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5 "Tells" that the Stock Markets Are About to Reverse

George Osborne Warns of More Affordable UK Housing Market if BrExit Happens

ElectionOracle / EU_Referendum May 21, 2016 - 12:55 PM GMT

By: Nadeem_Walayat

ElectionOracle

George Osborne in the last few weeks of the EU referendum campaign appears to morphing form a to Euro-phile into a Euro-skeptic, effectively coming full circle as his most recent statement illustrates, warning that a BrExit would result in the UK housing market becoming MORE AFFORDABLE for the British people, presumably because there could be 5 million LESS NEW EU migrants by 2030 and thus the pressure cooker that is the UK housing market should gradually cool due to reduced demand from the current insane levels that has the UK building 140,000 homers per annum which is set against net migration of at least 500k per year, let alone the pressure from new domestic demand. Therefore each year for the past 15 years Britain's housing crisis has relentlessly worsened as new supply has been nowhere near able to keep pace with both domestic demand PLUS 1/2 million extra migrants to house per annum!


George Osborne stated: “If we leave the European Union there will be an immediate economic shock that will hit financial markets... That affects the value of people’s homes and the Treasury analysis shows that there would be a hit to the value of people’s homes by at least 10 per cent and up to 18 per cent. And at the same time first time buyers are hit because mortgage rates go up, and mortgages become more difficult to get.

UK Affordability Crisis

What the academics and mainstream press commentators persistently fail to comprehend is TREND, or more precisely the TREND in AFFORDABILITY. The trend over the past 40 years has been for the proportion of household earnings spent on housing costs to rise from 20% 40 years ago to an average of 35% for Dec 2013, which is trending towards 50% by 2030. This is the big story that the academics have missed as over time, decades in fact people are gradually becoming conditioned to spend more and more of their earnings on housing costs as being the norm which the government subsidises through benefits such as tax credits and housing benefit.

Affordability Forecast - Dec 2013

The reason why I expected affordability to trend ever higher again has its roots in the exponential inflation mega-trend as workers relentlessly face a loss of purchasing power of earnings and savings due to reasons such as the Inflation of the size of the population that is MOSTLY as a result of continuing out of control IMMIGRATION, as evidenced by the baby boom now underway mostly amongst migrant families of the past 15 years that acts to relentlessly put pressure on housing availability where annual construction (new builds) are not able to keep pace with even half of the new demand generated each year. Therefore workers have no choice but to commit an ever larger proportion of their earnings towards housing costs, the effect of which is that housing bear market affordability troughs are being ratcheted ever higher, which has left many academics confused as they remain fixated on their theoretical models that imply house prices must fall so as to return to affordability levels of past troughs as the real world trend passes them and their models by.

The updated affordability graph (Dec 2015) shows the underlying relentless trend of affordability being once more ratcheted higher that looks set to breach the 2007 bull market peak during 2016 i.e. house prices this year will be even more unaffordable then they were right at the very peak of the last housing bull market mania!

More on the housing affordability crisis in the following video -

UK House Prices 5 Year Forecast

In terms of the prospects for UK house prices, it is now near 2 1/2 years since excerpted analysis and the concluding 5 year trend forecast from the then forthcoming UK Housing Market ebook was published:

30 Dec 2013 - UK House Prices Forecast 2014 to 2018, The Debt Fuelled Election Boom

UK House Prices Forecast 2014 to 2018 - Conclusion

This forecast is based on the non seasonally adjusted Halifax House prices index that I have been tracking for over 25 years. The current house prices index for November 2013 is 174,671, with the starting point for the house prices forecast being my interim forecast as of July 2013 and its existing trend forecast into Mid 2014 of 187,000. Therefore this house prices forecast seeks to extend the existing forecast from Mid 2014 into the end of 2018 i.e. for 5 full years forward.

My concluding UK house prices forecast is for the Halifax NSA house prices index to target a trend to an average price of £270,600 by the end of 2018 which represents a 55% price rise on the most recent Halifax house prices data £174,671, that will make the the great bear market of 2008-2009 appear as a mere blip on the charts as the following forecast trend trajectory chart illustrates:

Recent UK average house prices data (£212,859) is showing a 3.6% deviation against the forecast trend trajectory, which if it continued to persist then in terms of the long-term trend forecast for a 55% rise in average UK house prices by the end of 2018 then would translate into a 9% reduction in the forecast outcome to approx for a 46% rise by the end of 2018.

The bottom line is that house prices are going to continue to get ever more expensive where those who are waiting for a crash to more affordable levels will continue to regret not buying as the only way housing can even start to become more affordable is if the UK literally triples the number of new builds each year from approx 140,000 per year to 400,000, something that is just not going to happen as it would literally mean the government undertaking to build a new major city EVERY YEAR! Instead it has been over 40 years since the last new town let alone city was built.

Therefore the UK housing crisis is not just one of the inability of the housing market to cope with current demand, but as the earlier housing affordability trend graph illustrates that the crisis is going to get much WORSE with each passing year, which ultimately means an social EXPLOSION of some kind, maybe not a revolution but it's not going to look pretty! Whilst a BrExit bringing a halt to out of control immigration would provide a mechanism that gives Britain time to at least stabilise the current crisis, whilst a REMAIN vote guarantees that UK housing will continue to become ever more unaffordable, which will especially hit young people and families HARD! All because the vested interests in the establishment want cheap labour that the tax payer picks up the bill for in terms of in work benefits and the people of Britain pay the price for in terms of the slow motion collapse of society as literally each service after service FREEZES!

EU Referendum BrExit - Last Chance for Britain!

Counting Down to Freedom - Support Our BrExit Campaign

The latest EU referendum opinion polls put the LEAVE and REMAIN camps virtually neck and neck on 44% with 12% of those polled undecided. Which compares against a month ago of 42% LEAVE and 48% REMAIN, 10% undecided. So it is no wonder that the REMAIN camp has gone into full blown panic mode with a relentless torrent of fear mongering emanating from the establishment REMAIN camp. Instead I offer my latest video in this series as a message of HOPE, a message of a New Dawn, New Life for Britain!

With just 5 weeks to go the Market Oracle's own 9 month long BrExit campaign has been ramped up a few gears as we enter this last stretch, producing Brexit resources from in-depth analysis, rebuttal articles such as this, many videos, and also active on the social networks so as to do our best to play a part in Britain wasting it's very last chance to avert catastrophe which you too can support allowing us to further intensify our efforts to counter the daily barrage of REMAIN propaganda as well as keep producing video's that help spread the BrExit cause.

Counting Down to Freedom - Support Our BrExit Campaign

And also ensure you are subscribed to my always free newsletter (only requirement is an email address) for forthcoming in-depth analysis and detailed trend forecasts that include the following :

  • BrExit to Save Europe from the Apocalypse
  • US Dollar Trend Forecast
  • UK Housing Market Trend Forecasts
  • US Stock Market Forecasts
  • US House Prices Detailed Multi-Year Trend Forecast
  • Gold and Silver Price Forecast

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2016 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Yuriy
21 May 16, 15:25
Outside eu immigration

Please explain how brexit will help contain 200k per year outside EU immigration?

If anything, lower level of EU immigrants will push salary higher attracting even more outside eu people.


Nadeem_Walayat
22 May 16, 15:26
Migration control

It's all about control.

Outside EU is controlled. Inside EU is uncontrolled.

The govenment if it chooses can lax or tighten outside EU migration but cannot do ANYthing about inside EU migration so 200k a month or 1 million a mont can come - no control

And its not just about what has transpired it is also about what is to come as my next in-depth analysis will cover.


Yuriy
22 May 16, 21:55
Disagree

If this was true that UK government would had slammed breaks on at least what it could in theory control - outside EU immigration,but they didn't.

Now, someone is looking for scapegoats to cover this up with brexit.

I also disagree about luck of control on eu immigration. Majority of it were one off factors life poland or Romania joining eu. Germany and france applied brakes but uk gov did not thinking that 10 of thouthands will come. Benefits system is another magnet - make it fair to middle class and workers and much less people would come.

All examples demonstrate the total incompetence or sone other vested interests at play that will persist in or out of EU.

I'd rather see UK to fix outside EU immigration to promised numbers first.

Revamp benefits gravy train and then consider EU impact.

As a summary, it is a huge political sharad to cover up a lot of mismanagement and imminent debt crises brought on uk by itself!


Nadeem_Walayat
23 May 16, 06:11
Your Wrong Again

As my forthcoming in-depth analysis will make it crystal clear!

Pull all of the strands together and forecast whats likely to transpire over the next few decades ..

Hmmm, Remember my indepth analysis and forecast on Ukraine of Feb 2014? That of civil war and large chunks of Ukraine were going to be grabbed by Russia, before the theft of Crimea. http://www.marketoracle.co.uk/Article44516.html

(Wrong on Scotland leaving too !)

And You commented -

Yuriy

23 Feb 14, 12:18 Ukraine vs UK

There will be no break-up in Ukraine.

Civil war is not possible, as people either support opposition, or do not support regime.

You cannot compare Ukraine and UK. The better comparison is UK and Russia: 2 ex-empires built on blood of others. Well, UK is like Russia in maybe 50-80 years. Scotland and England is like a little example of Russia and Ukraine.

The best way out of Scotland is to separate from UK but stay in EU. No much will change. This will be yet another stimulus for England to stay in EU ;-)


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