There will be falls (see 2008/9) but so long as there is low interest rates then I wouldn’t expect any prolonged fall. The world is so economically linked and politically stable now (compared to previous decades and centuries) and the rule of law etc. I don’t see that happening anytime soon.
I’m certain the moment I purchase a house the prices will come plummeting down. Don’t worry guys, my chronic rotten luck in these things will give you all a respite soon!
I don’t think it will. There’s too many fingers in the pie for it to be allowed to correct, so it will always be propped up one way or another.
Best hope is for decades of house price stagnation to somehow occur AND for governments to not have schemes designed to protect/raise prices.
The government has one plan – to support house prices at all costs!
They are now thieving from every saver in the UK, by restraining interest rates from rising and eroding the national debt.
Anyone who has any fiat is being made to subsidise the price of housing.
I sincerely hope that one day the politicians who have overseen this policy for the past 20+ years goes to jail.
Stupid headline, stupid article.
A “bubble” is when a commodity becomes overvalued, usually because ignorant investors are chasing the market. The bubble busts when the savvy investors realise they’ve nearly run out of new investors buying in, and they elect to cash out.
There is absolutely nothing about the UK housing market that suggests stock is overvalued, ergo it’s not a bubble and it won’t suddenly collapse.
The author incorrectly attributes low interest rates *solely* to be the driver of the increase in price. The issue however is far more connected to supply and demand. We’ve simply (almost) stopped building houses here while the population has continued to increase. Because people need somewhere to live, the market is captive – the value of property becomes whatever people can actually afford to pay, even if that cost means that they have to take on high debt levels and struggle financially otherwise.
The ONLY way to return house prices in the UK to a level more affordable for the average person is to build more, A LOT more!
The fundamental assumption of this article is that demand is only driven by the UK individual (or group of individuals) i.e wage earning, normal people, and that the basis in which houses should be valued is the average wage in the UK.
I completely disagree with this in the present day, as private entities and outside (foreign) individuals and entities continue to speculate in our housing market at greater rates than ever before, as well as investing in UK real estate with the intention to let the properties.
Wages can continue to stagnate and house prices rise if demand from private entities continues to flow in to the property market. Even if the BOE rate hikes, capital will still be EXTREMELY cheap, and with real estate being one of the only western markets to weather the current storm (induced by inflation and rate hike fears), it seems only logical that money will flow into western real estate.
The only way to handle this is with legislation in my opinion, but, well.. Tories.
The article contains more words than detail (i.e. doesn’t really touch on macroeconomic or international factors). But I think explores the major themes in an adaquate way, though neglects to mention others, like impacts of net migration or the inevitable future loss of the Boomer generation and what happens to their wealth.
But I suspect the author puts far too much emphasis on Government schemes, which realistically only helped, outside of a small COVID SDLT blip, FTB’s. Which really is the segment one cares most about, as they keep the entire scheme going. Without some group buying entry level homes, everything collapses.
At the end of the day, if demand:supply remains relatively static, then this situation will endure. In all likelihood, supply will not change in any meaningful sense to impact the market nationally. We could increase by 100% sustained and barely make a dent, given just how many capable buyers there actually are. But we can drastically alter demand. Namely, tightening the mortgage affordability criteria, raising interest rates, destroying jobs, increasing the CoL, preventing overseas/business ownership, placing charges on homes for forced improvements, etc. Which is to say, we can reduce demand noticably.
But lets not forget when such events occur, people get nervous about selling, so supply shrinks accordingly (why sell now when if you wait 12 months, you can sell for less but also afford something _bigger/better_ as a result given the next set of houses came into range).
While enacting policies directed at the housing market is a vote winner generally (this will not forever be guaranteed as owner-occupier demos shift), a competent Government would not want ever-rising prices. Not just because it is a timebomb, but because money servicing debt is money not going into the economy. We have less money so we spend less money. Productivity plummets and emmigration increases. A competent Government would want energy, house prices, and other neccessities as low cost as possible. Because that means you’re spending on goods and services instead. The more economic activity there is, the more jobs there are, the more taxes are collected.
But to constrain it artificially, like with mortgage affordability criteria (the only thing stopping this spiraling out of control), leads to secondary effects which are undesirable – i.e. bidding wars and restricting housing to those with wealth.
Was supposed to see how little the credit crunch impacted prices. Though i suppose People buy houses based on what they can afford per month, not income multiples or total price. Ultimately house prices will come down if interest rates rise.
Millions of people with negative equity won’t do much for the housing market either. Best anyone can hope for is a stabilisation of prices.
If rates rise enough then a crash is likely, and while govts are trying to ignore inflation, eventually they can’t and have to raise rates.
10 comments
There will be falls (see 2008/9) but so long as there is low interest rates then I wouldn’t expect any prolonged fall. The world is so economically linked and politically stable now (compared to previous decades and centuries) and the rule of law etc. I don’t see that happening anytime soon.
I’m certain the moment I purchase a house the prices will come plummeting down. Don’t worry guys, my chronic rotten luck in these things will give you all a respite soon!
I don’t think it will. There’s too many fingers in the pie for it to be allowed to correct, so it will always be propped up one way or another.
Best hope is for decades of house price stagnation to somehow occur AND for governments to not have schemes designed to protect/raise prices.
The government has one plan – to support house prices at all costs!
They are now thieving from every saver in the UK, by restraining interest rates from rising and eroding the national debt.
Anyone who has any fiat is being made to subsidise the price of housing.
I sincerely hope that one day the politicians who have overseen this policy for the past 20+ years goes to jail.
Stupid headline, stupid article.
A “bubble” is when a commodity becomes overvalued, usually because ignorant investors are chasing the market. The bubble busts when the savvy investors realise they’ve nearly run out of new investors buying in, and they elect to cash out.
There is absolutely nothing about the UK housing market that suggests stock is overvalued, ergo it’s not a bubble and it won’t suddenly collapse.
The author incorrectly attributes low interest rates *solely* to be the driver of the increase in price. The issue however is far more connected to supply and demand. We’ve simply (almost) stopped building houses here while the population has continued to increase. Because people need somewhere to live, the market is captive – the value of property becomes whatever people can actually afford to pay, even if that cost means that they have to take on high debt levels and struggle financially otherwise.
The ONLY way to return house prices in the UK to a level more affordable for the average person is to build more, A LOT more!
The fundamental assumption of this article is that demand is only driven by the UK individual (or group of individuals) i.e wage earning, normal people, and that the basis in which houses should be valued is the average wage in the UK.
I completely disagree with this in the present day, as private entities and outside (foreign) individuals and entities continue to speculate in our housing market at greater rates than ever before, as well as investing in UK real estate with the intention to let the properties.
Wages can continue to stagnate and house prices rise if demand from private entities continues to flow in to the property market. Even if the BOE rate hikes, capital will still be EXTREMELY cheap, and with real estate being one of the only western markets to weather the current storm (induced by inflation and rate hike fears), it seems only logical that money will flow into western real estate.
The only way to handle this is with legislation in my opinion, but, well.. Tories.
The article contains more words than detail (i.e. doesn’t really touch on macroeconomic or international factors). But I think explores the major themes in an adaquate way, though neglects to mention others, like impacts of net migration or the inevitable future loss of the Boomer generation and what happens to their wealth.
But I suspect the author puts far too much emphasis on Government schemes, which realistically only helped, outside of a small COVID SDLT blip, FTB’s. Which really is the segment one cares most about, as they keep the entire scheme going. Without some group buying entry level homes, everything collapses.
At the end of the day, if demand:supply remains relatively static, then this situation will endure. In all likelihood, supply will not change in any meaningful sense to impact the market nationally. We could increase by 100% sustained and barely make a dent, given just how many capable buyers there actually are. But we can drastically alter demand. Namely, tightening the mortgage affordability criteria, raising interest rates, destroying jobs, increasing the CoL, preventing overseas/business ownership, placing charges on homes for forced improvements, etc. Which is to say, we can reduce demand noticably.
But lets not forget when such events occur, people get nervous about selling, so supply shrinks accordingly (why sell now when if you wait 12 months, you can sell for less but also afford something _bigger/better_ as a result given the next set of houses came into range).
While enacting policies directed at the housing market is a vote winner generally (this will not forever be guaranteed as owner-occupier demos shift), a competent Government would not want ever-rising prices. Not just because it is a timebomb, but because money servicing debt is money not going into the economy. We have less money so we spend less money. Productivity plummets and emmigration increases. A competent Government would want energy, house prices, and other neccessities as low cost as possible. Because that means you’re spending on goods and services instead. The more economic activity there is, the more jobs there are, the more taxes are collected.
But to constrain it artificially, like with mortgage affordability criteria (the only thing stopping this spiraling out of control), leads to secondary effects which are undesirable – i.e. bidding wars and restricting housing to those with wealth.
Was supposed to see how little the credit crunch impacted prices. Though i suppose People buy houses based on what they can afford per month, not income multiples or total price. Ultimately house prices will come down if interest rates rise.
Millions of people with negative equity won’t do much for the housing market either. Best anyone can hope for is a stabilisation of prices.
If rates rise enough then a crash is likely, and while govts are trying to ignore inflation, eventually they can’t and have to raise rates.