Friday, 7 August 2009

Avert your eyes

The Halifax reported a 0.8 percent increase in house prices in July.

It remains to be seen whether house prices gain momentum. Nevertheless, it seems fairly clear that prices have stabilized and the huge monthly declines from last year have stopped.

Oh please can we go back to last year!

34 comments:

Anonymous said...

Stabilising is not a word I would choose, and stability is not where the economy is headed.

SO much credit has been pumped into the system by a government desperate to create a feel-OK factor before the next election that the market's drop has been arrested - prematurely.

The cost of this 'stabilising' the market will be a run on the pound, unless the sill-money people (those creating credit willy-nilly at the Bank of England and those who think houses are worth these silly prices and pay them) back off soon.

At some point, the slide will continue downwards to reflect a level of credit where it out to be, at about a third of pre-2007 levels, the only sustainable level for credit. Everything before then is a mirage.

B. in C.

electro-kevin said...

Oh no, Alice.

The greatest downturn since the 1930s is all over. Averted by the sheer brilliance of Gordon Brown.

Phew !

Fred said...

If the media, government and banks all are creating mis-truths through statistics, then what is left? How can anyone know the truth any more? Do the government even know what's going on any more? or have they become a victim of their own lies? Its all becoming very 1984....

Nick von Mises said...

Just noise, is all. Still another 30% to drop, as it will once the real economy decline feeds in, the forced sales hit en masse, and the bulltards give up on the green shoots optimism. This lull is on low volume, and thus not a signficant reversal

Attila the hun said...

It's called a Spring Bounce.

And don't forget that the government, acting in collusion with existing home-owners has been throwing hundreds of billions at propping up house prices for the last two years, it was bound to have some effect.

And there's plenty more they can do, like scrapping Council Tax, restricting new builds, reintroducing MIRAS, offering grants to FTBs, keeping interest rates at 0.5% or even reducing them to nil, and perhaps increasing tax on interest income, creating hyper-inflation and so on.

Remember: UK economic policy revolves around one single thing, keeping house prices up. Unemployment doesn't matter; deficits don't matter; the balance of payments doesn't matter; inflation doesn't matter; nothing matters except forever rising house prices.

Anonymous said...

This isn't a reversal and renewal of the credit bubble but merely what happens if a government is desperate enough to print lots of money and use this to buy its own bonds.

What you get is a very expensive, very temporary feel-good factor blip. This lasts a few months, and when the reckless "drunken sailor" borrowing comes to an end because the bonds market won't risk any more money on the enterprise, the borrowing stops and the Government has to look at its finances in the cold, hard light of day.

When that happens, the house prices are going to tank once more, and when inflation forces interest rates to rise to classic Old Labour levels, then there's going to be another slump in property as the speculative buy-to-let crowd get foreclosed upon.

This is a blip, nothing more.

QG said...

Alice, I suggest that it's too early for bulls or bears to claim to be right. We have a desperate government trying whatever it can to help housedebtors and prop up prices as the next election approaches. My understanding is that volumes are still rather low which complicates the task of interpreting the real implications of the recent rises. Patience.

Wag the Dog said...

"Oh please can we go back to last year!"

Whatever for? As your own graph shows, house prices were much higher last year than they are now. I'm looking forward to next year.

This obsession with short term month-by-month trends belongs in the same class as cherry picking, confirmation bias, and pareidolia.
The same sort of people will be claiming global warming has stopped based on the last decade of flat-lining temperatures.

electro-kevin said...
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electro-kevin said...

And what temperature would you like the Earth to be, WTD ? Global Warmers tend to ignore aeons of geological data in their argument for the preservation of a stable climate.

Interpreting graphs has its limits in forcasting. Sometimes intuition and rune stones are all that we have. In fact the fixation with graphs - whilst useful in retrospective analysis - can be counter to the intuitive interventions which are needed.

Despite being availed of the best technology in history the Met Office still got this year's summer predictions woefully wrong. In the longer range (variables multiplying exponentially) the Govt has cherry picked those stats which suit their socialist agenda ... and then chosen their remedial course by runes. Wind technology !

As we approach peak population and peak energy (2015) their solution is wind turbines ! Sometimes it takes a simple minded little boy to brush the nerds aside and point out that the king has no clothes.

In twelve years their neglect of our energy security has been criminal.

Our dependance on Russian gas and the spectre of wide ranging powercuts will doubtless impact on our economy ... and our house prices.

Fred said...

@EK/WTD
Climate change is real, but peak everything will have far greater and more immediate consequences. But responding to peak everything is no good if the planet becomes uninhabitable. Ultimately both groups have the same goals, a future for our children.

Anonymous said...

Definitely Green Shoots

Anonymous said...
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Rick said...

Looks like a fairly standard text book example of a market in decline -i.e. a sharp fall followed by some recovery (there are always those that want to bag a 'bargain') followed by another sustained fall from October 2009 onwards!

electro-kevin said...

Fred - Then a drastic devaluation in British housing over the next ten years it is.

Which is fine by me.

Anonymous said...
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Anonymous said...

Fred: "How can anyone know the truth any more?"

You ever took the word of the government seriously?

Fred: "Do the government even know what's going on any more?"

Yes.

Fred: "or have they become a victim of their own lies? :

No. Many of them are becoming a victim of the plummeting property market where their leveraged property portfolios are falling in value.

Poor dears.

Fred said...

Sure government's "bend" the truth, who doesn't, everyone has there own biases, but there is bending the truth, and then there is twisting and distorting the truth to such a degree that its just a plain lie.

Either the government is redefining stupid and are so utterly clueless that a rat turd looks intelligent.

Or,
They know exactly what's going on and running a "scorched earth" policy on the UK.

Anonymous said...

How sweet. You live in the most bankrupted country in the world along Iceland, Zimbabwe and Ireland, and yet all still wonder what will happen to house prices...

Craig said...

Can someone refer me to a resource on why labour are propping up house prices? I know it's something to do with their core voters, but even if it did crash so what? To the people with big mortgages if they can afford it that's alright... Property will rise again. why don't they just leave it to natural market forces?

Anonymous said...

Craig: Given the huge personal credit boom of the last 10 years, one could surmise that New Labour's core vote is actually very indebted. Therefore it makes sense for New Labour to attempt to inflate everyone's debts away.

Conversely, the Tory vote tends to come from older, wealthier people, so perhaps their core electoral base are net savers. This would imply that after the election, assuming a Conservative win, we will see a reversal of the deliberate inflation policy, and a restoration of relatively sound money, lower govt deficits and higher interest rates.

frugalista

Anonymous said...

Laughing out loud at the level of delusion by the commentators on this blog post.

You're all living in cloud cuckoo land if you think the long term structural factors behind rising house prices on this land-constrained island have dissappeared. We still have net immigration, we still have too few new builds and we still have a trend towards smaller family sizes.

All of these are good reasons why house prices are going to keep rising, despite the blip caused by the implosion of the global economy. In ten years time house prices will be a lot higher than there are now - probably in two years time too.

Anyone with half a brain would be buying property now, locking in cheap mortgage rates and good rental yields and then sitting back and waiting for the natural trend to resume.

You may not like it, but the facts of life remain regardless how much this upsets your world view.

Anonymous said...
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Anonymous said...

To Anon at 03:04

Keep laughing - markets are made up of contrasting viewpoints, attitudes and circumstances.

Several of your remarks seem comical to me:

1) "locking in to cheap mortgage rates" - fixed rate mortgages are not currently cheap - go look. And as interest rates rise markedly from here so will negative equity and foreclosures and the requirement for even higher deposits.

2) "blip caused by economic implosion" - when unemployment stops rising and government debt is under control; then you can call it a blip.

3) "higher house prices in ten years" - maybe - but a reversion to long term affordability patterns indicates you are unlikely to be right in anything more than nominal terms.

There is more that could be listed to expand on a viewpoint you haven't grasped and are therefore ill equipped to insult. The Times is not the only newspaper.

In this game every move you make has a speculative element to it - a gamble if you like.

By all means place your bet and chew your nails like the rest of humanity; but please don't come out with insulting 'half brain' comments; they kill any sort of informed discussion without actually raising your stature or status one iota.

Markbaldy said...

Craig - the government wants house price inflation for the following:-
1). Gordon Brown's so called "miracle" economy depended on people taking equity out of their property - the UK has very little manufacturing so the wealth came from within - hype !
2). Even though stamp duty thresholds have risen, the revenue from gained in stamp duty from rising house prices has benefited the government.
3). Inheritance tax at 40% now sucks in a whole lot of people, includin those with no savings, because of house price inflation.
4). People "feel wealthy" if their property goes up in value - hence votes for New Labour.

So Gordon Brown has shafted the prudent and rewarded recklessness in his quest to re-hype the housing bubble.

Anonymous said...
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John East said...

A must read for anyone with the brain power to understand (i.e. most of you on this blog).

http://market-ticker.denninger.net/archives/1313-Economic-Bottom-Calls-Willful-Ignorance.html

This applies to the US situation, but we are broadly following the same path.

Sure, prices have perked up a bit, as one would expect due to seasonal factors, QE, a perma-bull MSM, and a house buying public largely too stupid to have a clue what has happened over recent years.

Our fate might become clearer after the general election, although "head firmly in the sand" is still likely to remain the preferred stance for most.

Craig said...

I was wondering if there's any facts or figures on the demographic of people who live in house shares, bedsits in converted houses and those purpose built complex's. I'm talking very high density which can be a good explanation of how we get an increasing population, relationship breakdown, more single people... In a way it's higher density than a traditional family, yet these people may never see or speak to each other.
Also could this be a shift in our culture? If the building and surroundings are pleasant and aminable enough will (the next generation) get used to this way and prefer it? Is it not better to live in a highly dense complex complete with gym, laundrette, manicured lawn and balcony for BBQ than a damp Victorian two up two down ? Will the British always love their houses?

electro-kevin said...

"Will the British always love their houses?" 21.11

Until they learn to love their lives.

Mick said...

Anyone with half a brain would be buying property now

But anyone with a whole brain.......

fajensen said...

Ultimately both groups have the same goals, a future for our children.

No, they bloody well dont; they want Status Quo at *any* cost because they are parasites perfectly adopted to the economic system we have now..

Anonymous said...
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TheBinMan said...

To anon:

"Laughing out loud at the level of delusion by the commentators on this blog post."

There have been 5 Depressions in the last 400 Years.
Here are the timescales for the return to pre depression peaks of house prices 36,38,38,54 and 90years. Those are in nominal terms, inflation adjusted times are much longer.

House prices are dictated by supply and demand of(affordable!) credit, not the supply and demand of the houses themselves.

One more thing. If you think a fixed rate mortgage will protect you from a sharp spike in interest rates i suggest you read your mortgage contract VERY closely.

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