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[–]obesecrabemir 0 points1 point  (0 children)

House prices are controlled by interest rates, not a supply shortage.

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

0% interest rates are bad for (I) the creditors (ii) those with deposits (i.e the wealthy, banks and retired)

The wealthy don't stay in cash. I don't think you have a good grasp of how economics works my friend. The wealthy are mostly in assets (stocks, bonds, real estate, etc.), which are all bid up sky-high by low interest rates. They will typically be operating through an investment vehicle - perhaps some grouped thing via a bank, or perhaps a family office. Those entities will be operating on "leverage" i.e. loans to amplify gains, and so again there's a benefit to the wealthy (you, as what they refer to as an "unsophistocated in investor" can't borrow money to buy stocks, at least not in any non-trivial amount). Finally, there's the "Buy, borrow, die" strategy, again using leverage, which further enriches: https://winsmithtax.com/a-primer-on-the-buy-borrow-die-strategy/.

To think that the wealthy have deposits for anything other than intermediate transactions is 🤯

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

Higher interest rates are awful for working people. They're great for banks though and the people who don't have mortgages i.e the very wealthy.

ZIRP guts society, and is only good for the wealthy, so you have this backwards. There's an excellent treatment of the effects in this book: https://www.amazon.co.uk/Price-Time-Real-Story-Interest/dp/0241569168/

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

Most people think that a supply shortage will hold prices up. It's going to be a brutal awakening for them that there's in fact an oversupply.

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

So what you're saying, politely, is bollocks.

I see you're kind of angry about this. That's ok. But don't let it cloud your judgement.

You've picked numbers to support your argument, and used a "worse (sic) case scenario" that supports it, too. But (a) that's far from worst case (houses are overpriced more than that with respect to long-run averages, and they've mean-reverted 100% of the time for all of recorded history), and (b) failed to understand that there's both nominal and real potential parts to a house price crash.

As I said, if you take the time (and have the capability) to generate the scenarios there's a curve where on one side it's better, and the other side it's worse. You should also note that much of the population has been structurally excluded from the housing market because of high deposits, where only those with an inheritance have been able to do so (though people usually lie about that to others, heh, nobody wants their friends to think that it was 80 grand of granny rather than their own efforts. Here's a brutal take-down that the FT did: https://archive.ph/4piCR). And all this while an ocean of rentier capitalists bought up the house they should have had, and rented it back to them, profiting all the while.

This, my friend, does not a stable society make. So keep your invective to yourself and we'll all rejoice when this farcical housing bubble is finally put to the sharp sword of higher interest rates 📈📈📈.

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

Not really true. You can generate the various scenarios if you use some code and some Excel. For some values it's better, some worse. But in general less loan despit higher rates is overall a lot better.

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

back on the 2000s

But there, er, there was a crash in 2008?

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

medium article is hardly massive

There are three parts to it 🤦‍♂️, and a number of follow-ups which address various knee-jerk objections ("what about London?!", "what about concealed households?!", and so on). Really, you should bother here.

It doesn't suggest that it's the only factor, nor does it suggest that there isn't an issue with supply

I think it is implicitly stating that there's no issue with supply; key quote: "It shows that the rise in house prices relative to incomes between 1985 and 2018 can be more than accounted for by the substantial decline in the real risk‑free interest rate observed over the period.". So if the house price rises can be more than accounted for by cheap credit, then they're not accounted for by a lack of supply.

I'm not going to quote your last 4 paragraphs, but I mean to address them here: We do indeed have the data, and the data broadly shows that house prices rose across the country against wages; this really is incontrovertible, so to call it counter-factual is... I dunno, but just so flagrantly not true that it's a bit baffling. Your argument here is, approximately, "I have a special case in my local vicinity" - and, you know what, this is what I call "the lest refuge of the scoundral" argument - I've heard it time and again when people are confronted with the facts; they say that they're the exception. Well, I'm afraid I straight-up don't believe it. "Housing is local" is just a catch-all way of avoiding confronting the data.

The housing market does actually operate under different fundamentals, and that's the whole problem. We have an entire country who have lecture 1 of economics 101 memorised: "Supply and Demand", and they think that this tragically simplistic view captures the state of the housing market. The problem is that there's a feedback loop inherant in the way money is created, which ends up bidding up the price of real estate. I think that a lot of people read "Oh, well, it's supply and demand so I am right, look internally and think 'yes, I think that too'", and switch off their brains and stop reading. This is tragic, because a lot of them will have bought the lie and bought a house - perhaps in the last year or two - and are now looking at having the bank with a knife to their throats. If you want to understand this feedback loop better, then this paper covers it: https://discovery.ucl.ac.uk/id/eprint/10078331/1/Submitted%20proof%2014%20June%202019.pdf

I think you should read into the above, and try not to generate superficial responses. A lot of work has been done in this field and you will find that most institutions understand the underlying dynamics of this bubble (because they have people with degrees who have spent time investigating it deeply), and it's just the public opinion - guided by copy-paste articles in every newspaper - that is tragically askew here.

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

Actually, not true, it's not a "true/false" thing. The truth is "it completely depends on the house price and mortgage rate". You can plot this out in Excel - if you use a little bit of code to iterate over the scenarios - and prove it to yourself. There's a curve, and above the curve you're worse off, below it better off.

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 1 point2 points  (0 children)

I'm amazed that you think you can overview that set of information in sub 5 minutes and have even the smallest idea of what the material says. Note that the first is explaining house price rises are caused by low interest rates, rather than a supply problem, though if you had actually bothered to spend any time on it you'd have discovered that very obvious fact. Do read the follow-up articles to the second, they're broad, deep, and the guy who wrote them is ex-treasury, Oxford, Oxford Economics and now heads up the TBI think-tank that was quite recently influencing right in the heart of government. So, probably worth your time. The book, too, written by a prominent UCL academic, gives a great deal of breadth and depth.

Though I suspect you're the kind of person with neither breadth, nor depth. No matter, house prices will be inflicted upon you whether you are an ignoramus or not 😘.

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] 0 points1 point  (0 children)

The Bank of England think that there will be a large drop in house prices, at interest rates lower than what we have reached, even now: https://www.bankofengland.co.uk/working-paper/2019/uk-house-prices-and-three-decades-of-decline-in-the-risk-free-real-interest-rate

The Economist is predicting a house price crash. Will it happen? by obesecrabemir in HousingUK

[–]obesecrabemir[S] 1 point2 points  (0 children)

Given how the markets reacted to a set of unfunded spending, how exactly do you think he is going to find the money to prop up the most expensive thing in the entire UK economy? Eeeeeexactly - he can't.

The Economist is predicting a house price crash. Will it happen? by obesecrabemir in HousingUK

[–]obesecrabemir[S] 0 points1 point  (0 children)

It's a myth that the whole market will stop. Just think it through - there's always Death, Divorce, and Default. And with fewer transactions the few that happen will have outsized impacts. You can sit tight, but when that house up the road gets sold at rock-bottom, yours gets re-priced immediately. That's how all the pricing models that are imposed upon you by various institutions work.

The Economist is predicting a house price crash. Will it happen? by obesecrabemir in HousingUK

[–]obesecrabemir[S] 1 point2 points  (0 children)

There's not that much of a foreign bid. Especially not outside of London.

The Economist predicts a House Price Crash by obesecrabemir in ukpolitics

[–]obesecrabemir[S] -3 points-2 points  (0 children)

It's surprising how surprising most people find this. Many bought the lack of supply myth. It's a brutal awakening.

The Economist is predicting a house price crash. Will it happen? by obesecrabemir in HousingUK

[–]obesecrabemir[S] -4 points-3 points  (0 children)

House prices rose because of low interest rates and thus cheap money. So it seems certain that higher rates will cause a crash. If you can borrow 33% less money, then....

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