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| The UK housing market: a bubble about to burst? |
Unemployment Figures
by The Dark Lord
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#1001317
of 3278
 04 Dec 2002
02:12 PM |
The unemployment figures would be better described as "the poor index".
People in the City, and those outside it fortunate enough to earn more than very little have no incentive to register for the unemployment benefit on the grounds it doesn't pay for a decent meal for one in a London restaurant.
It therefore makes little-or-no difference to their financial plight/dent in their outgoings, and is simply an annoyance to queue with the riff-raff, and get lectured by some public servant to whom £20k is a lot of money.
In short, the unemployment figures show a lot of people are employed by Asda, but don't show how many people with money are out of work.
*Bubbles* |
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Desormeaux knows the truth
by Mr Britain
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#1001316
of 3278
04 Dec 2002
02:03 PM |
Well said Desormeaux I like you know many people who are losing there jobs and in my case I needed to half my rates to be in with a chance of getting any work at all. Call me stupid but if all these figures are to be taken at face value then how come we have less than 1 million people on the Dole. I must mix in the wrong circles having been in Cambridge and Sothend during the past few years since many people I know seem to be on Family Tax Credits of some other form of benefit (No disrespect to them) . Bet they are all running out to buy property.
[This message was edited by ftmonitor on 04 Dec 2002 at 02:36 PM.] |
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Housing Boom
by Anon
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#1001314
of 3278
04 Dec 2002
01:43 PM |
To be honest I have given up on having the ability/finances to buy a property. The South East is flooded by second house buyers and London escapees! Maybe one day I will be able to move out of my parents house but not until I win the lottery.
Hopefully it will crash and leave cetain people with egg on their faces!! |
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House price bubble
by H Khan
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#1001311
of 3278
04 Dec 2002
01:05 PM |
| If there is such great (real) demand for property, howcome rentals - in Central London - are actually lower than they were a year ago? |
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UK Housing Market
by Desormeaux
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#1001310
of 3278
04 Dec 2002
12:54 PM |
If you're like me, you know at least 10 people made redundant in the last three months, 80% of whom are homeowners, and 70% of whom have yet to find a job and continue to hold out little hope of doing so before March next year.
If you believe all these homeowners will get the same well paid jobs next year, and will face no pressure or even succumb to the urge to release equity from their homes, I'd be a buyer. If however you believe they'll struggle to find equally well paid jobs or a job at all - they work in the city and sales - and the only real income they can generate is by selling their home, I wouldn't buy. If I don't buy, and they're selling, only one thing can happen - prices fall until I buy. If I am nervous the market will continue to fall, their price will fall further.
Its annecdotal, but I bet some of you are thinking like that ... and how many people do you know out of a job?
[Edited to remove some extraneous HTML code.]
[This message was edited by Monitor_JDW on 04 Dec 2002 at 01:06 PM.] |
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Unnatural nterest rates and other perversities
by zorro
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#1001309
of 3278
04 Dec 2002
12:34 PM |
Hoogstraten
You muse on what Hayek might have said and you come to the conclusion that he would have advocated a complete laisser-faire situation where the government does not fiddle with the interest rates in order that a 'full employment' situation might arise as soon as possible.
I need to come out of the closet, declare myself a marxist and put to you the following:
In a totally laisser-faire market full employment is not possible. If this hypothetical 100% employment should occur, the laws of (unregulated) supply and demand would soon ensure that those who control the means of production would sack a goodly number of workers to ensure that the rest would meekly work for whatever pittance they were getting. 100% employment is only possible in communism where it is not based on productivity but on state-subsidy of work placements surplus to market demand as an alternative to dishing out the dole to the unemployed; based on the belief that to perform an often non-essential job is preferable as it induces a better self-image and motivation in those thus subsidised then lolling about in front of the telly all day for the same money. I have the empirical experience to say that I prefer that model, even though under that model I would have not enriched myself by property speculation as I have done. I am not hypocritical, merely pragmatic. Pecunia non olet.
Anyway, why bring a dead, discredited, irrelevant Austrian into a pre-deflationary global outlook, where Keynes's views are far more in tune?
You also seem to imply that the BOE's fiddling with the interest rates has erred on the down side. I have no idea why you should think that. Our rates are much higher than the USA, our productivity is lower, our rates are also by 0.75% higher than the EU rate, which is supposed to be going down by another 0.5% this week, and I won't even remind you how far out of step we are with Japan. So in fact the UK interest rates are only too low in relation to the property market but way too high from every other aspect.
The goverment has been elected to represent many diverse and often incompatible interests (they have my sympathy), from the City to the unemployed Glaswegian junkies. But the bottom line is that the property market is just another service, and unless measures are put in place to revive our manufacture, we will be stuffed.
Our interest rates need to come down further, and fiscal rather than monetary measures need to be employed to control the property market. If people had to pay 10-15% on average on every property transaction, as they do on the Continent, this would soon put a lid on double digit increases. NB I accept that there are at present double digit increases in the Spanish property market, but this is an anomaly as these are to a large extent caused by the Brits encouraged to the point of frenzy by the paper increases in their UK property, releasing it to buy in Spain. When the UK market cools off, this will soon deaden the Spanish market. |
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Trust the Goverment
by Mr Britain
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#1001308
of 3278
04 Dec 2002
10:32 AM |
In 1997 the total income into the exchequer was £298Bn in 2001 it had risen to £400Bn including stealth Taxes and this was a great achievement without raising personal income taxes during the same period.
2/3 of public sector worker have retired due to ill health by the time they reach 50. Now the government would like us to subsidise Key Works/Public sector workers by awarding them with “Affordable Houses” in the London and the South East. Sounds to me like Money for Votes I say. This must also mean that the government realise that house prices are out of step with public sector income.
You won’t believe this one but I read that in 10 years time if the government was to meet it’s pension commitments to public sector workers then it would cost the government £400Bn PA. Or put another way the total TAX+VAT income that they receive today and I read this before the pension companies started downgrading payments |
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The Rain Dancers
by Hoogstraten
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#1001307
of 3278
04 Dec 2002
08:25 AM |
Pentecost. In by “To Owners”, you say:
“Remember - you HAVE to sell to get the money, and that will make it a buyer's market.”
To realise the capital gain, you must sell. However, you can “get the money” every month if the interest costs you pay are less than your rental costs (for investors and home owners alike). Most property owners did not buy on today’s valuations, so they are “getting the money” every month.
Thank you for your investment advice in “To Investors”.
I note that your investment strategy does not have the complexity for example of using exotic equity derivatives to trade gamma. Rather, it is to “follow Pentecost back into the stock market in MAY 2004.” You then say:
“Unfortunately for you, I have to charge a fee for revealing the kind of stock I believe will be appropriate at that time.”
How much do you charge for your advice? I’m not actually interested in applying any investment advice you might give - but I am interested because I think your views are hilarious, and through their comedy value I might get my moneys worth…
Mr Britain, my favourite contributor says:
“Maybe privatising the Bank of England has created this boom.”
I am interested in buying some equity in the BOE (just to show off that I am a part owner) – is the BOE on the FTSE, or are they a private company?
I think the BOE as a private company must be very profitable – they could be a massive growth stock, if they start dishing out mortgages when “Banks raise lending rates to 5% above the base rate.”
Mr Britain then says:
“Halifax or Nationwide … love it when you get down on your luck.”
I remember the riots you were predicting, with furious farmers and aids ridden immigrants marching on the capital. Now, it sounds like bank tellers are set to join the conspiracy – a chilling, apocalyptic vision indeed. Maybe when “we go to war and London get a Bio-Attack so closing the LSE”, we can wipe the whole lot out in one killing fields?
The RealFakeElvis in “It’s a market for God’s sake” says:
“All the bulls here spouting Hayek and Friedman know very well that low nominal rates are having the same effect on house buyers as alcopops have on women.”
Maybe you have happened upon where Hayek and Friedman got their theories wrong – they didn’t realise it was a market! Nominal interest rates are low (in your analogy, alcopops are very affordable). I’m not sure a cheaper round is such a bad thing…
Finally, a general point. It seems to me that the doom mongers (better described as rain dancers) are unable to mount any economic arguments to justify their case. Economics is somehow therefore worthless. Could it be, as JMK quotes:
“Practical men who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." |
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Housing Market : a bubble about to burst?
by JCP
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#1001306
of 3278
04 Dec 2002
07:26 AM |
| I am very sceptical with regard to the accuracy of the reports on house price appreciation and valuation. At best there are pockets of appreciation along side a largerly stagnant and even declining broader market. Banking, property owners, and the real estate industry interests are too aligned to actually demand proper disclosure. Placed in the context of stressed infrustructure and valuations relative to other major cities the signs clear. One only needs to look at the numerous examples in the market today to question the arguments that London, Surrey or any other area are unique and insulated from the laws of economics. In the end this is a policy decision. Void of any true overhaul of the realestate industry the bubble will burst. |
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see article in today's FT
by Singapore D
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#1001305
of 3278
04 Dec 2002
07:23 AM |
See the article on currencies in the business section of today's FT.
Towards the end if the article it says that the pound is strengthening because people are expecting interest rate rises, and the fact that house price rises are still happening they are expecting a big drop in house prices and a subsequent flood of liquidity into the market when houses are put up for sale when prices drop. |
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The Strong Austrian Hayek – Should He Lead Us?
by Hoogstraten
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#1001304
of 3278
04 Dec 2002
05:56 AM |
Just in case anyone is interested (which is admittedly very remote) I have caught up on the theories of the strong Austrian H.
I think Pooh was closer than I - the natural rate of interest is that rate that ensures that saving and investment are appropriately matched. However, I don’t think Hayek would agree with all the comments Pooh makes when he says:
“Therefore the base rate defines one point of the natural interest rate. The rest is defined by the supply and demand of market participants.”
Hayek would argue somewhere along the lines that the BOE setting base rate distorts the market interest rates, not allowing the natural rate equilibrium to be attained – if the BOE set the base rate below the natural rate, then people will save too little and businesses will invest too much (and vice versa).
In the Austrian view, therefore, business cycles result mainly from businesses making bad investment decisions that are caused by BOE interference with the interest rate. Hayek would argue to stop fiddling completely with interest rates, thereby allowing the natural rate and the market rate to come together, and so wait for the economy to reallocate its resources properly using market forces. Anything government does to prevent this reallocation process only postpones it, delaying the time when full employment returns.
This is a radical theory, which raises 2 issues:
1. How far has BOE base rate setting pushed interest rates below the natural rate?
2. Is this appropriate?
In my mind, the long end of the yield curve would not indicate that the base rate has forced market interest rates a long way under the natural rate – the natural rate of interest seems to have fallen in recent years. I do not believe that the distortion is enough to constitute “boom and bust”.
The answer to 2 depends upon whether you have a completely free market view or not. I am right wing in my economics, but even I struggle with the concept of the Government not using monetary or fiscal policy ever. Hayeks views lost favour during the Great Depression (the only time I myself favour Keynesian fiscal expansionary policy – “We are all Keynesians now”). The Great Depression was characterised by a collapse in Aggregate Demand, followed by collapse in Aggregate Supply, which fed back to further collapses in demand and supply. The problem was not overinvestment, but underconsumption. To simply wait for the market to correct, in this circumstance, would have been in my opinion catastrophic.
However, I certainly would not dismiss Hayeks theory either - the crucial issue is how much have the BOE distorted the market interest rate by. I would not think the distortion constitutes boom and bust. |
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To Investors
by Pentecost
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#1001303
of 3278
04 Dec 2002
01:58 AM |
If, like me, you went from equities into cash in 1999 just before the problems really struck, then you know that timing cannot be perfect except by luck, but it can be judged.
So now. Not next week, not next month, not just in case, but NOW, take your profits on your houses. Slowly. We don't want to start a Buyer's market here.
You will NOT get the best possible profit. That's because you can't judge exactly what it is. What you CAN do is exit ahead, and be CERTAIN of it.
Then.... follow Pentecost back into the stock market in MAY 2004.
Unfortunately for you, I have to charge a fee for revealing the kind of stock I believe will be appropriate at that time. And that information will NOT come from the Halifax, nor from Blair, nor from the Bank of England, nor from yield curves.
But maybe from an FT forum like this one |
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To Buyers
by Pentecost
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#1001302
of 3278
04 Dec 2002
01:44 AM |
You need me, because I have a house to sell. You need it either to live in, or as an investment.
I don't care, it's a Seller's market, because there will ALWAYS be more tenants then houses.
The number of single female owner-occupiers has risen from 5% to nearly 50% 1980 to 2000. (figures anecdotal but I'm sure they came from the Hootsmon, a North British publication)
This one example illustrates that there are a number of reasons why more people are chasing the same number of houses.
Seller's market - prices up.
Options?
1) Buy now, pay forever.
2) Don't buy now, pay forever.
That's not an easy one. |
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To Owners
by Pentecost
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#1001301
of 3278
04 Dec 2002
01:33 AM |
Money withdrawn from the stock market has been thrown at houses. Seller's market - prices up. To realise the profit, the owners MUST sell. Buyer's market - prices down.
Note - this does not necessarily mean "crash".
You, as owners, can come out ahead from this, but whether that is in the short term or the long term depends upon me, or people like me. Not on Blair, not on the Bank of England, not on yield curves.
If I, or someone like me, buys your house now, you are ahead in the short term. If I, or someone like me doesn't, then you are in it for the long haul or you lose out.
On balance, whatever theories you have, and whatever your projections are of house price inflation, do NOT rely on me, or people like me, to throw money at you for your profit.
Remember - you HAVE to sell to get the money, and that will make it a buyer's market. |
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Thievery
by Taxed to Death
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#1001300
of 3278
04 Dec 2002
01:22 AM |
They make you work hard then the Bank of England devalues the pound in your pocket with inflation.
Gordon taxes you if you move (as does Red Ken).
The housing boom means you buy a larger house and the banks then own a larger proporttion of that house than they did under the previous owner. You meanwhile pay them lots of interest. That's if you're lucky. The unlucky ones get repossessed. |
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