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Why won't house prices increase if we have inflation caused by coronavirus?


HolyCow
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House prices should fall because people will lose jobs, have less money etc but with the Government printing so much, surely we will have (hyper)inflation? Can someone, @DurhamBorn  explain why house prices won't increase if we have inflation from the coronavirus handouts? I know it's not going to banks directly this time but I'm trying to work out the mechanism of how this is likely to play out when it comes to housing. Also, do you think property taxes will be increased to pay for all this as they are easy to tax and that is the way things were already going?

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Just now, HolyCow said:

House prices should fall because people will lose jobs, have less money etc but with the Government printing so much, surely we will have (hyper)inflation? Can someone, @DurhamBorn  explain why house prices won't increase if we have inflation from the coronavirus handouts? I know it's not going to banks directly this time but I'm trying to work out the mechanism of how this is likely to play out when it comes to housing. Also, do you think property taxes will be increased to pay for all this as they are easy to tax and that is the way things were already going?

The risk of hyper inflation is lower than its ever been since WW2.They are printing into the biggest deflation probably ever.Hyper inflation will be the risk at the end of the next cycle when things collapse with inflation already running at 12%/20%.

House prices are deflation loving assets,they go up as the cost of servicing the debt on them goes down.Rates will slowly rise through the whole cycle,then jump really high at the end.Inflation adjusted house wont see last years levels for probably 20 to 30 years.

Property taxes will increase yes,pension tax relief will also be cut,and i expect NI to be paid after 65 on any income over £12.5k.It will be done under the guise of paying for our wonderful NHS.

Another big drag on house prices will be the death of leveraged BTL.Higher rates,no equity forcing SVR and mass social house building.

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6 minutes ago, DurhamBorn said:

The risk of hyper inflation is lower than its ever been since WW2.They are printing into the biggest deflation probably ever.Hyper inflation will be the risk at the end of the next cycle when things collapse with inflation already running at 12%/20%.

House prices are deflation loving assets,they go up as the cost of servicing the debt on them goes down.Rates will slowly rise through the whole cycle,then jump really high at the end.Inflation adjusted house wont see last years levels for probably 20 to 30 years.

Property taxes will increase yes,pension tax relief will also be cut,and i expect NI to be paid after 65 on any income over £12.5k.It will be done under the guise of paying for our wonderful NHS.

Another big drag on house prices will be the death of leveraged BTL.Higher rates,no equity forcing SVR and mass social house building.

Will the Government really build social housing? I just don't see it happening and they have the excuse that it is unaffordable. They have never built before, why would they now? Also home owners vote Tory so what would be in it for the Tories if it reduces the value of houses? Or do you think the Tories have seen the light? (Was actually quite surprised that this money is going to the people and not the banks again but I suppose that would be politically toxic). Do you think the Government is thinking in terms of lowering house prices because they know in 5 years time a much bigger majority of the electorate will not be owners and that is starting to become a major problem (I think the Tories won because of Brexit, not because of their economic policies specifically). Sorry for the stream of consciousness...trying to work out how it's all likely to play out. Thanks Durhamborn.

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TheCountOfNowhere
56 minutes ago, HolyCow said:

House prices should fall because people will lose jobs, have less money etc but with the Government printing so much, surely we will have (hyper)inflation? Can someone, @DurhamBorn  explain why house prices won't increase if we have inflation from the coronavirus handouts? I know it's not going to banks directly this time but I'm trying to work out the mechanism of how this is likely to play out when it comes to housing. Also, do you think property taxes will be increased to pay for all this as they are easy to tax and that is the way things were already going?

Many people know me from the good old days and they know I'd like nothing better than to see a massive nominal collapse in prices now, but the banksters of england have already moved to prop up the bankers mortgage lending with another road on the onerous term funding scheme which single handedly was used to suppress mortgage  rates.

They're protecting peoples incomes too so they wont have to sell their houses.

When will the emergency money be turned off, it wont, how can it , it'll create a sudden massive hole

IIRC, They said they'd cover wages for A Minimum of 3 months, any sane mane would have said a MAXIMUM and allow people/companies to get their houses in order.

This whole thing is designed IMHO to keep their bubbles going, the "debts" being serviced and people in their place.

Will CV19 have a dramatic effect, I dont think so, already looks to be a bit of a damp squib with Italy and Spain tailing off.

Interest rates are at 0.1% and the bankers have got another £250bn to hand out like sweets

House prices might dip by the end of the year but these f**king criminals have no intention of letting them fall nominally.

The complicit MSM will make sure the "post coronavirus bounce" is pushed, all those pent up buyings being free'd from their houses ready to borrow for the common good.  I can see it now.

Rates will definitely rise at some point but price/wage inflation will be double digits and real price falls will be covered by house price inflation lagging wage inflation, but to most, it'll look like prices are "always going up"

Cash/money is already worthless, no one's caught on yet.  At some point, people will.

My view is now best spend it (wisely) while you can.

10 years from now, nothing going to look the same as it did last year.

 

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49 minutes ago, HolyCow said:

Will the Government really build social housing? I just don't see it happening and they have the excuse that it is unaffordable. They have never built before, why would they now? Also home owners vote Tory so what would be in it for the Tories if it reduces the value of houses? Or do you think the Tories have seen the light? (Was actually quite surprised that this money is going to the people and not the banks again but I suppose that would be politically toxic). Do you think the Government is thinking in terms of lowering house prices because they know in 5 years time a much bigger majority of the electorate will not be owners and that is starting to become a major problem (I think the Tories won because of Brexit, not because of their economic policies specifically). Sorry for the stream of consciousness...trying to work out how it's all likely to play out. Thanks Durhamborn.

Well i was an ex councillor,and people i know have told me the government have told the councils to build up their work boards again.They are going to let them build and offer incentives.They are doing it to pump money into the local economies,but also lower the HB bill.They can borrow at 0.5% and build for around £70k.Why pay a retired teacher £8k a year rent when they can pay themselves £5k a year thats costing them £350 in interest.

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4 minutes ago, DurhamBorn said:

Well i was an ex councillor,and people i know have told me the government have told the councils to build up their work boards again.They are going to let them build and offer incentives.They are doing it to pump money into the local economies,but also lower the HB bill.They can borrow at 0.5% and build for around £70k.Why pay a retired teacher £8k a year rent when they can pay themselves £5k a year thats costing them £350 in interest.

Wonder why they didn't do that sooner. But do you think the Tories will actually allow house prices to fall? 

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TheCountOfNowhere
3 minutes ago, HolyCow said:

 But do you think the property owning/2nd london home owning/over levered BTL portfolio owning Tories will actually allow house prices to fall? 

 

They can't stop them falling ultimately but they're giving it a real good go.  It's been real term falls that bring the market back in line with wages eventually. The illusion of ever increasing prices wont be broken.

If Interest rates hit 10% as DB predicts ( IIRC ) then unless we've seen massive wage inflation then prices would collapse.  When you start seeing the wage inflation you'll know what's happening.  Could be a year or 2 off but it will come.  They're already supporting peoples wages.

The whole thing is a total cluster fuck.

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7 minutes ago, HolyCow said:

Wonder why they didn't do that sooner. But do you think the Tories will actually allow house prices to fall? 

Watch the US long bond.That controls UK house prices over the longer term.

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TheCountOfNowhere
1 minute ago, DurhamBorn said:

Watch the US long bond.That controls UK house prices over the longer term.

https://www.wsj.com/articles/u-s-treasury-yields-drop-sharply-as-slowdown-fears-rise-11582302799

 

Falling, I assume they need to be rising to see mortgage rates go up ?

Oddly, they were rising just before the CB19 struck.  I of course am not one for conspiracy theories....

https://www.bloomberg.com/news/articles/2020-02-21/u-s-30-year-treasury-yield-falls-to-record-low-1-9032

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Castlevania
1 hour ago, HolyCow said:

Wonder why they didn't do that sooner. But do you think the Tories will actually allow house prices to fall? 

I think they’d be happy if prices stayed level in nominal terms, but became much cheaper in real inflation terms. 

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TheCountOfNowhere
Just now, Castlevania said:

I think they’d be happy if prices stayed level in nominal terms, but became much cheaper in real inflation terms. 

They weren't happy un 2008 with that sp i doubt it. 

The rich want more, not less, thats what drives them on. 

The one thing that would force tptb to allow prices to correct would be a clear danger to the ongoing position of the uk establishment. 

When they're handing out cash to anyone who breaths then the people are happy, not realising what's really going on. 

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2 minutes ago, spunko said:

Mr @DurhamBorn did you vote in the poll (I just replaced it incidentally), I would be interested in where you think avg. house prices will be this time next year.

A year isnt really a macro forecast as its far too close but il take a stab on it.Down 11%

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Another big drag on house prices will be the death of leveraged BTL.Higher rates, no equity forcing SVR and mass social house building.

I think the mass social housing will be the new 'Homes for Heroes' Think NHS, key workers, bin men and cleaners.

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31 minutes ago, DurhamBorn said:

A year isnt really a macro forecast as its far too close but il take a stab on it.Down 11%

I hope there's a nice steady downwards push on house prices.  Logic tells me they have to fall, but as TCON keeps saying - tptb will do anything to keep prices high 

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We have our house on the market. Left it on through the virus outbreak so far in case some delirious person comes along with a sack of cash. Hasn't happened yet!

We are prepared to take 15% off the asking price and hope that will do the trick when the lockdown finally eases. We had a couple very interested and they clearly had piles of cash. I just hope they survive the first wave. :D

We then potentially go into rented but that could be trickier than it sounds. Will cross that bridge later.

 

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4 hours ago, DurhamBorn said:

the government have told the councils to build up their work boards again.They are going to let them build and offer incentives

So does this mean an ideal shorting opportunity on the major housebuilder stocks when this takes off?

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4 hours ago, DurhamBorn said:

Watch the US long bond.That controls UK house prices over the longer term.

Google tells me this means the 30 year treasury which is now at circa 1.5 percent compared to 5 percent average looking at the graph.  Are we looking at a return to normal yield on this combined with DXY to 96ish?

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24 minutes ago, Loki said:

Google tells me this means the 30 year treasury which is now at circa 1.5 percent compared to 5 percent average looking at the graph.  Are we looking at a return to normal yield on this combined with DXY to 96ish?

8% by 2028 i think.UK mortgages will be 10%+,

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2 hours ago, Iamcynical said:

I hope there's a nice steady downwards push on house prices.  Logic tells me they have to fall, but as TCON keeps saying - tptb will do anything to keep prices high 

They have much more pressing problems like bringing back supply chains from China,food and energy security etc.House prices wont even register going forward.They would prefer they didnt crash,but down 15% and then down another 60% in inflation terms over the cycle they would bat an eyelid.House prices are so last cycle.

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1 minute ago, DurhamBorn said:

They have much more pressing problems like bringing back supply chains from China,food and energy security etc.House prices wont even register going forward.They would prefer they didnt crash,but down 15% and then down another 60% in inflation terms over the cycle they would bat an eyelid.House prices are so last cycle.

I hope you are right. 

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sancho panza
4 hours ago, Castlevania said:

I think they’d be happy if prices stayed level in nominal terms, but became much cheaper in real inflation terms. 

That would be nirvana for the elite,keep the banks solvent and make them more afforable for the plebs.

56 minutes ago, DurhamBorn said:

They have much more pressing problems like bringing back supply chains from China,food and energy security etc.House prices wont even register going forward.They would prefer they didnt crash,but down 15% and then down another 60% in inflation terms over the cycle they would bat an eyelid.House prices are so last cycle.

I think thats the main issue here.As Ive said elsewhere,food n fuel are the priorities,WIth what's elft people pay the rent/mortgage.Food and fuel are going up,not jsut through demnd/supply, but allso  weaker cable.

ALso,there will be issues in credit markets with any sort of debt deflation which could see banks reining in credit creation as they take losses.

already hearing anecodatlly banks getting stingy with car loans.

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sancho panza

 

Shaun Ricarhds on the UK hosuing market today

https://notayesmanseconomics.wordpress.com/2020/03/30/where-next-for-uk-house-prices-2/

This week has opened in what by recent standards is a relatively calm fashion. Well unless you are involved in the crude oil market as prices have taken another dive. That does link to the chaos in the airline industry where Easyjet has just grounded all its fleet. Although that is partly symbolic as the lack of aircraft noise over South West London in the morning now gives a clear handle on how many were probably flying anyway. So let us take a dip in the Bank of England’s favourite swimming pool which is UK house prices.

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The next issue for the market is that frankly a lot of people are now short of this.

Money talks, mmm-hmm-hmm, money talks
Dirty cash I want you, dirty cash I need you, woh-oh
Money talks, money talks
Dirty cash I want you, dirty cash I need you, woh-oh ( The Adventures of Stevie V )

I have been contacted by various people over the past few days with different stories but a common theme which is that previously viable and successful businesses are either over or in a lot of trouble. They will hardly be buying. Even more so are those who rent a property as I have been told about rent reductions too if the tenant has been reliable just to keep a stream of income. Now this is personal experience and to some extent anecdote but it paints a picture I think. Those doing well making medical equipment for example are unlikely to have any time to themselves let alone think about property.

Thus we are looking at a deep freeze.

Ice ice baby
Ice ice baby
All right stop ( Vanilla Ice)

Whereas for house prices I can only see this for now.

Oh, baby
I, I, I, I’m fallin’
I, I, I, I’m fallin’
Fall

 

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Why won't rents increase with inflation? So house prices drop and everyone will just live for 5% of their salary?

I'm sure your leveraged BTLer will get cunted but if you don't buy then you have to rent unless you live with your parents (wish I still did this)

I would have spent 45k GBP in rent up to this July since I bought. That's about 30% of the value of the purchase price. Will I lose that much money if I sell it in the first month after corona? Probably, so what's the difference?

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