Monday, April 25, 2011

David Blanchflower explains why house prices in the UK are set to fall.

Where do house prices go from here?

These numbers suggests that house prices have another 20 per cent or so to go, with the concern that, as has occurred in other house price corrections, there is a bigger overshooting before prices return to the long run equilibrium. Interestingly, a comparison of gross rental yields, relative to a long-run average, also indicate that housing is at least 20 per cent overvalued.

Posted by will @ 10:58 AM (2848 views)
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9 thoughts on “David Blanchflower explains why house prices in the UK are set to fall.

  • mark wadsworth says:

    Yeah! That’s my kind of talk!

    Those Lib-Cons are REALLY going to regret not allowing house prices to crash as soon as they got into government and then blaming it (quite reasonably) on Labour. When it finally does happen, everybody will blame the Lib Cons.

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  • Yes, I don’t understand why they are supporting the market now when it will only make things worse later. You can **** with the market for years, but eventually the market will turn around and **** you. Given recent news reports on the unsustainability of the US and Japanese public debt, their bond rates are likely to be much higher by 2013. Gilt rates and thus mortgage rates will follow them. No choice.

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  • Whilst I understand and agree with this article, I don’t understand why Blanchflower should have been the arch dove for so long, he appears to have undergone some sort of Damascene conversion.

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  • the number cruncher says:

    I think Blanchflower still wants Keynesian spending but focused on productive assets and not non productive assets, from watching him on Newsnight last week.

    We have the worst of both worlds at the moment with the pretence of Keynesian economics, but the reality is our borrowings are going into non productive areas of the economy such as speculative bubbles (commodities and dare I say it metals…) and propping up bank loans and assets such as housing and the defence of corporate and banking monopolies.

    Blanchflower is probably happy for a HPC but with Keynesian investment in real productivity such as infrastructure etc.

    I agree to some extent, but would of course prefer a Georgist style policy of slashing income tax and vat and shift taxation to land and natural resources, the abolition of legal monopolies and all forms of subsidy, relaxation of trademarks and ‘intellectual property rights’ and reform of planning law to favour productive use of land.

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  • the number cruncher says:

    MW @ 1

    I have a horrible feeling they will try to keep the plates spinning at all costs (and wreck the real economy) until the next election. I do hope they fail

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  • 1. mark wadsworth said…Those Lib-Cons are REALLY going to regret not allowing house prices to crash as soon as they got into government and then blaming it (quite reasonably) on Labour. When it finally does happen, everybody will blame the Lib Cons.

    ~ Then vote Labour again???? ~ Cryptic.

    There is no fool like an old fool.

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  • @ mark w and monty

    Never underestimate the capacity of politicians for kicking the can down the road.

    They make Mr Micawber look like an obsessive forward planner.

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  • Lib-Con should have let a few plates drop and blamed NuLabour (as MW said). It looks like they will try to keep plates in the air and then watch it crash. If so, they will hand over a big share of their votes to UKIP, I think.

    The US situation is important. America has a big influence on what will happen in the UK. Crony capitalism and massive debt (some hived off balance sheet) in the USA will seriously affect the UK. The Euro crowd are almost as bad. As the Stealers Wheel song goes..

    “Clowns to the left of me,
    Jokers to the right…”

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  • mark wadsworth says:

    Mr G 3, yup, they do this once they leave office, see also Bob Ainsworth on why we should legalise drugs.

    TNC 4, yup, that’s called DBC Reed-onomics. The government spends willy nilly but taxes all unearned capital gains on land (or on shares) to ensure that the extra money goes into productive stuff. Given where we are starting, that seems like a good plan to me.

    TNC 5, Peter 6, it could happen that they let the plates drop nearer 2015 and house prices crash, in which case the Home-Owner-Ist elite will arrange for Labour to get back into government and keep the subsidies rolling.

    Alan 7, the real reason that the Tories are so opposed to AV (having themselves offered it to us) is that they know perfectly well that at least a tenth of ballot papers will say “UKIP 1, Tory 2”. Whether UKIP turn out to be as Home-Owner-Ist as the others remains to be seen.

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