tag:blogger.com,1999:blog-2948538160252327076.post2456763977222056596..comments2023-11-02T15:48:50.381+00:00Comments on UK Bubble UK Economy: What really determines house pricesAlice Cookhttp://www.blogger.com/profile/05753570123987780947noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-2948538160252327076.post-58057895834311544022007-12-12T11:50:00.000+00:002007-12-12T11:50:00.000+00:00"But if sellers sit tight, refusing to lower price..."But if sellers sit tight, refusing to lower prices, the market might just sail on indefinitely until inflation eats up the difference in ten years or so.."<BR/><BR/><BR/>Have you really thought this through? <BR/><BR/>House builders sitting on inventory for 10 years until they get their price, what are they supposed to do for a living in the meantime, stop building?<BR/>Also if by some means of sheer luck that these empty houses don't deteriate any in that time, I'm sure the current bathrooms and kitchens will be just as desirable as mahogany kitchen cabinets, toilet seats and avocado and burgundy bathroom suites are today.<BR/><BR/>Are people going to stop dying, or do you think the money grasping wasters with their money grubbing wives that inherit grannies large Victorian will sit it out until the price rises until they get their grasping little fingers on the cash?<BR/><BR/>Do you seriously believe that banks with reposessions on their books will also hang onto them until they get the price they think they deserve?<BR/><BR/>You also need to take into account people who bought over 5 years ago, if they sold their houses today for half what they're "Worth", they'd still get twice what they paid for them.<BR/><BR/>What about estate agents, solicitors and surveyors, what do they do for the next 10 years waiting for house prices to pick up again?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-13750541578163739852007-12-12T10:32:00.000+00:002007-12-12T10:32:00.000+00:00The kink int he house price graph around 2000 is i...The kink int he house price graph around 2000 is interesting, that would correspond with the 'dot com' boom.<BR/><BR/>My two favourite personal data points are in 1976 a packet of crisps in the school tuck shop cost 2p. A similar packet of crisps today is now pushing above 50p, that is 10 shillings. And a pint of beer in 1980 used to cost me 48p it now costs five times that where I live(outside London).<BR/><BR/>Anectodal reports of people buying a new build house in the seventies for £500.<BR/><BR/>The point of all this is that we should not underestimate the impact of inflation.<BR/><BR/>That of course is in my opinion the reason behind these bubbles, the government uses inflation as a policy instrument, it means they can buy today devalue the currency and pay the debt in devalued monetry units tomorrow. It suits the government because by and large they won't be in government much more that ten years in the future. <BR/><BR/>But the problem is that it discourates responsible attitude to saving, if your hard saved cash is being erroded on the one hand by inflation and on the other by tax on the interest earned you would be a fool to do anything but spend it as quickly as possible unless you can get an extra ordinary return.<BR/><BR/>The only place people can do so is in the next bubble, it was 'dot com' it is now the 'property boom' who knows if there will be another bubble, but if you recognise it now you might be well advised to sell your house now and put the cash into the new bubble.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-9136721680414251272007-12-12T08:49:00.000+00:002007-12-12T08:49:00.000+00:00Point taken. But if sellers sit tight, refusing to...Point taken. But if sellers sit tight, refusing to lower prices, the market might just sail on indefinitely until inflation eats up the difference in ten years or so...What we want is a full-blooded crash, and I am mightily worried that the smug and complacent UK public won't panic far and fast enough to give us one. Certainly the BoE is going to lower rates again and again to support the bubble.Prim Reaperhttps://www.blogger.com/profile/14551655829890572559noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-9875817720469006832007-12-11T22:44:00.000+00:002007-12-11T22:44:00.000+00:00"But without rising interest rates, I do not think..."But without rising interest rates, I do not think we will have the crash."<BR/><BR/>It's affordability that causes crashes, higher interest rates were just the mechanism that caused the unaffordability.<BR/><BR/>What this means in real terms is this, the housing ladder is supported from below, once people stop buying on the bottom rung, the whole lot comes crashing down.<BR/>With house prices running at 10 times earnings, these prices are unsustainable long term, and the only way they can be viable short term is if there's significant appreciation in price as in recent years. Interest rates are irrelavent, even if they drop to 0% and people still cant afford the payments, prices have to fall.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-89398360697837183522007-12-11T19:31:00.000+00:002007-12-11T19:31:00.000+00:00This comment has been removed by the author.Alice Cookhttps://www.blogger.com/profile/05753570123987780947noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-18536096587018965262007-12-11T18:34:00.000+00:002007-12-11T18:34:00.000+00:00Killer graphs, but you might want to label them if...Killer graphs, but you might want to label them if they are your own, and cite the data source.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-54352651733358660832007-12-11T18:21:00.000+00:002007-12-11T18:21:00.000+00:00That there has been a bubble of the magnitude of C...That there has been a bubble of the magnitude of Commodities 70s, Nikkei 80s, Tech 90s--cannot be in dispute. But what will bring it down? Last time I posted you corrected me about the effect of interest rates, and I agree--but if rates continue to come down then people will continue to pay off their mortgages and prices will, if not go up, remain static. That would be terrible. Every bubble that has broken (in the recorded history of bubbles) has seen a decline of 50% at the minimum--this is what it would take to bring UK (esp London) house prices back to the realm of reality. But without rising interest rates, I do not think we will have the crash. Even though inflation is soaring, the BoE is determined to turn the other way.Prim Reaperhttps://www.blogger.com/profile/14551655829890572559noreply@blogger.com