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Yep, weirdly the prices of houses are dropping because the cost of houses is rising, put very simply.


Generally prices rises have been fuelled by among other things demand outstripping supply.

This is much more down to societal change (people staying single much longer and able to afford to buy on their own thanks to cheap credit) than anything to do with immigration which I inferred from your second point, but perhaps you were referring exactly to my point above.


The only way to relive that pressure is to build more houses. We have plenty of space to do this, it's just nobody wants anew town on their doorstep, which having grown up by Stevenage I can't say as I blame them.


The Lee valley is often molted which is a great plan for billions of pounds worth of flood damage, but hey.

Even if we are running out of space, there are other factors at work here other than supply-and-demand... e.g. availability of mortgages, "liquidity" and confidence in the housing market, employment, and the state of the economy in general.

Mockney Piers wrote:-

Yep, weirdly the prices of houses are dropping because the cost of houses is rising, put very simply.



Which makes no logical sense.



The cost of houses is directly related to how much anyone is willing to pay for them, put very accurately.

You would think so woldn't you but its not really what has just happened in the recent past. What?s happened is that prices have been directly related to how much banks are willing to lend people to buy them, which in turn leads to banks owning more dept and therefore thinking themselves richer for it and by making more and more money available unnaturally inflating the price of houses until it all predictably went bang.


And that was one of the main reasons for Le Credit Crunch, put very simply.

Brendan wrote:-

prices have been directly related to how much banks are willing to lend people to buy them.



Which have only been taken up by people who can afford to repay the loan, and those who failed became bankruptcy statistics, or sub-prime mortgages.

The price of a house isn't necessarily the main factor in the cost, because very very few people are cash buyers.


Most of us obviously have to get the bank to buy it in a hire purchase type arrangement.


The cost then becomes a reflection on how much you have to stump up initially, fees and of course interest rates. At the moment despite rock bottom BoE rates the cost is relatively high compared to the mortgage bonanza of recent times if you're looking to buy or remortgage.

In fact I think banks are currently taking the largest margins on mortgage lending in modern history.


So you might be willing to pay ?1000 a month, but not willing to pay ?50k deposit.


Hence the cost is too high, demand drops and prices go down. At this point it's much less relevant whether someone is willing to pay ?350k or ?400k face value. Put very very simply of course, as Jeremy said there are a larger number of factors, of which confidence is also a very very key one.

Yeah but that?s just my point Steve, in order to make sure the amount of money owed to them each year was growing exponential the banks, specifically in Britain and America, were not properly calculating how much would be an affordable amount to lend to people. This created the bubble.


In many country where the banks are more closely regulated (hellfire and communism I know) there are very strict rules on how much you can lend and the interest you can charge. This controls the property market and doesn?t let prices go skyrocketing and then crash.

Arrrr indeed 'in it together' Maurice, the wise words of David Cameron......although, of course, it is a bit easier to be in 'it together' with the odd ?1million plus fortune to hand - the shadow cabinet are certainly as a rule in 'that' together.

There?s a difference between ?responsibility? when you?re looking at getting a great big wodge of wonga from a deal and ?responsibility? when what you?re trying to do is put a roof over your family?s head.


But then again that may require a smidgen of empathy which as I?ve noted, from my not uneducated observation of the British political landscape, is a trait not attainable by the type of person who generally gives active support to the conservative party.


Christ I?m being some sort of irrational tory hating freak at the moment. I realise this, but unfortunately I?m having to deal, on a daily basis, with a bunch of highly unscrupulous individuals wnking over the conference in Manchester and its outcomes like a bunch of spoilt schoolboys who just found their first porno.


It?s nauseating.


Support for the labour party is delusional and stupid but support for the conservatives seems more and more to me like a financially sanctioned form of antisocial behaviour.

I suppose what im thinking is that as demand exceeds supply (not just at the mo but for the last few years). Wont the goal posts just shift and lower income groups will just be excluded form the mortgage market, as higher earners become the first time buyers shifting up the 'long term average'.

Obviously this will cause massive social problems, but i am really interested as unfortunately i want a bentley, a small one, possibly with a garden.

I can't remember the actual figure, but I think the total number of 'domiciles' in the UK is around 25m, with a population of over 60m.


Hence in that sense demand is already outstripping supply - the issue is the density of residents per domicile, the size, the quality and the location.


These attractiveness of these various attributes are defined culturally rather than economically, ensuring that supply and demand has far lower influence on price than the amount people are willing to sacrifice to gain social status.

mockney piers wrote:-

The price of a house isn't necessarily the main factor in the cost...........




The costs of repayment are what determines the take up on purchases of houses, whether it be a cash buyer a mortgage or bank loan.


It is directly related to what somone is willing to pay for it.

CT Wac Wrote:

-------------------------------------------------------

> Wont the goal posts just shift

> and lower income groups will just be excluded form

> the mortgage market


But this has already happened, hasn't it? Even to buy a modest one bed flat in Peckham, you're talking about something like 200k, so you'd need to be on a pretty reasonable salary.


> Obviously this will cause massive social problems,

> but i am really interested as unfortunately i want

> a bentley, a small one, possibly with a garden.


I'm not convinced it will cause massive social problems... or indeed any social problems. Owning a property isn't an essential requirement for a decent standard of living.

  • 1 month later...
There seems to be this myth constantly spouted that there is a lack of housing in the UK, there's not, at all. What there is a serious lack of is AFFORDABLE housing...when prices get too high (which they very much still are) it blocks off first-time buyers, therefore denying the market of that capital injection it is used to. Prices need to come down to oil the wheels of the very rusty housing market.

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