Acute Property Shortage Makes House Prices Rocket

[Guest Charlie The Tramp]

An acute shortage of properties on the market is pushing up house prices faster than expected, it has been revealed.

Halifax, Britain's biggest mortgage lender, said it expected the average cost of a home in the UK to go up by six per cent this year, compared to the four per cent it previously predicted.

It means the average price of a house in the UK would jump from £187,076 to £198,301.

The hike will dismay first-time buyers, who have watched interest rates rise five times in a year and are struggling to get a foothold on the property ladder.

It also comes alongside some bad news for those in the North.

The price divide with the South is expected to widen by £14,500 this year, leaving the average home in the South costing nearly £105,000 more than the average home in the North.

This will reverse the trend between 2003 and 2006, which saw the divide narrow by £20,000.

Acute property shortage makes house prices rocket

[OnlyMe]

It also comes alongside some bad news for those in the North.

The price divide with the South is expected to widen by £14,500 this year, leaving the average home in the South costing nearly £105,000 more than the average home in the North.

Bad news for the North?

Might be good news, the North may keep a few more jobs before manufacturing gets completely destroyed.

Then again, this is nothing to do with the real economy, only profits and an attempt to keep loose lending from backfiring on the lenders and collapsing their commissions, pay packets and shares.

[Catch22]

Halifax have a vested interest in driving the housing market up. Last thing they want is people thinking, hang on I reckon it might be worth just holding fire on buying a house.

There is a shortage of "affordable" housing, but that is not what is driving prices higher, lending on bigger multiples, and the spin that if you don't buy now, it will be to late is what is driving prices higher. Oh and the BTL brigade hoovering up the FTB stock. Withdraw liquidity from the market, such as lie to buy, sub prime, interest only, 40 year mortgages for the financially stupid, etc etc, and see then f there is a shortage of affordable houses on the agents books.

When the affordability trap is hit at Housing Market cyclical peaks, it sucks disposable income out of the economy and into the vaults of the banks. And that is when the down slope of the cycle begins.

[misfit]

It also comes alongside some bad news for those in the North.

The price divide with the South is expected to widen by £14,500 this year, leaving the average home in the South costing nearly £105,000 more than the average home in the North.

Bad news for the North?

Might be good news, the North may keep a few more jobs before manufacturing gets completely destroyed.

Then again, this is nothing to do with the real economy, only profits and an attempt to keep loose lending from backfiring on the lenders and collapsing their commissions, pay packets and shares.

If you choose your markets carefully it is still possible to manufacture in the UK and use a UK workforce for production.

Despite what you may think we have not all gone to China

I have family in the North and generally salaries are lower so I am sure this news will be gratefully received as it brings the next rung of the ladder that much closer.

I agree with your comments on loose lending though

[Realistbear]

Acute property shortage makes house prices rocket

There was an "acute" shortage of property in the spawning ground for both Great Crashes--California. It didn't stop the inevitable collapse. Its not just supply and demand but affordability. People cannot borrow enough and too many are going into reposession at current pricing levels. The market is correcting and all the demand in the world will not get you a house you can't afford as the banks are beginning to say NO.

The bellwethers are all showing supply is up and demand is down (NAEA, RM and findaproperty). People are either having to sell of get re-posessed. 2,000,000 Mortgage resets are around the corner and many will try to unload before their payments miraculously double overnight.

Edited July 20, 2007 by Realistbear

[VeryMeanReversion]

"An acute shortage of properties on the market is pushing up house prices faster than expected, it has been revealed."

Whilst endless credit is available, interest rates are low and lending standards are lax, there will always be a shortage.

Competition to buy a house in this boom has been based on the debt that sheeple were prepared to take on, rather than their ability to pay back the debt over the mortgage term.

When credit reduces and/or sheeple hit their debt ceiling, guess what happens next.

VMR.

[Guest Bart of Darkness]

Acute property shortage makes house prices rocket

I'm not too bothered about the place I buy being cute, just so long as it's in a good area.

It also comes alongside some bad news for those in the North.

I guess it all boils down to who you are how you look at it. As a northern FTB, this is nothing but good news.

[lets get it right]

The acute shortage of property during the 90's crash, as builders and developers went to the wall in droves and housing developments stood unfinished for years did not prevent house prices falling.

[Willy Weasel]

When is anyone going to remember their basic economic theory. As the price rises, demand falls. Supply is not the issue here.

[notthereyet]

Acute property shortage makes house prices rocket

Shortage of property,Our local property rag used to be posted through the letter box,Now they pass it through the window.

[gordonbrown]

not get you a house you can't afford as the banks are beginning to say NO.

Unfortunately they are not. I was speaking to a friend in Southampton who said one of the young blokes who works for him was looking for a mortgage and the bank was prepared to offer him 8 x his salary. Apparently the guy he was speaking to said to be honest 10 x would be possible as he had a PhD and good job. Don't expect much to happen anytime soon.

[Guest d23]

People are either having to sell of get re-posessed. 2,000,000 Mortgage resets are around the corner and many will try to unload before their payments miraculously double overnight.

Looks like those 'accomodative' IR hikes are going to have an effect then, as we (nearly) all thought they would; now theres a turn around for the books.

[stuckmojo]

Now that's a fine piece of VI spin...

..and for the North, it's only good news

[Guest Cletus VanDamme]

When is anyone going to remember their basic economic theory. As the price rises, demand falls. Supply is not the issue here.

Seems to work the other way round in the housing market (and other speculative markets). Price rises, people see an investment opportunity, so demand increases.

It's economic theory, not fact.

[crashmonitor]

As I mentioned on another thread ,as cumulative growth has already reached 5% to June,1% for the final six months looks pessimistic.

[Leonard Hatred]

Unfortunately they are not. I was speaking to a friend in Southampton who said one of the young blokes who works for him was looking for a mortgage and the bank was prepared to offer him 8 x his salary. Apparently the guy he was speaking to said to be honest 10 x would be possible as he had a PhD and good job. Don't expect much to happen anytime soon.

How is this even possible? Can anyone explain how people can pay mortgages at these multiples back? Calculating income minus all the bills, including the mortgage payments, the figures just don't add up. It's a net loss every single month.

[THE BALD MAN]

Seems to work the other way round in the housing market (and other speculative markets). Price rises, people see an investment opportunity, so demand increases.

It's economic theory, not fact.

From my scholl economics are we not talking about elasticity of demand. Housing is fairly inelastic to price because the availbility of cheap credit and the thought of a speculative profit.

[Guest Charlie The Tramp]

In my area strange that it may seem availability is now outstripping demand, the market appears to have ground to a halt as EAs sit at their desks twiddling their thumbs. Prices are being reduced as property sits there for many weeks without selling and this within the Greater London area. One EA is reducing prices without advertising the fact, no longer do you see the sticker REDUCED stuck on the properties in the window, although some have come down between £5 and £10k.

[nowthenagain]

could housing demand become more elastic to price due to the deluge of new rental properties?

as in germany for instance?

just a thought. i do think people tend to forget that our country and economy are very different now than any time in the past.

[downandout]

The article is actually about as 'bearish' as you could hope for, considering the Mail and Halifax are involved.

The reference to price increases and shortage of houses on the market is based only on the first 4 months of the year which is not really news to anyone.

'The Halifax said house prices had increased faster than expected during the first four months of this year because of a combination of 'greater economic momentum' and an acute house shortage problem. '

It was well documented that there was an abundance of properties on the market in the run up to June.

'Some of the reasons for the problem are a reluctance among homeowners to move because of the costs involved, and a shortage of new homes being built.'

They fail to mention that some of the other reasons are people unable to sell their houses at close to valuation or are unable to increase/get mortgages.

But the best part is:

'On the plus side, the £11,225 rise in the cost of the average UK home actually represents the smallest annual increase since 1995 and below the long-term average of eight per cent per year recorded since 1983.'

The smallest increase is usually followed by the big fat decrease.

[1632656]

Acute property shortage makes house prices rocket

'The Halifax said house prices had increased faster than expected during the first four months of this year because of a combination of 'greater economic momentum' and an acute house shortage problem. '

The fact that these VIs continue to spout this glib propaganda is a disgrace. :angry:

They have clearly forgotten Mankiw's "Ten Principles of Economics" from Economics 101 (Fundamentals):

How People Make Decisions:

• People Face Tradeoffs. To get one thing, you have to give up something else. Making decisions requires trading off one goal against another.

• The Cost of Something is What You Give Up to Get It. Decision-makers have to consider both the obvious and implicit costs of their actions.

• Rational People Think at the Margin. A rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost.

• People Respond to Incentives. Behavior changes when costs or benefits change.

How the Economy Works as A Whole:

• Trade Can Make Everyone Better Off. Trade allows each person to specialize in the activities he or she does best. By trading with others, people can buy a greater variety of goods or services.

• Markets Are Usually a Good Way to Organize Economic Activity. Households and firms that interact in market economies act as if they are guided by an "invisible hand" that leads the market to allocate resources efficiently. The opposite of this is economic activity that is organized by a central planner within the government.

• Governments Can Sometimes Improve Market Outcomes. When a market fails to allocate resources efficiently, the government can change the outcome through public policy. Examples are regulations against monopolies and pollution.

How People Interact:

• A Country's Standard of Living Depends on Its Ability to Produce Goods and Services. Countries whose workers produce a large quantity of goods and services per unit of time enjoy a high standard of living. Similarly, as a nation's productivity grows, so does its average income.

• Prices Rise When the Government Prints Too Much Money. When a government creates large quantities of the nation's money, the value of the money falls. As a result, prices increase, requiring more of the same money to buy goods and services.

• Society Faces a Short-Run Tradeoff Between Inflation and Unemployment. Reducing inflation often causes a temporary rise in unemployment. This tradeoff is crucial for understanding the short-run effects of changes in taxes, government spending and monetary policy.

Edited July 20, 2007 by studdymx