Millhouse

Lots of talk in the press now about a UK-house price slowdown and crash.

UK house prices: Is a crash coming? These economists thinks so, raising spectre of negative equity | City A.M.

Although the questionable (and biased) data suggests otherwise

http://www.nationwide.co.uk/~/media/...un_Q2_2017.pdf

The concept of an expensive house is such a terrible idea in the long-run, but I really don't see a crash coming... there is still room on government policy to prop up housing and interest rates remain very low. The real risk is if the central bank is forced to push up interest rates.

The UK is in a nice technical recession* right now that will most likely turn into a real one - I genuinely see it as quite a tough place to be.

*growth is less than inflation. Not a real recession as defined by quarters of negative growth but a death by thousand paper-cuts.

mission

:drinkwine ::drin kwine:

DXBtoDOH

No crash, or at least what I'd define as a crash.

Housing prices are highly regional. We know there's a world of difference between London and Leeds.

There is a severe shortage of housing especially in the south of England and very especially in greater London. The rate of new housing has not kept up both with large scale immigration and changing population dynamics (far greater numbers of single occupancy households compared to the family households of the past). As long as the immigration conveyor belt keeps pumping hundreds of thousands of new arrivals into the UK yearly, who mostly head for certain regions of the country, housing prices will be kept high. Any so-called crash will be temporary or a minor dip lasting for a year or two. Just like what happened in 2008-2009.

One could argue that the London housing market is so overvalued that it is at high risk, but so much of the market is driven by cash buyers and overseas buyers also paying in cash. The dynamics could change to make London less attractive to this affluent segment but they can largely afford to accept the adjustments, whether the decline hits unrealised paper equity in the property, or if they sell at a loss, they're still walking away with millions.

Johnnyboy11

House prices in Aberdeen fell 10% in 2016, ouch!

jam25mack

Yup, a friend of mine from up that way had been busy working here and buying up flats in Aberdoom..... Got rid of two very luckily early on. Think he is stuck with just one or two places now.

Oil and the SNP killed it.

scrubbedexpat141

I'd love to see a bit of a crash, they're simply not affordable for so many at the moment.

That being said, I can only see interest rates rising and people losing homes which isn't a nice place to be and feels unnecessary.

Millhouse

I love interest rates. They simply can't move up much as growth is too low everywhere - it will be a brave central bank that pushes them up.

After 10 years of near zero rates in Europe, Japan and US it's been almost impossible to increase them. Look at the Americans, so much discussion and drama over a 25bps increase. People forget that they used to be 5%+

scrubbedexpat141

A rise in rates will increase defaults on properties because people buying on expensive mortgages or trackers or those locked in but coming to an end will suddenly face large increases.

I can't imagine any central bank deliberately making lots of people 'homeless' to try and stimulate another part of an economy. Borrowing is cheap, spending must be high so this gets us closer to stagflation. I think.

Millhouse

Well that's the point. Increasing rates will not stimulate any part of the economy - we have poor growth despite the low rates. They are not increasing anytime soon. The only time rates would go up is if general inflation gets out of control due to the currency, but they will be forced turn a blind eye to some inflation due to the low growth.

Fossildog

Excluding London and some small 'property hotspots' around the country, suitable housing is more a case of personal aspiration rather than affordability.

Eeyore

I know a lot of people who will take very severe issue with you on that. Anywhere within commutable distance of London (which is now considered to be a 2+ hour journey) is now so expensive that people in their 20s and 30s with good jobs are completely priced out from buying *anything* unless they're lucky enough to be able to pull a £50k deposit out of a handy orifice.

Millhouse

I'm fairness no reasonable amount of house price deflation is going to ease deposit requirements. That's a totally different issue and the only thing stopping further inflation.

Only something like 40pct of UK property is actually mortgaged. A statistic that amazed me.

kostik3000

Not a proper economist here but I was under impression that GDP is always calculated excluding seasonal factor, i.e. current inflation. Technical recession is a bit different term all together too. UK won't be in recession unless something drastic happens, i.e. Corbyn gets PM job and starts planting magic money trees at everybody's gardens. When, who knows, money will just run out.

Millhouse

Yeh, I was a bit loose with the words... a technical recession is a couple of quarters of negative growth.

But if growth is behind inflation you can certainly call that recessionary, people will be getting poorer and a full recession could easily then happen.

the seasonal adjustments are probably what result in continual restatements of GDP... normally down.

scot47

In China the PLA had a solution. When they took control of an area they executed the landlords. Now there is an idea.