Tuesday, May 19, 2015

UK now in deflation - apart from average house prices

FT: UK slips into deflation as prices fall 0.1%

The price level has fallen, for the first time since ...? A blip into that territory in 2008 and before that the 1930s great depression. There is good deflation and bad deflation. The difference is not really explained, but here in the UK it is believed to be good deflation. Is good deflation that with a Union Jack on it, I wonder? To read the article, type the source title into google.

Posted by nickb @ 05:17 PM (6150 views)
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13 Comments

1. libertas said...

This will accelerate with austerity.

Also, Osbourne's deficit reduction plans will reduce supply of Gilts, forcing down yields, sending mortgage rates yet lower, driving a new housing boom to new heights. Just as TFL takes over West Anglia lines into Enfield, Waltham Forest, Redbridge and Havering, setting off a boom of a life time and gentrification of north east and east London that will completely transform vast swathes of the city.

Tuesday, May 19, 2015 11:08PM Report Comment
 

2. khards said...

Won't gentrification swathes of the city increase the supply of desirable areas to live, thus reduce prices within more desirable areas?

Wednesday, May 20, 2015 07:07AM Report Comment
 

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7. nickb said...

Libby
Where in the history of the world has accelerating deflation, which you predict, been accompanied by house price acceleration?
N

Wednesday, May 20, 2015 11:24AM Report Comment
 

8. icarus said...

Lower mortgage rates are driven by the demand side too. Lower mortgage rates are driven from that side by low demand for mortgages.

Wednesday, May 20, 2015 11:38AM Report Comment
 

9. britishblue said...

A tale of two customers.
I saw two customers last week who engaged with me on the value of their properties. The first was a 70 year old lady. She bought her property around 35 years ago for £46,000 in Hammersmith She has just completed the sale for 1.3 million pounds. The other was a young professional who has just bought a 1 bed flat on the outskirts of London for £350,000. I asked him what his career plans were. He said and I quote, ' My career doesn't matter, I'll make all my money from housing, now I am on the property ladder.'
The thing is bubbles of all sorts have regularly reared their heads for1000's of years and a 35 year span is relatively short in the history of man.

Wednesday, May 20, 2015 04:30PM Report Comment
 

10. mombers said...

When inflation is high, you get the following scenario:
Take a punt on a 'starter' home, e.g. one bed flat
Over 5 or 10 years, price goes up but much less than the price of the next step up the 'ladder' - leaving a bigger jump for our aspiring STB
BUT... inflation has meant that your pay has increased a lot over the years, so you can now take on a lot more mortgage debt.
With low inflation, all of a sudden your in a situation where you can't take on much more mortgage debt because your salary hasn't gone up by much. The big jump to the second 'rung' is impossible. Tough luck if you're thinking of starting a family...
Rising house prices are never a good thing and only in the case of salaries rising are people able to escape the lower rungs, at the cost of all of their increased earnings going to the bank yet again.

Wednesday, May 20, 2015 05:22PM Report Comment
 

11. mister ed said...

@9

In a word, scary.

Wednesday, May 20, 2015 05:52PM Report Comment
 

12. debtserf said...

#9:

Not sure that we've had easy credit or securitisation for thousands of years, but prices during the last 30 years have certainly been abetted by the deregulation and hyperfinancialization of the lending industry.

The bubble psychology that you're alluding to, the 'animal spirits', is a result of uncertainty about the future. Houses are perceived to be a safe investment. Because they only ever go up, according to the groupthink. There has been a buying mania for the last couple of years which surpasses anything seen in the prelude to 2007.

Never mind 35 years - most people cant even remember what happened 8 years ago, and are running for the train before it leaves the station.

Wednesday, May 20, 2015 10:38PM Report Comment
 

13. mark said...

Asda have certainly reversed deflation, most of their foods have gone up in price over the past few weeks, same with Tescos fake offers, I really can't see anything other than increasing prices everywhere i go

Thursday, May 21, 2015 09:48AM Report Comment
 

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