Tuesday, August 19, 2008

Insiders and outsiders

This is the kind of chart that puts estate agents out of business. Housing transactions in the second quarter of this year were down 39 percent compared to the same period last year. That adds up to a lot of idle people in those high street agencies.

This chart also points to an interesting difference between the recent bubble and the one back in the late 1980s. Transactions volumes were much higher in the 1980s.This suggests, as the Americans might say "a lot more people had skin in the game" back then.

It confirms one thing I have always suspected about our recent bubble. There were insiders and and outsiders. Those on the inside - property owners - were a comparatively small group. Their access to housing equity allowed them into the playground, where they acted out their get-rich-quick fantasies with buy to let.

When the market was on the way up, it offered enormous profit opportunities to home owners. Outsiders, for example, young workers and renters, sat on the sidelines as their aspirations of home ownership were crushed by this stampede of greed. Now that prices are collapsing, the outsiders are still on the sidelines, watching as those same home owners are taking huge losses.

On final observation; housing transactions are still higher than back in 1995. Does this mean that transactions still have further to fall? Or does it mean that the credit crunch has merely taken the top off an unsustainable credit-driven speculative bubble. Or could it be both?


  1. That is a really weird chart.

  2. Estate agent offices are dropping like flies.

  3. The chart indicates a large amount of house price fixing in my opinion.

    Compared to the 1980's it also suggests the value of all low-value/undesirable properties has substantially increased to a level similar of desirable properties.
    I.e there have been some fools buying up properties for large amounts of money when they are definitely not worth that much.

    Otherwise I fail to see how a lower number of transactions in the past 10 years (compared to the 1980's) can result in a higher overall average house price.

  4. I think you hit a sinister and scary revelation about what has been going on: basically a huge stitch-up by home owners of the entire UK economy. And the coming collapse, which will hurt everyone, will because of this. Even worse, the temporary inflation of the pound's value in 2007 has a darker motive I believe: it was a last attempt to clean up the wealth by using a strong pound to buy overseas properties and investments. We have well and truly been screwed by the system: not sure who will have the last laugh, probably the chaps who left the UK a couple years ago and have a paid-for villa somewhere and are now cracking open a bottle of Boschendal and turning the merguez one more time on the BBQ.