UK House prices: News & Views

[drbubb]

If you ask a successful chap about to move and take on a 400k mortgage (to buy that nice £1m house in Chiswick) whether he is worried about interest rates going up in the future he'll say 'Of course I know interest rates could go up in the future' but, somehow, he discounts this 'knowledge' because, although he 'knows' interest rates can/will go up in the future he doesn't 'realize' it. If he 'realized' it he would not take on such an insane mortgage because he would have recognized the threat as 'real' and not taken the risk.

Yeah.

That might be a guy working in the City, and it is exactly this sort of "happy chappy" who may get crushed by a stock market crash in the next 2-3 years.

[Carlton]

The assumption that I would question here is Average Household size

 

In a severe recession, I reckon it will RISE

That's what happened in the USA.

 

Households had been getting smaller over the past decades, despite population growth. That was great for housing, because it meant more demand. "A one tenth of a percent increase in people per household would wipe out three years worth of population- and immigration-driven household growth," according to Green Street Advisors. That appears where we're headed.

http://www.cnbc.com/id/44274402/

 

[drbubb]

DrB: "The assumption that I would question here is Average Household size (will be stable or go on falling.)

In a severe recession, I reckon household size will RISE, surprising many bulls.

 

That's what happened in the USA.

http://www.cnbc.com/id/44274402/

No surprise there.

As the housing bubble burst, people were forced out of homes where they could no longer afford the mortgage.

Ironically, that made the bust worse, because the overall demand for housing was falling as new homes and apartment that had been contracted for building during the boom continued to be completed years after the peak in the market.

 

Also empty homes tied up in the foreclosure eventually came back onto the market, further adding to the excess supply.

 

America is now working its way through its housing mess, while parts of the UK -such as London - have not even begun to do so. It is going to get increasing ugly in the UK housing market, I reckon.

[Pal]

The assumption that I would question here is Average Household size

 

In a severe recession, I reckon it will RISE

 

New government policy starting next year which could indeed cause average household size to rise - Single people under the age of 25 (may be 35, I will have to check) will no longer be able to claim HB for 1 bed flats. They will need to enter share accommodation. This is causing local councils a lot of consternation though as they see a potential huge rise in people being evicted due to HB being stopped and then claiming emergency housing from them. They have very limited places available in the B&B type sector and the cost is far higher so they are trying to get this decision changed.

 

Of course, this could equally just lead to an increase in demand for 2 bed flats, where 2 singles will then share the rent and get full HB.

 

Other planned changes which could cause changes are a stop to HB completely. The decision has been made to make a single "Universal Payment" to the claimant. They would then decide where they live and how much they spend on rents. Again, this is being fought hard as last time they stopped direct payments to landlords arrears and evictions rose sharply. There are already schemes being promoted to get around this by credit unions. The idea for the government is that by giving a single payment they can simplify the system and reduce the amount allowed on housing benefit without it looking like a direct cut.

[John Doe]

I was mostly being serious JD. Do you see Britain as some insular Trumpton-like land with a toytown currency tap that has nothing to do with wealth or value? Where the folk do not bother looking beyond 'their' (a naive notion, as ever) own shores because 'it's dangerous & foreign elsewhere'. So they prefer the quaint idea fostered over many years that it really is different here & that the majority will do everything to defend the system that has been screwing them for centuries?

If so, I think you are right. (I nearly typed 'right on the money' )

 

Sorry LB, I didn't understand your previous post, you are way too subtle for me sometimes

 

Not sure if everyone thinks that way (I would love to find a good job abroad, and am actively looking. The whole Doe house is even learning French!), but the vast majority I know seem to be happy to stay here.

 

Jees, many of my friends from my former life* haven't really ever left their own city! (except maybe for a day trip or two).

 

When I left many years back, many of them really couldn't understand why I'd want to leave and they all thought I'd be back within a few months! Weird!

 

It does worry me that without building lots of new houses, we are storing up trouble. Housing should be affordable.

 

The average person on the average wage SHOULD be able to afford the average house.

 

Greater supply can only help.

 

* Former life being before I went back to school etc, not as exciting as your former life (lives) definition

 

That's what happened in the USA.

 

The same USA with hardly any benefits?

 

Perhaps if the Gov actually bring in the measures mentioned by Pal (instead of keep talking about them, then doing U-turns), this would have an effect.

 

Until then, I don't think we can be compared with the USA.

[drbubb]

Other planned changes which could cause changes are a stop to HB completely. The decision has been made to make a single "Universal Payment" to the claimant. They would then decide where they live and how much they spend on rents. Again, this is being fought hard as last time they stopped direct payments to landlords arrears and evictions rose sharply. There are already schemes being promoted to get around this by credit unions. The idea for the government is that by giving a single payment they can simplify the system and reduce the amount allowed on housing benefit without it looking like a direct cut.

That would be a very good thing for the overall UK economy in the long run, since it will help to liquidate some of the truly mammoth mal-investment in the UK housing market.

 

But as it goes, it will be very painful for BTL investors. If they are smart and see it coming, they would be wise to exit ASAP, before the truly ugly price drops arrive.

[John Doe]

That would be a very good thing for the overall UK economy in the long run, since it will help to liquidate some of the truly mammoth mal-investment in the UK housing market.

 

But as it goes, it will be very painful for BTL investors. If they are smart and see it coming, they would be wise to exit ASAP, before the truly ugly price drops arrive.

 

Or buy 2 bed flats as suggested.

 

I agree the plans make good sense, but UK Gov's talk lots, but tend not to go through with radical plans.

 

We can but hope.

[tallim]

Or buy 2 bed flats as suggested.

 

I agree the plans make good sense, but UK Gov's talk lots, but tend not to go through with radical plans.

 

We can but hope.

I think it's odd that they are even seen as radical, I'm not sure you can blame it on a very vocal minority either, it's become quite a pervasive mindset. "Won't someone please think of the horror of having to move house?"

 

What's radical about people under 35 sharing a house, or that total benefits should be less than an average working household, or that the state doesn't need to control exactly how benefits are spent by having the payment relationship with the service providers?

 

It could just be that people are scared of change, it could be that people have lost perspective when doing risk management scenarios, or it could be that people don't understand that markets adapt to changing inputs quite quickly.

 

Who are the landlords of these low-end 1-bed flats that LHA 25-35 year olds are living in going to rent them to if they don't drop the rents to the LHA shared allowance? I'm not sure the private renters are going to take up the slack in the market. Some individuals might move, but they leave an empty house behind. For all this talk of a tight rental market there's still enough slack that I have a choice of suitable places at suitable prices I could move into tomorrow across most of the country (not true for London).

[John Doe]

I think it's odd that they are even seen as radical, I'm not sure you can blame it on a very vocal minority either, it's become quite a pervasive mindset. "Won't someone please think of the horror of having to move house?"

 

What's radical about people under 35 sharing a house, or that total benefits should be less than an average working household, or that the state doesn't need to control exactly how benefits are spent by having the payment relationship with the service providers?

 

It could just be that people are scared of change, it could be that people have lost perspective when doing risk management scenarios, or it could be that people don't understand that markets adapt to changing inputs quite quickly.

(not true for London).

 

I didn't mean radical like that, I meant radical as change (as you pointed out, they don't like change).

 

Or, perhaps even radical by actually using common sense to make policy. Now that would be radical for a UK gov.

 

Who are the landlords of these low-end 1-bed flats that LHA 25-35 year olds are living in going to rent them to if they don't drop the rents to the LHA shared allowance? I'm not sure the private renters are going to take up the slack in the market. Some individuals might move, but they leave an empty house behind. For all this talk of a tight rental market there's still enough slack that I have a choice of suitable places at suitable prices I could move into tomorrow across most of the country

 

Not sure about now, but most of the one beds with young people in on benefits etc were local authority or housing association back in the late 80's early 90's.

 

Back home there were a few dodgy landlords around the city centre that had cheapish bedsits, but they weren't as good, or cheap, as the LA and HA ones, it was mainly students and divorcees that rented these.

[tallim]

Good finds that man, so the 120,000 new homes IS net.

 

The growth in population of 470,000 is ALSO net.

 

So I make that ~ 470,000-120,000 = 350,000 and at ~2.3 av per house = shortage of ~30,000 houses per year.

 

So, why all the reports of an extra 150,000 needed per year? (perhaps a backlog, or maybe it's all in Scotland ?)

I think your maths is a bit squiffy, more wine last night? I make it:

 

470,000 additional population / 2.3 people per household = ~205,000 households at current household density

205,000 households required - 128,000 houses added = 75,000 houses missing to maintain current household densities

 

To put it into perspective:

 

Total population = 62,262,000

Current density = 2.29 people per household

Current households or houses = 62,262,000 / 2.29 = 27,188,646

Houses missing to maintain density = 75,000

Population density with missing households = 62,262,000 / (27,188,646 - 75,000) = 2.296

 

So to soak up the extra population in the current housing stock would need 6 extra people to live in every 1000 houses.

[John Doe]

I think your maths is a bit squiffy, more wine last night? I make it:

 

470,000 additional population / 2.3 people per household = ~205,000 households at current household density

205,000 households required - 128,000 houses added = 75,000 houses missing to maintain current household densities

 

To put it into perspective:

 

Total population = 62,262,000

Current density = 2.29 people per household

Current households or houses = 62,262,000 / 2.29 = 27,188,646

Houses missing to maintain density = 75,000

 

So to soak up the extra population in the current housing stock would need 6 extra people to live in every 1000 houses.

 

Moi? Just a glass or two, purely medicinal

 

However, the figures are, of course, correct if using my flawless night time logic (based loosely upon the Sancerre school of thought, with a splash of Pouilly Fume thinking thrown in). Clearly, I must have been assuming single person households for all the new 120,000 houses, then the remainder of the new population living 350,000/30,000 = ~12 per house , obviously students or East Europeans

 

Looking at your figures, I have found a couple of links showing the number of homes in the uk was 22,000,000 in 2001

 

So even building 200,000 new houses per year would make it 24,000,000 now, leaving a shortfall of (27,000,000-2,000,000) 3,000,000! That’s quite a shortfall.

 

http://wiki.answers.com/Q/How_many_households_in_the_UK

 

Using these figures with your calculations, that would mean 3,000,000 x 2.29 = 6,870,000 people.

 

So if solving the crisis, using your, admittedly ingenious, plan of squeezing 6 extra people into some of the existing housing stock, it would need 1,000,000 poor unsuspecting households to take up the slack!

 

So, maybe 8.29 bed houses rather than bungalows is the way to go?

 

just kidding

[drbubb]

NEO-72 at OtherPlace.com-ish mentions some Big Dates

 

...We have a zombie housing market, propped up by tax payer subsidies of one form or another, it was worth making a note of any upcoming changes in policy and any expected impacts.

 

So the two main ones coming up in the near future I can think of are:

 

1) Changes to the Local Housing Allowance (October 2011). From the ‘official’ (i.e. probably over-optimistic) estimates it looks like 83% of claimants will lose out, with an average loss of around £40 a month (£74 in London).

 

I’d be very surprised if this didn’t put downward pressure on rents (to assume otherwise, assumes 100% of renters have no alternative e.g. parents), and so yields, and increases the likelihood of tenants defaulting on rent. My prediction – a gradually increasing stream of BTL’s from early next year.

 

2) End of FTB stamp duty holiday (March 2012). When the original stamp duty holiday (for all buyers, not just first-time) ended in December 2009, there was quite a hefty increase in volumes in the months preceding the deadline, followed by a huge fall in volume in the months after, so wouldn’t be surprised to see this pattern again.

 

Don’t think it will be so pronounced this time around as there is probably (rightly) some scepticism that it will actually end, it only (theoretically) affects FTBs, and it has been going for much longer than the original scheme (and how many FTBs with circa 25% deposit are there?) but still would expect to see a relative drop in volumes and an acceleration in price falls after April.

==== ====

 

Other Other-Placers cannot quite get that it is not overall population that is likely to change in the UK, but household size. And a change in that can dramatically influence housing demand. They go on about other fantasies...

 

If at some point the economy implodes, and government was no longer able to pay benefits, or even guarantee food in the shops...well I feel there would be an exodus. Or is there something special about this sceptered isle that would keep everyone here?

 

I wonder if anyone will "spill the beans"

[John Doe]

NEO-72 at OtherPlace.com-ish mentions some Big Dates

 

...We have a zombie housing market, propped up by tax payer subsidies of one form or another, it was worth making a note of any upcoming changes in policy and any expected impacts.

 

So the two main ones coming up in the near future I can think of are:

 

1) Changes to the Local Housing Allowance (October 2011). From the ‘official’ (i.e. probably over-optimistic) estimates it looks like 83% of claimants will lose out, with an average loss of around £40 a month (£74 in London).

 

I’d be very surprised if this didn’t put downward pressure on rents (to assume otherwise, assumes 100% of renters have no alternative e.g. parents), and so yields, and increases the likelihood of tenants defaulting on rent. My prediction – a gradually increasing stream of BTL’s from early next year.

 

2) End of FTB stamp duty holiday (March 2012). When the original stamp duty holiday (for all buyers, not just first-time) ended in December 2009, there was quite a hefty increase in volumes in the months preceding the deadline, followed by a huge fall in volume in the months after, so wouldn’t be surprised to see this pattern again.

 

Don’t think it will be so pronounced this time around as there is probably (rightly) some scepticism that it will actually end, it only (theoretically) affects FTBs, and it has been going for much longer than the original scheme (and how many FTBs with circa 25% deposit are there?) but still would expect to see a relative drop in volumes and an acceleration in price falls after April.

==== ====

 

Other Other-Placers cannot quite get that it is not overall population that is likely to change in the UK, but household size. And a change in that can dramatically influence housing demand. They go on about other fantasies...

 

If at some point the economy implodes, and government was no longer able to pay benefits, or even guarantee food in the shops...well I feel there would be an exodus. Or is there something special about this sceptered isle that would keep everyone here?

 

I wonder if anyone will "spill the beans"

 

I think we might soon see more gov intervention.

 

Did you hear Lagardes latest speech as IMF head?

 

Wow!

 

More mortgage let offs, new lower rates for mortgage holders, capital injection into the banks etc etc

 

http://www.bbc.co.uk/news/business-14699093

[Meralti]

I think we might soon see more gov intervention.

 

Did you hear Lagardes latest speech as IMF head?

 

Wow!

 

More mortgage let offs, new lower rates for mortgage holders, capital injection into the banks etc etc

 

http://www.bbc.co.uk/news/business-14699093

 

At no point did I notice anything explicit being said about mortgage let offs, debt forgiveness or lower rate for mortgage holders outside of a US context.

 

Concerning Europen bank capitalisation she said:

 

Second, banks need urgent recapitalization. They must be strong enough to withstand the risks of sovereigns and weak growth. This is key to cutting the chains of contagion. If it is not addressed, we could easily see the further spread of economic weakness to core countries, or even a debilitating liquidity crisis. The most efficient solution would be mandatory substantial recapitalization—seeking private resources first, but using public funds if necessary. One option would be to mobilize EFSF or other European-wide funding to recapitalize banks directly, which would avoid placing even greater burdens on vulnerable sovereigns.

 

 

Explicitly concerning debt she said:

 

We are not without options. We know what needs to be done to support growth, reduce debt, and prevent further financial crises. But we need a new approach—based on bold political action, with a comprehensive plan across all policy levers, implemented in a coordinated global way.

 

Not quite the same as what you imply with your misquotation JD. Misrrepresentation - those old EA habits did hard huh!

 

The full transcript can be read at Global risks are rising

 

What she did say about mortgage holders was in a specific US context:

 

Second—halting the downward spiral of foreclosures, falling house prices and deteriorating household spending. This could involve more aggressive principal reduction programs for homeowners, stronger intervention by the government housing finance agencies, or steps to help homeowners take advantage of the low interest rate environment.

 

This is not the same as what you imply in your post. Anyway Laguarde doesn't determine US policy in this regard.

[John Doe]

At no point did I notice anything explicit being said about mortgage let offs, debt forgiveness or lower rate for mortgage holders outside of a US context.

 

Er, I never said anything about outside US did I?

 

Talk about seeing what you want to see Met

 

So lets have another look and see if what I said isn’t true.

 

http://www.ft.com/cms/s/0/9f857244-d0d0-11e0-8891-00144feab49a.html#axzz1WPGpDTau

 

What she said was (and I will highlight it so it is clear)

 

In the US, she called for new action on housing, such as writing off more of the principal on mortgages, intervention by government housing finance agencies such as Fannie Mae and Freddie Mac, or steps to help homeowners refinance their mortgages at lower rates.

“With falling house prices still holding down consumption and creating economic uncertainty, there is simply no room for half-measures or delay,” Ms Lagarde said.

 

She quite explicitly says “writing off more of the principle on mortgages” does she not? That's mortgage let off as I said.

 

She quite explicitly says “refinance mortgages at lower rates” does she not? Again, as I said.

 

 

Concerning Europen bank capitalisation she said:

 

Second, banks need urgent recapitalization. They must be strong enough to withstand the risks of sovereigns and weak growth. This is key to cutting the chains of contagion. If it is not addressed, we could easily see the further spread of economic weakness to core countries, or even a debilitating liquidity crisis. The most efficient solution would be mandatory substantial recapitalization—seeking private resources first, but using public funds if necessary. One option would be to mobilize EFSF or other European-wide funding to recapitalize banks directly, which would avoid placing even greater burdens on vulnerable sovereigns.

 

Not quite the same as what you imply with your misquotation JD. Misrrepresentation - those old EA habits did hard huh!

 

This is not the same as what you imply in your post.

 

That's capital injection into banks, as I said, did I not?

 

I don't imply anything in my post, I just said quite clearly that she said, "More mortgage let offs, new lower rates for mortgage holders, capital injection into the banks etc etc"

 

That is EXACTLY what she said, is it not?

 

So, if you insist on childishly implying that I am (or was an EA) in these very personal attacks, at least do it when (or rather if) I ever actually try to misrepresent views, rather than when you just don't like the facts, again

[LauraB]

“With falling house prices still holding down consumption and creating economic uncertainty, there is simply no room for half-measures or delay,” Ms Lagarde said.

 

Ola? Cristina? You are French, non? Before Les Anglais started their buying spree, I don't recall there being much of a fuss about the housing market in your country?

"Creating economic uncertainty". How did that come about my dear? You make it sound like a potential catastrophe. A few extra zeros were created, et, mais non!!! - puff! - C'est un truc mon cherie, c'est rien.

 

What do you think you can do anyway? Embark on more creation? Not a good idea, unless you are an illuminati puppet, & who would think such a thing?!

 

Have a look at where les Anglais are heading on their own turf before doing anything hasty, OK? & please note, no-one resists like the Brits:

 

"Riots in London, fear in France and Italy, meltdown in Greece and downgrades in Washington.

 

These are worrying times for anyone with half a brain and terrifying for anyone with a whole one.

 

Give or take the occasional riot, we in Britain have tended to think we’re relatively safe from these storms.

 

Yes, the government managed to get into serious debt, but we’re starting to work our way out.

 

The ratings agencies view George Osborne as Mr Credible. And, hey, at least we’re not in the Euro.

 

 

More...

House prices: What next?

What next for mortgage rates?

But the British economy is stalling badly and our financial system is much weaker than the authorities would have you believe.

 

Worse still, the biggest threat to our financial system is one that most likely affects you personally. British property prices are far too high and set for a fall.

 

Transaction volumes are still unbelievably sluggish, mortgage approvals still in a slump – but the problem isn’t volumes, it’s prices. There are two main ways of measuring whether property is fairly valued or not. The first is to compare house prices with average earnings. The second compares house prices with average rents.

 

On both measures, the UK market looks screamingly overvalued. British house prices are around 40 per cent too high in relation to incomes and about the same amount in relation to rents.

 

That’s not all of it. Housing markets are volatile. That means they overinflate in a bubble, but they crash too far in a slump. If prices are 40 per cent above their fair value, a collapse of more than 50 per cent is well within the realms of possibility.

 

Crazy? Think about where on earth the housebuyers of tomorrow going to come from. A recent report in the Mail quoted some young people as saying they ‘don’t think they will ever be able to afford to buy a property. ’ At these prices – they’re right.

 

That’s why the average age of a first-time buyer has been soaring and why the ‘Bank of Mum and Dad’ remains essential to so many new buyers today.

 

Then think about what’s happening to interest rates. The Bank of England has been in existence for more than 300 years and it has never once operated a monetary policy which is as slack as the one that has now been in place since 2008.

 

Prices have already fallen more than 15 per cent from their peak despite a Bank of England rate of just 0.5 per cent.

 

When interest rates return to sane levels, as they’ll have to if the Bank is to cope with runaway inflation, people are suddenly going to start finding that their mortgage burden becomes rapidly insupportable. All this at a time of high inflation, high fuel prices, high food costs.

 

You only have to look at the US to realise what happens when you get a cycle of mortgage defaults, repossessions and distress sales. In America, prices have already fallen at least 30 per cent and they’re still headed down with no bottom in sight.

 

No? You still don’t believe me? Then look at it this way. Can you name any occasion in history when a developed country simultaneously faces savage government cuts, swingeing rates of tax, high inflation, rising unemployment, depressed growth abroad, rising interest rates, huge levels of debt, and doesn’t have a housing crisis?

 

In the UK housing slump of the early 1990s, the world situation wasn’t nearly so bleak as it is now, yet prices (in real terms) still fell by well over a third from peak to trough.

 

These thoughts aren’t comfortable ones. Not for me, not for you, still less for George Osborne and his colleagues. But you don’t avoid disaster by wishing it away."

 

Mitchell B. Feierstein is chief executive of the Glacier Fund. He has been in the financial markets for 30 years. He is the author of Planet Ponzi (due out in February 2012), which argues that the credit crisis has only just begun.

 

http://www.dailymail.co.uk/money/news/article-2031172/MONDAY-VIEW-Why-Britain-heading-property-crisis.html

[John Doe]

With falling house prices still holding down consumption and creating economic uncertainty, there is simply no room for half-measures or delay, Ms Lagarde said.

 

Ola? Cristina? You are French, non? Before Les Anglais started their buying spree, I don't recall there being much of a fuss about the housing market in your country?

"Creating economic uncertainty". How did that come about my dear? You make it sound like a potential catastrophe. A few extra zeros were created, et, mais non!!! - puff! - C'est un truc mon cherie, c'est rien.

 

What do you think you can do anyway?

 

Yes, it is magic. (See my french lessons are working, Je faire du progress toute les jours! )

 

But just watch what they will pull out the hat if things get really dire.

 

Debt jubilee? I wouldnt rule it out if things are as bad as I (and many here) believe!

 

I actually read her speech as being along the lines of Bernanke, basically they are all on the same hymn sheet.

 

No more printing directly, but time for other approaches, including mortgage re-pricing, debt forgiveness and s**t loads of gov spending while slowing down the cuts.

 

Stimulus, stimulus, stimulus.

 

 

Mitchell B. Feierstein

is chief executive of the Glacier Fund

. He has been in the financial markets for 30 years.

He is the author of Planet Ponzi

(due out in February 2012), which argues that the credit crisis has only just begun.[/i]

 

I'm sure he will give a balanced veiw then

 

His "Glacier Fund" wouldn't happen to make lots of money if prices fell would it?

 

He says house buying more than 40% more expensive than renting. WRONG, it is buy all accounts now, cheaper to buy than rent in 80% of the country. Even if it was equal, this 40% statement is nonsense.

 

He is basing over-value on earnings and not affordability. In this ZIRP environment, this is the WRONG comparison.

 

He says what s**t we are in, then how Osborne is the darling of the market, then thinks rates are going to go up

 

Big mistake. Rates ain't going nowhere for a long time (and that is because things ARE bad).

 

Please ladies and gents, let's have some balance

[marceau]

Yes, it is magic. (See my french lessons are working, Je faire du progress toute les jours! )

 

But just watch what they will pull out the hat if things get really dire.

 

Debt jubilee? I wouldn’t rule it out if things are as bad as I (and many here) believe!

 

I actually read her speech as being along the lines of Bernanke, basically they are all on the same hymn sheet.

 

No more printing directly, but time for other approaches, including mortgage re-pricing, debt forgiveness and s**t loads of gov spending while slowing down the cuts.

 

Stimulus, stimulus, stimulus.

 

I'm sure he will give a balanced veiw then

 

His "Glacier Fund" wouldn't happen to make lots of money if prices fell would it?

 

He says house buying more than 40% more expensive than renting. WRONG, it is buy all accounts now, cheaper to buy than rent in 80% of the country. Even if it was equal, this 40% statement is nonsense.

 

He is basing over-value on earnings and not affordability. In this ZIRP environment, this is the WRONG comparison.

 

He says what s**t we are in, then how Osborne is the darling of the market, then thinks rates are going to go up

 

Big mistake. Rates ain't going nowhere for a long time (and that is because things ARE bad).

 

Please ladies and gents, let's have some balance

 

 

Your certainty worries me John.

 

They are choosing slow strangulation over a quick hanging, and will continue to do so as long as the market permits them. The result will still be the same. In both real and nominal terms house prices will eventually return to an affordability level based on earnings. The only question is how long it takes, and there are far too many variables to allow sensible prediction.

 

Those wishing for debt jubilee and/or government helicopters could end up very, very disappointed and substantially poorer, as could those wishing for the return of sound money policies and the real/nominal convergance that would entail. Governments can become powerless overnight, likewise they can somtimes influence markets to a ridiculous degree. The current dynamic could turn on a dime and head to either extreme before we reach the end.

 

There is no way to predict either the path we take to the collapse or its length, but we will get there.

[John Doe]

Your certainty worries me John.

 

They are choosing slow strangulation over a quick hanging, and will continue to do so as long as the market permits them. The result will still be the same. In both real and nominal terms house prices will eventually return to an affordability level based on earnings. The only question is how long it takes, and there are far too many variables to allow sensible prediction.

 

Those wishing for debt jubilee and/or government helicopters could end up very, very disappointed and substantially poorer, as could those wishing for the return of sound money policies and the real/nominal convergance that would entail. Governments can become powerless overnight, likewise they can somtimes influence markets to a ridiculous degree. The current dynamic could turn on a dime and head to either extreme before we reach the end.

 

There is no way to predict either the path we take to the collapse or its length, but we will get there.

 

Please don't get me wrong, I don't know exactly what will happen (no-one does, no matter what they tell you), it's just what I think is likely to happen considering where we are and what has happened so far.

 

For instance, I have always said IF rates were forced to rise early, all bets are off. But it's very unlikely this will happen considering where we are.

 

With the serious slowdown (again) now being observed in the Western economies, I really don't think inflation will stay high either, as even with the printing and ZIRP, a credit crunch, by definition, is deflationary, and the deleveraging hole they have to fill is still bigger than the printing (so far).

 

I hope things will not get so bad that they will have a debt jubilee, I just don't dismiss it out of hand. (Indeed, US and Eire are doing this in a small way already, and the restructuring of Greek debt (and Eire) is default by any other name, and essentially the first steps of this policy too).

 

I think beneath the surface, things are extremely bad, but, they have been for a very long time, and the world has muddled through with booms and busts regardless of this.

 

Your point about a slow grind is probably closest to my thinking. Manageable (yes fiddled) inflation (<5%) over a number of years, whilst scaring the population into not daring to ask for pay rises. IR's being kept really low for the same period.

[drbubb]

I hope things will not get so bad that they will have a debt jubilee, I just don't dismiss it out of hand. (Indeed, US and Eire are doing this in a small way already, and the restructuring of Greek debt (and Eire) is default by any other name, and essentially the first steps of this policy too).

Why not learn from Martin Armstrong, and also a little from me:

 

"No bailouts without haircuts"

 

There IS A WAY to out of this mess...

 

Instead of Outright Forgiveness, why not (do what Jules Caesar wanted to do):

 

DO NOT FORGIVE THE DEBT, but force lenders who lent too much, to buy part of the asset

 

Here's how the system works:

 

1) You "mark" assets to old values - like 2003 or something. So if "today's value is say GBP 200,000, and the value in 2003 was GBP 100,000, then if the loan exceeds the 2003 valuation of GBP 100,000, then the lender is going to have to buy a share of the asset. If the Loan is GBP 100,000 or less, no change is needed.

 

2) Let's look at two cases, involving a residential home:

 

+ 2a: A Loan of GBP 200,000 :

The lender "buys" half of the home, writing down to loan to GBP 100,000,

so the Borrower owns 50%, and the Lender owns 50%

 

+ 2b: A Loan of GBP 150,000 :

The lender "buys" one-third of the home writing down to loan to GBP 100,000,

so the Borrower owns 67.7%, and the Lender owns 33.3%.

 

3) The Borrower pays the GBP 100,000 Mortgage over 25 years at a market interest rate, and pays a little extra rent to the Bank, depending on what percentage the bank owns.

 

4) If and when the house is sold, the bank receives repayment of its mortgage, and each owner gets their share of equity on anything left

 

THIS SYSTEM has various advantages

 

+ Immediate debt relief

+ Much less moral hazard, since the more debt, the more equity the bank gets

+ The bank shares in the upside in a "fair" way, if there is any

[John Doe]

Why not learn from Martin Armstrong, and also a little from me:

 

 

Why, I always do Dr B .

 

That sounds a fine set of proposals, if the situation comes.

 

PS I see Douche doure has updated his Great Dow Highs of 2007 thread.

 

Always worth a read, talking of learning things.

 

http://www.greenenergyinvestors.com/index.php?showtopic=2199&pid=224983&st=260entry224983

[Meralti]

 

So, if you insist on childishly implying that I am (or was an EA) in these very personal attacks, at least do it when (or rather if) I ever actually try to misrepresent views, rather than when you just don't like the facts, again

 

JD, I've never seen you present an argument outside of:

 

• 
   
  
• Britain is a small island, land - they aren't making any more of it.
  
• Immigration will continue to boost demand
  
• Housing benefit keeps rents high and underpins capital values.
  
• Money Printing/ bank bailouts.
  
• We're a nation of house buyers/ Pent up FTBers and investors
  
• UK housing provides a yield the only thing left in the UK that has value.
   
   
  

 

These arguments have been done to death in various fora over the years. Most have been should to be false when fully analysed yet you continue to select any evidence that superficially supports any of the above, included the Laguarde speach. Your sound like a broken record and deserve to be mocked. The availability of credit is what drives the market. Low interest rates means vendors are not under duress to sell. The rest really is irrelevant, it would be easier to just admit it.

[Meralti]

U.K. House Prices Fell for Fourth Straight Month in August

 

 

 

U.K. house prices fell for a fourth month in August and demand for homes may weaken further this year, property researcher Hometrack Ltd. said.

 

The average cost of a home slipped 0.1 percent from July and was down 3.7 percent from a year earlier, the London-based firm said today in an e-mailed report on its monthly survey of real-estate agents. In London, prices increased by 0.1 percent.

 

“Weak consumer sentiment, pressure on household incomes and the uncertain economic outlook are likely to see demand weaken further over the remainder of the year,” Richard Donnell, Hometrack’s director of research, said in a statement. “This is likely to accelerate the downward pressure on prices over the autumn.”

 

A stuttering economic recovery, rising joblessness and the deepest government spending cuts since World War II are weighing on Britain’s housing market and eroding consumer confidence. The Bank of England cut its growth forecast this month and left interest rates at a record low as it warned the euro-area crisis and global economic cooling threaten to hurt the U.K. economy.

 

Demand for homes fell by 1.2 percent in August, the Hometrack survey showed. The percentage of sales agreed rose 3.6 percent this month, compared with a 9.6 percent jump in July. Sellers accepted on average 92.5 percent of the asking price of a property, the least in six months.

[John Doe]

JD, I've never seen you present an argument outside of:

 

• 
   
  
• Britain is a small island, land - they aren't making any more of it.
  
• Immigration will continue to boost demand
  
• Housing benefit keeps rents high and underpins capital values.
  
• Money Printing/ bank bailouts.
  
• We're a nation of house buyers/ Pent up FTBers and investors
  
• UK housing provides a yield the only thing left in the UK that has value.
   
   
  

 

These arguments have been done to death in various fora over the years. Most have been should to be false when fully analysed yet you continue to select any evidence that superficially supports any of the above, included the Laguarde speach. Your sound like a broken record and deserve to be mocked. The availability of credit is what drives the market. Low interest rates means vendors are not under duress to sell. The rest really is irrelevant, it would be easier to just admit it.

 

So you say, yet compared to the US and Eire and Spain etc etc, prices here haven't fallen anywhere near as far, have they?

 

Diferences between those places and the UK?

 

[*]Britain is a small island, land - they aren't making any more of it.

[*]Immigration will continue to boost demand

[*]Housing benefit keeps rents high and underpins capital values.

[*]Money Printing/ bank bailouts.

[*]We're a nation of house buyers/ Pent up FTBers and investors

[*]UK housing provides a yield the only thing left in the UK that has value.

 

Or perhaps you think that there is some other reason? And that is?

 

It doesn't matter what you think should be right, it just is what it is, and that is what one must accept. Not the wishes of others.

 

Besides, you should really read my posts properly, as all I am actually saying is that the reasons I outline appear to be stopping a bigger crash, not stopping prices fall.

 

So, without resorting to personal insults, (as there really is no need, as it just makes you look vindictive, and spoils otherwise interesting posts), I will put my points, and read yours with interest.

 

History will tell.

 

Oh and we can all find headlines

 

House prices see biggest leap in 19 months

 

http://www.dailymail.co.uk/news/article-2030510/House-prices-biggest-leap-19-months-year.html

[John Doe]

PS, now I' at home and had a chance to re-read your post properly, I thought I'd better clarify a couple of points you made.

 

1) It was Mark Twain that said "Buy land, they’re not making it any more", not me. What I have actually said is that it's the restrictive planning laws that are one of the problems.

 

2) Population growth (not just immigration) will lead to problems in the future.

 

Just to make sure you are not "misrepresenting" things, or attributing things to me that I haven't actually said, again