Time to buy Gold tinned food & guns.

[TheAnimus]

Yes, it does, high house prices leads to investment being taken from production

Why, why does house prices being inflated, suggest that the rest of the economy is suffering a lack of investment?

http://www.allagents.co.uk/house-prices-adjusted/

If we look at the time the inflation adjusted prices were rising, we do not see a problem with a lack of investment during those years.

Do you have any evidence to suggest otherwise?

only to be replaced by credit, after a while when the credit is taken away people reduce their spending in the economy to service their rent causing a contraction and leading to unemployment.

There is a logic saying that if people have debt obligations, then they will cut back on non-essentials first, but this could be applied to ANY debt obligation, for instance the debt we as tax payers face for some of the stupid PPI gordon browness.

But lets not forget there was an economy based on this, and at the end of the day a house is worth something because ultimately it provides a service for someone, and they like that.

The only people that benefit are landowners who get the working population to get credit to buy property/service rents and end up worse off, unemployed later on. Its the access to credit, property and monopolies on property/land that causes problems for the economy.

You see that bit I don't agree with, access to credit is normally fair, based on someones past performances, and money available. It can also act as a social leveling tool, by comparison to just having people own properties based on parental inheritance.

The problem is the restriction of supply, which drives up the prices, credit, like any gearing only exacerbates the issues. It is the accelerant, not the fire.

[petercook7]

R Square 0.967167942
Adjusted R Square 0.963519936
Durbin-Watson Statistic 0.857633733

Intercept (p-value) 0.696869457
Average loan (p-value) 5.52126E-08
Intercept Coefficients -3465.131913
Average loan Coefficients 1.231049445


This result indicates that 96% of the variation in the house price value could be explained by the variability in the average loan taken out. This R squared shows a strong linear relationship between these two variables, however 4% of the variation is due to factors other than what is account for in linear regression model.

Goodhart and Hofmann writes “property prices may affect credit demand by stimulating economic activity via wealth effects. Wealth effects may also give rise to direct effects on property prices on the credit demand of house owners”.

However when the wealth effects from mortgage equity release, constrict the economy in the long run.

[TheAnimus]

R Square 0.967167942
Adjusted R Square 0.963519936
Durbin-Watson Statistic 0.857633733

Ok, just think what you've posted here.

Completely meaningless indicators.

What is the sample data, how was it collected, what time period are we looking at.

Why have we got linear regression mixed with autocorrelation? Hell why even list something which is the result of a different kind of correlation that actually is less correlated than a others?

As a result I can't conclude anything useful from that. Let alone the biggest bugbear of interpreting such statistics, the whole pesky correlation does not imply causality.

I wouldn't read something like this:
http://en.wikipedia.org/wiki/Skyscraper_Index
and begin to suggest that sky scrapers create recessions, thou the data might suggest they are correlated.

You've not even demonstrated how the data is correlated.

This result indicates that 96% of the variation in the house price value could be explained by the variability in the average loan taken out. This R squared shows a strong linear relationship between these two variables, however 4% of the variation is due to factors other than what is account for in linear regression model.

So the data isn't some measure of economic growth or investment vs house prices? I'm not sure what your trying to prove here, it seems like an un-explaned tangent (which is fine, I love running off on tangents).
http://en.wikipedia.org/wiki/Skyscraper_Index

Goodhart and Hofmann writes “property prices may affect credit demand by stimulating economic activity via wealth effects. Wealth effects may also give rise to direct effects on property prices on the credit demand of house owners”.

does the quote (unhelpfully not properly cited reference!) suggest that property is removing growth? He talks about credit demand, but doesn't suggest that its constricting supply.

However when the wealth effects from mortgage equity release, constrict the economy in the long run.

Now this I just don't understand, its not part of the quote miss formatted? I just don't see any evidence anywhere for the suggestion that the wealth effects from a mortgage constrict the economy, you mean in the long term, do you mean the interest generated by the lending institute or the capital appreciation ahead of the interest rate accrued by the owner, constricting the economy, because I can't understand how either of those could. The best argument I can see is that the credit market gets spent entirely on residential properties, but when you look at the size of the credit market in 2006, and what percentage was on residential property I don't think the argument has any grounding in reality.