Tuesday, November 10, 2009

Cheap money to keep the party going

House prices 'to keep on rising'

Overall, a bullish article and some of the arguments given in favour of rising prices seem quite reasonable. This bit caught my eye, however: "Cheap money remains a critical prop for the market and this is being reflected in the continuing appetite for finance from first-time buyers despite the large deposits still being demanded by lenders" said Jeremy Leaf of Royal Institution of Chartered Surveyors. Will we ever be able to raise interest rates?

Posted by quiet guy @ 01:07 AM (1913 views)
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21 thoughts on “Cheap money to keep the party going

  • Not surprising, the government & BOE are putting absolutely everything into this.

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  • Typical BBC spin – I haven’t seen the detail of this month’s RICS survey yet, but last month they spouted the same cr&p about demand exceeding supply before stating that average stock levels had remained the same at 64 per agent. Excuse my naivity, but how can stock levels remain unchanged if demand exceeds supply???

    The truth is that effective demand is roughly in balance with supply, but supply is currently increasing (third month in a row according to RICS) and effective demand (as measured by mortgage approvals) is barely edging up. It’s a safe bet that the supply-demand balance will very quickly move in favour of buyers over the Winter, and even more so next Spring. I can afford to wait as long as it takes….

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  • I agree, the policy action taken by the Government / BoE has been staggering and they’d deny it vociferously but the subtext to it all their actions is to support house-prices in order to bring a return of the “wealth effect” so people with mortgages start spending (borrowed money) again. Of course this is grotesque as it is a complete betrayal of people not on the housing ladder due to age (too young) or poverty (too poor) or those with savings (eg. such as pensions) and the fact that it is a labour government that has instigated the boom, the inevitable bust and the extraordinary, and not in a good way, response to the crisis never ceases to amaze me. I suspect house prices will inexorably creep upwards due to the ridiculously loose monetary policy and the bank of Mum and Dad (an option not open to me or I suspect many other members of this site – another example of Labour mediated social division) and each time the HP figures are announced some lip service will be paid by commentators to the effect of saying how “delicate” the recovery is, how prices are likely to remain “soft” and how they might “fall back” at any time, until we have annual increases of 10-15% again (we are half-way there already over the last 6 months). The upshot being house price to income ratios will stay around the 6-7x level (I don’t know where the oft quoted 5x figure comes from, av. prices round my area are ca. £200K – 8x the average £25K income). The elephant(s) in the room of course are of course incipient inflation and a possible gilt strike for our sovereign debt- the former will destroy savers (myself) and the latter which would lead to higher interest rates, possibly much higher, could destroy many house owners on the precipice regarding the servicing of their mortgages. It is so desperate that I’m almost tempted to say a “plague all their houses” and hope this scenario occurs even though Samson-style the temple would fall on all of our heads – lets face it all hope is gone as far as buying a house AND be able to afford a pension, its either one or t’other and has been for the best part of a decade —- you pays your money and make your choice.

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  • There is little to be said re HPC at present other than it is not happening at present and more importantly will NOT happen for as long as the government provides, and extends, various forms of support to those who cannot manage their mortgage payments.

    HPC cannot happen without reposessions.

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  • First timers coming to the market because of low interest rates will end in tears when the rates start to rise.

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  • As usual (yawn), very London EA/media centric. Those daft enough to live in London deserve everything they get.

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  • http://money.aol.co.uk/mortgages/get-a-foot-on-the-housing/article/20091026045309990004

    I smell something fishy, but then again I always do. : )

    Parental help via guilt money is still a small percentage from which that feeling of guilt arose. TSB? Go figure! Is this really the last

    window of opportunity (The last bastion of hope. Don’t bombard me with blindness, PLEASE.) before the underground wavy gravy train

    doors slide shut, leaving the late comuters redundant and idle on the state platform their Grandparents sweated for.

    If this is so, then It would beg the question why.

    Cash is King, but Mummy’s social hand out will work “harder.”

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  • OK all the government help is hugely important and getting a result in keeping HPC at bay, but equally is the attitude of house owners and particularly prospective sellers. Their feelings are that collectively we simply cannot let prices drop further because too many people will go into negative equity and it would too damaging to their personal circumstances, and to the economy as a whole.

    Not a rational economic argument – but an immensely strong and emotional mindset that will take some breaking down. I see that as the fence at the edge of the cliff.

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  • Cash is King, but Mummy’s social hand out will work “harder.”

    Crash….rather than cash is king.

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  • Bit harsh doomwatch @4. What about those who have families that have lived in London for generations and can’t afford to buy a home?

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  • The site really does seem to be degenerating into a place to repetitively make the same comments with increasingly scant analysis or thought ie it is getting pointless and actually more akin to VI ramping than most of you would care to think.

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  • Nomad said @6 “but equally is the attitude of house owners and particularly prospective sellers. Their feelings are that collectively we simply cannot let prices drop further because too many people will go into negative equity and it would too damaging to their personal circumstances, and to the economy as a whole”.

    The majority of the sheeple are incapable of such intelligent reasoning as they only live for today and have no idea of their own financial circumstances.

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  • mark wadsworth says:

    Nomad, that is a fairly good summary of the economics of Home-Owner-Ism.

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  • bellwether @9, what analysis is to be made of some EA fed article on the BBC. Please shoot me.

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  • Banks are now pricing in risk, high interest rates low ltv ratio’s, we just have to wait until the average 1st time buyer can buy the average 1st time house. The babyboomers can only buy and sell houses between themselves for so long before they retire.

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  • blimey, you lot still around!

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  • Mr [email protected] I used the phrase “emotional mindset” and not “intelligent reasoning”. If you talk to people they are genuinely scared of the effects of HPC and will hang to the value in their homes by their finger nails.

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  • the number cruncher says:

    Many of the issues we face are often down to our inability to look at long term trends and humans find it very difficult to change their opinions.

    The social movement of home-ownersits took 30 years to get to where we are today. It was borne out of the credit expansion and monetary policy of Thatcher and Reagan to fuel the continued expansion of the American Empire. It will take years to shift attitudes and any politician brave enough to put forward policy ideas to tackle it will be crucified with a deluge of vested interest hate, mostly perpetrated in the right wing media.

    Bullingdon Dave will not stand up to the credit expansion interests, but instead just cut public spending and leave the rich with their funny money supported assets. This will be just as much a travesty as labour has perpetrated in not tackle the credit expansionist, but chosen to achieve their policy aims through taking a few crumbs from the table of the asset bubble.

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  • …and now straight from the horses mouth ( the RICS survey ).

    “””
    • The new instructions net balance increased compared to September but the stock of unsold property on surveyors’ books was virtually unchanged.
    • The net price balance is positive for the third consecutive month. Agreed sales, while positive, increased at a slightly slower rate than in September.
    • Price and sales expectations also continue to improve, and at a faster rate than in September.
    “””

    The seasonally adjusted balance went from 21% to 34% ( from 3%1 to 37% when not S.A. ). Far more are reporting rises than falls, although the majority ( 52% ) are reporting stagnation.

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  • * “3%1” should read “31%”

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