UK House Prices Forecast 2014 to 2018 - Conclusion

[extractorfan]

But UE is kind of right, cheap credit fuels house prices far more than supply and demand.

Even if the population was shrinking, if cheap credit was still available then people would simply buy more than one house, thus driving up prices, a bit like the tulip bulbs in Amsterdam that time. (There would be fewer houses than now if the population growth due to immigration had been prevented).

If the population doesn't grow, our economy suffers because of the way it is designed. We do have another model, but it is culturally almost impossible to resurrect.

Beware of preventing economic growth, and therefore population growth, in this location (the UK) if what you want to protect in the long term is the people of the UK until you have another system in place. We don't have another system, we only have right now this bizarre corporatocricy or whatever the popular name is. Benefits for rich corporations that are accepted whilst benefits for the poor are vilified. Until this is changed we only have the economic system we have.

We need a cultural shift. That's what I hope for.

[woodburner]

The current growth economy is unsustainable. It is a Ponzi scheme. Sooner or later it will have to change and since no one seems to want to do this voluntairly, it will happen without control, and will be devastating. I could be wrong.

[extractorfan]

The current growth economy is unsustainable. It is a Ponzi scheme. Sooner or later it will have to change and since no one seems to want to do this voluntairly, it will happen without control, and will be devastating. I could be wrong.

No, you are right

[Little John]

But UE is kind of right, cheap credit fuels house prices far more than supply and demand.

Yes, supply of cheap credit is by far and away the single most important driver of market price. Supply of buyers relative to supply of houses has some effect, but nowhere near as much.

An illustration of the above would be a highly densely populated region like, say, one of the urban areas of Bangladesh. The number of buyers who are willing to participate in the market will be immense. However, their relative lack of access to cheap credit limits the prices that can be obtained. In other words, the number of market participants affects the vigour and volume of a market. It is the supply of money or, in our case, the supply of debt, that directly affects the price of that market.

The insane prices in the UK housing market are largely the result of a wall of debt chasing houses over the last three or so decades.

[vtsnowedin]

UCE wrote:

having a government which raises taxes from the people is some sort of fundamental abuse of their human rights.

It is summed up perfectly in the following youtube video (which is narrated with an English voice maybe to give it some sort of credibility, I don't know). It's trying to explain to people why a government raising taxes in order to fund public education is such a bad thing, by giving an analogy with one person being asked to pay to help put another person's child through college:

http://www.youtube.com/watch?v=PGMQZEIXBMs

The person who wrote the script clearly believes that it is a moral outrage that he's forced to contribute taxes to pay to educate the children of people who could not afford to privately educate them themselves. As a result, he's trying to turn the clock back to a previous era when the children of the poor worked (usually ridiculous hours for very low pay) instead of going to school. Nowhere else in the developed world, apart from the US, could such a video be taken seriously. Everywhere else it is taken for granted that in a modern, civilised nation, the government should be responsible for providing a decent education for all children, and that this is in the greater interest of all members of that society.

It is not the level of taxation. It is what you get in return for your tax dollar.

What YOU get, personally? See...this is the problem. I live in a society. I don't just think about what *I* get for my "tax dollar". I think about it in terms of the society I live in, and expect everybody else to do the same.

From a European perspective, the mainstream US attitude to these things is so right wing as to be almost incomprehensible.

What YOU get, personally? See...this is the problem. I live in a society. I don't just think about what *I* get for my "tax dollar". I think about it in terms of the society I live in, and expect everybody else to do the same.

[/quote]
No I do not mean what the individual tax payer gets in return for his tax dollar. That would often come out negative at first glance. I meant weigh the benefit to the population as a whole compared to the loss of purchasing power stripped from the tax payers. I am not a Libertarian who foolishly believes that no government at all would work. There are tax expenditures that are worth the money. The National defense budget, or at least a major part of it for one. The highways and other transportation infrastructure, the rural electrification program for examples. But even these good programs can get out of hand. Aircraft carriers by the dozen, flowerbeds along the interstate highway, studies of why monkeys clench their jaws. etc.
I'll use myself as an example. I went to a state owned and operated technical college after high school. About half the cost $2000 ($25,000 in today’s $) came from state and Federal grants and scholarships. The degree got me a job and in forty years I have never collected any unemployment or welfare. Instead I have paid taxes of all sorts to the point that some years I payback that $20,000 in a single year and will next year and the year after that, plus I ha ve raised three children that are all employed and paying taxes. I'd say that was a pretty good return on their $2000 investment.
You have a very skewed view of publicly funded education in America. It is free up through high school (12th grade) and scholarships and government backed loans or outright grants are available to everyone who can keep their grades up.
Public school spending (the American usage of "public school") in Vermont amounts to $15,925 per student per year grades K through 12. There maybe a problem with test scores and other measures of results but it is not due to a lack of money.
http://vtdigger.org/2013/05/23/vermont- ... -spending/

From a European perspective, the mainstream US attitude to these things is so right wing as to be almost incomprehensible.

It is right wing to want to get a dollars value for a dollar paid? Then I guess I am right wing but you knew that.

[RenewableCandy]

But...don't (or didn't) you do highway engineering for a living, VT? Thus, (presuming the highways are under-written by your government), aren't your wages being paid using taxes?

The thing about taxes and government spending is, the money doesn't just disappear. It gets spent right back into the economy. Often more than once.

[vtsnowedin]

But...don't (or didn't) you do highway engineering for a living, VT? Thus, (presuming the highways are under-written by your government), aren't your wages being paid using taxes?

The thing about taxes and government spending is, the money doesn't just disappear. It gets spent right back into the economy. Often more than once.

Yes I was part of the bureaucracy that spends the tax money. Being on the inside I have seen tax money both well spent and totally wasted. The well spent money circulates in the economy. The wasted money is gone for good.

[fuzzy]

But UE is kind of right, cheap credit fuels house prices far more than supply and demand.

Yes, supply of cheap credit is by far and away the single most important driver of market price. Supply of buyers relative to supply of houses has some effect, but nowhere near as much.

An illustration of the above would be a highly densely populated region like, say, one of the urban areas of Bangladesh. The number of buyers who are willing to participate in the market will be immense. However, their relative lack of access to cheap credit limits the prices that can be obtained. In other words, the number of market participants affects the vigour and volume of a market. It is the supply of money or, in our case, the supply of debt, that directly affects the price of that market.

The insane prices in the UK housing market are largely the result of a wall of debt chasing houses over the last three or so decades.

I agree, and a lot of other peoples points are also right.
House prices rise because people are 'painted into a corner' by increasing credit+rising pop, planning hurdles, less protected tenancies, and people with savings who want it protected against risk and decreasing value. The underlying cause is security for the future. People in private rented cannot make long term plans without tenant protection. This has been removed and government housing schemes [ie protection] have dwindled. Nobody wants to live in a council house - they want to live somewhere they like for as long as they like at a reasonable cost. With cheap credit, house buying is similair cost to renting [ignoring all the other homeowner costs, as people do] and feels more secure. If you bring back tenant rights and the ability to live with security for your lifetime, then the market would collapse. The value of private rented houses with sitting tenants is much lower than empty property, so the economics change. With tenant rights, why would most people be desperate to sign up to 30 years of mortgage? The pressure would drop dramatically..and banks would collapse.

This is a fun example:

http://www.financialsensearchive.com/fs ... /0420.html

[Little John]

.... With tenant rights, why would most people be desperate to sign up to 30 years of mortgage? The pressure would drop dramatically..and banks would collapse.

This is a fun example:

http://www.financialsensearchive.com/fs ... /0420.html

Dead right. Most people just want somewhere secure to live that is not going to break them to keep the payments up and where they can know that when they are old and knackered, they are not going to get chucked out. If tenants rights covered all those concerns, my guess is a lot of people wouldn't give a toss about owning. As it is, those safeguards re not in place, the only way to get any level of security is to own and so we are where we are.

[biffvernon]

UK Dwellings Population Persons per dwelling
1951 14117000 50225000 3.56
2011 27614000 63182000 2.29

Not a very well displayed table - there should be four columns of three rows, a header and two rows of data. I'm sure you can sort it in your heads.


So during my lifetime the number of UK dwellings increased by 96%, almost doubling, whereas population has only increase by 26%.

Along side this increase in the raw dwelling per person we've seen the virtual elimination of the outside loo, the proportion of dwellings with more than one bathroom or shower has increased from a few to 21%, central heating has become widespread, more houses are better insulated (still a way to go!), less damp and the average dwelling size has increased. Mains water and electricity are assumed to be 100% (not the case in in 1951) and mains gas and drainage is available to all urban dwellings.

Somehow this adds up to a 'housing crisis' that never seems to go away, being repeated every year.

Clearly there are some people who, for various reasons, are living in conditions which most folk, including me, regard as unacceptable, and something ought to be done about it. But that said, when one takes a broader perspective, the question might be raised as to whether we have a crisis of expectations rather than a housing crisis.

It is not a simple matter of population growth.

[clv101]

But that said, when one takes a broader perspective, the question might be raised as to whether we have a crisis of expectations rather than a housing crisis.

Good point. Also see this article:
Nate Hagens: We're not facing a shortage of energy, but a longage of expectations
http://www.resilience.org/stories/2011- ... pectations

This cuts to the heart of many of our problems.

[woodburner]

Quite a number of those dwellings are second homes, holiday homes, or other designation which is wasted space.

[RenewableCandy]

This has prompted me to work out that our central heating+HW (15,000 kWh per year, and probably the largest single part of our energy use here) is equivalent to 6,000 food calories per day for each of the 4 of us.
We each eat about 2,000 food calories a day.

Somehow, I thought that ratio (6,000:2,000) would be bigger...

[biffvernon]

Indeed. However efforts to discourage leaving empty houses throw up awkward situations.

I have a friend, living in a rented house, He has bought a semi-derelict house and is doing it up, but this will take a while as he is in full time work and wants to do a good job making it a sustainable dwelling for the long term. It will take him at least a couple of years, maybe more.

The council, in it's wisdom, no longer waves the council tax on unoccupied dwellings so he has to pay council tax twice, once on the house he rents and again on the building site. After 12 months the council tax on the building site goes up to a 150% rate!

My friend is a bit miffed.

[woodburner]

He can reasonably blame wealthy celebrities for that, and even then it would be peanuts to them.