UK House Prices and Vested Interests

2007-10-21T00:51:23+02:00

Circulating numbers?

Does anyone know the best way to circulate some basic numbers to as many people as possible? I would like to put some data out there that makes a nonsense of what vested interest economists and the like put out during their press releases i.e. why the housing market cannot worsen.

There are some financial ratios for Japan that were worse than the UK, but the trends and levels of the numbers below, I hope speak for themselves....

Population density (persons per square km) in the UK is around 250 and that of Japan is 339. The population there was still growing in 1990…the year in which house prices started falling for the next 15 years—they added more people than we have over their boom period. (n.b. Japan has even less workable land because of earthquake zones and mountains.)

Unemployment in Japan in 1990 was around 3% (much lower than ours currently), while short term interest rates (higher than policy rates) were at close to current UK levels.

UK UK
Year Population
1990 57.27m
1995 57.96m
2000 58.87m
2005 60.24m
2010 61.52m
Source: United Nations.

Japan Japan
Year Population
1980 116.81m
1985 120.84m
1990 123.54m
1995 125.47m
2000 127.03m
2005 127.90m
2010 127.76m
Source: United Nations.

Japanese money market rates

1987 4.2
1988 4.5
1989 5.4
1990 7.7
1991 7.4
1992 4.5
1993 3.0

UK inter-bank lending rate

Jun-03 3.57
Sep-03 3.5
Dec-03 3.86
Mar-04 4.11
Jun-04 4.51
Sep-04 4.85
Dec-04 4.82
Mar-05 4.85
Jun-05 4.83
Sep-05 4.55
Dec-05 4.56
Mar-06 4.53
Jun-06 4.64
Sep-06 4.85
Dec-06 5.17
Mar-07 5.49
Jun-07 5.72
Sep-07 6.29

Hong Kong has a population density of 6,407 and Singapore 6,369 (Singapore in particular has traditionally had large numbers of foreign workers entering). They both saw a decade of price falls, although unlike Japan this was more related to the Asian financial crisis of 1997-98 (but population density did not provide a guaranteed rise in house prices as many would suggest is the case in the UK).

Current US and UK data:

US official rates: 4.75%
UK official rates: 5.75%

US unemployment rate: 4.7%
UK unemployment rate: 5.4%

The US, in other words, has lower interest rates and lower unemployment, but look at what is happening there.

p.s. I should add that in my opinion this housing market is a giant liquidity driven Ponzi scheme. Of course each country is unique (there were other things going on in Japan’s case up to 1990, for example, but the point is that the arguments (immigration; population growth, lack of land for housing, low unemployment and low interest rates)) being used by housing bulls failed to help any of the other countries when bubbles came to bursting and liquidity declined.

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Tired of vested interests in housing

UK House Prices and Vested Interests