends or stupid with money?

well do you think they will stay in it for the yields!

1) just clever friends

2) Believe it or not (and you may be surprised at this) yields are of little interest to buy to let landlords. they are only really interested in capital growth. its a bonus if the rent pays for all costs - in fact - the higher your yields the more tax you have to pay - which is not a good thing. I have never ever met a landlord who bragged about their 9% yield. I have met plenty who have bragged about the 50k equity they have

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And this is the problem isn't it. Because you know there is huge demand for housing you simply dismiss it as not relevant. The people who are going to get must from the housing market are the ones who consider all of the facts - including the supply of housing. Barker is telling us that we need to build an additional 70,000 homes per annum but you just don't want to accept it.

Is your point that insatiable and unfulfilled demand (across the wage earning spectrum) will extend the boom and at the very least avoid nominal price falls? This is fair if you limit your scope to the barker review. Now widen your scope by asking Mervyn why he believes mortgages need to be measured in the Cpi. Aside from macro economics, do you understand the need of the bankers to curb the enthusiastic imitation of their own model (money for nothing) by free loading benefit scum (who got the flats for free!) when they flip there 2 bedroom council flats! Future generations have enough tipping points already but by your reasoning reasonable and affordable shelter should be one of them!

For a planner whose principle aim is to benefit fair mindedness, let alone socialist ideals, your mind has become warped by selfish idealism. But hey, as long as you are eating our children and not your own, that's ok!

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1) just clever friends

i wish we were all that 'clever'

2) Believe it or not (and you may be surprised at this) yields are of little interest to buy to let landlords. they are only really interested in capital growth. its a bonus if the rent pays for all costs - in fact - the higher your yields the more tax you have to pay - which is not a good thing. I have never ever met a landlord who bragged about their 9% yield. I have met plenty who have bragged about the 50k equity they have

well you can't have it both ways because your original question was:

so your saying that if the market falls 20% - all of the btl'ers will sell up?

dgl - here's a site full of juicy stats for you

http://www.dca.gov.uk/statistics/cjust.htm#part1

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1) just clever friends

2) Believe it or not (and you may be surprised at this) yields are of little interest to buy to let landlords. they are only really interested in capital growth. its a bonus if the rent pays for all costs - in fact - the higher your yields the more tax you have to pay - which is not a good thing. I have never ever met a landlord who bragged about their 9% yield. I have met plenty who have bragged about the 50k equity they have

I always thought a healthy income stream was a good indicator of long term growth potential. Growth only "investments" usually need flipping quickly e.g. dotcom shares, tradeable commodities.

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Is your point that insatiable and unfulfilled demand (across the wage earning spectrum) will extend the boom and at the very least avoid nominal price falls? This is fair if you limit your scope to the barker review. Now widen your scope by asking Mervyn why he believes mortgages need to be measured in the Cpi. Aside from macro economics, do you understand the need of the bankers to curb the enthusiastic imitation of their own model (money for nothing) by free loading benefit scum (who got the flats for free!) when they flip there 2 bedroom council flats! Future generations have enough tipping points already but by your reasoning reasonable and affordable shelter should be one of them!

For a planner whose principle aim is to benefit fair mindedness, let alone socialist ideals, your mind has become warped by selfish idealism. But hey, as long as you are eating our children and not your own, that's ok!

The point i am making is that it is recognised that we need to build more and more housing. The lack of supply is fueling hpi. If you would have read earlier posts then you would have seen the Barker Report understands all of the macro/ micro issues you mention including the need to curb spending. Im not an economist - but Kate Barker is and she has considered all such issues.

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I have never ever met a landlord who bragged about their 9% yield. I have met plenty who have bragged about the 50k equity they have

Bragging really is the thing to do isn't it? I spotted a couple of tulips in a friends garden a while ago, looking much like the most famous (allegedly) tulip Semper Augustus so coveted in the mania days. How they bragged and bragged and bragged....

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The point i am making is that it is recognised that we need to build more and more housing. The lack of supply is fueling hpi.

yes the point your thread is built on

but just consider if supply and demand was way down on the factors that will or will not lead to a hpc, what then?

My point is this, the S&D argument (whether justified or not), is not going to be the main motivator, you may think it is because you work in planning but I think it is too far a narrow viewpoint. There are other factors at play here (as discussed) which have a far greater hold on the hpc balance

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1) just clever friends

2) Believe it or not (and you may be surprised at this) yields are of little interest to buy to let landlords. they are only really interested in capital growth. its a bonus if the rent pays for all costs - in fact - the higher your yields the more tax you have to pay - which is not a good thing. I have never ever met a landlord who bragged about their 9% yield. I have met plenty who have bragged about the 50k equity they have

What did they buy with their 50k?

To be honest supply and demand has an effect on the first 20% of the price, the remaining 80% is made up from the availability of credit. It's called leverage and is based on the global credit market, which at the moment is looking for higher ground.

If banks refused to lend £100,000 to anyone who did not have a £20,000 deposit would that mean few people need homes? or more people supply them? No it would not.

People are not buying homes.

They are buying capital from banks and then using that capital to chase property.

Did you even stop to think where that capital comes from? Let alone what is going on with supply and demand in the credit market?

Have you ever heard of the credit market? Bonds? Notes? Bills? Treasuries? Do you know about bad debts? Delinquencies? Defaults? CDO's? CDS'? Synthetic CDO's?

Do you know what securitization is?

Or do you admit you have no idea what you're doing? That the most complex thing you have looked at is post codes.

Is it true that you are simply holding all the liability, all the exposure, whilst the banks who sold you these loans reap their cashflow?

What happens if everyone tries to get their equity, all at once? Does it disappear?

.

Edited by ?...!
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2) Believe it or not (and you may be surprised at this) yields are of little interest to buy to let landlords. they are only really interested in capital growth. its a bonus if the rent pays for all costs - in fact - the higher your yields the more tax you have to pay - which is not a good thing. I have never ever met a landlord who bragged about their 9% yield. I have met plenty who have bragged about the 50k equity they have

Actually we're not surprised by this, we know that there are people buying for capital gain, this is the classic sign of a speculative bubble.

I find your patronising attititude quite bizarre, particularly coming from someone who doesn't grasp basic investment or economics.

You should consider buying some good books on finance, economics, and history, and start reading. Perhaps get a subscription to "The Economist".

When you have a better handle on these issues, come and demonstrate your new understanding, but until then you'd be better off trying to learn something, rather than repeating ill-considered views.

Edited by BandWagon
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Actually we're not surprised by this, we know that there are people buying for capital gain, this is the classic sign of a speculative bubble.

I find your patronising attititude quite bizarre, particularly coming from someone who doesn't grasp basic investment or economics.

You should consider buying some good books on finance, economics, and history, and start reading. Perhaps get a subscription to "The Economist".

When you have a better handle on these issues, come and demonstrate your new understanding, but until then you'd be better off trying to learn something, rather than repeating ill-considered views.

Bandwagon

I can tell you have a good grasp of economics - you've only been predicting a crash for the last 2 years.

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Bandwagon

I can tell you have a good grasp of economics - you've only been predicting a crash for the last 2 years.

And with that post, you've marked yourself out irreversibly as a sub-troll idiot. Plenty of clever folk who in a matter of seconds will forget more than you will ever know about economics have been predicting a crash. The failure to reliably predict the unpredictable does not in any way reflect on the expertise which guides those predictions and you'll have to extend your reading even further if you're to understand this fact also.

The more time I spend here the less baffled I become about by patronising attitudes. Evidently, with your shining example, the tendency to patronise is directly correlated with ignorance. You should thank BW for such a measured and gentle response; while the thread was arguably a useful primer for you (say "thank you"!!)it was also running a major risk of dignifying the postings of dunce.

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Good point - i understand where you are coming from but homes are not the same tradable commodities such as stocks and shares. My next door neighbours have lived in their property for the last 11 years - its not a traderable asset for everyone

Property is exactly the same as stocks and shares. Your next door neighbour's house is a traderable asset and they can trade when it suits them. Because there has been a massive bull market in property in the UK, a large number of property owners have been content to hold empty properties. This has created an artificial shortage.

When speculators start selling, the effects will be dramatic. For anyone who is heavily borrowed against property, it will be like bungee jumping with a steel cable.

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Let's persist with this for the sake of trying to force some answers out of you.

Answer me this. In July 1988 the removal of joint tax relief (MIRAS) announced in the 1988 budget was implemented. The housing market just STOPPED. The supply was the same but, because affordability had SUDDENLY changed, demand was lowered and the market ground virtually to a halt.

So, prices fell without any alteration in supply. Can you explain this?

Between 1988 and 1995 - thousands of property developers and builders went broke and supply contracted as very little new house building took place. Prices continued to fall. How do you explain that?

Most people (wrongly) attribute the last property crash to a steep rise in interest rates. Let's assume most people are correct. So prices fell because demand fell, not supply.

House prices - asking prices - fell quite significantly in my area during 2004 and 2005. New build flats stood empty for months, prices were dropped, incentives were increased but ... prices still fell. Why? Because rising interest rates were stifling DEMAND - nothing to do with SUPPLY.

It's now become a mantra - high house prices are caused by the lack of supply. You buy it, the media buys it, everyone buys it - despite it being obvious nonsense.

High house prices are caused by cheap credit.

There is always demand for housing - from people who don't currently own and people who want to own something nicer.

Well, just to make the point so you don't misinterpret what I am saying ...

High house prices are NOT caused by lack of supply.

High house prices are caused by DEMAND.

Demand is fuelled by sentiment and affordability.

Please explain why house prices have fallen in the past when supply has either not altered or has fallen.

To the OP. You haven't answered my questions (in red above) - you've said a lot but have not answered how house price can fall when supply is either unchanged or falling. How about some answers. How did it happen?

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And with that post, you've marked yourself out irreversibly as a sub-troll idiot. Plenty of clever folk who in a matter of seconds will forget more than you will ever know about economics have been predicting a crash. The failure to reliably predict the unpredictable does not in any way reflect on the expertise which guides those predictions and you'll have to extend your reading even further if you're to understand this fact also.

The more time I spend here the less baffled I become about by patronising attitudes. Evidently, with your shining example, the tendency to patronise is directly correlated with ignorance. You should thank BW for such a measured and gentle response; while the thread was arguably a useful primer for you (say "thank you"!!)it was also running a major risk of dignifying the postings of dunce.

No my point is this. There is a clear misunderstand about how the property market works. Kate Barker understands economics more than anyone on this board - including yourself, me and bandwagon. She clearly states that the undersupply of housing to the market is having a detrimental affect and yet the last majority dismiss under supply as an issue. Why is this?

Edited by dgl1001
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No my point is this. There is a clear misunderstand about how the property market works. Kate Barker understands economics more than anyone on this board - including yourself, me and bandwagon.

How do you know that?

How do you know everyone who writes on this site?

Do you beleive everything that academics / economists / 'experts' say?

Time for you to stop yaking and do a little bit of thinking for yourself methinks

edit: what happens when 2 experts have opposing opinions, what happens then? :o

do you end up like this fella:

http://www.youtube.com/watch?v=oQoPcUXyf3g

Edited by prophet-profit
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No my point is this. There is a clear misunderstand about how the property market works. Kate Barker understands economics more than anyone on this board - including yourself, me and bandwagon. She clearly states that the undersupply of housing to the market is having a detrimental affect and yet the last majority dismiss under supply as an issue. Why is this?

(whisper) ...it's because...

...Katie B likes to say...

....AWOOGAAAAA!....

(I thank you....)

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Who is Kate Barker?

To put this supply and demand issue into context i think its time to use an example. I have previously made reference to the Kate Barker Report - the report which took over 2 years to produce by a then member of the board which sets the UK's interest rates. Its fare to say that Kate knowns her economics because she had such an important

role in the UK's economy at the time.

and what did she say?

In nut shell she said that there has been a massive under supply of housing and that we need to produce an extra (extra means in addition to what we are already producing) 70,000 houses a year to ease out demand but a further 120,000 homes if we are to do a proper job and balance out the housing market. You can find it at

http://www.hm-treasury.gov.uk/consultation...arker_index.cfm if you don't believe me.

So what does an extra 70,000 homes pa equate to

Kate told us that we need to, at best, provide an additional 70,000 homes for families just to start balancing out the housing market and meet demand. This is just to meet demand, not to bring it back to normal which she says would be 120,000 households. The government now considers that, on average, 2.2 people form the typical household size. I should tell you that this 2.2 figure has been tested and accepted at a number of planning examinations and is well debated. This means the UK is creating an additional 70,000 households pa and going on the governments own figures of 2.2 people per household, equates to 154,000 people.

Oxford

A quick look on wikipedia tells me that 134,248 people live in Oxford, which is quite close to the 154,000 target. Therefore every year a population greater than Oxford needs to be housed - this is how much we need to provide if we are to meet demand. So, a city the size of Oxford needs to be build every year just to keep up with demand from household formation - and guess what - we haven't been providing it.

Supply and Demand

So what do all of these 154,000 people do? Well, they have no choice except to live in rented accomodation, stay at home with parents, go on Council waiting lists etc etc unfortunately the list goes on on. Its a sorry state of affair but this demand does not just go away. The simple law of supply and demand tells us that where supply is constrained, demand and prices will rise. Let me spelling it out for you..... every year a city larger than Oxford would have to built just to keep up with demand - and its been going on for years. With is in mind you may what to think

1) Is it possible for a HPC to occur when there is such a high level of demand

2) is it such a surprise that we have seen such a high level of HPI

Oh - i forget to mention. The Barker Report did not to account for the change in EU policy which has brought a huge number of east europeans into the country - so the 154,000 figure is an under-estimation!!!!!!!!

Best of luck.

dgl1001

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Guest The_Oldie
edit - note to self, read post fully before commenting, DOH!

Still pretty dumb though :lol:.

In my opinion, we're going to see much more of this type of trolling in the months to come as the market declines.

Whether the posts are made by worried employees (of lenders, builders and EAs) off their own back, or whether they are acting on management instructions we will probably never know.

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