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| The UK housing market: a bubble about to burst? |
The Blairs and stuff
by Carly C
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#1001544
of 3278
 17 Dec 2002
10:52 AM |
I'd like to but in here. The Blairs are not good role models when it comes to buying and selling property. They sold their house in Islington, at the wrong time, for about half a million. It sold not so long ago for about 1.2 million. The should have hung on for another 3 years. I'm sure someone out there can give the correct times and values, but this is roughly right.
At pesent, I have about 300k in a high interest account. I do not have a degree in economics, just a gut feeling. I think the writing is on the wall - there are too many people in debt, (spending money they do not have) I can see good friends who worked for companies like KPMG,Sun Life of Canada, Peoplesoft, SSA, etc, etc, who are now long-term unemployed. They are living off equity in their massive houses, with ever bigger mortgages.
I own my car, have no credit cards. I only buy something when I can afford to pay cash for it. When the time is right I will make my move. I know I may be taking a risk. I read this forum every day and would welcome nice, constructive, helpful comments. Thank you. |
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Inflation...
by Harry Ouse
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#1001543
of 3278
17 Dec 2002
10:50 AM |
House price inflation is just that - inflation. And like any inflating object, it will only strecth so far before it bursts.
With house prices rising at 20 - 30% pa while long-term GDP is growing at only 1 - 3% pa (well below the US), it's clear that the house price boom has had little or no long-term positive effect on the UK economy other than to harm our productivity (by making labor less mobile and business property prices overly expensive). |
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Mr Blair, Please give us your opinion????
by Shareholder
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#1001542
of 3278
17 Dec 2002
09:43 AM |
The Blairs are buying!
So is that wisdom, forethought,necessity, or what?
It makes one wonder why?
For a period of 2/3yrs while the son is at university or for speculation(investment) or because "The price is right".
Still I suppose they have taken advice from their friends in low places!!
Also from their neighbour!! |
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DryMartini - Hayekian or Keynesian???
by Hoogstraten
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#1001541
of 3278
17 Dec 2002
05:03 AM |
And one further point DryMartini.
Your analysis of the situation that the economy faces is pure Austrian Theory. The idea of a sharemarket bubble caused by loose credit conditions, followed by an inevitable “credit crunch”, is almost 100% Hayek based.
Your proposition to address this problem is to cut base rates from 4% to 0%. This is 100% a Keynesian theory. Someone from the Austrian school of thought would believe that cutting base rates in this manner would only massively exacerbate the situation, causing a worse crash later!
The Austrian School of Thought and the Keynesian School of Thought are at diametrically different ends of the spectrum. Before you inflict any more of your views on the forum, I suggest you work out which camp you are in, so that you ensure that your theories are at least internally consistent… |
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The Scream A Closet Keynesian - The Great Depression cont.
by Hoogstraten
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#1001540
of 3278
17 Dec 2002
02:29 AM |
The Scream,
The Great Depression is relevant because the doom mongers are effectively predicting another one (as are many in the Austrian School of Economic Thought).
There are actually 3 theories as to what caused the Great Depression, these being:
1. Keynesian Theory (John Maynard Keynes)
Cause of the Depression – A collapse in Aggregate Demand.
Proposed Solution – An expansionary monetary policy. If this did not work, Keynes would then advocate an expansionary fiscal policy.
2.Monetarist Theory (Milton Friedman)
Cause of the Depression – A collapse in the money supply.
Proposed Solution – An expansionary monetary policy.
3. Austrian Theory (Hayek)
Cause of the Depression – Fed set short-term interest rates too low in the 1920s (below the natural interest rate) and allowed credit (not just money supply) to expand artificially, creating inevitable boom and bust.
Proposed Solution –The Government should do nothing. Anything the Government does will make the situation worse. The market will correct itself eventually.
Your commentary advocates theory 2. The money supply certainly did collapse during the Great Depression – but many would say (both Keynesians and the Austrian School) that this was predominantly an example of correlation, and not causation. Suffice to say I agree with you that inappropriate monetary policy was one of the causes of the Great Depression. If a property collapse occurred in Britain, the BOE would cut rates (which both Friedman and Keynes would presumably agree with).
It is no surprise to me that you would reject theory 1 and propose theory 2 as the cause of the Great Depression, because you probably believe that you disdain Keynesian theory. However, both you and DryMartini are in fact Keynesians – you just don’t realise it. You both believe the base rate should be cut to boost the real economy (I have seen your name on the interest rate forum where you believe rate cuts should be introduced to help manufacturing). Keynes would agree with you completely. I do not believe in this Keynesian tinkering of base rates to boost the real economy in general, but I will be happy to accept the windfall that accrues to me if you and your Keynesian friends get their way.
Only the Austrians would disagree with this policy of cutting base rates (in fact, there would be no such thing as a base rate to cut).
I have read a lot more about Austrian Theory recently – it is largely a rehash of the Classical Economists (Smith and Ricardo). One supposed difference is the Austrians reject the classical assumptions of perfect competition and perfect information. However, the plausibility of the Austrians anti-centralisation argument depends on reading it against a background of the tendency towards the perfect competition and perfect knowledge assumptions that Hayek explicitly rejects. The classical economists are more to my taste in this regard – their assumptions are explicit.
The only major difference I can see so far between the Austrian school and the Classical School seems to be the rejection of the causation of the Classical labour theory of value. I think what the Austrians are arguing is that demand sets the price of goods, which then determines the return that the factors of production receive. Ricardo (a Classical Economist) would say that the price of goods is determined by the costs of supply (land, labour plus capital). I am happy to be corrected on this point.
DryMartini, I find your comments tiresome. In summary, the last paragraph of animal farm says:
“Twelve voices were shouting in anger, and they were all alike. No question, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”
You then say:
“Also, don’t use cheap tricks like writing under more than one name – if your argument is strong enough it will stand by itself (i.e. without needing other people to appear to agree with you).”
I have only ever posted under one name – that is Hoogstraten. My IP address is now different from any other contributor (I am no longer in London). The FT Monitor can confirm this if they are not as bored by this argument as I am.
With regards to Engineer or Rev.hk leaving the forum – that is up to them. Frankly, I do not miss them, and nor would I miss you. Andy B was the only interesting person who has left the forum that I can remember.
Pooh –I will forward my autobiography when it is completed. Until then, I guess you will just need to speculate on which investment banks I worked for. Certainly, I didn’t work in FX or money markets – I would probably find these products a little dull… |
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BIG fall predicted.
by The Scream
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#1001539
of 3278
17 Dec 2002
12:06 AM |
Analysts forecast a worse case scenario today that house prices could fall by 30% should unemployment increase or interest rates rise significantly.
This is in line with previous housing crashes in the late 70's and 80's which saw 30% falls in real terms. This was largely masked by the 22% CPI in 1980 and to a lesser extent the 11% CPI in 1990.
With CPI at 2.1% at the moment, a real-terms drop of 30% would be almost the same as a nominal 30% fall!
Whoohoohoo! |
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Touche Mr. guiltless grandfils
by Lone Ranger
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#1001538
of 3278
16 Dec 2002
09:38 PM |
Mr. Roberts,
It appears that your ability to "read between the lines" (and perhaps read markets) is severely blinkered by your desire to discover "Reds under the forum". Perhaps for your onanistic reasons you maintain some there?
"If prices are an indicator of having and having not ". A high price for an asset presumably indicates the owner is in possession of more capital than similar at a low price. Thus let us look at assets with a high price e.g. high end housing in London.
"then it would appear that at present the haves would rather have not where housing is concerned."
Prices are falling at the high end. In your book an indicator of strange movements beneath your bed. In mine an indicator of falling demand by owners of sufficient capital for a particular class (no not that sort) of asset.
Slugs cannot talk no matter what your governess told you.
Prices have fallen (these are samples of transactions.
"Even if prices were to fall its a theoretical reduction in capital" Irrelevant since we are discussing preference for an asset class not for all assets classes.
As to polarity (is this magnetic metaphor man indicator of narcissism?) perhaps you are over restricting your view by obsessing from your bed. A preference for one asset class over another is not an indicator of lack of assets.
Whither grandsons guiltless wealth? |
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Jeff & Bob
by Rob G
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#1001537
of 3278
16 Dec 2002
08:30 PM |
Jeff Morgan:
In an ideal workd, you may be correct. However, there are pertinent cases where the 'value' of your house may not be academic if you don't intend to sell.
I am referring of course to the many (otherwise intelligent) people in the country who are seeking to realise the increased equity in their homes by taking out large loans secured against them. They see this in some misguided way as 'taking profit' from their good fortune, and spending a good proportion of the raised capital on consumer goods. Of course they are simply bringing forward expenditure of their future earnings.
The increase in property value also has an unfortunate psychological effect of giving people unrealistic expectations of their present and future prosperity and the state of the economy.
Bob Roberts:
I have to thank you for your very entertaining post. I admit to laughing out loud when you suggest that the Sean Poulter article must be somehow flawed because it 'flies in the face of Nationwide and Halifax figures'.
If you mean by this, that predictions by the aforementioned lenders (who of course can be relied on to offer impartial views!) suggesting that prices will continue to rise before magically settling into a gradual upward trend holds any water at all, then I think you should think again.
If on the other hand, you're pointing to the actual historical figures released by them, then I fear you are woefully misinterpreting their indications. In fact, their figures for house price increases echo precisely the same series of changes which occurred leading up to the last two house price crashes, not to mention the recent UK stock market boom and bust.
To believe that by sticking your head in the sand, you can talk your way out of what is tantamount to DNA evidence for another simple boom and bust cycle is nothing short of self-deception. Not to mention misleading for any poor unfortunates who might be foolish enough to invest in the market at the current point in time on the advice of misguided individuals such as yourself. |
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"and they complain...."
by Bob Roberts
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#1001536
of 3278
16 Dec 2002
08:22 PM |
Lone Ranger,
FYI
"If prices are an indicator of having and having not "
Dear boy, "having and not having" is defined by ownership of capital. This capital is not verbal but monetary. Have a look in the communist manifesto you appear to worship, its in there.
"then it would appear that at present the haves would rather have not where housing is concerned."
This is like a slug asking an eagle how it can soar. Validity would be a question here. Even if prices were to fall its a theoretical reduction in capital, unless realised by a sale. However, of course, a "have not", to quote Monty Python, starts and ends with nothing. So "what have they lost - nothing"
You have failed to address my points about the polarity of this forum. Please try again.
Whither grannies guilty wealth? |
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Haves not having: Revisited
by Lone Ranger
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#1001535
of 3278
16 Dec 2002
07:54 PM |
Prices in London at the high end are falling.
If prices are an indicator of having and having not then it would appear that at present the haves would rather have not where housing is concerned.
Whither grannies guilty wealth? |
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Thanks for Economics 101, here's some history
by The Scream
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#1001534
of 3278
16 Dec 2002
07:01 PM |
Hoogs:
I would like to elaborate on the causes of th eGreat Depression.
The inital crash in 1929 was caused by the Smoot-Hawley act signed in 1930. The passage through the US government caused the crash before it was signed. The act imposed massive tariffs on US imports in a protectionist madness which actually hurt US producers as their import costs rose.
Following the 1920's boom interest rates and the money supply were raised and tightened respectively.
Next FDR (supposedly one of the greatest US presidents but to my mind and idiot) brought in the "New Deal" (now where have I heard that before) which some described as "a series of bogus miracles". It was a series of programmes for job creation based on tax and spend.
Finally, having had the New Deal thrown out by judges because it was unconstitutional, FDR brought in its replacement the Wagner Act.
All of this wasn't helped by a severe drought in the US.
It was only the second world war which FDR was desperate to get into that saw the US recover. |
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"Grandma felt guilty 'bout being so rich and it bothered her until the day she died. But I will take my inheritance and invest it with pride, yes invest it with pride."
by Bob Roberts
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#1001533
of 3278
16 Dec 2002
06:26 PM |
Being a reader, for a period of time, I feel it is time to dive in!
Tony Blair once said at the labour party conference, “Ask me my three priorities for Government, and I tell you: education, education and education”. Clearly looking at many of the postings today the Government of the UK has failed you! Just as a sheep dog can make a flock move, alarmist headlines can make the sheep run. Interestingly there are people here quoting headlines, on housing, that questioned headlines on Iraq. I also read the article and it stated 30% over 4 years. This does not suggest any immediate issue, if it does come to pass, and also flies in the face of Nationwide and Halifax figures.
I’d suggest what is good for the flock is not good for the more informed investor. But good luck gentlemen, perhaps, “the meek will inherit the earth.” As for myself, being an educated investor, I don’t hold much store in headline politics or sickly liberal politics.
I have reviewed almost all the postings and I must admit of the current posters I am most amused by “Martini”. Clearly this lady has changed her views over a period of time, but even this article fails to concur with her 70% falls. Please explain, how can you agree with a journalist who disagrees with you?
In summary it appears, as always, that the split is between the haves and the have nots. In this Evelyn Waugh stylised hell we can see that the bears, as always, are the have nots. |
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value and price, mace #1521
by jeff morgan
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#1001532
of 3278
16 Dec 2002
04:28 PM |
mace, let me echo (in rather less emphatic words) Mr X'x response (# 1522). Value matters only when a sale is completed, otherwise it's an academic exercise. We bought our house 17 years ago for £105,000 with an £80,000 mortgage. It is now valued at £750,000 and we have no mortgage. The only important figure in this statement is the mortgage owing, of £0. The rest will only be of account when (if) we sell.
Our house isn't part of the housing market - and it won't be unless we can get the price we think is right. And if we die first, that's OK too.
To paraphrase Mr X, reality is that the market is only what buyers will buy and sellers want to sell, at a price they can agree.
PS: to Rob G #1517, I did explain that my guess was just that and it's as good as your guess, or Martini's guess, or Jack Straw's guess,...
I did have some fancy figures that I worked out to jutify the guess but I lost them in the move. If I find them again I'll post them - but all they will demonstrate is that one can support any hypothesis with enough numbers by applying +, - ,* ,/ and % enough times! |
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an efficient move...and some elucidation
by jeff morgan
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#1001531
of 3278
16 Dec 2002
03:25 PM |
That was good. Out on Friday, installed in new office on Monday.
When I mentioned the majority not being affected by market prices I didn't have time to explain all of what I meant. My point wasn't necessarily to suggest a stop on price movement, more to propose a sense of perspective to the market.
The people who don't move don't affect the market (I think that was ExtraDry's comment) - because they are not within the market. It's the people who have to sell and who bought within the last three years - or who borrowed more against their equity - that will have a problem. Not all of them will suffer because the lenders will probably see their way to saving a proportion.
[Explanation. With prices rising by a total of about 60% compound in the last three years someone who bought on 100% mortgage in that time still only has 37.5% equity and so is vulnerable to any price downturn of 40% or more. The lenders won't repossess everyone because they won't need to reposess as long as the debt is serviced].
I'm not intending to be a hopeless optimist, that's not my normal view of life; we do need to keep perspective on this though, otherwise it's difficult to tell Cassandra from Chicken Little. |
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Down we go again....
by Extradry Martini
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#1001530
of 3278
16 Dec 2002
02:55 PM |
Hoogstraten/Straw
By your insults, I appear to have rattled you! Apologies, it wasn’t the intention – I come to this forum for intelligent discussion, not to wind people up. However, you seem to think that if you post long, childish, insult-ridden rantings, that somehow any real arguments buried deep in your posts will become more legitimate - I assure you they won’t.
As you have (yet again) disqualified yourself from the world of grown-up discussion, this will be the last post in which I address you directly. For your own sake, I would advise you to think hard about why you are in this forum and what you can get from it, as you seem to spend a lot of time in it. If you really do have something to contribute, do so without personally attacking anyone that disagrees with you. This only has the effect of making you look desperate and insecure. Have some respect for yourself and for your own arguments and give them the legitimacy they need by behaving like an adult – I’m sure that you are not as foolish as your posts make you appear. Also, don’t use cheap tricks like writing under more than one name – if your argument is strong enough it will stand by itself (i.e. without needing other people to appear to agree with you). I would also suggest you think hard before writing those sweeping statements of which you seem to be so fond .(e.g. “The biggest mass-psychology economic event of the 20th Century was probably the Great Depression.” – no, it was the stock market bubble that preceded and helped cause it). Badly researched or badly worded, these just add to the impression that your entire argument is groundless – and I’m sure it is not.
Above all, remember that it’s only a discussion – not some kind of contest. This is not about "winning" or "losing" - you haven't "won" because Engineer and the Rev have got bored with the puerile level down to which you have brought this forum, and gone elsewhere for intelligent debate. If you present intelligent analysis based on real facts you will have contibuted something - and that's what you'll be happier with in the long run.
So have a happy Christmas, relax, and don't get too obsessed by protecting your point of view. |
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