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How Do I Argue With The Bulls 'demand Exceeds Supply'?

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I'm constantly hearing and reading "there wont be a crash, only a soft landing as demand exceeds supply".

How is this so when every EA has properties on thier books for weeks if not months and in some cases no sale is ever achieved?

I thought demand exceeding supply meant THERE WERE NO MORE PS2s (a while back) IN THE SHOPS!

So to follow the PS2 sceanrio, why are'nt there lots of EAs with NO properties on the shelves?

Is this whole demand thing an urban myth?

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I'm constantly hearing and reading "there wont be a crash, only a soft landing as demand exceeds supply".

How is this so when every EA has properties on thier books for weeks if not months and in some cases no sale is ever achieved?

I thought demand exceeding supply meant THERE WERE NO MORE PS2s (a while back) IN THE SHOPS!

So to follow the PS2 sceanrio, why are'nt there lots of EAs with NO properties on the shelves?

Is this whole demand thing an urban myth?

Keep up with the bearish view dogbox: There is over supply due to dodgy lending which is now drying up and we are entering a period of stickiness in prices before people realise what they need to market their property for to actually sell it.

edit - oh.. and to counterpoint that, the bullish view: There's never been a better time to buy because... christ only knows why.

and the neither view: My bum's getting sore from sitting on this fence.

Edited by meow

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I'm constantly hearing and reading "there wont be a crash, only a soft landing as demand exceeds supply".

How is this so when every EA has properties on thier books for weeks if not months and in some cases no sale is ever achieved?

I thought demand exceeding supply meant THERE WERE NO MORE PS2s (a while back) IN THE SHOPS!

So to follow the PS2 sceanrio, why are'nt there lots of EAs with NO properties on the shelves?

Is this whole demand thing an urban myth?

Someone posted a great article from Morgan Stanley or someone similar talking about supply demand imbalance. It phrased the whole thing wonderfully as supply and demand always being in balance and the price changing to the point where they are in balance.

Seemed a much better way of looking at it and should buy you some time while they get confused trying to think of it in the other way to make a quick exit and talk to someone else.

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I think someone on Sky News recently said something about looking in local papers to see the 'reams and reams' of properties for sale and rent. There is no excess demand. There was when BTLers were buyig but they're not anymore - chains are falling apart and not completing at all...

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Someone posted a great article from Morgan Stanley or someone similar talking about supply demand imbalance. It phrased the whole thing wonderfully as supply and demand always being in balance and the price changing to the point where they are in balance.

Seemed a much better way of looking at it and should buy you some time while they get confused trying to think of it in the other way to make a quick exit and talk to someone else.

Market Equilibrium.

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I'm constantly hearing and reading "there wont be a crash, only a soft landing as demand exceeds supply".

How is this so when every EA has properties on thier books for weeks if not months and in some cases no sale is ever achieved?

I thought demand exceeding supply meant THERE WERE NO MORE PS2s (a while back) IN THE SHOPS!

So to follow the PS2 sceanrio, why are'nt there lots of EAs with NO properties on the shelves?

Is this whole demand thing an urban myth?

The argument is correct - demand does exceed supply enough to keep prices up.

However, demand is "artificially" high due to

- loose credit

- a culture that prizes home ownership above renting

- a belief that house prices will always go up

While the second will remain here for a good while yet, the first and last are leaving us now. So demand will fall.

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I think the standard reply is that if it is simply a matter of supply and demand, then rents will rise at the same rate as property prices.. when these become inbalanced (as they are at the moment) then this is due to property speculation and NOT demand for places to live.

I'm sure that others reading this thread will be able to elaborate on this for me!

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I have this conversation on a regular basis with my brother in law (the one who was convinced a bank would lend him half a million on his £40k salary).

It generally goes like this;

Him "Prices won't crash, there's a shortage of housing".

Me "How many middle class homeless people did you trip over on the way from the tube tonight?"

Him "None"

Me "That's because there isn't a housing shortage"

Demand = desire + ability to pay. If people can't fund their desires the demand dries up.

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Structural not cyclical.

If there was a genuine shortage of supply that would be a structural feature of the UK market. It would not prevent a cyclical downturn anymore than global warming will prevent average daily temperatures from falling as we move into winter.

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I think the standard reply is that if it is simply a matter of supply and demand, then rents will rise at the same rate as property prices.. when these become inbalanced (as they are at the moment) then this is due to property speculation and NOT demand for places to live.

I'm sure that others reading this thread will be able to elaborate on this for me!

Why? For renters the growth of BTL has vastly increased the supply available, there's been no speculative hope of prices going up so no boost to demand there, there's no desire to own ones home at any cost, interest rates aren't really a big driver etc.

No particular reason why they should rise at the same rate. Indeed if BTLs exit the market in droves I'd expect house prices to fall but rents to suddenly start increasing.

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My argument goes along the lines of:

If house prices have been driven by supply and demand then why have countries such as the US, Canada and Australia where there is definitely no shortage of supply (or mass immigration etc) have experienced the same boom in prices?

The answer an oversupply of CREDIT

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Remind them that:

- when prices go up, people always think there aren't enough houses. Ask yourself, did the yanks think they had enough houses for everyone about 2 years ago? Probably not which is why they kept building more.

- in places like London there has always been a shortage, certainly in most of our lifetimes. Same for any nice place (obviously not including London as a nice place). I live in a very nice village and people think prices will never go down because it's nice and people want to live here. When I point out it was nice 10 years ago but prices weren't so high they start to see the light.

- there is high demand only becuase of the brain-washing that has happened. A whole generation has no concept that prices could go down in a big way. Once they de-learn all this, they won't want to buy.

- rents are not going through the roof (getting higher in some places, definitely) but not following HPI by any stretch. If there was a genuine shortage of physical housing stock then rents would follow.

It's a speculative bubble and the pin has already entered. If people can't see it now they will in about 2 or 3 months.

Edited by House of Lords

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If demand exceeded supply, prices would be infinite. Think about it.

Supply has to meet demand, any imbalance is restored through a price change (hence changing supply and demand).

'Supply and Demand' argument is ridiculous without explaining either of those forces.

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Are you saying that there are 900,000 properties empty?

No I'm saying there are over 900K houses on rightmove (not including the many not advertised on Rightmove) that are on the market in one way or another.

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Someone posted a great article from Morgan Stanley or someone similar talking about supply demand imbalance. It phrased the whole thing wonderfully as supply and demand always being in balance and the price changing to the point where they are in balance.

Seemed a much better way of looking at it and should buy you some time while they get confused trying to think of it in the other way to make a quick exit and talk to someone else.

equalzl2.th.png

ops ad should be as, now swap quantity with wages, wages have to rise.

equalie3.th.png

as you can see wages havent kept up, so inorder for it to do so people need to borrow more, to fill up the gap between W1 and W2. ad erm as would need to increase to bring it into line, ie build more homes ie as2. So wages will also need to increase by x the amount to reach a new equalibrium.

Edited by crash2006

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No I'm saying there are over 900K houses on rightmove (not including the many not advertised on Rightmove) that are on the market in one way or another.

Then surely it does not necessarily mean that there is an oversupply. These houses will have people in them that are looking to move.

It could also be argued that there are 900,000 properties on rightmove as people feel bullish and want to move up. The recent news on the banks and markets will be bear food to a lot on here but to the average person they will see headlines of "BoE to cut rates"

A more accurate figure to put up would have been eg "xxxx new homes for sale on rightmove compared to yyyy this time last year"

Edited for clarity

Edited by madasafrog

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http://www.housepricecrash.co.uk/forum/ind...mp;#entry790803

stats from the government? Housing stock has risen mush faster than population, and the country intends to build 1 property for each person born/immigrating. Each year we live in smaller and smaller households, this just wouldn't be possible if there was a shortage of housing. People don't want to live separately they want to live in families, large sections of the populations have been conditioned/told that living separately in flats is the way forwards and its backfiring.

housing stock has risen by 30% over the past 30 years, population has only risen by 10%, housing is being built at 150k per year, and the government wants 200k per year.... 100k per year would keep the current proportion of people to housing, and that includes massive predictions for immigration (which wont happen if we have an economic slump)

Edited by moosetea

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Why? For renters the growth of BTL has vastly increased the supply available, there's been no speculative hope of prices going up so no boost to demand there, there's no desire to own ones home at any cost, interest rates aren't really a big driver etc.

No particular reason why they should rise at the same rate. Indeed if BTLs exit the market in droves I'd expect house prices to fall but rents to suddenly start increasing.

Hi Benedict,

I think you have answered your own question, in renting there is no speculation thus it is a reasonable indicator as to how much house prices should have gone up by comparison. I see your point about there being an increase in the supply of BTL, but if there is a shortage of housing, surely people must be fighting just as hard for rented accomodation as for private accomodation? After all, the only difference is the "investment" aspect. I agree that if prices drop and lots of BTLs sell their portfolios there will be a sudden surge rental prices.. but this will be the rents and housing costs just returning to equilibrium.

would you agree?

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Imagine this, a man walks into an estate agents with £1 Million in a suitcase. He opens the case and the estate agent says "sorry we don't have any houses, they havn't build enough". IT'S NEVER GOING TO HAPPEN. There is no shortage of houses, there's only a shortage of funds to pay for houses.

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Are you saying that there are 900,000 properties empty?

A house doesn't have to be empty for it to be on the market. :rolleyes:

According to the last census though there are indeed close to 900,000 empty properties in England and Wales - for the UK it must be around the million mark.

"There are a total of 22,539,000 households in England and Wales. 21,660,000 of these are occupied (20,451,000 in England and 1,209,000 in Wales), 727,000 are vacant (676,000 in England and 51,000 in Wales) and 151,000 are second homes or holiday accommodation (135,000 in England and 16,000 in Wales)." (2001)

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The government’s predictions for the growth in the number of households have been proved wrong, however. Between 2001 and 2006, according to the Office of National Statistics, the number of households in England and Wales grew from 23.8 million to 24.2 million — an average increase of 80,000 a year, far short of the 223,000 which planners at the Department for Communities and Local Government have been predicting. Their mistake was to fail to appreciate that high property prices act as a brake on household creation: the more expensive houses become, the greater the incentive for children to remain living with their parents and for warring couples to remain together.

Meanwhile, the rate of housebuilding has quietly recovered: in 2006/07, 173,369 new homes were completed.

http://www.spectator.co.uk/the-magazine/bu...-shortage.thtml

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A house doesn't have to be empty for it to be on the market. :rolleyes:

According to the last census though there are indeed close to 900,000 empty properties in England and Wales - for the UK it must be around the million mark.

"There are a total of 22,539,000 households in England and Wales. 21,660,000 of these are occupied (20,451,000 in England and 1,209,000 in Wales), 727,000 are vacant (676,000 in England and 51,000 in Wales) and 151,000 are second homes or holiday accommodation (135,000 in England and 16,000 in Wales)." (2001)

I was just trying to make a point that 900k on rightmove does not mean that there is oversupply. It just seemed "grasping at straws" evidence .

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Mr BTL Smith and Mr FTB Jones want a house and there's only 1 left = Shortage of houses.

Prices go down and Mr BTL Smith doesn't want a house = No shortage.

It could be that simple. However clearly there has been a lot of immigration and these folk have been housed by BTL Smith too but they are more mobile (ie. prone to move back to family again) and likely to be happy to suffer densely populated accomodation.

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