Wednesday, August 29, 2007

Relentless denial persists at the Times

Could contagion from the US finally kill off the boom?

The Times analyst Gabrial Rozenberg tries to convince himself and everyone else too that the UK market isn't headed for a crash like the USA because "Britain’s market will be cushioned by supply conditions" which are tighter than in the US, apparently. Ireland's definitely going to crash he notes at the end of the article - but the UK's doing just fine!!! Yep, no HPC in Britain! Nothing to see here, move along now... Funny the way everyone is trying to find some reason why the housing boom in their country is going to be the exception to the worldwide credit crunch.

Posted by an bearin bui @ 12:30 PM (1233 views)
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13 thoughts on “Relentless denial persists at the Times

  • Be fair, if Ireland’s had a 210% increase in housing supply over the last 7 years compared to a 20% increase in Britain then the market is going to be a bit different.

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  • Only 20% increase in 7 years??? You’re kidding right???

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  • Ah, the old supply red herring. If supply and demand issues were so key, why have their been massive price booms in countries with plentiful land like the US, Canada and Australia? Why have prices fallen so far in Japan where land and housing supply is very limited? Why have prices shot up in countries like Poland and Lithuania where people have been moving abroad in droves?

    Unprecedented asset price booms do not just plateau out in an orderly fashion as these observers would have you believe.

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  • An Bearin Bui says:

    Don’t get me wrong: I completely agree with him on Ireland crashing but I just think it’s amusing that journalists here are desperately trying to distance the UK market from the US and Irish markets to stave off any talk of a crash. They’re determined that it just can’t happen here whereas I think it can.
    The funny side of this is only increased by the number of journalists in Ireland insisting that everything’s just fine in Ireland and there won’t be a US-style crash because there’s no subprime there and there are far more FTBs due to demographics… sure, I don’t believe them any more than I believe the Times.

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  • Yeah, all were building over here are huge numbers of crappy flats aimed at ripping off FTB’s.

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  • Robertpaulson says:

    shame nobody pointed out to Gabrial Rozenberg that a tight supply picture simply exacerbates price swings. In the US falls have been cushioned by the builders taking the brunt of the fall in demand, in the UK we have no such mop to soak up the impact and the brunt of a correction must be bourne by prices.

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  • Britains market will be hammered the like of which you have never seen.

    People will be left destitute and wondering how anybody could have seen what was coming; hindsight is 20/20. Then they will be referred to this forum.

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  • Benedict it is true to say that Ireland has had a massive increase in built houses, but the amount of houses converted into flats in Brighton far out ways the available land.Given this we now have a population increase of about 25% without a single house being built. could this be where the markets differ between England and Ireland?

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  • crash bandicoot says:

    If high house prices in the UK are down to a lack of supply then how have Irish prices risen so much if their stock has risen by 210%.

    We all know the answer to this one – the bubble is driven by cheap credit not housing supply.

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  • captain sensible says:

    As has been said on this forum numerous times before, shortage is a myth because rents are not rising significantly. As crash bandicoot says, a bubble driven by cheap credit, which gains momentum as people lose sight of economic fundamentals and run along with the herd. In the early to mid-90s prices fell by an average 20% (much more in some regions). I don’t recall 20% of the population leaving the uk at the time, changing the demand/supply ratio. The bubble burst then because of rising interest rates. The same will happen again soon.

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  • An Bearin Bui says:

    Gabriel Rozenberg has actually responded to the comments written in to his article (makes a change as journalists usually lob their VI-backed pieces into the crowd and then run away back to printed paper land where no-one bothers them with mean, unpleasant things like questions):

    “Hi. I agree with quite a few comments here. I just wanted to clarify something: I do think that cheaper property prices would be a good thing for Britain.
    The situation at the moment is based on an unfair market distortion caused by “planning” [read: refusing] and I’ve written about that a few times now.
    But while a slow fizzling out of prices would be ideal, a crash could do a lot of short-term damage. Hence my suggestion that Ireland may be unlucky. I do appreciate that falls in property prices may be good or bad depending on your perspective.

    In reply to MB: I think actually that in the UK people have been arguing that there’ll be a crash or correction for many years and it hasn’t happened. It’s worth asking why.
    That’s not to say that there aren’t some areas where speculation has crept in. But I think the supply constraints are are what’s behind the boom; and I don’t expect them to change much.”

    It’s interesting because there is a fundamentally illogical point in his analysis: Ireland and the US will suffer HPCs as they upped supply to meet demand and are now left with a glut of unsold properties. But surely if the supply/demand argument were true, then the US and Ireland were doing the right thing to moderate prices and they should be facing the apocryphal “soft landing”? Instead they’re suffering a crash (as GR admits) so obviously all that “demand” wasn’t real demand but was speculative excess that was only ever about making money.

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  • Fear and speculation, with a dose of vested interest spin .are the only thing keeping the Property Dream alive.
    Welldone Crash Bandicoot,said it all . the old demand v supply s..t,
    took me eight months to sell up in the south east 2006/7

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